> **U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, 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 September 30, 2000.[   ]
> 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 November 6, 2000 there were 4,761,291 shares of the Registrant's Common Stock outstanding.1**INDEX**
> 
> **PAGE****PART I.**
> **FINANCIAL INFORMATION**
> 3-15ITEM 1.
> FINANCIAL STATEMENTS
> 3-15Consolidated Balance Sheets at September 30, 2000 and
> December 31, 1999.
> 3-4Consolidated Statements of Operations for the Three Months and
> Nine Months     ended September 30, 2000 and 1999.
> 5Consolidated Statements of Cash Flows for the Nine Months     ended September 30, 2000 and 1999.
> 6-7Notes to Interim Consolidated Financial Statements
> 8-15ITEM 2.
> MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
> CONDITION AND RESULTS OF OPERATIONS
> 15-19**PART II.**
> **OTHER INFORMATION**
> 19-20ITEM 1.
> LEGAL PROCEEDINGS
> 19ITEM 2.
> CHANGES IN SECURITIES
> 19ITEM 3.
> DEFAULTS UPON SENIOR SECURITIES
> 19ITEM 4.
> SUBMISSION OF MATTERS TO A VOTE OF SECURITY
> HOLDERS
> 19ITEM 5.
> OTHER INFORMATION
> 19ITEM 6A.
> EXHIBITS
> 20ITEM 6B.
> REPORTS ON FORM 8-K
> 202**PART I - FINANCIAL INFORMATION****ITEM 1.	FINANCIAL STATEMENTS****TELTRONICS, INC. AND SUBSIDIARIES
> CONSOLIDATED BALANCE SHEETS**
> 
> **ASSETS**September 30,2000
> 
> December 31,1999(Unaudited)**Current Assets:**Cash
> $
> 345,143
> 
> $
> 954,764Accounts receivable, net of allowance for doubtful accounts
>      of $248,200 at September 30, 2000 and $210,000 at
>      December 31, 1999.
> 
> 8,040,484
> 
> 
> 4,754,896Inventories, net
> 
> 11,366,940
> 
> 
> 5,319,765Prepaid expenses and other current assets
> 306,392
> 
> 236,034Total current assets
> 
> 20,058,959
> 
> 
> 11,265,459Property and equipment, net
> 
> 5,380,493
> 
> 
> 3,872,018Goodwill and other intangible assets
> 
> 1,356,877
> 
> 
> 106,914Other assets
> 382,567
> 
> 550,450Total assets
> $
> 27,178,896
> 
> $
> 15,794,841The accompanying notes are an integral part of these consolidated financial statements.
> 
> 3**TELTRONICS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS - Continued**
> 
> **LIABILITIES AND SHAREHOLDERS' EQUITY**
> 
> 
> September 30,2000
> 
> December 31,1999(Unaudited)**Current Liabilities:**Current portion of long-term debt
> $
> 4,538,479
> 
> $
> 5,266,159Note payable
> 
> 6,884,355
> 
> 
> 0Current portion of capital lease obligations
> 
> 313,563
> 
> 
> 326,663Accounts payable
> 
> 5,572,040
> 
> 
> 3,151,492Accrued expenses and other current liabilities
> 
> 3,329,711
> 
> 
> 981,030Deferred income
> 
> 1,721,472
> 
> 734,856Total current liabilities
> 22,359,620
> 
> 10,460,200**Long-term liabilities:**Long-term debt, net of current portion
> 
> 1,000,000
> 
> 
> 1,250,000Capital lease obligations, net of current portion
> 29,926
> 
> 259,662Total long-term liabilities
> 1,029,926
> 
> 1,509,662**Shareholders' equity:**Common stock, $.001 par value, 40,000,000 shares
>           authorized, 4,740,596 and 4,054,522 issued
>           and outstanding at September 30, 2000 and
>           December 31, 1999, respectively.
> 
> 4,742
> 
> 
> 4,056Non-voting common stock, $.001 par value,
>           5,000,000 shares authorized, zero shares
>           issued and outstanding.
> 
> 0
> 
> 
> 0Preferred Series A stock, $.001 par value, 100,000
>           shares authorized, 100,000 shares issued and out-
>           standing at September 30, 2000 and December 31, 1999.
> 
> 100
> 
> 
> 100Preferred Series B Convertible stock, $.001 par value,
>           25,000 shares authorized, 12,625 shares issued
>           and outstanding at September 30, 2000 and
>           December 31, 1999.
> 
> 13
> 
> 
> 13Additional paid-in capital
> 
> 18,788,375
> 
> 
> 16,624,672Accumulated deficit
> (15,003,880)
> 
> (12,803,862)Total shareholders' equity
> 3,789,350
> 
> 3,824,979Total liabilities and shareholders' equity
> $
> 27,178,896
> 
> $
> 15,794,841The accompanying notes are an integral part of these consolidated financial statements.
