<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
---------------------------------
or
( ) TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT
For the transition period from ____________ to ________________
Commission file number 0-17893
----------------------------------------------------------
TELTRONICS, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 59-2937938
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2150 Whitfield Industrial Way, Sarasota,FL 34243-4046
- --------------------------------------------------------------------------------
(Address or principal executive offices)
Issuer's telephone number (941) 753-5000
-------------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)
Check whether the issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 2,612,013
<PAGE> 2
PART I - FINANCIAL INFORMATION
TELTRONICS, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 62,370 $ 264,379
Accounts receivable, net of allowance for
doubtful accounts of $93,534 at
June 30, 1996 and $65,239 at
December 31, 1995 4,837,664 3,207,556
Inventories 3,068,580 3,239,658
Prepaid expenses and other current assets 425,017 167,948
---------------- ----------------
Total current assets 8,393,631 6,879,541
PROPERTY AND EQUIPMENT, NET 1,871,236 1,636,067
OTHER ASSETS:
Prepaid lease guarantee, net 256,686 270,684
Software development costs, net 21,822 66,822
Other 273,524 60,837
----------------- ----------------
Total other assets 552,032 398,343
TOTAL ASSETS $ 10,816,899 $ 8,913,951
================ ================
</TABLE>
See accompanying notes
2
<PAGE> 3
TELTRONICS, INC.
BALANCE SHEET
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long term debt $ 3,827,912 $ 2,565,070
Current portion of capital lease obligations 152,646 152,646
Accounts payable 3,015,979 2,388,231
Accrued expenses 874,756 730,122
Deferred income 117,037 87,169
Other current liabilities 98,187 68,870
---------------- ----------------
Total current liabilities 8,086,517 5,992,108
LONG-TERM LIABILITIES:
Capital lease obligations, less current portion 153,041 218,865
Long term debt, less current portion 374,086 364,808
---------------- ----------------
Total long-term liabilities 527,127 583,673
SHAREHOLDERS' EQUITY:
Common stock, $.001 par, 50,000,000
shares authorized, 2,610,168 issued
and outstanding at June 30, 1996
and December 31, 1995 2,611 2,611
Additional paid-in capital 10,861,593 10,861,593
Accumulated deficit (8,660,949) (8,526,034)
---------------- ----------------
Total shareholders' equity 2,203,255 2,338,170
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 10,816,899 $ 8,913,951
================ ================
</TABLE>
See accompanying notes
3
<PAGE> 4
TELTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDED 6 MONTHS ENDED
------------------------------- --------------------------------
JUNE 30, JUNE 30,
1996 1995 1996 1995
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
SALES $ 6,284,190 $ 5,679,789 $ 13,309,261 $ 11,350,494
COST OF GOODS SOLD 4,127,083 3,639,637 8,957,747 7,497,039
------------- ------------- ------------ -------------
GROSS PROFIT 2,157,107 2,040,152 4,351,514 3,853,455
OPERATING EXPENSES
General and administrative 543,966 393,579 1,014,527 769,168
Research and development 469,378 379,657 669,322 798,561
Selling and marketing expenses 1,256,576 918,839 2,563,627 1,818,326
------------- ------------- ------------ -------------
2,269,920 1,692,075 4,247,476 3,386,055
OPERATING INCOME (LOSS) (112,813) 348,077 104,038 467,400
OTHER INCOME (EXPENSES)
Interest (134,069) (91,075) (259,863) (178,288)
Gain on sale of investment 0 (5,207) 0 (2,614)
Miscellaneous 27,103 (65,500) 20,910 (65,500)
------------- ------------- ------------ -------------
(106,966) (161,782) (238,953) (246,402)
INCOME (LOSS) BEFORE
INCOME TAXES (219,779) 186,295 (134,915) 220,998
PROVISION FOR INCOME TAXES 0 0 0 0
------------- ------------- ------------ -------------
NET PROFIT (LOSS) $ (219,779) $ 186,295 $ (134,915) $ 220,998
============= ============= ============ =============
NET PROFIT (LOSS) PER SHARE $ (0.08) $ 0.12 $ (0.05) $ 0.15
============= ============= ============ =============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,610,168 1,547,069 2,610,168 1,428,115
============= ============= ============ =============
</TABLE>
See accompanying notes
4
<PAGE> 5
TELTRONICS, INC.
STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
Retained
Additional
COMMON STOCK Earnings
---------------------------- Paid-In (Accumulated
Shares Amount Capital Deficit) Total
------------ ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT,
December 31, 1995 2,610,168 $ 2,611 $ 10,861,593 $ (8,526,034) $ 2,338,170
Net loss 0 0 0 (134,915) (134,915)
------------ --------- ------------- -------------- -------------
BALANCE AT,
June 30, 1996 2,610,168 $ 2,611 $ 10,861,593 $ (8,660,949) $ 2,203,255
</TABLE>
See accompanying notes
5
<PAGE> 6
TELTRONICS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
6 MONTHS ENDED
-------------------------------------------
JUNE 30,
-------------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (134,915) $ 220,998
Adjustments to reconcile net income (loss)
to net cash flows from (used in)
operating activities:
Depreciation and amortization 297,798 273,880
Cost of conversion rights 0 65,500
Changes in assets and liabilities:
Accounts receivable and other assets (1,630,108) (296,869)
Inventories 171,078 (504,684)
Income taxes receivable 0 428,538
Increase in other assets (257,069) 0
Deferred revenue 29,868 0
Accounts payable and accrued liabilities 801,699 (114,688)
---------------- ----------------
Net cash flows from operating activities (721,649) 72,675
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (473,969) (99,280)
Capitalized software development costs (212,687) 0
---------------- ----------------
Net cash flows from investing activities (686,656) (99,280)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 10,631,951 11,593,747
Repayment on line of credit (9,432,176) (11,139,488)
Repayment of notes payable and
other long-term debt (254,861) (436,358)
Proceeds from notes payable 261,382 0
Advance from related party 0 14,000
---------------- ----------------
Net cash flows from financing activities 1,206,296 31,901
Net increase (decrease) in cash (202,009) 5,296
Cash and cash equivalents, beginning of year 264,379 19,824
---------------- ----------------
Cash and cash equivalents, end of year $ 62,370 $ 25,120
================ ================
</TABLE>
See accompanying notes
6
<PAGE> 7
TELTRONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
NOTE A - GENERAL
The financial statements as of June 30, 1996 and for the six month period then
ended are unaudited and, in the opinion of the Company, reflect all adjustments
necessary for a fair presentation of such data and have been prepared on a
basis consistent with the December 31, 1995 Audited Financial Statements. All
such adjustments were of a normal recurring nature. The unaudited results of
operations for the interim periods reported are not necessarily indicative of
results to be expected for the year.
The year-end condensed balance sheet data included in the condensed financial
statements was derived from audited financial statements, but does not include
all disclosures required by generally accepted accounting principles. The
statements therefore should be read in conjunction with the financial
statements and related notes included in the Company's Form 10-KSB for the year
ended December 31, 1995.
NOTE B - SUBSEQUENT EVENTS
In July 1996 the Company entered into a letter of intent with Shared Resource
Exchange, Inc. ("SRX") and is negotiating for the possible purchase of assets
of their digital switching business that includes PBX, ACD, E911 and wireless
local loop products.
The proposed purchase would involve the issuance of up to 975,000 shares of
Restricted voting common shares of Teltronics. The shares would have piggyback
registration rights under certain circumstances. The proposed purchase is
subject to due diligence review and negotiation of a mutually acceptable
definitive agreement. The Company has approved the issuance to Norman R.
Dobiesz of up to 3,500 shares of Series A Preferred Stock of the Company
("Series A Preferred") upon a closing of the proposed SRX purchase. Each share
of Series A Preferred would: (1) entitle Mr. Dobiesz to four hundred (400)
votes; (2) have no liquidation preference over the shares of Common Stock of
the Company; and (3) be subject to certain restrictions on resale.
On July 30, 1996 the Board of Directors approved an amendment to the Company's
1995 Incentive Stock Option Plan increasing the number of shares of Common
Stock available thereunder to 1,250,000 Shares. The Board of Directors also
approved the grant of an option to purchase an additional 500,000 shares of the
voting common stock of the Company to the Company's President and CEO,
exercisable at a rate of 100,000 shares each year over a five year period
provided he is employed by the Company. The Board also approved the grant of
an option to purchase 50,000 shares of the voting common stock of the Company
to Carl S. Levine, a director of the Company.
