U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the Quarterly Period Ended June 30, 1999.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the Transition Period from __________ to __________.
COMMISSION FILE NUMBER: 0-17893
TELTRONICS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
--------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
59-2937938
---------------------------------------
(I.R.S. Employer Identification Number)
2150 WHITFIELD INDUSTRIAL WAY
SARASOTA, FLORIDA 34243
------------------------------------------------------------
(Address of principal executive offices, including zip code)
941-753-5000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 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 [ ]
As of July 30, 1999 there were 4,054,522 shares of the Registrant's Common
Stock outstanding.
<PAGE>
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS....................................3-13
Consolidated Balance Sheets at June 30, 1999 and
December 31, 1998........................................3-4
Consolidated Statements of Operations for the Three
Months and Six Months ended June 30, 1999 and 1998.........5
Consolidated Statements of Cash Flows for the
Six Months ended June 30, 1999 and 1998..................6-7
Notes to Interim Consolidated Financial Statements......8-13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................14-19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.........................................20
ITEM 2. CHANGES IN SECURITIES.....................................20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES...........................20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS..........................................20
ITEM 5. OTHER INFORMATION.........................................20
ITEM 6A. EXHIBITS..................................................20
ITEM 6B. REPORTS ON FORM 8-K.......................................20
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,148,682 $ 136,467
Accounts receivable, net of
allowance for doubtful accounts
of $145,000 at June 30, 1999
and $110,000 at December 31, 1998 4,561,617 4,755,963
Inventories, net 4,683,272 3,863,371
Prepaid expenses and other
current assets 227,837 307,413
----------- -----------
Total current assets 10,621,408 9,063,214
----------- -----------
PROPERTY AND EQUIPMENT, NET 4,252,520 4,422,722
----------- -----------
OTHER ASSETS 883,828 944,833
----------- -----------
Total assets $15,757,756 $14,430,769
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of
long-term debt $ 5,629,340 $ 4,184,639
Current portion of capital
lease obligations 301,781 315,605
Accounts payable 3,280,682 2,913,161
Accrued expenses and other
current liabilities 1,233,669 821,572
Deferred income 458,605 159,757
----------- -----------
Total current liabilities 10,904,077 8,394,734
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt, net of current
portion 1,321,405 2,870,887
Capital lease obligations, net of
current portion 458,511 546,401
----------- -----------
Total long-term liabilities 1,779,916 3,417,288
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value,
40,000,000 shares authorized,
4,054,522 and 3,478,139 issued and
outstanding at June 30, 1999 and
December 31, 1998, respectively. 4,056 3,480
Non-voting common stock, $.001 par
value, 5,000,000 shares authorized,
zero shares issued and outstanding. 0 0
Preferred Series A stock, $.001 par
value, 100,000 shares authorized,
100,000 shares issued and outstanding
at June 30, 1999 and December 31, 1998. 100 100
Preferred Series B Convertible stock,
$.001 par value, 25,000 shares
authorized, 12,625 and 25,000 shares
issued and outstanding at June 30, 1999
and December 31, 1998. 13 25
Additional paid-in capital 16,624,672 16,443,371
Accumulated deficit (13,555,078) (13,828,229)
----------- -----------
Total shareholders' equity 3,073,763 2,618,747
----------- -----------
Total liabilities and
shareholders' equity $15,757,756 $14,430,769
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 7,853,946 $ 6,397,011 $14,678,932 $13,036,533
Cost of goods sold 3,837,164 3,469,406 7,366,976 7,584,778
----------- ----------- ----------- -----------
GROSS PROFIT 4,016,782 2,927,605 7,311,956 5,451,755
----------- ----------- ----------- -----------
OPERATING EXPENSES:
General and
administrative 1,025,275 845,175 1,877,721 1,838,118
Sales and marketing 1,431,662 1,123,374 2,726,498 2,326,200
Research and
development 853,342 703,498 1,791,078 1,355,877
----------- ----------- ----------- -----------
3,310,279 2,672,047 6,395,297 5,520,195
----------- ----------- ----------- -----------
Income (loss)
from operations 706,503 255,558 916,659 (68,440)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest (228,009) (184,395) (436,388) (421,022)
Financing (68,121) (36,883) (171,360) (101,101)
Litigation costs (26,492) 0 (48,177) (4,096)
Gain on dispositions 0 100,000 111,614 1,248,250
Other 11,342 56,287 35,688 76,120
----------- ----------- ----------- -----------
(311,280) (64,991) (508,623) 798,151
----------- ----------- ----------- -----------
Income before income
taxes 395,223 190,567 408,036 729,711
Income tax expense (300) 0 0 0
----------- ----------- ----------- -----------
NET INCOME 395,523 190,567 408,036 729,711
Dividends on Preferred
Series B Convertible
Stock 59,875 75,000 134,875 100,000
----------- ----------- ----------- -----------
Income attributable to
Common Shareholders $ 335,648 $ 115,567 $ 273,161 $ 629,711
=========== =========== =========== ===========
INCOME PER SHARE:
Basic $ .09 $ .03 $ .08 $ .18
=========== =========== =========== ===========
Diluted $ .08 $ .03 $ .07 $ .18
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 408,036 $ 729,711
Adjustments to reconcile net
income to net cash flows provided
by (used in) operating activities:
Bad debt expense 35,200 42,200
Provision for obsolete inventory 58,883 92,045
Depreciation and amortization 670,135 447,144
Gain on dispositions (111,614) (1,248,250)
Amortization of deferred
financing costs 82,341 0
Amortization of goodwill 3,121 0
Changes in operating assets and
liabilities, net of dispositions:
Accounts receivable 159,146 (185,199)
Inventories (778,794) 218,780
Prepaid expenses and other
current assets 79,576 (516,829)
Accounts payable 367,521 318,006
Accrued expenses and other liabilities 412,097 139,412
Deferred income 298,848 (76,200)
----------- -----------
Net cash flows provided by (used in)
operating activities 1,684,496 (39,180)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (355,373) (482,781)
Decrease in other assets 91,820 94,679
Proceeds from dispositions 111,614 150,000
Proceeds from sale of assets 0 1,000
Acquisition of assets of Cascade
Technology Corporation (57,500) 0
----------- -----------
Net cash flows used in investing
activities (209,439) (237,102)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payment) from line
of credit (27,159) 668,067
Loan proceeds 2,220 1,328,212
Principal repayments of loans,
notes and leases (303,028) (1,153,726)
Dividends on Preferred Series B
Convertible Stock (134,875) (100,000)
----------- -----------
Net cash flows provided by
(used in) financing activities (462,842) 742,553
----------- -----------
Net increase in cash 1,012,215 466,271
Cash - beginning of period 136,467 435,538
----------- -----------
Cash - end of period $ 1,148,682 $ 901,809
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - Continued
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------
1999 1998
----------- -----------
<S> <C> <C>
SUPPLEMENTAL NON-CASH FINANCING AND
INVESTING ACTIVITIES:
Conversion of Preferred Stock
to Common Stock $ 1,237,500 $ 0
=========== ===========
Acquisition of assets of Cascade
Technology Corporation $ 181,865 $ 0
=========== ===========
Lease of fixed assets $ 73,560 $ 61,998
=========== ===========
Issuance of non-interest bearing note $ 47,913 $ 0
=========== ===========
Issuance of preferred stock $ 0 $ 2,500,000
=========== ===========
Cancellation of unpaid shares
issued pursuant to Employee Stock
Payment Plan $ 0 $ 1,191,500
=========== ===========
Issuance of warrants $ 0 $ 569,600
=========== ===========
Note receivable from disposition
of AT Supply $ 0 $ 200,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
TELTRONICS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND BASIS OF PRESENTATION
Teltronics, Inc. ("Teltronics" or "Company"), a Delaware corporation,
designs, develops, manufactures and markets electronic hardware and
application software products, and engages in contract manufacturing for
the telecommunication industry. Through its majority owned subsidiary,
Interactive Solutions, Inc. ("ISI") it has also engaged in the design and
manufacturing of a small, Pentium(R) powered, multimedia computer for the
mobile computer industry.
The accompanying consolidated financial statements include the accounts of
the Company and is comprised of its wholly-owned subsidiaries TTG
Acquisition Corp. and TELTRONICS/SRX, Inc., and its 80% formerly owned
subsidiary AT Supply, Inc. ("AT Supply"), and its 85% owned subsidiary
Interactive Solutions, Inc. ("ISI"). AT Supply was sold on March 6, 1998.
All significant intercompany transactions and balances have been eliminated
in consolidation.
The unaudited consolidated financial statements and related notes have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and on substantially the same basis as the annual
consolidated financial statements. In the opinion of management, the
consolidated financial statements reflect all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
financial position, operating results, and cash flows for those periods
presented. Operating results for the six month period ended June 30, 1999
are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. These consolidated financial statements
should be read in conjunction with the consolidated financial statements,
and notes thereto, for the year ended December 31, 1998, as presented in
the Company's annual report on Form 10-K.