> 4**TELTRONICS, INC. AND SUBSIDIARIES
> CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)**
> 
> Three Months EndedSeptember 30,
> 
> Nine Months EndedSeptember 30,2000
> 
> 1999
> 
> 2000
> 
> 1999**Net Sales**
> $
> 13,613,796
> 
> $
> 9,336,501
> 
> $
> 27,611,292
> 
> $
> 24,015,433Cost of goods sold
> 6,684,521
> 
> 
> 4,721,143
> 
> 15,366,165
> 
> 12,088,119**Gross profit**
> 6,929,275
> 
> 4,615,358
> 
> 12,245,127
> 
> 11,927,314**Operating expenses:**General and administrative
> 
> 1,431,825
> 
> 
> 1,090,462
> 
> 
> 3,549,581
> 
> 
> 2,968,183Sales and marketing
> 
> 2,425,311
> 
> 
> 1,598,870
> 
> 
> 5,553,885
> 
> 
> 4,325,368Research and development
> 1,670,392
> 
> 1,003,084
> 
> 3,702,915
> 
> 2,794,1625,527,528
> 
> 3,692,416
> 
> 12,806,381
> 
> 10,087,713Income (loss) from operations
> 1,401,747
> 
> 922,942
> 
> (561,254)
> 
> 1,839,601**Other income (expense):**Interest
> 
> (436,931)
> 
> 
> (215,279)
> 
> 
> (865,493)
> 
> 
> (651,667)Financing
> 
> (96,068)
> 
> 
> (67,362)
> 
> 
> (241,945)
> 
> 
> (238,723)Litigation costs
> 
> (44,967)
> 
> 
> (29,043)
> 
> 
> (372,849)
> 
> 
> (77,220)Gain on dispositions
> 
> 0
> 
> 
> 0
> 
> 
> 0
> 
> 
> 111,614Other
> (20,534)
> 
> 12,924
> 
> 1,408
> 
> 48,613(598,500)
> 
> (298,760)
> 
> (1,478,879)
> 
> (807,383)Income (loss) before income
>      taxes
> 
> 803,247
> 
> 
> 624,182
> 
> 
> (2,040,133)
> 
> 
> 1,032,218Income taxes
> (46,261)
> 
> 0
> 
> (46,261)
> 
> 0**Net income (loss)**
> 
> 756,986
> 
> 
> 624,182
> 
> 
> (2,086,394)
> 
> 
> 1,032,218Dividends on Preferred Series
>      B Convertible  Stock
> 
> (37,875)
> 
> (55,015)
> 
> (113,625)
> 
> (189,890)Net income (loss) attributable
>      to Common Shareholders
> $
> 719,111
> 
> $
> 569,167
> 
> $
> (2,200,019)
> 
> $
> 842,328**Net income (loss) per share:**Basic
> $
> .15
> 
> $
> .14
> 
> $
> (.50)
> 
> $
> .22Diluted
> $
> .14
> 
> $
> .13
> 
> $
> (.50)
> 
> $
> .21The accompanying notes are an integral part of these consolidated financial statements.
> 5**TELTRONICS, INC. AND SUBSIDIARIES
> CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)**
> Nine Months Ended September 30,2000
> 
> 1999**Cash Flows from Operating Activities:**Net income (loss)
> $
> (2,086,394)
> 
> $
> 1,032,218Adjustments to reconcile net income (loss) to net cash
>      flows provided by operating activities:Provision for doubtful accounts
> 
> 38,200
> 
> 
> 110,000Provision for obsolete inventories
> 
> 357,046
> 
> 
> (296,603)Depreciation and amortization
> 
> 1,263,290
> 
> 
> 1,032,131Amortization of deferred financing costs
> 
> 77,835
> 
> 
> 108,286Amortization of goodwill and intangibles
> 
> 40,173
> 
> 
> 6,242Gain on dispositions
> 
> 0
> 
> 
> (111,614)Changes in operating assets and liabilities, net of
>      acquisitions and dispositions:Accounts receivable
> 
> (2,712,790)
> 
> 
> (281,559)Inventories
> 
> (691,322)
> 
> 
> (828,477)Prepaid expenses and other current assets
> 
> (89,190)
> 
> 
> 121,275Accounts payable
> 
> 2,336,756
> 
> 
> 247,408Accrued expenses and other liabilities
> 
> 794,642
> 
> 
> 483,215Deferred income
> 958,470
> 
> 640,680Net cash flows provided by operating activities
> 286,716
> 
> 2,263,202**Cash Flows from Investing Activities:**Acquisition of property and equipment
> 
> (404,853)
> 
> 
> (429,102)Increase in goodwill and other intangible assets
> 
> (27,333)
> 
> 
> 0Decrease in other assets
> 
> 96,330
> 
> 
> 76,328Proceeds from dispositions
> 
> 0
> 
> 
> 111,614Acquisition of Cascade Technology Corporation
> 
> 0
> 
> 
> (57,500)Cash received in acquisition of Telident, Inc. net assets
> 762,321
> 
> 0Net cash flows provided by (used in) investing activities
> 426,465
> 
> (298,660)**Cash Flows from Financing Activities:**Net (repayment) proceeds from line of credit
> 
> (147,423)
> 
> 
> (689,778)Loan proceeds
> 
> 0
> 
> 
> 3,853Principal repayments of loans, notes and leases
> 
> (1,072,254)
> 
> 
> (421,031)Net proceeds from sale of common stock
> 
> 10,500
> 
> 
> 0Dividends on Preferred Series B Convertible Stock
> (113,625)
> 
> (189,890)Net cash flows used in financing activities
> (1,322,802)
> 
> (1,296,846)Net increase (decrease) in cash
> 
> (609,621)
> 
> 
> 667,696Cash - beginning of period
> 954,764
> 
> 136,467Cash - end of period
> $
> 345,143
> 
> $
> 804,163The accompanying notes are an integral part of these consolidated financial statements.6**TELTRONICS, INC. AND SUBSIDIARIES
> CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - Continued**
> Nine Months Ended September 30,2000
> 
> 1999**Supplemental Non-cash Financing and
> Investing Activities:**Acquisition of assets of Harris 20-20 for a note payable
> $
> 6,884,355
> 
> $
> 0Acquisition of assets of Telident, Inc. for common stock
> $
> 2,073,626
> 
> $
> 0Employer Stock match 401(k)
> $
> 80,264
> 
> $
> 0Conversion of Preferred Stock to Common Stock
> $
> 0
> 
> $
> 1,237,500Acquisition of assets of Cascade Technology  Corporation
>           for common stock
> $
> 0
> 
> $
> 181,865Lease of fixed assets
> $
> 0
> 
> $
> 73,560Issuance of non-interest bearing note
> $
> 0
> 
> $
> 47,913The accompanying notes are an integral part of these consolidated financial statements.7**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 produces systems for the hearing impaired.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
