U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, 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 March 31, 2001.
[   ]	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 May 11, 2001 there were 4,856,993 shares of the Registrant's Common Stock outstanding.

INDEX

PAGE     

PART I.	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets at March 31, 2001 and December 31, 2000.	3-4
	Consolidated Statements of Operations for the Three Months ended March 31, 2001 and 2000.	5
	Consolidated Statements of Cash Flows for the Three Months ended March 31, 2001 and 2000.	6
	Notes to Interim Consolidated Financial Statements	7-12
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	13-14
PART II.	OTHER INFORMATION	15
ITEM 1.	LEGAL PROCEEDINGS	15
ITEM 2.	CHANGES IN SECURITIES	15
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	15
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	15
ITEM 5.	OTHER INFORMATION	15
ITEM 6A.	EXHIBITS	15
ITEM 6B.	REPORTS ON FORM 8-K	15
SIGNATURES		16

2

PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS

	March 31, 2001		December 31, 2000
	(Unaudited)
Current Assets:
Cash and cash equivalents	$	21,530	$	35,292
Accounts receivable, net of allowance for doubtful accounts      of $276,000 at March 31, 2001 and $278,500 at      December 31, 2000.		19,034,946		10,594,463
Inventories, net		12,409,382		11,494,314
Prepaid expenses and other current assets		816,491		391,964
Total current assets		32,282,349		22,516,033
Property and equipment, net		5,518,402		5,841,728
Goodwill and other intangible assets, net		735,173		760,927
Other assets		302,628		412,779
Total assets	$	38,838,552	$	29,531,467

The accompanying notes are an integral part of these consolidated financial statements.

3

TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - Continued

LIABILITIES AND SHAREHOLDERS' EQUITY

	March 31, 2001		December 31, 2000
	(Unaudited)
Current Liabilities:
Current portion of note payable	$	857,059	$	857,059
Current portion of long-term debt		1,082,226		5,042,465
Current portion of capital lease obligations		248,126		313,370
Accounts payable		12,746,638		7,853,835
Accrued expenses and other current liabilities		3,365,998		2,416,614
Deferred income		10,878,732		1,333,567
Total current liabilities		29,178,779		17,816,910
Long-term liabilities:
Note payable, net of current portion		6,239,564		6,239,564
Long-term debt, net of current portion		0		1,000,000
Capital lease obligations, net of current portion		41,300		71,862
Total long-term liabilities		6,280,864		7,311,426
Commitments and contingencies
Shareholders' equity:
Common stock, $.001 par value, 40,000,000 shares           authorized, 4,818,783 and 4,761,291 issued and           outstanding at March 31, 2001 and December 31,           2000, respectively.		4,820		4,763
Non-voting common stock, $.001 par value, 5,000,000           shares authorized, zero shares issued and outstanding.		0		0
Preferred Series A stock, $.001 par value, 100,000 shares           authorized, 100,000 shares issued and out standing.		100		100
Preferred Series B Convertible stock, $.001 par value,           25,000 shares authorized, 12,625 shares issued           and outstanding.		13		13
Additional paid-in capital		18,899,815		18,838,798
Accumulated deficit		(15,525,839)		(14,440,543)
Total shareholders' equity		3,378,909		4,403,131
Total liabilities and shareholders' equity	$	38,838,552	$	29,531,467

The accompanying notes are an integral part of these consolidated financial statements.

4

TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Three Months Ended March 31,
	2001		2000
Net Sales	$	18,250,470	$	7,584,389
Cost of goods sold		11,897,180		4,501,137
Gross profit		6,353,290		3,083,252
Operating expenses:
General and administrative		1,746,985		980,193
Sales and marketing		3,538,242		1,633,810
Research and development		1,575,124		907,889
		6,860,351		3,521,892
Loss from operations		(507,061)		(438,640)
Other income (expense):
Interest		(421,398)		(219,123)
Financing		(78,651)		(70,894)
Litigation costs		0		(76,800)
Other		(35,160)		17,022
		(535,209)		(349,795)
Loss before income taxes		(1,042,270)		(788,435)
Income taxes		(5,151)		0
Net Loss		(1,047,421)		(788,435)
Dividends on Preferred Series B Convertible Stock		37,875		37,875
Net loss attributable to Common Shareholders	$	(1,085,296)	$	(826,310)
Net loss per share:
Basic and Diluted	$	(.23)	$	(.20)

The accompanying notes are an integral part of these consolidated financial statements.

