U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ______________
Commission file number 0-9352
American Teletronics, Inc.
(Exact name of small business issuer as specified in its charter)
Colorado 76-1675704
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
15400 Knoll Trail, Suite 205, Dallas, TX 75248
(Address of principal executive offices) (Zip Code)
(214) 661-2345
(Registrant's telephone number)
____________________________________________
__________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 52,639,056
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN TELETRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1996 1995
CURRENT ASSETS
Cash $327,426 $230,591
Certificates of Deposit, pledged
to secure notes payable 350,000 350,000
Accounts Receivable, net of allowance
for doubtful accounts of $62,422
and $67,985 in 1996
and 1995, respectively 343,302 302,591
Receivable Under Warehouse Agreements 52,100 82,296
Mortgage Participation Held for Sale 590,000 -
Mortgage Loan Receivable 87,941 87,941
Prepaid Expenses 79,490 101,610
Workers' Compensation Insurance Deposit 755,557 813,840
Single Family Residential Real Estate 416,588 271,435
FmHA Loan Fees Receivable 177,300 320,000
TOTAL CURRENT ASSETS 3,179,704 2,560,304
OFFICE BUILDING, FURNITURE AND EQUIPMENT 968,302 880,071
Less Accumulated Depreciation (232,008) (189,438)
NET OFFICE BUILDING, FURNITURE
AND EQUIPMENT 736,294 690,633
OTHER ASSETS
Mortgage Loan Participation 267,320 268,077
Investment in Bank Stock 91,500 91,500
Investment in Preferred Stock 204,000 204,000
Land Held for Sale 365,957 365,957
Goodwill, net of accumulated
amortization of $979,780
and $969,836, respectively 543,619 553,563
Noncompete Agreements, net of accumulated
amortization of $33,750
and $30,000, respectively 41,250 45,000
Deposits and Other Assets 67,444 68,586
Investment in American Teletronics,
Inc.'s Common Stock 142,793 90,191
Related Party Receivables 315,260 319,403
TOTAL OTHER ASSETS 2,039,143 2,006,277
TOTAL ASSETS $5,955,141 $5,257,214
(Continued)
The accompanying notes are an integral part
of these consolidated financial statements.
F-1
AMERICAN TELETRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31, December 31,
1996 1995
CURRENT LIABILITIES
Notes Payable $1,226,746 $802,426
Current Maturities of Long-Term Debt 295,528 294,744
Accounts Payable 201,843 233,691
Accrued Liabilities 736,632 629,387
Deferred FmHA Loan Fees 276,800 320,000
TOTAL CURRENT LIABILITIES 2,737,549 2,280,248
LONG-TERM DEBT, Excluding
Current Maturities 1,485,238 1,248,380
TOTAL LIABILITIES 4,222,787 3,528,628
STOCKHOLDERS' EQUITY
Common Stock, no par value;
Authorized 100,000,000 shares; issued
and outstanding 52,639,056
and 52,139,056 shares, respectively 3,815,975 3,715,975
Retained (Deficit) (2,083,621 (1,987,389)
TOTAL STOCKHOLDERS' EQUITY 1,732,354 1,728,586
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $5,955,141 $5,257,214
The Accompanying notes are an integral part
of these consolidated financial statements.
F-2
AMERICAN TELETRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
REVENUES
Employee Leasing $9,809,550 $10,465,959
Mortgage Services Income 988,652 258,424
Mortgage Interest 52,090 24,856
FmHA Loan Fee 183,810 -
TOTAL REVENUES 11,034,102 10,749,239
COST OF REVENUES
Leased Employee Cost 9,394,173 10,189,566
Commissions and Other Mortgage
Services Costs 466,699 155,778
Mortgage Interest 65,030 7,226
TOTAL COST OF REVENUES 9,925,902 10,352,570
GROSS PROFIT 1,108,200 396,669
SELLING EXPENSES 55,928 82,431
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries and Employee Benefits 658,738 470,533
Occupancy Expense 144,140 96,277
Amortization 13,694 38,087
Other 321,663 181,268
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 1,138,235 786,165
OTHER INCOME AND (EXPENSE)
Interest Income 14,159 7,797
Other Income 3,439 2,433
Interest Expense (80,469) (63,828)
TOTAL OTHER INCOME AND (EXPENSE) (62,871) (53,598)
(LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (148,834) (525,525)
INCOME TAX EXPENSE - -
(LOSS) FROM CONTINUING OPERATIONS ($148,834) ($525,525)
DISCONTINUED OPERATIONS
Income on Disposal of Subsidiaries 52,602 -
NET (LOSS) ($96,232) ($525,525)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 52,139,056 51,668,153
(LOSS) PER SHARE
Continuing Operations $ - $ (.01)
Discontinued Operations - -
$ - $ (.01)
The accompanying notes are an integral part
of these consolidated financial statements.