On August 6, 1996, at the Company's Annual Meeting of Stockholders, the
Stockholders re-elected the directors of the Company; ratified the selection of
Millward and Company, independent certified public accountants, as auditors of
the Company; and approved an
7
<PAGE> 8
TELTRONICS, INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
amendment to and restatement of the Company's Restated Certificate of
Incorporation which (i) adjusted the authorized capital stock of the Company to
permit the issuance of up to: Forty Million (40,000,000) shares of Common
Stock, Five Million (5,000,000) shares of Non-Voting Common Stock ("NVC
Stock"), and Five Million (5,000,000) shares of Preferred Stock, each with a
par value of $.001 per share; (ii) authorized the Board of Directors to
determine and set: the class and designation (including conversion rights, if
any) of future classes of NVC Stock; and the series, rank and serial
designation, including, but not limited to, voting rights, if any, of future
series of Preferred Stock.
8
<PAGE> 9
TELTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
The first six months of 1996 reflected sales of $13,309,000 compared to
$11,350,000 for the first six months of 1995. The increased sales were the
result of additional sales of $3,515,000 provided by AT Supply, Inc. ("AT
Supply"), an 80% subsidiary located in San Antonio, Texas and formed in October
1995. Gross profit increased to $4,352,000 from $3,853,000 for the same period
last year primarily as a result of the increased sales. Total operating
expenses increased to $4,247,000 from $3,386,000 for the first six months of
the prior year. The increased operating expenses were primarily the result of
$478,000 attributable to AT Supply coupled with $256,000 in R&D expenses
recorded by the Company's wholly owned subsidiary, Interactive Solutions, Inc.
("IS"). The first six months of 1996 reflected a net loss of ($135,000)
compared to a net profit of $221,000 for the first half of 1995. The loss for
the first six months is the direct result of the added R&D expenditures
incurred by IS as continued technological advancements are made on the
Company's small, self contained, voice activated, portable pentium(R) processor
driven, multimedia computer.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
For the three months ended June 30, 1996 sales increased to $6,284,190 from
$5,679,789. The sales increase was the result of approximately $1,630,000 in
sales contributed by AT Supply. Gross profit increased to $2,157,107 compared
to $2,040,152 as a direct result of increased sales. The gross profit
percentage of sales declined from 35.9% to 34.3% as a result of AT Supply,
whose margins are typically in the 16%-18% range as well as some changes in
other product mixes.
Total operating expenses for the three months ended June 30, 1996 were
$2,269,920 compared to $1,692,075 for the comparable period of 1995. The
increase in operating expenses is primarily the result of approximately
$241,000 in expenses attributable to AT Supply and $256,000 in R&D expenses
associated with IS. As a direct result of the increased R&D expenditures, an
operating loss of ($112,813) was reflected for the three month period ended
June 30, 1996 compared to an operating profit of $348,077 for the corresponding
three month period of 1995.
Other income and expenses for the three month period ended June 30, 1996
reflected expenses of $106,966 compared to expenses of $161,782 for the three
month period ended June 30, 1995. These expenses reflected a reduction from
the prior year as a result of $65,500 non-recurring financing expense which was
recorded during 1995.
9
<PAGE> 10
TELTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The three month period ended June 30, 1996 reflected a net loss of ($219,779)
compared to a profit of $186,295 for the same period of 1995 primarily as a
direct result of the Company's decision to pursue the opportunities associated
with research and development efforts of IS.
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Total sales for the six months ended June 30, 1996 increased by 17.3% to
$13,309,261 compared to $11,350,494 for the first six months of 1995. The
sales increase was the result of approximately $3,515,000 in sales recorded by
the Company's 80% subsidiary AT Supply.
Gross profit for the first six months increased to $4,351,514 from $3,853,455
for the same period of 1995. Gross profit reflected at 32.7% of sales for the
first six months of 1996 as compared to 33.9% for the same period of 1995. The
decline in gross profit percentage is related to the increased sales of AT
Supply whose margins are typically in the 16%-18% range coupled with some
changes in other product mixes.
Total operating expenses for the first six months were $4,247,476, an increase
of $861,421 from the same period of last year. The increase in operating
expenses is directly attributable to AT Supply which recorded $478,320 in
operating expenses during the first six months and IS which recorded $256,488
in R&D expenses during the first six months of 1996.
Operating income for the first six months of 1996 was $104,038 compared to
$467,400 for the first half of 1995. The reduced operating income level for
this period is tied to the R&D expenditures of approximately $256,000 recorded
by IS during the second quarter coupled with the slight decline in gross margin
percentage.
Other income and expenses reflected expenses of $238,953 for the first six
months of 1996 compared to $246,402 for the corresponding period of 1995.
Interest expense increased by $81,575 to $259,863 for the first six months of
1996 however, that increase was offset for the most part as a result of a
$65,500 non-recurring charge which was recorded in the corresponding period of
1995 and not present in 1996.