> 85% owned subsidiary Interactive Solutions, Inc. ("ISI").  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 three and nine month periods ended September 30, 2000 are not necessarily
> indicative of the results that may be expected for the year ending December 31, 2000.  These consolidated
> financial statements should be read in conjunction with the consolidated financial statements, and notes
> thereto, for the year ended December 31, 1999, as presented in the Company's annual report on Form
> 10-K and other reports filed with the Securities and Exchange Commission.**NOTE 2 - ACQUISITIONS****Telident, Inc.**On May 18, 2000, the Company acquired substantially all of the assets and assumed certain liabilities of
> Telident, Inc., a Minnesota corporation ("Seller") located in Minneapolis, Minnesota.  The Company
> acquired all of the Seller's rights to and in certain technology for the identification or location of emergency
> 911 telephone calls.The Company delivered  662,500  shares of its $.001 par value voting common stock for substantially all
> of the assets of the Seller.  Ten percent of the shares were placed in escrow for ninety days to cover any
> indemnity claims of the Company.  Registration of the shares on Form S-4 was declared effective by the
> Securities and Exchange Commission April 20, 2000.The acquisition has been accounted for using the purchase method of accounting and operations of the
> acquired business are included in the Company's results of operations and financial position subsequent
> to the date of acquisition.  The pro forma operating results for 2000 assuming this acquisition had been
> consummated as of January 1, 2000, would not be materially different from reported operating results.
> 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:8Cash
> 
> $     762,321Accounts receivable, net
> 
> 610,998Inventory, net
> 
> 260,757Prepaid expenses and other current assets
> 
> 26,168Property and equipment, net
> 
> 240,234Other assets
> 
> 6,282Goodwill and identifiable intangible assets
> 
> 474,937Accounts payable
> 
> (76,792)Accrued expenses and other current liabilities
> 
> (200,143)Deferred Income
> 
> (28,146)Long-Term debt
> 
> (2,990)Net assets acquired
> 
> $   2,073,626The excess cost over fair value of the net assets acquired (goodwill) and identifiable intangible assets are
> being amortized on a straight-line basis as follows:Amount
> 
> LifeCustomer List
> 
> $     142,481
> 
> 5 yearsPatent
> 
> 142,481
> 
> 14 years, 4 monthsGoodwill
> 
> 189,975
> 
> 15 years**Harris Corporation 20-20 Switching Product Line**On June 30, 2000, the Company acquired certain equipment, inventory and intellectual property rights
> related to the 20-20 switching technology and associated products of Harris Corporation Communications
> Products Division located in Melbourne, Florida ("Harris"), under an Asset Sale Agreement dated June 30,
> 2000 ("Agreement").Under the Agreement, the Company acquired the assets and assumed on-going support obligations for
> certain of Harris' Communications Products Division customers in consideration for $6,884,355 paid for
> with a promissory note in the principal amount and paying interest at ten and one-half percent (10.5%) per
> annum ("Note").  The Note provided for interest at twelve and one-half percent (12.5%) per annum
> effective August 14, 2000.  The Note is secured by a first lien on the Assets and a lien on the Company's
> other assets.The Note was amended August 17, 2000 to extend the maturity to September 29, 2000 and was further
> amended October 30, 2000.  Under this amendment, the principal and capitalized interest total was stated
> at $7,096,623 and the due date was changed to December 31, 2000.  Interest accrues at 10.5% effective
> October 4, 2000 and is paid monthly starting November 1, 2000.  The Company has received shareholder
> approval to offer and sell common stock and warrants through a private placement and is negotiating
> equity and debt financing to refinance payment of the Note and fund working capital requirements.  There
> can be no assurance that these negotiations will be successful.The acquisition has been accounted for using the purchase method of accounting and results of
> operations of the acquired net assets are included in the Company's results of operations and financial
> position subsequent to the date of acquisition.  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:9Inventory, net
> 
> $    5,452,142Property and equipment, net
> 
> 2,130,507Goodwill and identifiable intangible assets
> 
> 787,867Note payable
> 
> (6,884,355)Accounts payable
> 
> (1,434,161)Accrued expenses and other current liabilities
> 
> (52,000)Net assets acquired
> 
> $                  0The estimates are preliminary, however, management believes that any adjustments to the amounts
> allocated will not have a material effect on the Company's financial position or results of operations.The excess cost over fair value of the net assets acquired (goodwill) and identifiable intangible assets are
> being amortized on a straight-line basis as follows:Amount
> 
> LifeCustomer List
> 
> $     236,360
> 
> 5 yearsPatent and trade secrets on Cumulus call center software     and 20-20 switching product line
> 
> 236,360
> 
> 10 yearsGoodwill
> 
> 315,147
> 
> 15 yearsThe following selected pro forma consolidated financial data are unaudited.  The pro forma data for the
> nine months ended September 30, 2000 and 1999 are based upon the historical statement of operations