F-3
AMERICAN TELETRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited) Retained
COMMON STOCK Earnings
Shares Amount (Deficit) TOTAL
BALANCE DECEMBER 31, 1994 51,668,153 $3,598,249 ($1,180,041) $2,418,208
Sale of Common Stock
August, 1995 470,903 117,726 - 117,726
Net Loss 1995 - - (807,348) (807,348)
BALANCE DECEMBER 31, 1995 52,139,056 $3,715,975 ($1,987,389) $1,728,586
Sale of Common Stock
March, 1996 500,000 100,000 100,000
Net Loss 1996 - - (96,232) (96,232)
BALANCE MARCH 31, 1996 52,639,056 3,815,975 (2,083,621) 1,732,354
The accompanying notes are an integral part
of these consolidated financial statements.
F-4
AMERICAN TELETRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) ($96,232) ($525,525)
Adjustments to Reconcile Net (Loss)
to Net Cash Used by Operations
Income From Discontinued Operations (52,602) -
Depreciation 42,570 21,763
Amortization 13,694 38,087
Changes in Current Assets and Liabilities
(Increase) Decrease in Accounts Receivable (40,711) 65,551
(Increase) Decrease in Receivable Under
Warehouse Agreements 30,196 (14,892)
(Increase) Mortgage Participation Held
for Sale (590,000) -
Decrease in Prepaid Expenses 22,120 15,393
Decrease in Workers' Compensation
Insurance Deposit 58,283 51,030
Purchase Single Family Residential
Real Estate (145,153) -
Change in Cash Overdraft - (53,517)
Increase (Decrease) in Accounts Payable (31,848) 58,804
Increase (Decrease) in Accrued Liabilities 107,245 225,592
Increase in Deferred Revenue 99,500 -
NET CASH (USED) BY
OPERATING ACTIVITIES (582,938) (117,714)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Office Furniture and Equipment (88,231) (18,647)
Mortgage Loan Participation Collections 757 (4,720)
Deposits and Other 1,142 (525)
NET CASH (USED) BY
INVESTING ACTIVITIES (86,332) (23,892)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in Related Party Receivable/Payable 4,143 72,219
Note Borrowings 762,837 74,000
Note Payments (100,875) (14,027)
Sale of Common Stock 100,000 -
NET CASH PROVIDED BY
FINANCING ACTIVITIES 766,105 132,192
NET INCREASE (DECREASE) IN CASH AND
CERTIFICATES OF DEPOSITS 96,835 (9,414)
CASH AND CERTIFICATES OF DEPOSITS AT THE
BEGINNING OF THE PERIOD 580,591 210,737
CASH AND CERTIFICATES OF DEPOSITS AT THE END
OF THE PERIOD $677,426 $201,323
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Year as:
Interest Expense $135,621 $36,054
(Continued)
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
AMERICAN TELETRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued)
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Change in Related Party Receivable/Payable $ - ($103,000)
Assumption of Long-Term Debt - 103,000
Decrease in FmHA Loan Fee Receivable 142,700 -
Decrease in Deferred Revenue (142,700) -
TOTAL $ - $ -
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
AMERICAN TELETRONICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulations S-X. They do not include all information and notes required by
generally accepted accounting principles for complete financial statements.