The six month period ended June 30, 1996 reflected a net loss of ($134,915)
compared to a profit of $220,998 for the first six months of 1995. The net
loss position at the end of six months is directly related to the decision to
invest approximately $256,000 of R&D expenditures during the second quarter to
pursue the opportunities related to the technology of IS.
10
<PAGE> 11
TELTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets at June 30, 1996 were $10,816,899 compared to $8,913,951 at
December 31, 1995. The Company's current ratio at June 30, 1996 was 1.04:1
compared to 1.14:1 at December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash requirements were met with cash provided by borrowings from The CIT
Group/Credit Finance ("CIT"). The CIT facility was modified May 14, 1996 to
provide for borrowing up to $4,950,000. Previously the line had provided for
borrowing up to $3,500,000. $296,700 of this was a term loan secured by fixed
assets at an interest rate of 3% above the prime rate to be repaid monthly
until fully paid on October 28, 1999. The remaining line facility is a
revolving loan secured by inventory and receivables at an interest rate of
prime plus 3%. Effective November 1, 1996, the interest rate will be reduced
to an interest rate of 2.5% above the prime rate.
The Company's working capital ratio at June 30, 1996 was 1.04:1. Net working
capital was $307,114 at June 30, 1996. Short term requirements are expected to
be met through cash flows from operations augmented by the credit line
facility.
In addition, the Company is exploring the possibility of other equity or debt
financing.
CURRENT OUTLOOK
The Company anticipates continued positive results from its subsidiary AT
Supply which contributed $3,515,000 in additional sales and $143,000 in
operating income during the first six months of 1996.
The Company is currently investing in the product developed by Interactive
Solutions. Indications are good that this product will have a niche market in
the marketplace of hands free training. The Company anticipates a
demostratable unit by the beginning of October.
In the event that SRX's definitive agreement closes, the Company will have a
new product range that it will be able to manufacture and sell. Our current
business of remote monitoring, communications management and contract
manufacturing continue to grow. As anticipated, the long distance management
products have slowed but still accounted for over $2,000,000 in the last six
months.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 1. 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
Corp. ("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. The complaint was refiled
in early April, 1996 and discovery has commenced. The Company
believes that it has meritorious defenses to the allegations
and will vigorously defend the refiled complaint.
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - None
ITEM 6A. EXHIBITS
<TABLE>
<S> <C> <C>
10.2 Amendment to Loan and Security Agreement
dated December 29, 1995 between The CIT
Group/Credit Finance, AT Supply, Inc.
and Teltronics, Inc. dated May 14, 1996 . . . . . . . . . . . . . . . . . (a)
10.3 Promissory Note between Barnett Bank of
Manatee County, N.A. and Teltronics, Inc.
dated April 22, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . (a)
10.4 Agreement of Sale dated as of the 27th day
of March, 1996 by and among Interactive Solutions, LLC,
its Members and ISL, Inc. . . . . . . . . . . . . . . . . . . . . . . . . (b)
10.5 Amendment to Agreement of Sale dated the 18th
day of April, 1996 by and among Interactive Solutions,
LLC, its Members and ISL, Inc. . . . . . . . . . . . . . . . . . . . . . . (c)
27 Financial Data Schedule (for SEC use only) . . . . . . . . . . . . . . . . (a)
</TABLE>
12
<PAGE> 13
ITEM 6B. REPORT ON FORM 8-K
Two reports were filed to report the acquisition of the
Interactive Solution technology. No financial statements were
required to be filed.
(1) Form 8-K filed April 5, 1996
(2) Form 8-K/A-1 filed April 25, 1996
- -------------------------
(a) Filed as an Exhibit to this Quarterly Report on Form 10-QSB for the 6
month period ended June 30, 1996.
(b) Filed as an Exhibit to Form 8-K filed April 5, 1996.
(c) Filed as an Exhibit to Form 8-K/A-1 filed April 25, 1996.
13
<PAGE> 14
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TELTRONICS, INC.
August 12, 1996 /s/ Ewen Cameron
-------------------------------------
President and Chief Executive Officer
14
<PAGE> 1
EXHIBIT 10.2
The CIT Group/Credit Finance
135 West 50th Street
New York, NY 10020
Tel: 212-408-6000
Fax: 212-408-6100
May 14, 1996
Teltronics, Inc.
2150 Whitfield Industrial Way
Sarasota, Florida 34243
AT Supply, Inc.