> of the Company and reflects the pro forma effects of the acquisition of the Harris 20-20 Switching
> Technology as if the acquisition had occurred at the beginning of the periods presented.The pro forma consolidated financial data are based upon certain assumptions and estimates and are not
> necessarily indicative of the results which would actually have been attained if the transaction had been
> consummated at the beginning of the indicated periods, or which may be attained in the future.In the opinion of Teltronics' management, all adjustments necessary to present fairly such pro forma
> consolidated financial data, as set forth in the accompanying explanatory notes, have been made.The pro forma consolidated financial data should be read in conjunction with the consolidated financial
> statements and related notes thereto as presented in the Company's annual report on Form 10-K for the
> year ended December 31, 1999, its quarterly report on Form 10-Q for the period ended June 30, 2000,
> its Form 8-K filed on September 13, 2000 and its other filings with the Securities and Exchange
> Commission.The Company employed approximately 70 of the 300 personnel employed by Harris Corporation
> Communications Product Division.  The Company expects to improve margins by manufacturing the
> products instead of outsourcing the manufacturing.  The Company will utilize its existing infrastructure to
> support the product line.  In addition, the Company does not expect to incur such 2000 expenses as
> capitalized software amortization of $21,873,000, loss on disposal of plant and equipment of $6,886,000,
> loss on disposal of investments of $2,502,000 and allowances for bad debt of $2,655,000.  As a result,
> the Company does not believe the pro forma data are representative of the operating results that will be
> achieved in the future.10
> 
> 
> Nine Months Ended
> September 30,
> 
> 2000
> 
> 1999Net sales
> $  50,722,292
> 
> $  81,058,433Net income (loss)
> (45,122,394)
> 
> (12,160,782)Net loss per share -Basic
> $          (10.30)
> 
> $          (3.27)Diluted
> $          (10.30)
> 
> $          (3.07)**Cascade Technology Corporation**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 DiscoveryMATE panel link display, open sales orders and certain other assets.  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
> 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 repaid in June, 1999.The acquisition has been accounted for using the purchase method of accounting and results of
> operations of Cascade are included from the date of acquisition.  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
> 
> $     100,000Property and equipment
> 
> 71,000Goodwill and identifiable intangible assets
> 
> 116,278Notes payable
> 
> (47,913)Net assets acquired
> $     239,365The pro forma operating results for 1999 assuming this acquisition had been consummated as of January
> 1, 1999, would not be materially different from reported operating results.  The excess cost over fair value
> of the net assets acquired (goodwill) and identifiable intangible assets are being amortized on a straight-line basis as follows:Amount
> 
> LifeCustomer List
> 
> $     35,000
> 
> 5 yearsPatent
> 
> 35,000
> 
> 14 years, 7 monthsGoodwill
> 
> 46,278
> 
> 15 years11**NOTE 3 - DISPOSITIONS**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, and a contingent consideration payable in one year
> of $112,000. The Company recognized a gain of $100,000 during the quarter ended June 30, 1998 and
> $111,614 during the quarter ended March 31, 1999.**NOTE 4 - NET INCOME (LOSS) PER SHARE**Basic net income (loss) per share is computed by dividing net income (loss), adjusted for preferred stock
> dividends, by the weighted average number of issued common shares outstanding during the applicable
> period.  Diluted net income (loss) per share is computed by dividing net income (loss), 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.  Potential
> common shares for  the nine months ended September 30, 2000 were anti-dilutive and were not included
> in the calculation of diluted net loss per share.  Potential common  shares for 2000 and 1999 relating to
> Preferred Series B Convertible Stock were anti-dilutive and were not included in the calculation of diluted
> net income (loss) per share.The following unaudited table sets forth the computation of basic and diluted net income (loss) per share:Three Months Ended
> September 30,
> 
> Nine Months Ended
> September 30,2000
> 
> 1999
> 
> 2000
> 
> 1999**Basic**Net income (loss)
> 
> $      756,986
> 
> 
> $      624,182
> 
> 
> $      (2,086,394)
> 
> 
> $      1,032,218Dividends on Preferred Series B
>      Convertible Stock
> 
> (37,875)
> 
> 
> (55,015)
> 
> 
> (113,625)
> 
> 
> (189,890)Net income (loss) attributable
>            to Common Shareholders
> 
> $      719,111
> 
> 
> $      569,167
> 
> 
> $      (2,200,019)
> 
> 
> $      842,328Weighted average shares
>      outstanding
> 
> 4,730,090
> 
> 
> 4,054,522
> 
> 
> 4,393,444
> 
> 
> 3,773,683Net income (loss) per share
> 
> $            .15
> 
> 
> $            .14
> 
> 
> $            (.50)
> 
> 
> $            .22**Diluted**Net income (loss)
> 
> $      756,986
> 
> 
> $      624,182
> 
> 
> $      (2,086,394)
> 
> 
> $      1,032,218Dividends on Preferred Series B
>      Convertible Stock
> 
> (37,875)
> 
> 
> (55,015)
> 
> 
> (113,625)
> 
> 
> (189,890)Net income (loss) attributable