However, except as disclosed, there has been no material change in the
information disclosed in the notes to consolidated financial statements included
in the Annual Report on Form 10-K of American Teletronics, Inc. and Subsidiaries
for the year ended December 31, 1995. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the three month
period ended March 31, 1996, are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operation
Financial Comparisons:
For the first quarter ending March 31, 1996 the Company had a 2.7% increase
in total revenues of $11,034,102 as compared to $10,749,239 in the same period
last year. Revenues from employee leasing declined 6.3% to $9,809,550 in 1996
as compared to $10,465,959 in the first quarter of 1995. This decline was
planned and expected and is the result of management's implementation of a
business plan to eliminate high risk or unprofitable business. Revenues from
mortgage activities in the quarter ended March 31, 1996 increased 367% to
$1,040,805 as compared to $283,280 in the first quarter of 1995. This increase
was the result of the Company's acquisition of a mortgage operation in Maryland
in the fourth quarter of 1995 and lower interest rates during most of the first
quarter of 1996 as compared to 1995. The Company also generated $183,810 in
FmHA loan premium fees in the first quarter ended March 31, 1996 as compared of
none in the first quarter of 1995. Gross profit for the quarter ended March 31,
1996was $1,108,200 as compared to $396,669 in the same quarter last year, an
increase of $711,531 or 179.4%. The gross margin increase was the result of
improved margins in both the employee leasing division and in the mortgage
division combined with the favorable impact of the FmHA loan premium fees
recognized in the first quarter. Selling expenses decreased from $82,431 in
the first quarter of 1995 to $55,928 in the first quarter of 1996, a net
decrease of $26,503 or 32.3%, as a result of changes in the commission
program in the employee leasing operation. Total general and administrative
expenses increased from $786,165 in the first quarter of 1995 to $1,138,235 in
the first quarter of 1996, an increaseof $352,070. This increase was primarily
due to increases in personnel costs and professional fees associated with a
planned spin-out of Crest. Total other income and expense increased by $9,273
in 1996 over 1995 due to increased interest expense. Losses from continuing
operations were reduced from $525,525 in the first quarter of 1995 to $148,834
in the quarter inded March 31, 1996, a net reduction of $376,691 or 71.7%.
The Net Loss for the first quarter of 1995 was $525,525 as compared to a Net
Loss for the quarter ended March 31, 1996 of $96,232. The additional reduction
in Net Loss is attributed to the recovery of $52,602 worth of shares previously
issued which have been returned to the Company.
Total assets increased to $5,955,141 at March 31, 1996 as compared to
$5,257,214 at December 31, 1995. The current ratio of the Company increased to
1:16 to 1:00 at March 31, 1996 as compared to 1:12 to 1:00 at December 31,
1996. Total liabilities increased to $4,222,787 at March 31, 1996 as compared to
$3,528,628 at December 31, 1995. Total stockholders' equity increased to
$1,732,354 at March 31, 1996 as compared to $1,728,586 at December 31, 1995.
Marketing:
The Company has been successful in its target and nitch marketing efforts
in both the employee leasing and mortgage divisions as is reflected above in the
improved gross margin from both divisions. The Company is continuing its
efforts to develop new products and programs with higher gross margins and to
improve margins on existing products and programs.
Mergers and Acquisitions:
On April 4, 1996, the Company entered into a letter of intent for a merger
with Evins Personnel Consultants, Inc. and its related entities. The letter of
intent includes the provision that 5,000,000 shares of the Company's common
stock and warrants for an additional 9,000,000 shares, subject to performance
and profitability, will be exchanged for all of the outstanding shares of Evins
Personnel Consultants, Inc. and its related entities. Evins, located in Austin,
Texas, provides a variety of personnel services including employee leasing,
temporary placement services, contract employment services, recruiting, testing
and training.
PART II - OTHER INFORMATION
Item 5 - Other Information
The Company's Board of Directors has approved a spin-out and initial public
offering ("IPO") of its employee leasing or professional employer organization
("PEO"), Crest Outsourcing, Inc. At the Board's direction, management has begun
preliminary underwriter discussions and plans a partial stock dividend of Crest
shares to ATI shareholders subsequent to the initial public offering. Terms of
the offering have not yet been determined, and any offering will be made only by
means of a prospectus. The Company seeks to complete the offering before year
end.
The Company's Board of Directors also approved the filing of a registration
statement with the SEC to hold a Special Shareholders' meeting to approve the
redomestication of the legal domicile of American Teletronics, Inc. from
Colorado to Texas and to ratify an incentive compensation agreement with two
executive officers of the Company. The date of the Special meeting will not be
determined until the prospectus through which the offering will be made has
been declared effective by the SEC.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The registrant filed a report on Form 8-K on April 16, 1996, reporting
under "Item 5. Other material events."
Signatures
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.
American Teletronics, Inc.
May 2, 1996 /s/ John N. Stogner
By: John N. Stogner, President and
Principal Financial Officer