4706 Shavano oak
Suite 104
San Antonio, Texas 78249
Gentlemen:
Reference is made to that certain Loan and Security Agreement dated
October 28, 1994, as amended by that certain letter agreement dated December
27, 1994, and that certain Second Amendment to Loan and Security Agreement
dated as of December 29, 1995 and that certain letter agreement dated March 11,
1996 (as at any time amended, the "Loan Agreement"), among Teltronics, Inc.,
("Teltronics"), AT Supply, Inc. ("ATS") and The CIT Group/Credit Finance, Inc.
("Lender"). Capitalized terms used herein and not otherwise defined herein
shall have the meaning ascribed to such terms in the Loan Agreement.
Borrowers have requested that Lender agree to increase the Maximum Credit
and Inventory Sublimit, effective as of the execution of this letter and
decrease the Interest Rate commencing November 1, 1996. Lender is willing to
amend the Loan Agreement as requested by Borrowers, subject to the terms and
conditions contained herein.
The Loan Agreement is hereby amended as follows:
(a) By deleting Section 10.1(a) of the Loan Agreement in its entirety
and by substituting the following in lieu thereof:
10.1(a) Maximum Credit: $4,950,000.
(b) By deleting Section 10.1(c) of the Loan Agreement in its entirety
and by substituting the following in lieu thereof:
<PAGE> 2
10.1(c) Inventory Sublimit: at any time, the lesser of (a)
$1,300,000, or (b) 50% of the amount of Eligible Accounts
outstanding at such time multiplied by the Eligible Accounts
Percentage.
(c) By deleting Section 10.4(a) of the Loan Agreement in its entirety
and by substituting the following in lieu thereof:
Interest Rate: A variable rate per annum equal to the Prime Rate
(currently 8.25% per annum) plus three percent (3%) per annum.
The Interest Rate in effect on the date hereof, expressed in
simple interest terms, 11.25% per annum. Effective November 1,
1996, the Interest Rate shall be reduced to: A variable rate per
annum equal to the Prime Rate plus two and one-half percent (2.5%)
per annum.
(d) By deleting the dollar amount "$87,500" from Section 10.4(b)
Facility Fee: (i) Initial Term and substituting the dollar amount
$122,500.
(e) By replacing the word "The" with the word "A" in Section
10.4(b)(i)(C) and deleting the word "remaining" from Section
10.4(b)(i)(C) and adding a new Section 10.4(b)(i)(D) to read:
(D) The remaining portion of the fee equal to $35,000 shall be
payable on the third anniversary of the closing date.
(f) By deleting Section 9.1 of the Loan Agreement in its entirety and
by substituting the following in lieu thereof:
9.1 This Agreement shall continue in full force and effect
until October 28, 1998 (the "Initial Term") and shall be
deemed automatically renewed for successive terms of two
(2) years thereafter (each a "Renewal Term") unless
terminated as of the end of the Initial Term or any
Renewal Term by either party giving the other written
notice at least sixty (60) days' prior to the end of the
Initial Term or such Renewal Term.
In consideration of the above Amendments, Teltronics and ATS agree to pay
Lender a facility fee of $7,250 which fee shall be fully earned and charged to
their loan account upon their execution of this agreement.
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.
<PAGE> 3
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 defence, 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); and the security
interests and liens granted by each Borrower in favor of Lender are duly
perfected, first priority security interests and liens.
Each Borrower represents and warrants to Lender, to induce Lender to enter
into this agreement, that no default or Event of Default exists on the date
hereof; that execution, delivery and performance of this agreement have been
duly authorized by all requisite corporate action on the part of each Borrower
and this agreement has been duly executed and delivered by each Borrower; and
on and as of the date hereof.
This agreement 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. This agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
Except as otherwise expressly provided therein, nothing herein shall be
deemed to amend or modify any provisions of the Loan Agreement or any of the
other Loan Documents, each of which shall remain in full force and effect.
This Agreement is not intended to be nor shall it be construed to create, a
novation or an accord and satisfaction and the Loan Agreement as herein
modified shall continue in full force and effect.
This agreement 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.
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
AGREEMENT.
Very truly yours,
THE CIT GROUP/CREDIT FINANCE, INC.
By: /s/ BRUCE HILOWITZ
---------------------------------
Title: VICE PRESIDENT
<PAGE> 4
TELTRONICS, INC.
("Borrower")
By: /s/ EWEN R. CAMERON
- -----------------------------
Title: President & CEO
Attest: /s/ PAUL D. SHRADER
- -----------------------------
Title: VP Finance
[CORPORATE SEAL]
AT SUPPLY, INC.
