> U.S. SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
> FORM 10-Q/A
> 
> 
> (Mark One)
> 
> [ X ]
> QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the Quarterly Period Ended March 31, 2005[    ]
> 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(IRS Employer Identification Number)2150 Whitfield Industrial Way, Sarasota, Florida 34243(Address of principal executive offices including zip code)(941) 753-5000Issuer's telephone number, including area codeIndicate 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 [  ] Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12-b-2 of the Exchange Act.) Yes [ ] No [ X ]As of May 10, 2005, there were 7,874,539 shares of the Registrants Common Stock, par value $.001, outstanding.Exhibit index appears on page 12.
> TABLE OF CONTENTS
> 
> PAGEPART I
> FINANCIAL INFORMATIONITEM 1.
> FINANCIAL STATEMENTSCondensed Consolidated Balance Sheets at March 31, 2005(Unaudited) and December 31, 2004
> 3Condensed Consolidated Statements of Operations (Unaudited)for the Three months ended March 31, 2005 and 2004
> 4Condensed Consolidated Statements of Cash Flows (Unaudited)for the Three months ended March 31, 2005 and 2004
> 5Notes to Condensed Consolidated Financial Statements (Unaudited)
> 6ITEM 2.
> MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS
> 8ITEM 3.
> QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK
> 9ITEM 4.
> CONTROLS AND PROCEDURES
> 9PART II
> OTHER INFORMATIONITEM 3.
> DEFAULTS UPON SENIOR SECURITIES
> 10ITEM 6.
> EXHIBITS AND REPORTS ON FORM 8-K
> 10SIGNATURE
> 11EXHIBIT INDEX
> 122
> 
> 
> 
> PART I  FINANCIAL INFORMATIONITEM 1.   FINANCIAL STATEMENTS
> 
> 
> TELTRONICS, INC. AND SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE SHEETSIn thousands, except shares and per share amounts
> 
> 
> ASSETS
> 
> March 31,
> 
> December 31,2005
> 
> 2004(Unaudited)Current assets:Cash and cash equivalents
> $      880
> 
> $   1,580Accounts receivable, net of allowance fordoubtful accounts
> 5,404
> 
> 5,499Costs and estimated earnings in excess of billingson uncompleted contracts
> 655
> 
> 342Inventories, net
> 4,585
> 
> 3,858Other current assets
> 1,033
> 
> 382Total current assets
> 12,557
> 
> 11,661Property and equipment, net
> 3,345
> 
> 3,729Other assets
> 978
> 
> 1,034Total assets
> $ 16,880
> 
> $ 16,424LIABILITIES AND SHAREHOLDERS' DEFICIENCYCurrent liabilities:Current portion of long-term debt and capitallease obligations
> $   4,698
> 
> $   4,831Accounts payable
> 7,238
> 
> 5,883Other current liabilities
> 3,938
> 
> 3,869Total current liabilities
> 15,874
> 
> 14,583Long-term liabilities:Long-term debt and capital lease obligations,net of current portion
> 7,468
> 
> 7,885Commitments and contingenciesShareholders' deficiency:Capital stock
> 8
> 
> 8Additional paid-in capital
> 24,302
> 
> 24,301Accumulated deficit and other comprehensive loss
> (30,772)
> 
> (30,353)Total shareholders' deficiency
> (6,462)
> 
> (6,044)Total liabilities and shareholders' deficiency
> $ 16,880
> 
> $ 16,424The accompanying notes are an integral part of these condensed consolidated financial statements.
> 
> 3
> TELTRONICS, INC. AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSIn thousands, except shares and per share amounts
> Three Months Ended March 31,2005
> 
> 2004Net salesProduct sales and installation
> $        6,614
> 
> $        8,794Maintenance and service
> 3,179
> 
> 2,5139,793
> 
> 11,307Cost of goods sold
> 5,583
> 
> 6,238Gross profit
> 4,210
> 
> 5,069Operating expenses:General and administrative
> 1,525
> 
> 1,611Sales and marketing
> 2,065
> 
> 2,222Research and development
> 1,014
> 
> 8644,604
> 
> 4,697Income (loss) from operations
> (394)
> 
> 372Other income (expense):Interest
> (348)
> 
> (434)Gain on sale of abandoned technology
> 495
> 
> ---Other
> 15
> 
> (3)162
> 
> (437)Loss before income taxes
> (232)
> 
> (65)Income taxes
> 5
> 
> 2Net loss
> (237)
> 
> (67)Dividends on Preferred Series B and C Convertible stock
> 159
> 
> 153Net income (loss) available to common shareholders
> $         (396)
> 
> $         (220)Net income (loss) per share:Basic and Diluted
> $       (0.05)
> 
> $       (0.03)Weighted average shares outstanding:Basic and Diluted
> 7,869,617
> 
> 7,795,670The accompanying notes are an integral part of these condensed consolidated financial statements.