>           to Common Shareholders
> 
> $      719,111
> 
> 
> $      569,167
> 
> 
> $      (2,200,019)
> 
> 
> $      842,328Weighted average shares
>      outstanding
> 
> 4,730,090
> 
> 
> 4,054,522
> 
> 
> 4,393,444
> 
> 
> 3,773,683Net effect of dilutive stock
>      options using the treasury
>      stock method
> 
> 178,677
> 
> 
> 160,152
> 
> 
> 0
> 
> 
> 134,541Net effect of dilutive warrants
>      using the treasury stock
>      method
> 
> 70,712
> 
> 
> 81,770
> 
> 
> 0
> 
> 
> 119,993Dilutive potential common
>           shares
> 
> 4,979,479
> 
> 
> 4,296,444
> 
> 
> 4,393,444
> 
> 
> 4,028,217Net income (loss) per share
> $            .14
> 
> $            .13
> 
> $            (.50)
> 
> $            .2112**NOTE 5 - INVENTORIES**The major classes of inventories are as follows:September 30,
> 2000
> 
> December 31,
> 1999(Unaudited)Raw materials
> $     9,355,663
> 
> $     3,307,549Work-in-process
> 1,781,125
> 
> 1,931,809Finished goods
> 1,290,268
> 
> 783,478Provision for obsolete inventories
> (1,060,116)
> 
> (703,071)$   11,366,940
> 
> $     5,319,765**NOTE 6 - LONG TERM DEBT**On February 25, 1998, the Company issued $1,750,000 of Subordinated Secured Debentures (the
> "Debentures").  The Debentures are due February 13, 2002.  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 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 May 12, 2000 and June 30, 2000, the Company amended and restated the $1,750,000 of
> Subordinated Secured Debentures Agreement.  The Company repaid $750,000 of the Debentures on
> September 29, 2000 and $250,000 on October 31, 2000 and the remaining $750,000 has a revised
> maturity of December 30, 2000.On February 25, 1998, the Company entered into senior Secured Loans ("Loans") for $1,000,000 and
> $280,000.  Interest is paid quarterly starting May 15, 1998.  On May 12, 2000, the Company 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 February 13, 2002.  The interest rate
> is 12%.  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 holding period beginning on the date of issuance.  The Loans contain certain financial
> covenants, including restrictions which could effect future funding of ISI by the Company.**NOTE 7 - SHAREHOLDERS' EQUITY**(A)      **1995 Incentive Stock Option Plan** - On October 23, 2000, the Shareholders ratified an increase
> in the number of common shares available for issuance for the Incentive Stock Option Plan from 1,250,000
> to 2,500,000 shares.  The shares were registered on Form S-8 on September 8, 2000.(B)     **Employee Stock Purchase Plan** - On October 23, 2000, the Shareholders ratified adoption of an
> Employee Stock Purchase Plan, under which the employees of the Company are provided the opportunity
> to acquire common shares of the Company at 85% of fair market value.  The Shareholders authorized
> 500,000 common shares to be available for issuance under the Employee Stock Purchase Plan.  The
> shares were registered on Form S-8 on September 18, 2000.13**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.  Company management evaluates
> performance based on segment profit, which is net income (loss) before taxes, excluding nonrecurring
> gains or losses.The following table presents information about reportable segment operations and assets.Three Months EndedSeptember 30,
> 
> Nine Months EndedSeptember 30,2000
> 
> 1999
> 
> 2000
> 
> 1999**Net Sales**Teltronics
> $     13,393,000
> 
> $     9,340,000
> 
> $     27,105,000
> 
> $     24,066,000ISI
> 
> 221,000
> 
> 
> (3,000)
> 
> 
> 507,000
> 
> 
> 22,000Elimination of Intersegment sales
> 0
> 
> 0
> 
> 0
> 
> (73,000)Total sales
> $     13,614,000
> 
> $     9,337,000
> 
> $     27,612,000
> 
> $     24,015,000**Depreciation and Amortization**Teltronics
> $          379,000
> 
> $          232,000
> 
> $          871,000
> 
> $          643,000ISI
> 131,000
> 
> 130,000
> 
> 392,000
> 
> 389,000Total depreciation and
>      amortization
> $          510,000
> 
> $          362,000
> 
> $      1,263,000
> 
> $      1,032,000**Interest and Financing Costs**Teltronics
> $          533,000
> 
> $          158,000
> 
> $        1,107,000
> 
> $          515,000ISI
> 0
> 
> 125,000
> 
> 0
> 
> 375,000Total interest and financing costs
> 533,000
> 
> 283,000
> 
> 1,107,000
> 
> 890,000**Segment Profits (Losses)**Teltronics
> $        1,205,000
> 
> $        1,457,000
> 
> $          (602,000)
> 
> $        3,120,000ISI
> (402,000)
> 
> (833,000)
> 
> (1,438,000)
> 
> (2,200,000)Total
> 803,000
> 
> 624,000
> 
> (2,040,000)
> 
> 920,000Gain on dispositions
> 0
> 
> 0
> 
> 0
> 
> 112,000Net income (loss) before taxes
> $          803,000
> 
> $        624,000
> 
> $        (2,040,000)
> 
> $        1,032,000**Segment Assets**Teltronics
> $     26,455,000
> 
> $     14,783,000
> 
> $     26,455,000
> 
> $     14,783,000ISI
> 724,000
> 
> 1,058,000
> 
> 724,000
> 
> 1,058,000Total segment assets
> $     27,179,000
> 
> $     15,841,000
> 
> $     27,179,000
> 
> $     15,841,000**Acquisition of Property and
> Equipment**Teltronics
> $          219,000
> 
> $            59,000
> 
> $          382,000
> 
> $          325,000ISI
> 4,000
> 
> 15,000
> 
> 23,000
> 
> 104,000Total acquisition of property
>      and equipment
> $          223,000
> 
> $            74,000
> 
> $          405,000
> 
> $          429,000**NOTE 9 - SUBSEQUENT EVENTS**On October 23, 2000, at a special Meeting of Stockholders, the following was approved by the