NOTE 2 - ACQUISITIONS
On February 19, 1999, the Company acquired certain assets and the
technology of Cascade Technology Corporation ("Cascade"). The Company
acquired all of Cascade's rights to and in certain technology for a
DiscoverMATE panel link display, open sales orders and other purchased
assets described in the Agreement. The display is sold to Ford Visteon,
Chrysler, General Motors, Kelsey Hayes and other companies.
The Company delivered an aggregate of 126,383 restricted shares (including
52,117 shares in escrow for potential claims by the Company) of its voting
common stock for selected assets of Cascade. The holders of these
restricted shares have been granted certain registration rights under a
Registration Rights Agreement which allows them to elect to have their
shares registered if the Company proposes to register any of its securities
under the Securities Act of 1933, as amended, in an offering for cash. In
addition, the Company paid $57,500 at closing and issued a non-interest
bearing note for $47,913 that was paid in June, 1999.
The acquisition has been accounted for using the purchase method of
accounting. The purchase price has been assigned to the net assets
acquired based on management's estimate of the fair value of such assets
and liabilities at the date of acquisition as follows:
Inventory $ 100,000
Fixed assets 71,000
Goodwill and identifiable intangible assets 116,278
Notes payable (47,913)
-----------
Net assets acquired $ 239,365
===========
8
<PAGE>
The excess cost over fair value of the net assets acquired (goodwill) and
identifiable tangible assets are being amortized on a straight-line basis
as follows:
$ Life
----------- -----------
Customer List $ 35,000 5 years
Patent 35,000 14 years, 7 months
Goodwill 46,278 15 years
NOTE 3 - DISPOSITIONS
On March 6, 1998, the Company sold the assets and liabilities of AT Supply,
a majority owned subsidiary. The subsidiary was sold to the minority
owners of the subsidiary for $424,836 in cash and a note receivable for
$200,000. Interest on the note receivable is payable at 12% and principal
and interest are due monthly over three years starting April 1, 1998. The
note receivable is secured by a second lien on assets and is personally
guaranteed by the principals of the buyer. The buyer paid $972,450 at
closing to terminate all liens and security interests with the Company's
principal lender. The buyer assumed responsibility for payment of all
liabilities. The Company recognized a gain of $1,148,250 during the
quarter ending March 31, 1998. Revenues and net income for AT Supply were
$1,278,000 and $6,000, respectively for the quarter ended March 31, 1998.
On April 23, 1998, the Company sold the customer list and maintenance and
support agreements for the ORBi-TEL for Windows and non-Unix call
accounting product lines to MDR Telemanagement Limited. These product
lines were sold for $100,000 in cash, a contingent consideration payable in
one year of $112,000 and a 30% commission based on sales, payable monthly
for one year. The Company recognized a gain of $100,000 during the quarter
ending June 30, 1998 and a gain of $111,614 during the quarter ended March
31, 1999. Revenues for these product lines were $82,000 for the six months
ending June 30, 1998.
NOTE 4 - NET INCOME PER SHARE
Basic net income per share is computed by dividing net income, adjusted for
preferred stock dividends, by the weighted average number of issued common
shares outstanding during the applicable period. Diluted net income per
share is computed by dividing net income, adjusted for preferred stock
dividends, by the weighted average number of issued common shares, adjusted
for potential common shares. Potential common shares consist of
convertible preferred stock, stock options (vested and unvested) and
warrants and are computed using the treasury stock method. Common
equivalent shares for 1999 and 1998 relating to Preferred Series B
Convertible Stock were anti-dilutive and were not included in the
calculation of diluted net income per share.
9
<PAGE>
The following unaudited table sets forth the computation of basic and
diluted earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
BASIC
Net income $ 395,523 $ 190,567 $ 408,036 $ 729,711
Preferred dividends (59,875) (75,000) (134,875) (100,000)
---------- ---------- ---------- ----------
Income attributable to
common shareholders $ 335,648 $ 115,567 $ 273,161 $ 629,711
---------- ---------- ---------- ----------
Weighted average shares
outstanding 3,726,500 3,415,513 3,630,936 3,415,513
========== ========== ========== ==========
Net income per share $ .09 $ .03 $ .08 $ .18
========== ========== ========== ==========
DILUTED
Net income $ 395,523 $ 190,567 $ 408,036 $ 729,711
Preferred dividends (59,875) (75,000) (134,875) (100,000)
---------- ---------- ---------- ----------
Income attributable to
common shareholders $ 335,648 $ 115,567 $ 273,161 $ 629,711
========== ========== ========== ==========
Weighted average shares
outstanding 3,726,500 3,415,513 3,630,936 3,415,513
Net effect of dilutive
stock options 230,552 106,030 121,736 89,194
Net effect of dilutive
warrants 278,208 121,554 139,104 60,777
---------- ---------- ---------- ----------
Dilutive potential
common shares 4,235,260 3,643,097 3,891,776 3,565,484
========== ========== ========== ==========
Net Income per share $ .08 $ .03 $ .07 $ .18
========== ========== ========== ==========
</TABLE>
NOTE 5 - INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Raw materials $ 3,573,674 $ 2,909,470
Work-in-process 1,069,114 825,631
Finished goods 1,175,125 1,204,018
Allowance for obsolete inventory (1,134,641) (1,075,748)
----------- -----------
$ 4,683,272 $ 3,863,371
=========== ===========
</TABLE>
NOTE 6 - LONG TERM DEBT
On February 25, 1998, the Company issued $1,750,000 of Subordinated Secured
Debentures (the "Debentures"). The proceeds of the Debentures were used
for the partial repayment of the $4,250,000 Convertible Debentures issued
on February 13, 1997. Interest is paid at 12% per annum, payable quarterly
starting May 1, 1998. The Debentures are due February 13, 2002 and fees
paid in connection with the Debentures totaled $8,750. The Debentures do
not have a prepayment penalty and are collateralized by a first lien on
fixed assets and a second lien on all other assets. The Holder of the
10
<PAGE>
Debentures received 525,000 warrants to purchase the Company's Common Stock
at an exercise price of $2.75 per share. These warrants are exercisable in
whole, or in part, at any time during a five-year period beginning on the
date of issuance. The Debentures contain certain financial covenants,
including restrictions which could affect future funding of ISI by the
Company.
On March 29, 1999, the Company and Sirrom Capital Corporation ("Sirrom")
amended and restated the $1,750,000 of Subordinated Secured Debentures
originally entered into on February 25, 1998 and due February 13, 2002.
The Debentures have a revised maturity of $500,000 on April 30, 2000 and
$1,250,000 on February 13, 2002. The $500,000 has been classified as long
term debt at December 31, 1998 and current portion of long term debt at
June 30, 1999.
On February 25, 1998, the Company entered into senior Secured Loans
("Loans") for $1,000,000 and $280,000. The proceeds of the Loans were used
for working capital ($1,000,000) and to repay the $290,300 term loan
agreement. Interest is paid at 12% per annum. The $1,000,000 loan was due
February 25, 1999 and interest is payable quarterly starting May 15, 1998.
The monthly principal and interest payment on the $280,000 loan is $10,272
starting May 15, 1998 and the note is due October 1, 2000. Fees paid in
connection with these Loans totaled $32,000. The Loans do not have a
prepayment penalty and are collateralized by a first lien on property and
equipment and a second lien on all other assets. The holder of the Loans
received 365,000 warrants to purchase the Company's Common Stock at an
exercise price of $2.75 per share. These warrants are exercisable in whole
or in part, at any time during a five-year period beginning on the date of
issuance. The Loan contains certain financial covenants, including
restrictions which could affect future funding of ISI by the Company.
On March 29, 1999, the Company and Sirrom amended and restated the
$1,000,000 Loan Agreement originally entered into on February 25, 1998 and
originally due February 25, 1999. The Loan Agreement has a revised
maturity of April 30, 2000. If the Loan is not repaid by September 30,
1999, the interest rate increases from 12% to 13.5%. This Loan has been
classified as long-term debt at December 31, 1998 and current portion of
long term debt at June 30, 1999.
NOTE 7 - SHAREHOLDERS' EQUITY
The total number of shares of all classes of capital stock which the
Company has the authority to issue is 50,000,000 shares divided into three
classes of which 5,000,000 shares, par value $.001 per share are designated
Preferred stock, 40,000,000 shares, par value $.001 per share are
designated Common stock and 5,000,000 shares, par value $.001 per share,
are designated Non-Voting Common stock.
(A) PREFERRED STOCK - On February 16, 1998, the Company reduced the number
of authorized shares designated as Preferred Series A Stock from 250,000 to
100,000 such shares.
