SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-9040 METRO TEL CORP. DELAWARE 11-2014231 ____________________________________________________________________________ (State of other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 500 North Broadway, Suite 240, Jericho, New York 11753 (516) 937-3420 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 . State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: Common Stock, $.025 par value per share - 2,004,046 shares outstanding as of November 9, 1995. ============================================================================ Metro Tel Corp. Statement of Operations (Unaudited, Note A) For the three months ended September 30, 1995 1994 Net Sales $ 923,012 $1,100,595 Cost of goods sold 590,719 671,064 Gross Profit 332,293 429,531 Selling, general and administrative expenses 296,814 266,822 Research and development 72,813 68,552 Interest expense 419 Interest income (306) 369,321 335,793 Earnings (loss) before provision for income taxes (37,028) 93,738 Provision (credit) for income taxes (14,800) 37,500 Net earnings (loss) $ (22,228) $ 56,238 ========================================================================== Earnings (loss) per common share (Note B) $ (.01) $ .03 ========================================================================== Weighted average number of shares outstanding 2,004,046 2,004,046 ============================================================================ Metro Tel Corp. Balance Sheets (Unaudited, Note A) ASSETS September 30, June 30, 1995 1995 Current Assets Cash and cash equivalents $ 299,541 $ 297,157 Accounts receivable, net 431,592 598,281 Inventories 1,515,171 1,498,562 Prepaid expenses 71,894 16,141 Total current assets 2,318,198 2,410,141 Property and equipment - at cost Machinery and equipment 466,054 450,498 Furniture and fixtures 88,564 88,564 Leasehold improvements 8,765 8,765 563,383 547,827 Less accumulated depreciation 487,243 478,708 76,140 69,119 Other assets Goodwill, net of accumulated amortization of $347,076 on September 30, 1995 and $339,621 on June 30, 1995 845,624 853,079 Other, net 27,660 29,692 873,284 882,771 $3,267,622 $3,362,031 ========================================================================== Metro Tel Corp. Balance Sheets (Unaudited, Note A) LIABILITIES AND STOCKHOLDERS' EQUITY September 30, June 30, 1995 1995 Current Liabilities Accounts payable $ 137,770 $ 196,378 Accrued liabilities 171,548 154,156 Income taxes payable 30,965 Total current liabilities 309,318 381,499 Stockholders' Equity Preferred Stock, $1 par value, 200,000 shares authorized, none issued or outstanding Common stock, $.025 per value, 6,000,000 shares authorized, 2,030,296 shares issued, 2,004,046 shares outstanding 50,757 50,757 Additional paid-in capital 2,107,173 2,107,173 Retained earnings 869,124 891,352 3,027,054 3,049,282 Less 26,250 shares of treasury stock - at cost (68,750) (68,750) 2,958,304 2,980,532 $3,267,622 $3,362,031 ============================================================================= Metro Tel Corp. Statements of Cash Flows (Unaudited, Note A) For the three months ended September 30, 1995 1994 Cash flows from operating activities Net earnings (loss) $ (22,228) $ 56,238 Adjustments to reconcile net earnings to cash provided by operating activities Depreciation and amortization 18,022 18,917 (Increase) decrease in operating assets Accounts receivable 166,689 (45,538) Inventories (16,609) 46,465 Prepaid expenses and other (55,753) (34,408) Increase (decrease) in operating liabilities Accounts payable (58,608) (20,631) Accrued liabilities 17,392 (19,335) Income taxes payble (30,965) 34,362 Net cash provided by operating activities 17,940 36,170 Cash flows from investment activities Capital expenditures (15,556) (1,932) Net cash used in investing activities (15,556) (1,932) Cash flows from financing activities Principal payment of debt (12,501) Net cash used in financing activities (12,501) Net increase in cash and cash equivalents 2,384 (21,737) Cash and cash equivalents at beginning of year 297,157 180,653 Cash and cash equivalents at end of three months $ 299,541 $ 202,390 ============================================================================ Supplement disclosures of cash flow information Cash paid during the period for Interest $ $ 419 Income taxes $ 29,540 $ 489 [FN] METRO TEL CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A - General: The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB related to interim period financial statements. Accordingly, these financial statements do not include certain information and footnotes required by generally accepted accounting principles for complete financial statements. However, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. For further information, refer to the Company's financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the year ended June 30, 1995. Note B - Earnings Per Common Share: Earnings per common share is based upon the weighted average number of shares of common stock outstanding during the year. Stock options have not been included in the calculation since their inclusion would not be materially dilutive. Management's Discussion and Analysis of Financial Condition and Results of Operation Liquidity and Capital Resources During the three month period ended September 30, 1995, cash increased by $2,384. Of the cash generated by operating activities ($17,940), $15,556 was used to purchase capital assets. The Company believes that the cash which it expects to generate from operations will be sufficient to meet operational needs. Results of Operations Net sales decreased by $177,583 (16.1%) in the first quarter of fiscal 1996 from the same period in fiscal 1995. The decrease in sales in the current year's first quarter was mainly due to a reduction in foreign orders and a continuing reduction in sales to the Regional Bell Operating Companies (RBOCs). Prices remained constant and were not material to operations. Sales of telephone test equipment and cutomer premise equipment decreased by $148,662 (15.9%) and $48,101 (41.0%), respectively, for the three month period of fiscal 1996 from the same period of fiscal 1995. Decreases in sales of outside plant test sets (30.6%) and installer's test sets (6.1%) offset increases in transmission test equipment (5.2%). The decrease in outside plant test sets is attibuted to the downsizing of the RBOCs while the decrease in installer's test sets is mainly due to a reduction in foreign orders. The increase in transmission test equipment was the result of increased sales to a non-RBOC company. Sales of miscellaneous products, parts and repairs increased by 31.9%. The Company's gross profit margin, expressed as a percentage of sales, decreased to 36.0% in the first quarter of fiscal 1996 from 39.0% for the same period of fiscal 1995. The decrease was mainly due to the lower level of sales which reduced the degree to which the Company could absorb its fixed expenses. Selling, general and administrative expenses increased by $29,992 (11.2%) for the first quarter of fiscal 1996 from the comparable period of fiscal 1995. The increase was mainly attributable to increased sales expenses, including the addition of a Vice President of Sales and Marketing which offset a reduction in royalty expenses due to the renegotiation of a royalty agreement. Research and development expenses increased by $4,261 (6.2%) due to salary increases to existing staff and associated payroll expenses. PART ll - OTHER INFORMATION Item 7. Exihibits and Reports on Form 8-K (a) Exhibits 27 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 1995. SIGNATURES 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. METRO-TEL CORP. Date: November 7, 1995 By:Venerando J. Indelicato President, Treasurer and Principal Financial and Chief Accounting Officer EXHIBIT INDEX Exhibit Number Description Page 27. Financial Data Schedule 10