> Shareholders:1.     The offering and sale of $8,000,000 - $10,000,000 of common stock and common stock warrants
> through a private placement.  The private placement is expected to be completed in ninety days at a14discount to the common stock price.  The Company expects to use the proceeds for working capital and
> general corporate purposes, including payment of the note payable to Harris Corporation of $7,096,623.2.     The number of common shares available for issuance for the 1995 Incentive Stock Option Plan
> was increased from 1,250,000 to 2,500,000 shares.3.     The Employee Stock Purchase Plan covering 500,000 shares was ratified.On October 28, 2000, the Company renewed its bank line of credit with The CIT Group/Business Credit,
> Inc. until October 28, 2002.  Terms of the bank line of credit are being renegotiated.On October 30, 2000 the Note payable to Harris Corporation was amended.  The principal and capitalized
> interest total was $7,096,623 and the due date was changed to December 31, 2000.  Interest accrues at
> 10.5% effective October 4, 2000 and is paid monthly starting November 1, 2000.  The Company has
> received shareholder approval to offer and sell common stock and warrants through a private placement
> and is negotiating equity and debt financing to refinance payment of the Note and fund working capital
> requirements.  There can be no assurance that these negotiations will be successful.**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 maintain adequate liquidity, 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 Company continues the integration of the acquisition of the 20-20 switching technology from the
> Harris Corporation Communications Product Division.  The inventory has been transferred to the
> Company's facility in Sarasota.  The Company is now in a position to manufacture the 20-20 switch.The increase in sales during the last quarter was primarily due to the acquisition of the 20-20 switching
> technology.  The Company was able to ship upgrades to customers from the inventory it acquired and
> achieved sales of $6,010,000 since the acquisition.The Company has performed work under contracts from Harris for the New York Board of Education and
> Department of Corrections.  The Company is in the process of having these contracts assigned.Due to the large installed base of 20-20 switches in Mexico, the Company has taken the decision to create
> a subsidiary in Mexico City.  The Company intends to maintain and support the installed base, which
> includes major installations with the government.  It is also the Company's intention to continue to sell and
> install new systems.15The acquisition of Telident has also been successful with this product line achieving sales of $1,158,000
> since the acquisition.The other product lines of Teltronics continue to experience slow sales, with the exception of the electronic
> manufacturing business, which continues to increase sales.  However the margins in electronic
> manufacturing are lower than the margin the Company achieves with its other product lines.The Company continues to focus on its established customer base for its Intelligent Systems Management
> products.  The Company will also offer its Vision switch to the 20-20 switch distribution channel, which is
> complimentary.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 nine month periods ended September
> 30, 2000 and 1999.Three Months EndedSeptember 30,
> 
> Nine Months EndedSeptember 30,2000
> 
> 1999
> 
> 2000
> 
> 1999Net sales
> 100.0%
> 
> 100.0%
> 
> 100.0%
> 
> 100.0%Cost of goods sold
> 49.1%
> 
> 50.6%
> 
> 55.7%
> 
> 50.3%Gross profit
> 50.9%
> 
> 49.4%
> 
> 44.3%
> 
> 49.7%Operating expenses:General and administrative
> 10.5%
> 
> 11.7%
> 
> 12.9%
> 
> 12.4%Sales and marketing
> 17.8%
> 
> 17.1%
> 
> 20.1%
> 
> 18.0%Research and development
> 12.3%
> 
> 10.7%
> 
> 13.4%
> 
> 11.6%40.6%
> 
> 39.5%
> 
> 46.4%
> 
> 42.0%Income (loss) from operations
> 10.3%
> 
> 9.9%
> 
> (2.1%)
> 
> 7.7%Other income (expense):Interest
> (3.2%)
> 
> (2.3%)
> 
> (3.1%)
> 
> (2.8%)Financing
> (0.7%)
> 
> (0.7%)
> 
> (0.9%)
> 
> (1.0%)Litigation costs
> (0.3%)
> 
> (0.3%)
> 
> (1.3%)
> 
> (0.3%)Gain on dispositions
> 0.0%
> 
> 0.0%
> 
> 0.0%
> 
> 0.5%Other
> (0.2%)
> 
> 0.1%
> 
> 0.0%
> 
> 0.2%(4.4%)
> 
> (3.2%)
> 
> (5.3%)
> 
> (3.4%)Income (loss) before income taxes
> 5.9%
> 
> 6.7%
> 
> (7.4%)
> 
> 4.3%Income taxes
> (0.3%)
> 
> 0.0%
> 
> (0.2%)
> 
> 0.0%Net income (loss)
> 5.6%
> 
> 6.7%
> 
> (7.6%)
> 
> 4.3%**Three Months Ended September 30, 2000 and 1999.**Sales were $13,614,000 for 2000 as compared to $9,337,000 for 1999.  The increase was due to strong
> sales from the Harris and Telident acquisitions and electronic manufacturing.Gross profit was $6,929,000 or 50.9% for 2000 as compared to $4,615,000 or 49.4% for 1999.  The
> increase in gross profit dollars was due to increased sales from the Harris and Telident acquisitions.General and administrative expenses were $1,432,000 for 2000 as compared to $1,090,000 for 1999.  The
> increase was due to increased payroll, benefit plan and bad debt expenses.16Sales and marketing expenses were $2,425,000 for 2000 as compared to $1,599,000 for 1999.  The
> increase is due to increased payroll, travel and marketing expenses, including the acquisitions of Telident
> and Harris.Research and development expenses were $1,670,000 for 2000 as compared to $1,003,000 for 1999.