5

TELTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended March 31,
	2001		2000
Cash Flows from Operating Activities:
Net income (loss)	$	(1,047,421)	$	(788,435)
Adjustments to reconcile net income (loss) to net cash      flows provided by (used in) operating activities:
Provision for doubtful accounts		(2,500)		(71,008)
Provision for obsolete inventories		56,835		9,501
Depreciation and amortization		576,608		372,940
Amortization of deferred financing costs		21,000		25,935
Amortization of intangibles		25,754		3,121
Changes in operating assets and liabilities, net of      acquisitions and dispositions:
Accounts receivable		(8,437,983)		308,288
Inventories		(971,903)		(349,541)
Prepaid expenses and other current assets		(424,527)		16,887
Accounts payable		4,892,803		(9,680)
Accrued expenses and other current liabilities		950,674		234,818
Deferred income		9,545,165		271,436
Net cash flows provided by operating activities		5,184,505		24,262
Cash Flows from Investing Activities:
Acquisition of property and equipment		(254,181)		(156,794)
Decrease in other assets		89,151		6,432
Proceeds from sale of assets		899		500
Net cash flows used in investing activities		(164,131)		(149,862)
Cash Flows from Financing Activities:
Net repayment of line of credit		(4,211,529)		(77,022)
Principal repayments of loans, notes and leases		(845,806)		(108,076)
Net proceeds from sale of common stock		61,074		10,500
Dividends on Preferred Series B Convertible Stock		(37,875)		(37,875)
Net cash flows used in financing activities		(5,034,136)		(212,473)
Net decrease in cash		(13,762)		(338,073)
Cash and cash equivalents - beginning of period		35,292		954,764
Cash and cash equivalents - end of period	$	21,530	$	616,691

The accompanying notes are an integral part of these consolidated financial statements.

6

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") the Company has also engaged in the design and manufacturing of a portable hardware/software device which allows two-way communication between speaking/hearing impaired individuals and hearing individuals.

The accompanying consolidated financial statements include the accounts of the Company and is comprised of its wholly-owned subsidiaries TTG Acquisition Corp. and Teltronics, S.A. de C.V. and its 85% owned subsidiary Interactive Solutions, Inc. ("ISI"). All significant inter-company 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 month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. These consolidated financial statements should be read in conjunction with the consolidated financial statements, and notes thereto, for the year ended December 31, 2000, as presented in the Company's annual report on Form 10-K.

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.

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 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:

Cash		$	762,321
Accounts receivable, net			610,998
Inventory, net			260,757
Prepaid expenses and other current assets			26,168
Property and equipment, net			240,234
Other assets			6,282
Goodwill and identifiable intangible assets			514,299
Accounts payable			(76,792)
Accrued expenses and other current liabilities			(239,505)
Deferred Income			(28,146)
Long-Term debt			(2,990)
	Net assets acquired	$	2,073,626

7

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 with interest at 10.5% per annum ("Note"). The Note provided for interest at 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, the due date was extended to December 31, 2000 and interest was changed to 10.5% effective October 4, 2000 and was to be paid monthly starting November 1, 2000.

In March, 2001, Harris and the Company agreed to further amend the Note owed by the Company to Harris which contemplates partial payment of the existing principal of the Note and payment of the balance under the amended Note with interest only at a rate of 10.5% per annum during an initial period of six months and amortization of the adjusted principal balance in eighteen monthly installments commencing seven months after execution of the amended Note. It is expected that the amended Note will be executed and the partial payment made to Harris simultaneously with the closing of a private placement by the Company at which closing Harris is expected to simultaneously convert a portion of the principal of the Note to convertible preferred stock of the Company and be issued warrants to acquire shares of the common stock of the Company. The Company expects the simultaneous closing of a private placement, Harris amended Note, and issuance of convertible preferred stock and warrants of the Company to Harris to occur during the third quarter of 2001. There can be no assurance that the closing will occur or that it will close on the terms contemplated. Pending closing of the contemplated transaction, Harris and the Company have agreed that the principal of the Note has been increased by an additional amount of $2,642,941 to reflect the aggregate payables owed by the Company to Harris for additional inventory and services provided; the maturity date of the Note has been extended to April 30, 2002; and interest only payments at a rate of 10.5% will commence on May 1, 2001.

The acquisition has been accounted for using the purchase method of accounting and results of operations of the acquired business are included in the Company's results of operations 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, net		$   5,277,113
Property and equipment, net		3,083,025
Customer lists and patents		206,210
Note payable		(6,884,355)
Accrued expenses and other current liabilities		(1,629,993)
Accounts payable		(52,000)
	Net assets acquired	$                 0

Purchase price allocation is open for inventory and fixed asset valuation.

8

The unaudited pro forma results presented below include the effects of the acquisitions as if they had been consummated at the beginning of the year prior to acquisition. The unaudited pro forma financial information below is not necessarily indicative of either future results of operations or results that might have been achieved had the acquisitions been consummated at the beginning of the year prior to acquisitions of Telident and Harris.

	Year Ended
	December 31, 2000
Net sales	$	67,106,506
Net loss	$	(44,909,028)
Net loss available to common shareholders	$	(45,060,528)
Net loss per share -
Basic	$	(9.53)
Diluted	$	(9.53)

NOTE 3 - NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss, adjusted for preferred stock dividends, by the weighted average number of issued common shares outstanding during the applicable period. Diluted net loss per share is computed by dividing net loss, adjusted for preferred stock dividends, by the weighted average number of issued 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 2001 and 2000 were anti-dilutive and were not included in the calculation of diluted net loss per share.