On February 16, 1998, the Company authorized 25,000 shares of Preferred
Series B Convertible Stock at a par value of $.001 per share.
On February 25, 1998, the Company issued $2,500,000 of Preferred Series B
Convertible Stock. The Company issued 25,000 shares at a par value of
$.001 per share. The proceeds were used for the partial repayment of the
$4,250,000 Convertible Debentures issued on February 13, 1997. The
Preferred Series B Convertible Stock provides for a $12 per share annual
dividend, payable quarterly starting May 15, 1998. The dividend increases
to $20 after four years. Fees paid in connection with this Preferred Stock
totaled $12,500. The holder of the Preferred Series B Convertible Stock
has the right at its option to convert to the Company's Common Stock at
$2.75 per share. The Preferred Series B Convertible Stock cannot be
called for two years and after two years, only if the twenty-day average
bid price of the Company's common stock exceeds $5.50 per share. After
four years, the Company has the right to
11
<PAGE>
redeem the Preferred Series B Convertible Stock in full at 100% of the face
value plus accrued and unpaid dividends. The Preferred Series B
Convertible Stock contains certain financial covenants.
During the quarter ended June 30, 1999, 12,375 shares of the Company's
Preferred Series B Convertible Preferred Stock were converted into 450,000
shares of common stock at a conversion price of $2.75 per share.
(B) COMMON STOCK - During the quarter ended June 30, 1999, 12,375 shares of
the Company's Preferred Series B Convertible Preferred Stock were converted
into 450,000 shares of common stock at a conversion price of $2.75 per
share.
(C) WARRANTS - On February 25, 1998, the Company issued 890,000 warrants
to purchase the Company's common stock at an exercise price of $2.75 per
share. These warrants are exercisable in whole, or in part, at any time
during a five year period beginning on the date of issuance. The fair value
of the warrants was recorded as deferred financing costs and totaled $569,600.
This amount is being amortized to financing expense over the life of the
Subordinated Secured Debentures and Senior Secured Loans.
(D) EMPLOYEE STOCK PAYMENT PLAN - On February 16, 1998, the Company
cancelled the remaining 211,100 shares.
(E) CONSULTANT STOCK PAYMENT PLAN - On February 16, 1998, the Company
cancelled the remaining 105,000 shares.
NOTE 8 - SEGMENT INFORMATION
The Company's operations are classified into two reportable segments,
Teltronics and ISI. Each reportable segment is staffed separately,
requires different technology and marketing strategies and sells to
different customers.
The accounting policies of the Segments are the same. Intersegment sales
and transfers are recorded at Teltronics' cost plus a normal margin for
electronic manufacturing. Corporate overhead is allocated between
Teltronics and ISI based on estimated dollar usage for administration
expenses and net investment for interest. Company management evaluates
performance based on segment profit, which is net income or (loss) before
taxes, excluding nonrecurring gains or losses.
12
<PAGE>
The following table presents information about reportable segment
operations and assets.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------- ----------- ----------- -----------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES
Teltronics:
Telecommunications $ 7,846,000 $ 6,177,000 $14,727,000 $11,234,000
AT Supply (distri-
bution) (1) 0 0 0 1,278,000
ISI 8,000 276,000 25,000 646,000
Elimination of Inter-
segment sales 0 (56,000) (73,000) (121,000)
----------- ----------- ----------- -----------
Total sales $ 7,854,000 $ 6,397,000 $14,679,000 $13,037,000
=========== =========== =========== ===========
DEPRECIATION AND
AMORTIZATION
Teltronics:
Telecommunications $ 213,000 $ 218,000 $ 411,000 $ 406,000
AT Supply (distri-
bution) (1) 0 0 0 1,000
ISI 138,000 20,000 259,000 40,000
----------- ----------- ----------- -----------
Total depreciation
and amortization $ 351,000 $ 238,000 $ 670,000 $ 447,000
=========== =========== =========== ===========
INTEREST AND
FINANCING COSTS
Teltronics:
Telecommunications $ 171,000 $ 96,000 $ 358,000 $ 240,000
AT Supply (distri-
bution) (1) 0 0 0 32,000
ISI 125,000 125,000 250,000 250,000
----------- ----------- ----------- -----------
Total interest and
financing costs $ 296,000 $ 221,000 $ 608,000 $ 522,000
=========== =========== =========== ===========
SEGMENT PROFITS
Teltronics:
Telecommunications $ 1,083,000 $ 457,000 $ 1,663,000 $ (2,000)
AT Supply (distri-
bution) (1) 0 0 0 6,000
ISI (687,000) (366,000) (1,367,000) (522,000)
----------- ----------- ----------- -----------
Total $ 396,000 $ 91,000 $ 296,000 $ (518,000)
=========== =========== =========== ===========
Gain on dispositions 0 100,000 112,000 1,248,000
----------- ----------- ----------- -----------
Income before income
taxes $ 396,000 $ 191,000 $ 408,000 $ 730,000
=========== =========== =========== ===========
SEGMENT ASSETS
Teltronics:
Telecommunications $14,587,000 $11,750,000 $14,587,000 $11,750,000
AT Supply (distri-
bution) (1) 0 0 0 0
ISI 1,171,000 1,745,000 1,171,000 1,745,000
----------- ----------- ----------- -----------
Total segment assets $15,758,000 $13,495,000 $15,758,000 $13,495,000
=========== =========== =========== ===========
ACQUISITION OF PROP-
ERTY AND EQUIPMENT
Teltronics:
Telecommunications $ 147,000 $ 80,000 $ 266,000 $ 98,000
AT Supply (distri-
bution) (1) 0 0 0 0
ISI 43,000 169,000 89,000 385,000
----------- ----------- ----------- -----------
Total acquisition of
property and
equipment $ 190,000 $ 249,000 $ 355,000 $ 483,000
=========== =========== =========== ===========
</TABLE>
(1) AT Supply was sold on March 6, 1998.
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
A number of statements contained in this Quarterly Report on Form 10-Q are
forward-looking statements which are made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements involve a number of risks and uncertainties,
including the timely development and market acceptance of products and
technologies, competitive market conditions, successful integration of
acquisitions, the ability to secure additional sources of financing, the
ability to reduce operating expenses, the ability to comply with the rules
for inclusion in the Nasdaq Stock Market and other factors described in the
Company's filings with the Securities and Exchange Commission. The actual
results that the Company achieves may differ materially from any forward-
looking statements due to such risks and uncertainties.
RESULTS OF OPERATIONS
The following unaudited tables set forth certain data, expressed as a
percentage of revenue, from the company's consolidated Statements of
Operations for the three and six month periods ended June 30, 1999 and
1998.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 48.9% 54.2% 50.2% 58.2%
------ ------ ------ ------
Gross profit 51.1% 45.8% 49.8% 41.8%
------ ------ ------ ------
Operating expenses:
General and administrative 13.1% 13.2% 12.8% 14.1%
Sales and marketing 18.2% 17.6% 18.6% 17.8%
Research and development 10.8% 11.0% 12.2% 10.4%
------ ------ ------ ------
42.1% 41.8% 43.6% 42.3%
------ ------ ------ ------
Income (loss) from operations 9.0% 4.0% 6.2% (0.5%)
------ ------ ------ ------
Other income (expense):
Interest (2.9%) (2.9%) (3.0%) (3.2%)
Financing (0.9%) (0.6%) (1.2%) (0.9%)
Litigation costs (0.3%) 0.0% (0.3%) 0.0%
Gain on dispositions 0.0% 1.6% 0.8% 9.6%
Other 0.1% 0.9% 0.3% 0.6%
------ ------ ------ ------
(4.0%) (1.0%) (3.4%) 6.1%
------ ------ ------ ------
Income before income taxes 5.0% 3.0% 2.8% 5.6%
Income tax expense 0.0% 0.0% 0.0% 0.0%
------ ------ ------ ------
Net income 5.0% 3.0% 2.8% 5.6%
====== ====== ====== ======
</TABLE>
14
<PAGE>
THREE MONTHS ENDED JUNE 30, 1999 AND 1998.
Sales were $7,854,000 for 1999 as compared to $6,397,000 for 1998. This
increase was due to improved Remote Maintenance and Vision sales.
Gross profit was $4,017,000 or 51.1% for 1999 as compared to $2,928,000 or
45.8% for 1998. The increase was due to a change in product mix, with
increased Remote Maintenance and Vision sales and reduced low margin
electronic manufacturing sales.
General and administrative expenses were $1,025,000 for 1999 as compared to
$845,000 for 1998. The increase is due to increased payroll expense and
depreciation on tools and dies for the Mentis(R) computer.
Sales and marketing expenses were $1,432,000 for 1999 as compared to
$1,123,000 for 1998. The increase is due to increased payroll, commission
and travel expenses. The number of sales personnel has been increased to
improve sales.