("Borrower")
By: /s/ PAUL D. SHRADER
- -----------------------------
Title: Secretary, Treasurer
Attest: /s/ SUSAN MASLANKA
[CORPORATE SEAL]
<PAGE> 5
CONSENTED TO:
TTG ACQUISITION CORP.
("Guarantor")
By: /s/ EWEN R. CAMERON
- -------------------------------
Title: President
Attest: /s/ SUSAN MASLANKA
[CORPORATE SEAL]
/s/ NORMAN R. DOBIESZ (SEAL)
- -------------------------------
Norman R. Dobiesz ("Guarantor")
<PAGE> 1
EXHIBIT 10.3
Florida documentary stamp tax required by law in the amount of
$914.90 has been paid or will be paid directly to the
Department of Revenue. Certificate of Registration #__________.
[Barnett Bank Logo]
PROMISSORY NOTE
<TABLE>
<CAPTION>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$261,382.00 04-22-1996 04-22-1999 06900005775 A100 40 0494
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular
loan or item.
</TABLE>
<TABLE>
<S> <C> <C>
Borrower: Teltronics, Inc. Lender: BARNETT BANK OF MANATEE COUNTY, N.A.
2150 Whitfield Industrial Way 1001 3rd Avenue West
Sarasota, FL 34243 P.O. Box 9390
Bradenton, FL 34206
</TABLE>
Principal Amount: $261,382.00 Date of Note: April 22, 1996
PROMISE TO PAY. Teltronics, Inc., jointly and severally if more than one
("Borrower"), promises to pay to BARNETT BANK OF MANATEE COUNTY, N.A.
("Lender"), or order, in lawfully obtained money of the United States of
America, the principal amount of Two Hundred Sixty One Thousand Three Hundred
Eighty Two & 00/100 Dollars ($261,382.00), together with interest on the unpaid
principal balance from date(s) of disbursement, until paid in full as set forth
herein.
PAYMENT. Subject to any payment changes resulting from changes in the index,
Borrower will pay this loan in 35 principal payments of $3,816.17 each and one
final principal and interest payment of $128,384.14. Borrower's first principal
payment is due May 22, 1996, and all subsequent principal payments are due on
the same day of each month after that. In addition, Borrower will pay regular
monthly payments of all accrued unpaid interest due as of each payment date.
Borrower's first interest payment is due May 22, 1996, and all subsequent
interest payments are due on the same day of each month after that. Borrower's
final payment due April 22, 1999, will be for all principal and accrued interest
not yet paid. Interest on this Note is computed on a 365/360 simple interest
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by the
outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender's address
shown above or at such other place as Lender may designate in writing. Payments
shall be allocated between principal, interest, costs, fees, if any, in the
discretion of Lender. Any payment to be debited from Borrower's designated
account will be debited on the scheduled due date; however, if the scheduled due
date is on a weekend or holiday, the payment will be debited on the next
non-weekend/holiday day.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is the Barnett Banks, Inc.
prime rate (the ("Index"). This is the rate Barnett Banks, Inc. announces from
time to time as its prime rate. The interest rate will be adjusted to reflect a
change in the index on the same day as the index changes. The interest rate to
be applied to the unpaid balance of this Note will be at a per annum rate of
1.000 percentage point over the index. Lender will tell Borrower the current
index rate upon Borrower's request. NOTICE: Under no circumstances will the
effective rate of interest on this Note be more than the maximum rate allowed by
applicable law. Upon demand for payment of this Note, the interest rate on this
Note to be applied to the unpaid balance or principal, unpaid accrued interest,
costs and fees, to be applicable until paid in full, will be the highest
interest rate permitted by applicable law.