> 
> 4
> TELTRONICS, INC. AND SUBSIDIARIESUNUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS In thousands, except shares and per share amounts
> Three Months Ended March 31,2005
> 
> 2004NET CASH FLOWS USED IN OPERATING ACTIVITIES
> $  (424)
> 
> $  (127)INVESTING ACTIVITIES - NET
> 353
> 
> (45)FINANCING ACTIVITIES:Net borrowings on line of credit
> (629)
> 
> 1,244Other
> 24
> 
> (35)Net cash flows provided by (used in) financing activities
> (605)
> 
> 1,209Effect of exchange rate changes on cash
> (24)
> 
> 7Net decrease in cash and cash equivalents for the period
> (700)
> 
> (86)Cash and cash equivalents - Beginning of Period
> 1,580
> 
> 146Cash and cash equivalents - End of Period
> $    880
> 
> $      60The accompanying notes are an integral part of these condensed consolidated financial statements.
> 
> 5
> TELTRONICS, INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSIn thousands, except shares and per share amounts(Unaudited)
> 
> 
> NOTE 1 - BASIS OF PRESENTATION
> 
> 
> The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. 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, 2005, are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.
> 
> 
> The balance sheet at December 31, 2004 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements.
> 
> 
> For further information, refer to the consolidated financial statements and notes thereto included in the Companys annual report on Form 10-K for the year ended December 31, 2004.
> 
> 
> NOTE 2 - COMPREHENSIVE INCOME (LOSS)
> 
> 
> 
> Total comprehensive income (loss) is as follows:
> 
> Three Months Ended March 31,2005
> 
> 2004Net loss
> $    (237)
> 
> $    (67)Foreign currency translation
> (24)
> 
> 7Total comprehensive income (loss)
> $    (261)
> 
> $    (60)6
> NOTE 3 - NET INCOME (LOSS) PER SHARE
> 
> 
> The following table sets forth the computation of basic and diluted net loss per share for the periods indicated:
> 
> Three Months Ended March 31,2005
> 
> 2004Basic and dilutedNet loss
> $         (237)
> 
> $          (67)Preferred dividends
> (159)
> 
> (153)$         (396)
> 
> $         (220)Weighted average shares outstanding
> 7,869,617
> 
> 7,795,670Net loss per share
> $       (0.05)
> 
> $       (0.03)For the three months ended March 31, 2005 and 2004, options to purchase 1,700,000 shares of common stock, respectively, were not included in the computation of diluted net loss per share because the effect would be anti-dilutive.
> 
> 
> For the three months ended March 31, 2005 and 2004, warrants to 1,190,000 shares of common stock were not included in the computation of diluted net loss per share because the effect would be anti-dilutive.
> 
> 
> 
> NOTE 4 - INVENTORIES
> 
> 
> 
> The major classes of inventories are as follows:
> 
> March 31,2005
> (Unaudited)
> 
> December 31,2004Raw materials
> $      2,088
> 
> $      1,707Work-in-process
> 965
> 
> 759Finished goods
> 1,532
> 
> 1,392$      4,585
> 
> $      3,8587
> ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND            RESULTS OF OPERATIONS (In thousands, except shares and per share amounts)
> 
> 
> FORWARD-LOOKING STATEMENTS
> 
> 
> References in this report to the Company, Teltronics, we. or us mean Teltronics, Inc. together with its subsidiaries, except where the context otherwise requires. 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 can generally be identified as such because the context of the statement will include words such as we believe, anticipate, expect, or words of similar import. Similarly, statements that describe our future plans, objectives, strategies or goals are also forward-looking statements. These forward-looking statements involve a number of risks and uncertainties that may materially adversely affect the anticipated results. Such risks and uncertainties
> include, but are not limited to, 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, and other factors described in the Companys filings with the Securities and Exchange Commission. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements made herein and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this Form 10-Q and we disclaim any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
> 
> 
> RESULTS OF OPERATIONS
> 
> 
> Net Sales and Gross Profit Margin
> 
> 
> Net sales decreased $1,500 or 13.4% for the three month period ended March 31, 2005 as compared to the same period in 2004. The decrease resulted primarily from a sales lag on a product enhancement introduced in late 2004 and a shift of $500 from the first quarter to the second quarter of 2005 as the result of a particular government contract put on hold. This order was reinstated in May 2005.
> 
> 
> Gross profit margin for the three month periods ended March 31, 2005 and 2004 was 43.0% and 44.8%, respectively. The decrease in gross profit percentage was primarily driven by sales mix.
> 
> 
> Operating Expenses
> 
> 
> Operating expenses were $4,604 and $4,697 for the three month period ended March 31, 2005 and 2004, respectively.
> 
> 
> General and administrative expenses decreased $86 for the three month period ended March 31, 2005 as compared to the same period in 2004. The net decrease was primarily a result of a $205 decrease in the provision for doubtful accounts resulting from the collection of outstanding specific accounts, partially offset by an increase of $95 in compensation and benefits, and an increase of $34 in expenses related to employee recruitment.