Research and development expenses were $853,000 for 1999 as compared to
$703,000 for 1998. The increase was due to continued funding for ISI and
Teltronics Remote Maintenance and Vision products.
Income from operations was $707,000 for 1999 as compared to $256,000 for
1998. This increase relates to increased sales and margins.
Other expense was $311,000 for 1999 as compared to expense of $65,000 for
1998. Interest and financing was $296,000 for 1999 as compared to $221,000
for 1998. The customer list and maintenance and support agreements for the
OBRi-TEL for Windows contract maintenance business were sold to MDR
Telemanagement Limited in April, 1998 for a gain of $100,000 in the second
quarter of 1998.
Income tax expense was offset by a corresponding reduction in the deferred
tax asset valuation allowance.
The net income was $396,000 for 1999 as compared to a net income of
$191,000 for 1998.
SIX MONTHS ENDED JUNE 30, 1999 AND 1998.
Sales were $14,679,000 for 1999 as compared to $13,037,000 for 1998. This
increase was due to improved Remote Maintenance and Vision sales. The
prior year included $1,278,000 of AT Supply sales.
Gross profit was $7,312,000 or 49.8% for 1999 as compared to $5,452,000 or
41.8% for 1998. The increase was due to a change in product mix, with
increased Remote Maintenance and Vision sales and the sale of AT Supply.
General and administrative expenses were $1,878,000 for 1999 as compared to
$1,838,000 for 1998.
Sales and marketing expenses were $2,726,000 for 1999 as compared to
$2,326,000 for 1998. The increase is due to increased payroll, commission
and travel expenses. The number of sales personnel has been increased to
improve sales.
Research and development expenses were $1,791,000 for 1999 as compared to
$1,356,000 for 1998. The increase was due to continued funding for ISI and
Teltronics Remote Maintenance and Vision products.
15
<PAGE>
Income from operations was $917,000 for 1999 as compared to a loss from
operations of $68,000 for 1998. This increase relates to increased sales
and margins and the sale of AT Supply in the first quarter of 1998.
Other expense was $509,000 for 1999 as compared to income of $798,000 for
1998. Interest and financing was $608,000 for 1999 as compared to $522,000
for 1998. The customer list and maintenance and support agreements for the
OBRi-TEL for Windows contract maintenance business were sold to MDR
Telemanagement Limited in April, 1998 for a gain of $100,000 recorded in
the second quarter of 1998 and $112,000 recorded in the first quarter of
1999. AT Supply was sold for a gain of $1,148,000 during the first quarter
of 1998.
Income tax expense was offset by a corresponding reduction in the deferred
tax asset valuation allowance.
The net income was $408,000 for 1999 as compared to a net income of
$730,000 for 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash requirements were met with borrowings from The CIT Group/Credit
Finance ("CIT"). On December 22, 1998, the Ninth Amendment of the
Agreement with CIT was changed by the Company reducing the maximum
availability to $5,500,000 due to the sale of AT Supply.
The Company's working capital ratio was .974:1 at June 30, 1999 as compared
to 1.08:1 at December 31, 1998. Net working capital was ($283,000) at
June 30, 1999 as compared to $668,000 at December 31, 1998. Included in
current liabilities was $3,971,000 and $3,998,000 of borrowings under the
Company's line of credit at June 30, 1999 and December 31, 1998,
respectively. During the second quarter of 1999, $1,500,000 of Debentures
and loans with due dates of April 30, 2000 were reclassified from long-term
debt to current portion of long-term debt.
Net cash increased by $1,012,000 for the six months ended June 30, 1999 as
compared to a net cash increase of $466,000 for the six months ended June
30, 1998. Net cash flows from operating activities totaled $1,684,000 for
the six months ended June 30, 1999 as compared to cash flows used in
operating activities of $39,000 for the six months ended June 30, 1998.
Accounts receivable decreased by $159,000 for the six months ended June 30,
1999 as compared to an increase of $185,000 for the six months ended June
30, 1998. Inventories increased by $779,000 for the six months ended June
30, 1999 as compared to a decrease of $219,000 for the six months ended
June 30, 1998. This increase relates to inventory purchases made for
production scheduled for the third quarter of 1999.
Net cash flows used in investing activities totaled $209,000 for the six
months ended June 30, 1999 as compared to $237,000 for the six months ended
June 30, 1998. Acquisition of property and equipment totaled $355,000 for
the six months ended June 30, 1999 as compared to $483,000 for the six
months ended June 30, 1998. The decrease was due to reduced expenditures
for dies and molds for ISI.
Cash flows used in financing activities totaled $463,000 for the six months
ended June 30, 1999 as compared to cash flows provided by financing
activities of $743,000 for the six months ended June 30, 1998. The Company
borrowed $1,328,000 in the six months ended June 30, 1998.
The Company entered into an agreement on February 25, 1998 with Sirrom
Capital. Pursuant to this agreement, the Company issued $2,500,000 of
Preferred Series B Convertible Stock and $1,750,000 of 12% Subordinated
Secured Debentures due February 13, 2002. The proceeds of this financing
were
16
<PAGE>
used to repurchase $4,250,000 of 11% Subordinated Convertible Debentures
due on February 13, 2002. In connection with the Subordinated Secured
Debentures, the Company issued 525,000 warrants to purchase the Company's
Common Stock at an exercise price of $2.75 per share. The warrants were
recorded at fair value and are being amortized to financing expense over
the life of the related obligation. These warrants are exercisable in
whole, or in part, at any time during a five year period beginning on the
date of issuance.
On March 29, 1999, the Company and Sirrom amended and restated the
$1,750,000 of Subordinated Secured Debentures originally entered into on
February 25, 1998 and due February 13, 2002. The Debentures have a revised
maturity of $500,000 on April 30, 2000 and $1,250,000 on February 13, 2002.
The $500,000 has been classified as long-term debt at December 31, 1998 and
current portion of long term debt at June 30, 1999.
The Company borrowed $1,280,000 from Sirrom Capital under a Loan and
Security Agreement between the Company and Sirrom Capital dated February
25, 1998 ("Loan Agreement") and delivered its: (i) Secured Senior
Subordinated Promissory Note in the principal amount of $1,000,000 with
interest at 12% per annum maturing in February, 1999, the proceeds of which
were used for working capital of the Company and (ii) Secured Senior
Subordinated Promissory Note in the principal amount of $280,000 with
interest at 12% per annum maturing in October, 2000, the proceeds of which
were used to pay an equipment loan made to the Company by CIT. The Company
issued 365,000 warrants to purchase the Company's Common Stock at an
exercise price of $2.75 per share. The warrants were recorded at fair
value and are being amortized to financing expense over the life of the
related obligation. These warrants are exercisable in whole, or in part,
at any time during a five year period beginning on the date of issuance.
On March 29, 1999, the Company and Sirrom amended and restated the
$1,000,000 Loan Agreement originally entered into on February 25, 1998 and
originally due February 25, 1999. The Loan Agreement has a revised
maturity of April 30, 2000. If the Loan is not repaid by September 30,
1999, the interest rate increases from 12% to 13.5%. This Loan has been
classified as long-term debt at December 31, 1998 and current portion of
long-term debt at June 30, 1999.
YEAR 2000 READINESS DISCLOSURE
The Company is preparing for the impact of the arrival of the Year 2000 on
its business. The "Year 2000 Issue" is a term used to describe the
problems created by systems that are unable to accurately interpret dates
after December 31, 1999. These problems are derived predominantly from the
fact that many software programs have historically categorized the "year"
in a two-digit format. The Year 2000 Issue creates potential risks for the
Company, including potential problems in the Company's products as well as
in the Information Technology ("IT") and non-IT systems that the Company
uses in its business operations. The Company may also be exposed to risks
from third parties with whom the Company interacts who fail to adequately
address their own Year 2000 Issues.
The Company is pursuing an organized program to assure the Company's
products, production equipment and information systems and related
infrastructure will be year 2000 compliant. The Company's Year 2000
program includes four phases: (1) an audit and assessment phase designed to
identify Year 2000 issues; (2) a modification and testing phase designed to
correct year 2000 issues internally; (3) a purchase phase designed to
correct Year 2000 issues externally; and (4) an implementation and test
phase to install and test the system for Year 2000 compliance for external
purchases.
The Company has completed the audit and assessment phases for all products.
The modification of all products and related testing was completed by
December 31, 1998. Selected older and discontinued
17
<PAGE>
products are not Year 2000 compliant and customers have been advised. The
Company has established an Internet site as contemplated by the Year 2000
Readiness Disclosure Act to assist customers and provide information
related to the Year 2000 Issue. The cost to update products for year 2000
compliance was not significant and was completed in conjunction with
ongoing development efforts.