PREPAYMENT. Borrower may pay all or a portion of the amount owed earlier than
it is due. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower's obligation to continue to make payments under
the payment schedule. Rather, they will reduce the principal balance due and
may result in Borrower making fewer payments.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.000% of the unpaid portion of the regularly scheduled payment or $100,000,
whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due; (b) Borrower breaks any written
promise Borrower has made to Lender, or Borrower fails to perform promptly at
the time and strictly in the manner provided in this Note or in any written
agreement related to this Note, or in any other written agreement or loan
Borrower has with Lender, contingent or absolute, due or to become due, now or
hereafter existing; (c) A breach of any term or condition of any security
agreement, pledge agreement, mortgage loan agreement or any other agreement
related to or securing this Note regardless if said document is executed by
Borrower, any guarantor or a third-party not liable for this Note, upon which a
cure period, if any, contained in said agreement has expired; (d) suspension,
liquidation, sale or transfer of Borrower's business or assets; (e) Any
representation, warranty, statement or report made or furnished to Lender by
Borrower or on Borrower's behalf is false, or misleading in any material
respect; (f) Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit of creditors,
or any proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws; (g) Any creditor tries to take any of Borrower's
property on or in which Lender has a lien or security interest. This includes
a garnishment of any of Borrower's accounts with Lender; (h) Failure of
Borrower to furnish Lender within thirty (30) days after written request by
Lender, current financial statements, including income tax returns, in form
satisfactory to Lender or to permit inspection of any of Borrower's books or
records; (i) The issuance of any tax levy or lien against Borrower or
Borrower's failure to pay, withhold, collect or remit any tax when assessed or
due; (j) The filing of formal charges under any federal or state law against
Borrower or Borrower's assets which forfeiture is a potential penalty; (k) Any
of the events described in this default section occurs with respect to any
guarantor of this Note; (l) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest, costs and fees immediately
due, without notice, and then Borrower will pay that amount. Upon default, or
if this Note is not paid at final maturity, Lender, at its option, may add any
unpaid accrued interest, costs and fees to principal and such sum will bear
interest therefrom until paid, at the rate provided in this Note but in no event
at an effective total interest rate on this Note greater than the rate permitted
by applicable law. Lender may hire or pay someone else to help collect this Note
if Borrower does not pay. Borrower also will pay Lender the amount of these
costs and expenses, which includes, subject to any limits under applicable law,
Lender's reasonable attorneys' fees and Lender's legal expenses whether or not
there is a lawsuit, including reasonable attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law. This Note shall be
governed by and construed in accordance with the laws of the State of Florida.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays in later dishonored.
RIGHT OF SETOFF. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge, withdraw or setoff all sums owing on this Note
against any and all the accounts set forth below in the Accounts section
without prior demand or notice to Borrower.
<PAGE> 2
04-22-1996 PROMISSORY NOTE Page 2
Loan No 06900005775 (Continued)
================================================================================
ACCOUNTS. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all of Borrower's right, title and interest in and to, Borrower's
deposits, accounts (whether checking, savings, or some other account), or
securities now or hereafter in the possession of or on deposit with Lender or
with any Barnett Banks, Inc. affiliate or subsidiary including without
limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts.
GARNISHMENT. Borrower consents to the issuance of a continuing writ of
garnishment or attachment against Borrower's disposable earnings, in accordance
with Section 222.11, Florida Statutes, in order to satisfy, in whole or in
part, any money judgment entered in favor of Lender.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact
will not affect the rest of the Note. Borrower does not agree or intend to
pay, and Lender does not agree or intend to contract for charge, collect, take,
reserve or receive (collectively referred to herein as "charge or collect"),
any amount in the nature of interest or in the nature of a fee for this loan,
which would in any way or event (including demand, prepayment, or acceleration)
cause Lender to charge or collect more for this loan than the maximum Lender
would be permitted to charge or collect by federal law or the law of the State
of Florida (as applicable). Any such excess interest or unauthorized fee
shall, instead of anything stated to the contrary, be applied first to reduce
the principal balance of this loan, and when the principal has been paid in
full, be refunded to Borrower. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower and any other
person who signs, guarantees or endorses this Note, to the extend allowed by
law, waive presentment, demand for payment, protest and notice of dishonor and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note. Upon any change in the terms
of this Note, and unless otherwise expressly stated in writing, no party who
signs this Note, whether as maker, guarantor, accommodation maker or endorser,
shall be released from liability. All rights, powers, privileges and
immunities herein granted to Lender shall extend to its successors and assigns
and any other legal holder of this Note. All rights, powers, privileges and
immunities of Borrower hereunder may not in any way be assigned, transferred or
sold. Lender at any time is authorized to correct patent errors herein. All
such parties agree that Lender may renew, modify, substitute, consolidate or
extend (repeatedly and for any length of time) this loan, or release any party
or guarantor or collateral; or impair, fail to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to, acknowledgement or agreement by
anyone. All such parties also agree that Lender may modify this loan without
the consent of or notice to anyone other than the party with whom the
modification is made. This Note constitutes the entire understanding and
agreement of the parties as to the matters set forth in this Note and
supersedes all prior understandings and correspondence, oral or written, with
respect to the subject matter hereof. No alteration of or amendment to this
Note shall be effective unless given in writing and signed by Lender. Borrower
acknowledges that this Note evidences a loan made primarily for business,
commercial or agricultural purposes and not primarily for personal, family or
household purposes. When this Note becomes due, by default, demand or
maturity, Lender may, at its option, demand, sue for, collect, or make any
compromise or settlement it deems desirable with reference to any collateral
pledged or granted for this Note. Lender shall not be bound to take any steps
necessary to preserve any rights in any such collateral against prior parties.