> 
> 
> Sales and marketing expenses decreased $158 for the three month period ended March 31, 2005 as compared to the same period in 2004. The net decrease was primarily a result of the decrease in severance costs related to the reduction in force in the NYC sales office.
> 
> 
> Research and development expenses increased $150 for the three month period ended March 31, 2005 as compared to the same period in 2004. The net increase was primarily a result of the addition of new staff at the Atlanta facility.
> 
> 8
> Other Income (Expense)
> 
> Other income (expense) were $162 and $437 for the three month period ended March 31, 2005 and 2004, respectively. For the three month period ended March 31, 2005 interest expense decreased $69, financing costs decreased $17 and other expenses decreased $16. The decrease in interest expense was a result of the decrease in the interest rate on the note payable to Harris.
> 
> 
> The first quarter of 2005 also included a gain of $495 on the sale of abandoned technology.
> 
> 
> LIQUIDITY AND CAPITAL RESOURCES
> 
> 
> In April 2005 we amended our credit facility which has a maximum credit limit of $5,500. The new facility matures March 31, 2006. The facility bears interest at prime plus 2.0% to 3.0% depending on the Companys financial results. At March 31, 2005 and December 31, 2004, the Companys interest rate was 8.75% and 8.25%, respectively. The amount available under this credit facility is subject to restriction based on availability formulas. The availability formulas relate primarily to the eligibility of accounts receivable as part of the Companys borrowing base. As a result of the foregoing availability restrictions, the amount available under this credit facility as of March 31, 2005 was $95. The credit facility is secured by a lien on substantially all our assets and a pledge of substantially all the capital stock of our subsidiaries.
> 
> 
> In March 2005, the Company paid $530 to a related party reducing the outstanding loan balance to $248.
> 
> 
> Seasonality
> 
> 
> The Company has experienced seasonality due in part to purchasing tendencies of our customers during the fourth and first quarters of each calendar year. Consequently, net sales for the fourth and first quarters of each calendar year are typically not as strong as results during the other quarters. The net sales of the Company continued to be impacted by the general slowdown of telecommunications expenditures.
> 
> ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
> 
> 
> We have no material changes to the disclosure under the caption Quantitative and Qualitative Disclosures About Market Risks in our Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference.
> 
> ITEM 4.    CONTROLS AND PROCEDURES
> 
> 
> The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective in timely making known to them material information relating to the Company and the Companys consolidated subsidiaries required to be disclosed in the Companys reports filed or submitted under the Exchange Act. There has been no change in the Companys internal control over financial reporting during the quarter ended March 31,
> 2005 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
> 9
> PART II - OTHER INFORMATION
> 
> ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
> 
> 
> As of March 31, 2005, we were in arrears on dividend payments on our Series B and Series C Preferred Stock in the amounts of $173 and $881, respectively, which amounts include interest thereon. We were also in arrears on debt payment and the Note Payable to Tri-Link in the amount of $1,080.
> 
> ITEM 6(a).
> EXHIBITS31.1
> Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
> Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232
> Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200210.1
> Extension and Amendment of Lease between ARE Sarasota Limited Partnership and Teltronics, Inc. dated March 31, 200510.2
> New York State Department of Education/DIIT Minibid #2189 Awarded January 31, 2005 to Teltronics, Inc10.3
> Amended Loan and Security Agreement between Teltronics, Inc. and The CIT Group/Business Credit, Inc. dated April 25, 2005ITEM 6(b).    REPORTS ON FORM 8-KThe Company filed two reports on Form 8-K during the quarter ended March 31, 2005. Information regarding the item reported on is as follows:Date Filed
> Item Reported OnFebruary 3, 2005
> 1.01 Entry Into a Material Definitive Agreement. The Company issued a Press Release announcing it had been awarded a Maintenance Contract with the New York City Board of Education .March 4, 2005
> 1.02 Termination of a Material Definitive Agreement. The Company issued a Press Release announcing International Media Network AG was unable to fulfill its obligation to Teltronics.10
> 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.
> 
> 
> Dated:  November 10, 2005
> 
> TELTRONICS, INC.BY: /S/ EWEN R. CAMERONEwen R. CameronPresident & Chief Executive OfficerDated:  November 10, 2005
> 
> BY: /S/ RUSSELL R. LEE IIIRussell R. Lee IIIVice President & Chief Financial Officer11
> EXHIBIT INDEX
> ExhibitNumber
> Description31.1*
> Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*
> Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200232*
> Certification of Periodic Financial Report by the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200210.1*
> Extension and Amendment of Lease between ARE Sarasota Limited Partnership and Teltronics, Inc. dated March 31, 200510.2*
> New York State Department of Education/DIIT Minibid #2189 Awarded January 31, 2005 to Teltronics, Inc10.3*
> Amended Loan and Security Agreement between Teltronics, Inc. and The CIT Group/Business Credit, Inc. dated April 25, 2005(*)
> Filed as an Exhibit to this Report on Form 10-Q for the period ended March 31, 2005.12