The Company has completed the audit and assessment of production equipment
and related infrastructure. Such equipment and infrastructure is year 2000
compliant.
The Company has completed an audit and assessment of the Year 2000 issue
for the computer system, which includes finance and production hardware and
software. The Company's computer system is not Year 2000 compliant. This
could cause a system failure or miscalculations, causing operation
disruption and a temporary inability to process transactions, send invoices
or engage in similar normal business activities.
The Company has leased a new computer system that is year 2000 compliant.
This system cost $570,000 and was capitalized in 1998. Internal costs are
expected to increase $100,000 per year due to the computer system
installation. The external installation and training costs are estimated
to be $130,000 and the installation was completed by April 30, 1999, which
was prior to any significant impact of the Year 2000 on its operating
systems. Training and installation costs of $100,000 related to the new
computer system have been expensed as of June 30, 1999. The $130,000 will
be paid from operating cash flow. The system installation should not defer
any additional systems projects.
The Company has initiated formal communications with its significant
suppliers to determine the extent to which its raw materials are vulnerable
to the Year 2000 Issue. If any suppliers indicate that they are not Year
2000 compliant, the Company plans to develop contingency plans to address
the issue.
There can be no assurance that the Company will be completely successful in
its efforts to address Year 2000 Issues. If the Company's products are not
Year 2000 compliant, the Company could suffer lost sales or other negative
consequences, including, but not limited to, diversion of resources, damage
to the Company's reputation, increased service and warranty costs and
litigation, any of which could materially adversely affect the Company's
business operations or financial statements.
The Company is also dependent on third parties, such as its customers,
suppliers, service providers and other business partners. If these or
other third parties fail to adequately address Year 2000 Issues, the
Company could experience a negative impact on its business operations or
financial statements. For example, the failure of certain of the Company's
principal suppliers to have Year 2000 compliant systems could impact the
Company's ability to manufacture and/or ship its products or to maintain
adequate inventory levels for production.
At the present time, the Company does not have a contingency plan to
operate in the event that its business systems, products and raw materials
are not Year 2000 compliant. If additional testing scheduled for the third
quarter of 1999 suggests that there is a significant risk that the computer
system, products, customers and raw materials might not be Year 2000
compliant, the Company anticipates developing a contingency plan.
Notice: Various statements in this discussion of year 2000 are forward-
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements include statements of the Company's
expectations, statements with regard to schedules, cost and expected
completion dates and statements regarding expected Year 2000 compliance.
These forward-looking statements are subject to various risk factors which
may materially affect the Company's efforts to achieve Year 2000
compliance. These risk factors include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to
install the new computer system on a timely basis, the ability to source
18
<PAGE>
Year 2000 compliant raw materials, customer and vendors systems, and the
completion of product modifications. The Company is attempting to reduce
the risks by utilizing an organized approach, extensive testing, and
allowance of ample contingency time to address issues identified by tests.
19
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is a party to litigation which arises in the
normal course of business. There is no litigation pending against the
Company which, if determined adversely, would have a material adverse
effect upon the business or financial condition of the Company.
In June, 1999, litigation was commenced against the Company and its ISI
subsidiary in U.S. Federal District Court, District of Delaware, by
Xybernaut Corporation alleging patent infringement. The litigation was
dismissed with prejudice and without costs on the merits in July, 1999.
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders on June 4, 1999, the stockholders of
the Company:
(1) Elected Norman R. Dobiesz, Ewen R. Cameron, Carl
S. Levine and Gregory G. Barr directors to serve
until the next annual meeting of the stockholders
(3,309,325 Common Stock votes and all of the
Series A Preferred and Series B Preferred stock
votes in favor, 8,092 votes withheld/abstentions);
and
(2) Ratified the appointment of Ernst & Young LLP as
the Company's independent auditors for the 1999
fiscal year (3,312,406 Common Stock votes and all
of the Series A Preferred and Series B Preferred
stock in favor, 4,625 votes opposed, 386
abstentions).
ITEM 5. OTHER INFORMATION
In June, 1999, Xybernaut Corporation and the Company entered into a License
Agreement relating to certain of the hardware covered by patents owned by
Xybernaut if the Company elects to manufacture or design products covered
by the Xybernaut patents.
On June 11, 1999, the Company entered into an agreement with Lucent Public
Safety Systems, a wholly-owned subsidiary of Lucent Technologies, to
distribute the Company's E911 switching system.
ITEM 6A. EXHIBITS
10.1 Amended and Restated Employment Agreement between the
Company and Ewen R. Cameron dated May 3, 1999.............(a)
10.2 Amended and Restated Employment Agreement between the
Company and Norman R. Dobiesz dated May 3, 1999...........(a)
27 Financial Data Schedule...................................(a)
ITEM 6B. REPORTS ON FORM 8-K - None
__________________________
(a) Filed as an Exhibit to this Quarterly Report on Form 10-Q for the Six
month period ended June 30, 1999.
20
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELTRONICS, INC.
July 30, 1999 /s/ Ewen R. Cameron
President & Chief Executive Officer
July 30, 1999 /s/ Mark E. Scott
Vice President Finance, Secretary,
Treasurer and Principal Accounting
Officer
21
TELTRONICS, INC.
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT ("Agreement") made as of May 1,
1999 by and between TELTRONICS, INC. a Florida corporation (the "Company")
having its principal place of business at 2150 Whitfield Industrial Way,
Sarasota, Florida 34243, and Ewen Cameron (the "Employee") currently
residing at 4243 Escondito Circle, Sarasota, Florida 34238.
BACKGROUND INFORMATION
The Company wishes to secure the continued employment services of the
Employee for a definite period of time and upon the particular terms and
conditions hereinafter set forth. Employee and the Company previously
entered an Amended And Restated Employment Agreement as of January 1, 1995
which Employee and the Company now intend to amend and restate by execution
of this Agreement. The Employee is willing to continue to be so employed.
Accordingly, Employee and the Company agree as follows:
OPERATIVE PROVISIONS
1. Employment and Term.
The Company hereby employs Employee and the latter hereby accepts
employment by the Company for the period commencing May 1, 1999 and
expiring December 31, 2005, which employment shall be automatically
extended for a successive five year period at the option of the Employee
exercisable by written notice to the Company at least ninety days prior to
December 31, 2005, unless it is terminated during the pendency of any such
period, whether initial or extended, by the occurrence of one of the events
described in paragraph 8 of this Agreement.
2. Duties.
During the term of this Agreement, whether initial or extended, the
Employee shall render to the Company services as Chief Executive Officer
and President, and shall perform such duties as may be designated by and
subject to the supervision of the Company's Board of Directors, and shall
serve in such additional capacities appropriate to his responsibilities and
skills as shall be designated by the Company, through action of its Board
of Directors. During such period, the Employee shall devote his full
attention, time and energies to the business and affairs of the Company
(subject to the terms of paragraph 4 below), and will use his best efforts
to promote the interests and reputation of the Company; provided that he
may pursue such non-competitive activities as do not materially interfere
with the performance of his obligations hereunder. Any question of
interpretation which may arise under the preceding proviso shall be
resolved by majority decision of the Company's Board of Directors. During
the term of this Agreement, without his written consent, the Company shall
not require Employee to perform services at any location other than
headquarters of the Company located in Sarasota, Florida.
3. Compensation.
For the services to be rendered by the Employee under this Agreement
the Company shall pay him, while he is rendering such services and
performing his duties hereunder, and the Employee shall accept as full
payment for such service, a base compensation of $325,000 per year
(inclusive of any amounts subject to employment related withholding
requirements), payable in arrears in equal installments on the last
business day of each month occurring during the period of employment or
otherwise as the parties may agree. Such base compensation shall be
increased on the first day of January of each year commencing January 1,
2000 by twenty-five thousand dollars ($25,000), and may from time to time
be supplemented by discretionary bonuses or other benefits payable from
time to time, all as determined by action of the Company's Board of
Directors. The Company shall have the right to pay the increases in base
compensation and any discretionary bonus in the form of securities of the
Company or any of its subsidiaries with the written approval of the
Employee.
In addition to the compensation described in this paragraph, Employee
shall be eligible to participate in any stock option plan that may be
adopted by the Company from time to time.
4. Vacation; Fringe Benefits; Reimbursement of Expenses.
The Employee shall be entitled to five (5) weeks of fully paid
vacation annually during the initial and each extended term of this
Agreement. He shall not be entitled to receive monetary or other valuable
consideration for vacation time to which he is entitled but does not take.
The timing of vacation periods shall be within the discretion of the
Company, reasonably exercised so as not to unnecessarily inconvenience the
Employee.