Lender shall have no duty with respect to collection or protection of any such
collateral or of any income of any such on the collateral as to the
preservation of any rights pertaining to any such collateral beyond safe
custody. Borrower authorizes Lender to exchange Lender's deposit, credit and
borrowing information about Borrower with third parties. Borrower agrees to
indemnify and hold Lender harmless against liability for the payment for
documentary stamp and intangible taxes (including interest and penalties) (if
applicable), which may be determined to be payable with respect to this
transaction. If this Note is renewed, modified, extended, substituted or
consolidated, although Lender is under no duly to do so, Lender may, without
Borrower's or any guarantor's consent: (a) advance the maximum amount of
principal then available the day prior to said occurrence, (b) deposit said
amount in Borrower's account with Lender the day prior to said occurrence, (c)
withdraw said amount from Borrower's account with Lender the day after said
occurrence, and (d) apply said amount to the principal amount then outstanding.
Said procedures are intended to minimize Borrower's documentary stamp tax
and/or intangible tax liabilities (if applicable) although Borrower will be
fully responsible for accrued interest on the amount of principal advanced for
said procedure. If this Note represents a renewal, modification, extension,
substitution or consolidation of a Note owed to Lender, then Borrower
acknowledges and agrees that there are no claims, setoffs, avoidances,
counterclaims or defenses or rights to claims, setoffs, avoidances,
counterclaims or defenses to enforcement of this Note.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
Teltronics, Inc.
By: /s/ Ewen R. Cameron
---------------------------------
Ewen R. Cameron, President
<PAGE> 3
[Barnett Bank Logo]
DISBURSEMENT REQUEST AND AUTHORIZATION
<TABLE>
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C>
$261,382.00 04-22-1996 04-22-1999 06900005775 A100 40 0494
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular
loan or item.
Borrower: Teltronics, Inc. Lender: BARNETT BANK OF MANATEE COUNTY, N.A.
2150 Whitfield Industrial Way 1001 3rd AVENUE WEST
Sarasota, FL 34243 P.O. BOX 9390
BRADENTON, FL 34206
====================================================================================================================================
</TABLE>
LOAN TYPE. This is a Variable Rate (1.000% over Barnett Banks, Inc.'s
announced from time to time), Principal Plus Interest Loan to a Corporation
for $261,382.00 due on April 22, 1999.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:
[ ] Personal, Family, or Household Purposes or Personal Investment.
[ ] Business (including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: To finance
equipment.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $261,382.00 as follows:
<TABLE>
<S> <C>
Amount paid to others on Borrower's behalf: $261,382.00
$193,382.00 to Amistar Corporation
$68,000.00 to DEK USA, Inc.
Other Charges Financed: $ 0.00
-----------
Note Principal: $261,382.00
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash: $ 0.00
Other Charges Paid in Cash: $ 1,214.90
$37.00 UCC Recording - Secretary of State - Florida
$250.00 Loan Processing Fee
$7.00 Corporate Search
$6.00 UCC Search
$914.90 Documentary Stamp
-----------
Total Charges Paid in Cash: $ 1,214.90
</TABLE>
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED APRIL 22, 1996.
BORROWER:
Teltronics, Inc.
By: /s/ Ewen R. Cameron, President
---------------------------------
Ewen R. Cameron, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10QSB FOR QUARTERLY PERIOD ENDED JUNE 30,
1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 62,370
<SECURITIES> 0
<RECEIVABLES> 4,837,664
<ALLOWANCES> 0
<INVENTORY> 3,068,580
<CURRENT-ASSETS> 8,393,631
<PP&E> 1,871,236
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,816,899
<CURRENT-LIABILITIES> 8,086,517
<BONDS> 0
0
0
<COMMON> 2,611
<OTHER-SE> 2,200,644
<TOTAL-LIABILITY-AND-EQUITY> 10,816,899
<SALES> 13,309,261
<TOTAL-REVENUES> 13,309,261
<CGS> 8,957,747
<TOTAL-COSTS> 4,247,476
<OTHER-EXPENSES> (20,910)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 259,863
<INCOME-PRETAX> (134,915)
<INCOME-TAX> 0
<INCOME-CONTINUING> (134,915)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (134,915)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