> This increase related to the acquisition of Telident and Harris and increased expenses for Intelligent
> Systems Management and Vision products.Income from operations was $1,402,000 for 2000 as compared to  $923,000 for 1999.  This increase
> relates to increased sales and gross profit, offset by increased expenses and one time acquisition costs.Other expense was $598,000 for 2000 as compared to $299,000 for 1999.  Interest and financing was
> $533,000 for 2000 as compared to $283,000 for 1999.  This increase relates to borrowings for the Harris
> acquisition.Income tax expense for 1999 was offset by a corresponding reduction in the deferred tax asset valuation
> allowance.The net income was $757,000 for 2000 as compared to $624,000 for 1999.**Nine Months Ended September 30, 2000 and 1999.**Sales were $27,611,000 for 2000 as compared to $24,015,000 for 1999.  The increase was due to strong
> sales from the Harris and Telident acquisitions and electronic manufacturing sales.Gross profit was $12,245,000 or 44.3% for 2000 as compared to $11,927,000 or 49.7% for 1999.  The
> decrease in gross profit percentage was due to product mix, with increased low margin electronic
> manufacturing sales and cost  increases on selected components.General and administrative expenses were $3,550,000 for 2000 as compared to $2,968,000 for 1999.
> This increase was due to increased payroll, benefit plan and bad debt expenses.Sales and marketing expenses were $5,554,000 for 2000 as compared to $4,326,000 for 1999.  The
> increase was due to increased payroll and benefit plan expenses, including the acquisitions of Telident
> and Harris.Research and development expenses were $3,703,000 for 2000 as compared to $2,794,000 for 1999.
> The increase related to the acquisitions of Telident and Harris and increased expenses for ISM and Vision
> products.Loss  from operations was $561,000 for 2000 as compared to income from operations of $1,840,000  for
> 1999. This decrease relates to lower gross profits, increased expenses and one time acquisition costs.Other expense was $1,479,000 for 2000 as compared to $807,000 for 1999. The increase relates to
> litigation costs for the ISI lawsuit discussed in legal proceedings.  Interest and financing was $1,107,000
> for 2000 as compared to $890,000 for 1999.  The increase relates to borrowings for the Harris acquisition.Income tax expense for 1999 was offset by a corresponding reduction in the deferred tax asset valuation
> allowance.The net loss was $2,086,000 for 2000 as compared to a net income of $1,032,000 for 1999.17**LIQUIDITY AND CAPITAL RESOURCES**Cash requirements were provided by operations, borrowings from The CIT Group/Business Credit ("CIT")
> and the acquisition of Telident, Inc.The Company's working capital ratio was .90:1 at September 30, 2000 as compared to 1.08:1 at
> December 31, 1999.  Net working capital  was a deficit of $2,301,000 at September 30, 2000 as compared
> to $805,000 at December 31, 1999.  The reduction in working capital relates primarily to the Harris
> acquisition completed on June 30, 2000 and the net loss incurred in the first nine months of 2000.Net cash decreased by $610,000 for the nine months ended September 30, 2000 as compared to an
> increase of $668,000 for the nine months ended September 30, 1999.  Net cash flows provided by
> operating activities were $287,000 for the nine months ended September 30, 2000 as compared to
> $2,263,000 for the nine months ended September 30, 1999.Accounts receivable increased by $3,286,000 as of September 30, 2000.  The increase was due to strong
> sales.  Inventories increased by $6,047,000 as of September 30, 2000.  This increase was primarily due
> to the acquisition of Telident and the Harris 20-20 switching product line.  Accounts payable increased by
> $2,421,000 as of September 30, 2000.  The increase was due to the Telident and Harris acquisitions.