During this period of employment hereunder, the Employee shall further
be entitled to (a) such leave by reason of physical or mental disability or
incapacity and to such participation in medical and life insurance, pension
benefits, disability and other fringe benefit plans as the Company may
generally available to all of its executive employees from time to time;
subject, however, as to such plans, to such budgetary constraints or other
limitations as may be imposed by the Board of Directors of the Company from
time to time; (b) reimbursed for all normal and reasonable expenses
necessarily incurred by him in the performance of his obligations
hereunder, subject to such reasonable substantiation requirements as may be
imposed by the Company; and (c) a luxury automobile suitable for Employee
as an executive officer of the Company all costs of which including
specifically but not exclusively acquisition, maintenance, insurance and
operation shall be paid by the Company.
5. Proprietary Interests.
During and after the expiration of his term of employment with the
Company, the Employee shall not communicate or divulge to, or use for the
benefit of, any individual, association, partnership, limited partnership,
trust, corporation or other entity except the Company, any proprietary
information of the Company received by the Employee by virtue of such
employment, without being in receipt of the Board of Directors of the
Company's written consent to do so.
6. Restrictive Covenant.
During the term of his employment hereunder, the Employee shall not,
directly or indirectly, engage in or become an owner of, render any service
to, enter the employment of, or represent or solicit for any business which
competes with any activity of the Company conducted at any time during the
Employee's period of employment and which is located or active in any
country in which the Company shall maintain or intend to maintain any
activity. The parties expressly agree that the duration and geographical
area of this restrictive covenant are reasonable.
This covenant shall be construed as an agreement independent of any
other provision herein, and the existence of any claim or cause of action
of the Employee against the Company regardless of how arising, shall not
constitute a defense to the enforcement by the Company of its terms. If
any portion of the covenant is held by a court of law to be unenforceable
with respect either to its duration or geographical area, for whatever
reason, it shall be considered divisible both as to time and geographical
area, so that each month of the specified period shall be deemed a separate
period of time and each country or political subdivision thereof a separate
geographical area, resulting in an intended requirement that the longest
lesser period of time or largest lesser geographical area found by such
court to be a reasonable restriction shall remain an effective restrictive
covenant, specifically enforceable against the Employee.
Notwithstanding any statement contained in this paragraph 6 to the
contrary, legal or beneficial ownership by the Employee of a less than five
percent (5%) interest in a competitive corporation at least one class of
capital stock of which is publicly traded on a national or regional stock
exchange or by means of an electronic interdealer quotation system, shall
not be deemed to constitute a breach by the Employee of the terms hereof.
7. Remedies for Breach of Employee's Obligations.
The parties agree that the services of the Employee are of a personal,
specific, unique and extraordinary character and cannot be readily replaced
by the Company. They further agree that in the course of performing his
services, the Employee will have access to various types of proprietary
information of the Company, which, if released to others or used by the
Employee other than for the benefit of the Company, in either case without
the Company's consent, could cause the Company to suffer irreparable
injury. Therefore, the obligations of the Employee established under
paragraphs 5 and 6 hereof shall be enforceable both at law and in equity,
by injunction, specific performance, damages or other remedy; and the right
of the Company to obtain any such remedy shall be cumulative and not
alternative and shall not be exhausted by any one or more uses thereof.
8. Modification and Termination.
a. Modification. This Agreement may be amended or modified
only with the mutual written consent of the parties, and in its present
form comprises the entire agreement between the parties.
b. Termination - General. This Agreement is subject to
termination prior to the expiration of its initial or any extended term:
(i) if by the Employee, upon delivery to the Company of written notice of
such intention; and (ii) if by the Company, upon the occurrence of any one
of the following events, (a) the complete discontinuance of the Company's
activities, (b) the death of the Employee, (c) the physical or mental
disability of Employee which, in the judgment, reasonably exercised, by the
Board of Directors, renders him unable to perform his normal duties on
behalf of the Company for a continuous period of nine (9) months (measured
from the first day of the month immediately following the occurrence of
such disability), or (d) a unanimous determination by the Board of
Directors (excluding Employee) that there is cause (as described in
subparagraph (d) below) to terminate Employee's employment.
c. By Death or Disability. In the event of the Employee's
death, his base compensation otherwise due for the succeeding six full
calendar months following his death shall be paid to his Beneficiary. In
the event of his disability, for the period ending on the last business day
of the ninth calendar month following the occurrence of such disability,
the Employee shall be paid his base compensation (reduced by any amount
received by the Employee under the terms of any disability insurance policy
maintained by the Company at its sole expense); and thereafter, until he
either returns to full-time service or is terminated, he shall be treated
as being on an authorized but unpaid leave of absence.
d. For Cause. In the event of a unanimous decision by the
Board of Directors (excluding Employee), reasonably exercised, to terminate
Employee's employment due to (i) violation by Employee of paragraphs 5
and/or 6 of this Agreement; (ii) his violation of any provision of the
Company's by-laws or of its other stated policies, standards or regulations
approved in writing by Employee; or (iii) his conviction by a court of
competent jurisdiction of any act involving moral turpitude related to his
employment by the Company; then, upon termination, he shall be entitled to
receive severance pay in an amount equal to one (1) year of his annual base
compensation. As a condition precedent to the Company's right to terminate
this Agreement on the basis of clause (ii), it must be able to demonstrate
that the Employee has been furnished with a copy of and approved in writing
the by-law provision, or of the policy, standard or regulation, which he is
being accused of having violated, at a time prior to the alleged commission
of the violation.
e. Payment of Termination Compensation; Continued
Effectiveness of Certain Obligations. Any compensation due the Employee as
a result of the termination of his employment status under this Agreement
shall be paid in the same manner as if the Employee was still employed by
the Company without regard to, set-off or reduction by reason of Employee's
compensation for services or otherwise from any other source or party. No
termination or expiration of this Agreement whether consummated by action
of either party or by operation of the terms hereof, shall relieve the
Employee from his continued performance of the obligations established
under paragraphs 5 and 6 hereof.
f. Life and Disability Coverage. If termination of this
Agreement is due to any reason other than death, the Employee shall have
the right to purchase any policy of insurance on his life or insuring
against his disability which is owned by the Company, the exercise of which
right shall be made by written notice furnished to the Company within 30
days subsequent to the date of termination. The purchase price of each
policy of life insurance shall be the sum of its interpolated terminal
reserve value (computed as of the closing date) and the proportional part
of the gross premium last paid before the closing date which covers any
period extending beyond that date; or if the policy to be purchased shall
not have been in force for a period sufficient to generate an interpolated
terminal reserve value, the price shall be an amount equal to all net
premiums paid as of the closing date. The purchase price of each
disability income policy shall be the sum of its cash value and the
proportional part of the gross premium last paid before the closing date
which covers any period extending beyond that date. The purchase of any
insurance policy by the Employee shall be closed as promptly as may be
practicable after the giving of notice, in no event to exceed thirty (30)
days thereafter.
9. Indebtedness of Employee. If, during the course of his
employment, Employee become indebted to the Company for any reason, the
Company shall, if it so elects, have the right to set-off and to collect
any sums due it from the Employee out of any amounts which it may owe to
the Employee for unpaid compensation. In the event that this Agreement
terminates for any reason, all sums owed by the Employee to the Company
shall become immediately due and payable.
10. General Provisions.
a. Nonassignability: Neither this Agreement nor any right or
interest hereunder shall be assignable by the Employee, his Beneficiary of
his legal representatives except as otherwise expressly provided herein.
b. Enforceability: If any term or condition of this Agreement
shall be adjudged invalid or unenforceable to any extent or in any
application by a court of competent jurisdiction, then the remainder of
this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby and each and every term and
condition of this agreement shall be valid and enforced to the fullest
extent and in the broadest application permitted by law.
c. Notice: All notices or other communications required or
permitted to be furnished pursuant to this Agreement shall be in writing
and shall be deemed properly furnished if hand delivered, mailed from
within the United States by certified or registered mail, or sent by
prepaid telegram to the recipient party at the address appearing in the
preamble to this Agreement or to such other address as any such party may
have designated by like notice forwarded to the other party hereto. Change
of address notices shall be deemed given when received. All other notices
shall be deemed given when mailed, telegraphed or hand delivered.
d. Jurisdiction; Application of Florida Law; Venue: The
parties agree that, irrespective of any wording that might be construed to
be in conflict with this paragraph, this Agreement is one for performance
in Florida. The parties to this Agreement agree that they waive any
objection, constitutional, statutory or otherwise, to a Florida court's
exercising jurisdiction of any dispute between them. By entering into this
Agreement, the parties, and each of them understand that they might be
called upon to answer a claim asserted in a Florida court. This Agreement,
and the application or interpretation thereof, shall be governed
exclusively by its terms and by the laws of the State of Florida. Venue
shall be deemed located in Manatee County, Florida.
e. Counterparts: This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which together shall be deemed an original, but all of which together shall
constitute one and the same instrument.
