SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 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 February 9, 1996. =========================================================================== Metro Tel Corp. Statement of Operations (Unaudited, Note A) For the six months For the three months ended December 31 ended December 31 1995 1994 1995 1994 Net Sales $ 1,950,620 $ 2,068,890 $1,027608 $ 968,295 Cost of goods sold 1,217,432 1,263,433 626,713 592,369 Gross Profit 733,188 805,457 400,895 375,926 Selling, general and administrative expenses 577,168 561,430 280,354 294,608 Research & development 141,673 144,458 68,860 75,906 Interest expense -- 754 -- 335 Royalty,interest and other income (7,032) (5,600) ( 6,726) (5,600) 711,809 701,042 342,488 365,249 Earnings before provision for income taxes 21,379 104,415 58,407 10,677 Provision (credit) for income taxes 8,500 32,350 23,300 (5,150) Net Earnings $ 12,879 $ 72,065 $ 35,107 $ 15,827 ========================================================================== Earnings per common share (Note B) $ .01 $ .04 $ .02 $ .01 ========================================================================== Weighted average number of shares outstanding 2,004,046 2,004,046 2,004,046 2,004,046 ============================================================================ Metro Tel Corp. Balance Sheets (Unaudited, Note A) ASSETS December 31, June 30, 1995 1995 Current Assets Cash and cash equivalents $ 211,496 $ 297,157 Accounts receivable, net 578,619 598,281 Inventories 1,520,226 1,498,562 Prepaid expenses and other 40,865 16,141 Total current assets 2,351,206 2,410,141 Property and equipment - at cost Machinery and equipment 466,488 450,498 Furniture and fixtures 88,564 88,564 Leasehold improvements 8,765 8,765 563,817 547,827 Less accumulated depreciation 495,778 478,708 68,039 69,119 Other assets Goodwill, net of accumulated amortization of $354,530 on December 31, 1995 and $339,621 on June 30, 1995 838,170 853,079 Other, net 25,627 29,692 863,797 882,771 $3,283,042 $3,362,031 ========================================================================== Metro Tel Corp. Balance Sheets (Unaudited, Note A) LIABILITIES AND STOCKHOLDERS' EQUITY December 31, June 30, 1995 1995 Current Liabilities Accounts payable $ 147,948 $ 196,378 Accrued liabilities 131,759 154,156 Income taxes payable 9,924 30,965 Total current liabilities 289,631 381,499 Stockholders' Equity Preferred stock, $1 par value, 200,000 shares authorized, none issued or outstanding Common stock, $.025 par 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 904,231 891,352 3,062,161 3,049,282 Less 26,250 shares of treasury stock - at cost (68,750) (68,750) 2,993,411 2,980,532 $3,283,042 $3,362,031 ============================================================================= Metro Tel Corp. Statements of Cash Flows (Unaudited, Note A) For the six months ended December 31, 1995 1994 Cash flows from operating activities Net earnings $ 12,879 $ 72,065 Adjustments to reconcile net earnings to cash provided by operating activities Depreciation and amortization 36,044 37,818 (Increase) decrease in operating assets Accounts receivable 19,662 107,609 Inventories (21,664) (9,005) Prepaid expenses and other (24,724) (22,240) Increase (decrease) in operating liabilities Accounts payable (48,430) (3,491) Accrued liabilities (22,397) (64,738) Income taxes payable (21,041) 4,318 Net cash provided by operating activities (69,671) 122,336 Cash flows from investing activities Capital expenditures (15,990) (6,795) Net cash used in investing activities (15,990) (6,795) Cash flows from financing activities Principal payment of long term debt (25,000) Net cash used in financing activities (25,000) Net (decrease) increase in cash and cash equivalents (85,661) 90,541 Cash and cash equivalents at beginning of year 297,157 180,653 Cash and cash equivalents at end of six months $ 211,496 $ 271,194 ============================================================================ Supplement disclosures of cash flow information Cash paid during the period for Interest $ -- $ 754 Income taxes $ 29,540 $ 25,489 [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 six month period ended December 31, 1995, cash decreased by $85,661. The decrease included, (i) cash used by operating activities ($69,671), resulting from a net use of $118,594 for working capital items which offset cash provided by net income of $12,879 and non-cash charges of $36,044 for depreciation and amortization, (ii) cash used to purchase capital assets ($15,990). 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 for the six month and three month periods ended December 31, 1995 decreased by $118,270 (5.7%), but increased by $59,313 (6.1%), respectively, from the comparable periods of fiscal 1995. The decrease in sales for the six month period was mainly due to a reduction in foreign orders and a continuing reduction in sales to the Regional Bell Operating Companies (RBOCs). The increase in sales during the second quarter was attributable to the shipment of new products which offset a reduction in foreign and RBOC orders. Prices remained constant. Sales of telephone test equipment decreased by $217,474 (12.5%) and $68,812 (8.5%) for the six month and three month periods, respectively, of fiscal 1996 from the same periods of fiscal 1995. These decreases were attributable to the reduction in sales to RBOC companies and foreign orders. Sales of customer premise equipment increased by $126,480 (72.8%) and $174,581 (310.2%) for the six and three month periods, respectively,of fiscal 1996 from the same periods of fiscal 1995. These increases were primarily due to increased shipments of data products (CSU/DSU). Sales of spares, repairs and miscellaneous products decreased by $29,742 (19.2%) for the six month period and $46,248 (44.6%) for the three month period of fiscal 1996. The Company's gross profit margin, expressed as a percentage of sales, decreased to 37.6% for the first six months of fiscal 1996 from 38.9% for the same period of fiscal 1995. Gross profit for the second quarter improved to 39.0% in fiscal 1996 from 38.8% in fiscal 1995. The changes for both periods relate to the changes in sales for the same period which affect the ability of the Company to absorb its fixed expenses. Selling, general and administrative expenses increased by $15,738 (2.8%) for the six month period and decreased by $14,253 (4.8%) for the three month periods, respectively, of fiscal 1996 when compared to the comparable periods of fiscal 1995. For the six month period the increase was primarily attributed to increases of sales expense due to the addition of a Vice President of Sales and Marketing, which offset reductions in royalty expenses due to the renegotiating of a royalty agreement. The decrease for the three month period was mainly due to reductions in advertising, royalties and commissions which offset increases in benefits, travel expenses and professional fees. Research and development expenses increased by $2,785 (1.9%) and $7,046 (9.3%) for the six and three month periods, respectively, in fiscal 1996 over fiscal 1995 due to decreases in engineering supplies and hospitalization expenses. The provision for income taxes in the fiscal 1995 periods are lower than the statutory rates as a result of a tax refund credit. PART 11 - OTHER INFORMATION Item 7. Exhibits 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 December 31, 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: February 9, 1996 By: Venerando J. Indelicato President, Treasurer and Principal Financial and Chief Accounting Officer EXHIBIT INDEX Exhibit Number Description Page 27 Financial Data Schedule 10