> Accrued expenses and other current liabilities increased $2,349,000 as of September 30, 2000.  The
> increase is due to the acquisition of Telident  and the Harris 20-20 switching product line.Net cash flows provided by investing activities totaled $426,000 for the nine months as compared to net
> cash used in investing activities of $299,000 for the nine months ended September 30, 1999.  Acquisition
> of property and equipment totaled $405,000 for the nine months ended September 30, 2000 as compared
> to $429,000 for the nine months ended September 30, 1999.  This decrease related to a reduction in
> capital expenditures.Cash flows used in financing activities totaled $1,323,000 for the nine months ended September 30, 2000
> as compared to $1,297,000 for the nine months ended September 30, 1999.  The Company repaid debt
> of $1,072,000 during the nine months ended September 30, 2000.On May 12, 2000 and June 30, 2000, the Company amended and restated the $1,750,000 of
> Subordinated Secured Debentures Agreement. The Company repaid $750,000 of the Debentures on
> September 29, 2000 and $250,000 on October 31, 2000 and the remaining $750,000 has a revised
> maturity of December 30, 2000.On May 12, 2000, the Company 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 February 13, 2002.  The interest rate is 12%.The Company delivered a $6,884,355 Note with interest accruing at 10.5% to acquire the Harris 20-20
> switching product line.   The repayment schedule was $3,442,178 of principal due August 14, 2000 and
> $3,442,177 of principal and accrued interest due on September 29, 2000.  The Note is secured by a first
> lien on the assets acquired and a lien on the Company's other assets subject to liens previously granted
> by the Company to its other lenders.  After August 14, 2000, the interest rate increased to 12.5%.The Note was amended August 17, 2000 to extend the maturity to September 29, 2000 and was further
> amended on October 30, 2000, under this amendment, the principal and capitalized interest total was
> stated at $7,096,623 and the due date was changed to December 31, 2000.  Interest accrues at 10.5%
> effective October 4, 2000 and is paid monthly starting November 1, 2000.  The Company has received
> shareholder approval to offer and sell common stock and warrants through a private placement and is18
> negotiating equity and debt financing to refinance payment of the Note and fund working capital
> requirements.  There can be no assurance that these negotiations will be successful.**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, or to the Company's knowledge, threatened that, if determined
> adversely,
> would have a material adverse effect upon the business or financial condition of the Company.In August, 1999, a former employee commenced an action against Teltronics in the Circuit Court, Twelfth
> Judicial Circuit, Sarasota County, Florida seeking damages for alleged violations of the Florida Worker's
> Compensation Law and the Family and Medical Leave Act. An answer with affirmative defenses was
> served and the action will be vigorously defended.In September, 1999, Teltronics and its subsidiary, ISI, were served with a counterclaim in connection
> with litigation commenced in July, 1998, by Teltronics and ISI in the United States District Court for the
> Middle District of Florida against two former employees and entities they control. Teltronics' and ISI's
> complaint sought damages and equitable relief against the defendants for breach of fiduciary duties and
> contract obligations; fraud; conversion; theft of trade secrets; interference with contracts and business
> relations; and violations of federal and state anti-fraud statutes.  During the trial in May, 2000, certain
> claims of Teltronics and ISI against the defendants and the counterclaims made by the defendants
> against Teltronics and ISI were withdrawn.  After trial of the remaining claims of Teltronics and ISI
> against the defendants, the jury rendered a verdict that awarded Teltronics and ISI approximately $16
> million from the defendants.  In August, 2000, the Court ordered a new trial of the damages owed to
> Teltronics and ISI which was scheduled to commence in October, 2000.In early November,  2000, Teltronics, ISI and the defendants entered into a Settlement Agreement under
> which the defendants agreed to pay Teltronics $700,000 in cash and deliver restricted shares of the
> voting common stock of Intelliworxx in escrow ("Intelliworxx Shares") which could result in Teltronics
> receiving an additional $4,550,000 over two years upon resale of the Intelliworxx Shares based upon
> the price of Intelliworxx Shares at time of resale.  The Settlement payments are conditioned upon closing
> of a private equity placement by Intelliworxx in December, 2000 which if not consummated, could result
> in a new trial in February, 2001 of the damages owed to Teltronics and ISI by the defendants.  There can
> be no assurance that the Intelliworxx private placement will occur or if it occurs that Teltronics will be
> successful in collecting the Settlement payments agreed to be paid by the defendants.In May, 2000, the Company was named in an action commenced in the Circuit Court for the County of
> St. Clair, Michigan by two former shareholders of Cascade Technology Corporation ("Cascade") seeking
> release of 52,117 shares of the Company's common stock held in escrow ("Escrow Stock") and
> damages, interest and attorneys fees.  The Escrow Stock was issued in February, 1999 and placed in
> escrow to secure indemnification rights of the Company under its purchase of certain rights and
> technology from one of the former shareholders of Cascade.  The Company served an Answer with
> affirmative defenses and a counterclaim seeking delivery of the Escrow Stock to the Company.**ITEM 2.**
> **CHANGES IN SECURITIES - None**ITEM 3.
> DEFAULTS UPON SENIOR SECURITIES - None**ITEM 4.**
> **SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None****ITEM 5.**
> **OTHER INFORMATION - None**19**ITEM 6A.**
> **EXHIBITS**10
> Amended Agreement Dated October 30, 2000between Harris Corporation and Teltronics, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> (a)27
> Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
> (a)**ITEM 6B.**
> **REPORTS ON FORM 8-K**The Company filed a Form 8-K on July 12, 2000 and a Form 8/K-A on September 13,
> 2000.____________________________(a)
> Filed as an Exhibit to this Quarterly Report on Form 10-Q for the nine month period
> ended September 30, 2000.20Pursuant 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.November 9, 2000
> /s/ Ewen R. CameronEwen R. Cameron
> President & Chief Executive Officer
> November 9, 2000
> /s/ Mark E. ScottMark E. Scott
> Vice President Finance, Secretary, Treasurer
> and Principal Accounting Officer21