f. Binding Effect: Subject to paragraph 10(a) of this
Agreement, each of the provisions and agreements herein contained shall be
binding upon and enure to the benefit of the personal representatives,
devisees, heirs, successors, transferees and assigns of the respective
parties hereto.
g. Beneficiary: As used herein, the term "Beneficiary" shall
mean the person or persons (who may be designated contingently or
successively and who may be an entity other than an individual, including
an estate or trust) designated on a written form prescribed by the Board of
Directors to receive the termination of Agreement or death benefits
described in paragraph 8 above. Each Beneficiary designation shall be
effective only when filed with the Secretary of the Company during the
Employee's lifetime. Each Beneficiary designation filed with the Secretary
will cancel all designations previously so filed. If the Employee fails to
properly designate a Beneficiary or if the Beneficiary predeceases the
Employee or dies before complete distribution of the benefits has been
made, the Company shall distribute the benefit (or balance thereof) to the
surviving spouse, of the Employee or if she be then deceased to the
Employee's estate.
h. Entire Agreement: This Agreement, and the other documents
referenced herein, constitute the entire understanding of the parties
hereto with respect to the subject matter hereof, and supersedes any prior
understandings or agreements, oral or written, including specifically but
not exclusively the Amended And Restated Employment Agreement between the
Employee and the Company dated as of January 1, 1995, and no amendment,
modification or alteration of the terms hereof shall be binding unless the
same be in writing, dated subsequent to the date hereof and duly approved
and executed by each of the parties hereto.
IN WITNESS WHEREOF, the parties have hereunto executed this
Agreement as of the day and year first above written.
TELTRONICS, INC.
By: /s/ Mark E. Scott
Mark E. Scott, Vice President-Finance
EMPLOYEE:
/s/ Ewen Cameron
Ewen Cameron
STATE OF FLORIDA )
COUNTY OF MANATEE )SS.:
The foregoing instrument was acknowledged before me this 3rd day of
May, 1999, by Mark E. Scott, Vice President-Finance of Teltronics, Inc., a
Delaware corporation, known to me personally to be such, on behalf of the
corporation.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Susan D. Maslanka
Notary Public
STATE OF FLORIDA )
COUNTY OF MANATEE )SS.:
The foregoing instrument was acknowledged before me this 3rd day of
May, 1999 by Ewen Cameron.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Susan D. Maslanka
Notary Public
TELTRONICS, INC.
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT ("Agreement") made as of May 1,
1999 by and between TELTRONICS, INC. a Florida corporation (the "Company")
having its principal place of business at 2150 Whitfield Industrial Way,
Sarasota, Florida 34243, and Norman R. Dobiesz (the "Employee") currently
residing at 739 Galleon Drive, Tierra Verde, Florida 33715.
BACKGROUND INFORMATION
The Company wishes to secure the continued employment services of the
Employee for a definite period of time and upon the particular terms and
conditions hereinafter set forth. Employee and the Company previously
entered an Employment Agreement as of January 1, 1995 which Employee and
the Company now intend to amend and restate by execution of this Agreement.
The Employee is willing to continue to be so employed. Accordingly,
Employee and the Company agree as follows:
OPERATIVE PROVISIONS
1. Employment and Term.
The Company hereby employs Employee and the latter hereby accepts
employment by the Company for the period commencing May 1, 1999 and
expiring December 31, 2005, which employment shall be automatically
extended for a successive five year period at the option of the Employee
exercisable by written notice to the Company at least ninety days prior to
December 31, 2005, unless it is terminated during the pendency of any such
period, whether initial or extended, by the occurrence of one of the events
described in paragraph 7 of this Agreement.
2. Duties.
During the term of this Agreement, whether initial or extended, the
Employee shall render to the Company services as Senior Vice President
Business Development, and shall perform such duties as may be designated by
and subject to the supervision of the Company's Board of Directors, and
shall serve in such additional capacities appropriate to his
responsibilities and skills as shall be designated by the Company, through
action of its Board of Directors. During such period, the Employee shall
devote such attention, time and energies to the business and affairs of the
Company (subject to the terms of paragraph 4 below) as Employee shall deem
necessary and appropriate, and will use his best efforts to promote the
interests and reputation of the Company; provided that he may pursue such
non-competitive activities as do not materially interfere with the
performance of his obligations hereunder. Notwithstanding anything in this
Agreement to the contrary, nothing contained in this Agreement shall be
construed to preclude Employee, either individually or through any
associated or affiliated entity, from negotiating arrangements with the
Company under which the Company will pay Employee or any such affiliated or
associated entity, amounts in addition to the compensation payable to
Employee under this Agreement, for rendering advice and/or services
respecting matters other than acquisitions and mergers, including without
limitation financings, investments, placement agencies, underwriting
agreements and securities offerings. During the term of this Agreement,
without his written consent, the Company shall not require Employee to
perform services at any location other than headquarters of the Company
located in Sarasota, Florida.
3. Compensation.
For the services to be rendered by the Employee under this Agreement
the Company shall pay him, while he is rendering such services and
performing his duties hereunder, and the Employee shall accept as full
payment for such service, a base compensation of $325,000 per year
(inclusive of any amounts subject to employment related withholding
requirements), payable in arrears in equal installments on the last
business day of each month occurring during the period of employment or
otherwise as the parties may agree. Such base compensation shall be
increased on the first day of January of each year commencing January 1,
2000 by twenty-five thousand dollars ($25,000), and may from time to time
be supplemented by discretionary bonuses or other benefits payable from
time to time, all as determined by action of the Company's Board of
Directors. The Company shall have the right to pay the increases in base
compensation and any discretionary bonus in the form of securities of the
Company or any of its subsidiaries with the written approval of the
Employee.
In addition to the compensation described in this paragraph, Employee
shall be eligible to participate in any stock option plan that may be
adopted by the Company from time to time.
4. Vacation; Fringe Benefits; Reimbursement of Expenses.
The Employee shall be entitled to five (5) weeks of fully paid
vacation annually during the initial and each extended term of this
Agreement. He shall not be entitled to receive monetary or other valuable
consideration for vacation time to which he is entitled but does not take.
The timing of vacation periods shall be within the discretion of the
Company, reasonably exercised so as not to unnecessarily inconvenience the
Employee.
During this period of employment hereunder, the Employee shall further
be entitled to (a) such leave by reason of physical or mental disability or
incapacity and to such participation in medical and life insurance, pension
benefits, disability and other fringe benefit plans as the Company may
generally available to all of its executive employees from time to time;
subject, however, as to such plans, to such budgetary constraints or other
limitations as may be imposed by the Board of Directors of the Company from
time to time; (b) reimbursed for all normal and reasonable expenses
necessarily incurred by him in the performance of his obligations
hereunder, subject to such reasonable substantiation requirements as may be
imposed by the Company; (c) a luxury automobile suitable for Employee as an
executive officer of the Company all costs of which including specifically
but not exclusively acquisition, maintenance, insurance and operation shall
be paid by the Company; and (d) an Administrative Assistant acceptable to
Employee at the cost of the Company.
5. Proprietary Interests.
During and after the expiration of his term of employment with the
Company, the Employee shall not communicate or divulge to, or use for the
benefit of, any individual, association, partnership, limited partnership,
trust, corporation or other entity except the Company, any proprietary
information of the Company received by the Employee by virtue of such
employment, without being in receipt of the Board of Directors of the
Company's written consent to do so.
6. Remedies for Breach of Employee's Obligations.
The parties agree that the services of the Employee are of a personal,
specific, unique and extraordinary character and cannot be readily replaced
by the Company. They further agree that in the course of performing his
services, the Employee will have access to various types of proprietary
information of the Company, which, if released to others or used by the
Employee other than for the benefit of the Company, in either case without
the Company's consent, could cause the Company to suffer irreparable
injury. Therefore, the obligations of the Employee established under
paragraph 5 hereof shall be enforceable both at law and in equity, by
injunction, specific performance, damages or other remedy; and the right of
the Company to obtain any such remedy shall be cumulative and not
alternative and shall not be exhausted by any one or more uses thereof.
7. Modification and Termination.
a. Modification. This Agreement may be amended or modified
only with the mutual written consent of the parties, and in its present
form comprises the entire agreement between the parties.
b. Termination - General. This Agreement is subject to
termination prior to the expiration of its initial or any extended term:
(i) if by the Employee, upon delivery to the Company of written notice of
such intention; and (ii) if by the Company, upon the occurrence of any one
of the following events, (a) the complete discontinuance of the Company's
activities, (b) the death of the Employee, (c) the physical or mental
disability of Employee which, in the judgment, reasonably exercised, by the
Board of Directors, renders him unable to perform his normal duties on
behalf of the Company for a continuous period of nine (9) months (measured
from the first day of the month immediately following the occurrence of
such disability), or (d) a unanimous determination by the Board of
Directors (excluding Employee) that there is cause (as described in
subparagraph (d) below) to terminate Employee's employment.
c. By Death or Disability. In the event of the Employee's
death, his base compensation otherwise due for the succeeding six full
calendar months following his death shall be paid to his Beneficiary. In
the event of his disability, for the period ending on the last business day
of the ninth calendar month following the occurrence of such disability,
the Employee shall be paid his base compensation (reduced by any amount
received by the Employee under the terms of any disability insurance policy
maintained by the Company at its sole expense); and thereafter, until he
either returns to full-time service or is terminated, he shall be treated
as being on an authorized but unpaid leave of absence.
d. For Cause. In the event of a unanimous decision by the
Board of Directors (excluding Employee), reasonably exercised, to terminate
Employee's employment due to (i) violation by Employee of paragraph 5 of
this Agreement; (ii) his violation of any provision of the Company's
by-laws or of its other stated policies, standards or regulations approved
in writing by Employee; or (iii) his conviction by a court of competent
jurisdiction of any act involving moral turpitude related to his employment
by the Company; then, upon termination, he shall be entitled to receive
severance pay in an amount equal to one (1) year of his annual base
compensation. As a condition precedent to the Company's right to terminate
this Agreement on the basis of clause (ii), it must be able to demonstrate
that the Employee has been furnished with a copy of and approved in writing
the by-law provision, or of the policy, standard or regulation, which he is
being accused of having violated, at a time prior to the alleged commission
of the violation.
e. Payment of Termination Compensation; Continued
Effectiveness of Certain Obligations. Any compensation due the Employee as
a result of the termination of his employment status under this Agreement
shall be paid in the same manner as if the Employee was still employed by
the Company without regard to, set-off or reduction by reason of Employee's
compensation for services or otherwise from any other source or party. No
termination or expiration of this Agreement whether consummated by action
of either party or by operation of the terms hereof, shall relieve the
Employee from his continued performance of the obligations established
under paragraph 5 hereof. Anything in this Agreement to the contrary
notwithstanding, compensation under paragraph 3 of this Agreement shall
continue in full so long as Employee is a guarantor of the Company's
borrowings from C.I.T. Financial or any successor and/or is a guarantor of
the Company's obligations under a lease of its plant and headquarters with
ARE Sarasota Limited Partnership.
f. Life and Disability Coverage. If termination of this
Agreement is due to any reason other than death, the Employee shall have
the right to purchase any policy of insurance on his life or insuring
against his disability which is owned by the Company, the exercise of which
right shall be made by written notice furnished to the Company within 30
days subsequent to the date of termination. The purchase price of each
policy of life insurance shall be the sum of its interpolated terminal
reserve value (computed as of the closing date) and the proportional part
of the gross premium last paid before the closing date which covers any
period extending beyond that date; or if the policy to be purchased shall
not have been in force for a period sufficient to generate an interpolated
terminal reserve value, the price shall be an amount equal to all net
premiums paid as of the closing date. The purchase price of each
disability income policy shall be the sum of its cash value and the
proportional part of the gross premium last paid before the closing date
which covers any period extending beyond that date. The purchase of any
insurance policy by the Employee shall be closed as promptly as may be
practicable after the giving of notice, in no event to exceed thirty (30)
days thereafter.
8. Indebtedness of Employee. If, during the course of his
employment, Employee become indebted to the Company for any reason, the
Company shall, if it so elects, have the right to set-off and to collect
any sums due it from the Employee out of any amounts which it may owe to
the Employee for unpaid compensation. In the event that this Agreement
terminates for any reason, all sums owed by the Employee to the Company
shall become immediately due and payable.
9. General Provisions.
a. Nonassignability: Neither this Agreement nor any right or
interest hereunder shall be assignable by the Employee, his Beneficiary of
his legal representatives except as otherwise expressly provided herein.
b. Enforceability: If any term or condition of this Agreement
shall be adjudged invalid or unenforceable to any extent or in any
application by a court of competent jurisdiction, then the remainder of
this Agreement, and such term or condition except to such extent or in such
application, shall not be affected thereby and each and every term and
condition of this agreement shall be valid and enforced to the fullest
extent and in the broadest application permitted by law.
c. Notice: All notices or other communications required or
permitted to be furnished pursuant to this Agreement shall be in writing
and shall be deemed properly furnished if hand delivered, mailed from
within the United States by certified or registered mail, or sent by
prepaid telegram to the recipient party at the address appearing in the
preamble to this Agreement or to such other address as any such party may
have designated by like notice forwarded to the other party hereto. Change
of address notices shall be deemed given when received. All other notices
shall be deemed given when mailed, telegraphed or hand delivered.
d. Jurisdiction; Application of Florida Law; Venue: The
parties agree that, irrespective of any wording that might be construed to
be in conflict with this paragraph, this Agreement is one for performance
in Florida. The parties to this Agreement agree that they waive any
objection, constitutional, statutory or otherwise, to a Florida court's
exercising jurisdiction of any dispute between them. By entering into this
Agreement, the parties, and each of them understand that they might be
called upon to answer a claim asserted in a Florida court. This Agreement,
and the application or interpretation thereof, shall be governed
exclusively by its terms and by the laws of the State of Florida. Venue
shall be deemed located in Manatee County, Florida.
e. Counterparts: This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of
which together shall be deemed an original, but all of which together shall
constitute one and the same instrument.
f. Binding Effect: Subject to paragraph 9(a) of this
Agreement, each of the provisions and agreements herein contained shall be
binding upon and enure to the benefit of the personal representatives,
devisees, heirs, successors, transferees and assigns of the respective
parties hereto.
g. Beneficiary: As used herein, the term "Beneficiary" shall
mean the person or persons (who may be designated contingently or
successively and who may be an entity other than an individual, including
an estate or trust) designated on a written form prescribed by the Board of
Directors to receive the termination of Agreement or death benefits
described in paragraph 8 above. Each Beneficiary designation shall be
effective only when filed with the Secretary of the Company during the
Employee's lifetime. Each Beneficiary designation filed with the Secretary
will cancel all designations previously so filed. If the Employee fails to
properly designate a Beneficiary or if the Beneficiary predeceases the
Employee or dies before complete distribution of the benefits has been
made, the Company shall distribute the benefit (or balance thereof) to the
surviving spouse, of the Employee or if she be then deceased to the
Employee's estate.
h. Entire Agreement: This Agreement, and the other documents
referenced herein, constitute the entire understanding of the parties
hereto with respect to the subject matter hereof, and supersedes any prior
understandings or agreements, oral or written, including specifically but
not exclusively the Employment Agreement between the Employee and the
Company dated as of January 1, 1995, and no amendment, modification or
alteration of the terms hereof shall be binding unless the same be in
writing, dated subsequent to the date hereof and duly approved and executed
by each of the parties hereto.
IN WITNESS WHEREOF, the parties have hereunto executed this
Agreement as of the day and year first above written.
TELTRONICS, INC.
By: /s/ Ewen Cameron
Ewen Cameron, President
EMPLOYEE:
/s/ Norman R. Dobiesz
Norman R. Dobiesz
STATE OF FLORIDA )
COUNTY OF MANATEE )SS.:
The foregoing instrument was acknowledged before me this 3rd day of
May, 1999, by Ewen Cameron, President of Teltronics, Inc., a Delaware
corporation, known to me personally to be such, on behalf of the
corporation.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Susan D. Maslanka
Notary Public
STATE OF FLORIDA )
COUNTY OF MANATEE )SS.:
The foregoing instrument was acknowledged before me this third day of
May, 1999 by Norman R. Dobiesz.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ Susan D. Maslanka
Notary Public
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-Q FOR FISCAL QUARTER ENDED JUNE 30, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,148,682
<SECURITIES> 0
<RECEIVABLES> 4,706,617
<ALLOWANCES> (145,000)
<INVENTORY> 4,683,272
<CURRENT-ASSETS> 10,621,408
<PP&E> 9,097,211
<DEPRECIATION> (4,844,691)
<TOTAL-ASSETS> 15,757,756
<CURRENT-LIABILITIES> 10,904,077
<BONDS> 1,779,916
0
113
<COMMON> 4,056
<OTHER-SE> 3,069,594
<TOTAL-LIABILITY-AND-EQUITY> 15,757,756
<SALES> 14,678,932
<TOTAL-REVENUES> 14,678,932
<CGS> 7,366,976
<TOTAL-COSTS> 6,360,097
<OTHER-EXPENSES> (99,125)
<LOSS-PROVISION> 35,200
<INTEREST-EXPENSE> 607,748
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 408,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 408,036
<EPS-BASIC> .08
<EPS-DILUTED> .07
</TABLE>