The following unaudited table sets forth the computation of basic and diluted net loss per share:

	Three Months Ended March 31,
	2001		2000
Basic
Net income (loss)	$	(1,047,421)	$	(788,435)
Preferred dividends		(37,875)		(37,875)
Net loss attributable to common shareholders	$	(1,085,296)	$	(826,310)
Weighted average shares outstanding		4,802,804		4,058,412
Net loss per share	$	(.23)	$	(.20)
Diluted
Net income (loss)	$	(1,047,421)	$	(788,435)
Preferred dividends		(37,875)		(37,875)
Net loss attributable to common shareholders	$	(1,085,296)	$	(826,310)
Weighted average shares outstanding		4,802,804		4,058,412
Net effect of dilutive stock options using the treasury      stock method		0		0
Net effect of dilutive warrants using the treasury      stock method		0		0
Dilutive potential common shares		4,802,804		4,058,412
Net loss per share	$	(.23)	$	(.20)

9

NOTE 4 - INVENTORIES

The major classes of inventories are as follows:

	March 31, 2000		December 31, 2000
	(Unaudited)
Raw materials	$	9,098,470	$	8,794,585
Work-in-process		1,404,388		1,276,872
Finished goods		1,906,524		1,422,857
	$	12,409,382	$	11,494,314

Provision for obsolete inventories were $56,835 at March 31, 2001 and $462,246 at December 31, 2000.

NOTE 5 - LONG TERM DEBT

On February 25, 1998, the Company issued $1,750,000 of Subordinated Secured Debentures (the "Debentures"). The Debentures were due February 13, 2002 and fees paid in connection with the Debentures totaled $8,750. 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 March 29, 1999, the Company amended and restated the $1,750,000 of Subordinated Secured Debentures Agreement. The Debentures have a revised maturity of $500,000 on April 30, 2000 and $1,250,000 on February 13, 2002. The Holder has extended the April 30, 2000 maturity date.

On May 12, 2000 and June 30, 2000, the Company amended and restated the $1,750,000 of Subordinated Secured Debentures Agreement with Finova Capital. The Company repaid $750,000 of the Debentures on September 29, 2000, $250,000 on October 31, 2000 and the remaining $750,000 was paid by March 30, 2001.

On May 12, 2000, the Company amended and restated the $1,000,000 Loan Agreement with Finova Capital 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 Loan 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 Loan contains certain financial covenants, including restrictions which could effect future funding of ISI by the Company.

In March, 2001, Harris and the Company agreed to further amend the Note owed by the Company to Harris which contemplates partial payment of the existing principal of the Note and payment of the balance under the amended Note with interest only at a rate of 10.5% per annum during an initial period of six months and amortization of the adjusted principal balance in eighteen monthly installments commencing seven months after execution of the amended Note. It is expected that the amended Note will be executed and the partial payment made to Harris simultaneously with the closing of a private placement by the Company at which closing Harris is expected to simultaneously convert a portion of the principal of the Note to convertible preferred stock of the Company and be issued warrants to acquire shares of the common stock of the Company. The Company expects the simultaneous closing of a private placement, Harris amended Note, and issuance of convertible preferred stock and warrants of the Company to Harris to occur during the third quarter of 2001. There can be no assurance that the closing will occur or that it will close on the terms contemplated. Pending closing of the contemplated transaction, Harris and the Company have agreed that the principal of the Note has been increased by an additional amount of $2,642,941 to reflect the aggregate payables owed by the Company to Harris for additional inventory and services provided; the maturity date of the Note has been extended to April 30, 2002; and interest only payments at a rate of 10.5% will commence on May 1, 2001.

10

NOTE 6 - SHAREHOLDERS' EQUITY

The total number of shares of all classes of capital stock which the Company has the authority to issue is 50,000,000 shares divided into three classes of which 5,000,000 shares, par value $.001 per share are designated Preferred stock, 40,000,000 shares, par value $.001 per share are designated Common stock and 5,000,000 shares, par value $.001 per share, are designated Non-Voting Common stock.

(A)     Preferred Stock - On February 25, 1998, the Company issued 25,000 shares of Preferred Series B Convertible Stock for $2,500,000. The Preferred Series B Convertible Stock provides for a $12 per share annual dividend, payable quarterly starting May 15, 1998. The dividend increases to $20 after four years. Fees paid in connection with this Preferred Stock totaled $12,500. The holder of the Preferred Series B Convertible Stock has the right at its option to convert to the Company's Common Stock at $2.75 per share. The Preferred Series B Convertible Stock cannot be called for two years and after two years, only if the twenty-day average bid price of the Company's common stock exceeds $5.50 per share. After four years, the Company has the right to redeem the Preferred Series B Convertible Stock in full at 100% of the face value plus accrued and unpaid dividends. The Preferred Series B Convertible Stock contains certain financial covenants.

(B)     Warrants - On February 25, 1998, the Company issued 890,000 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 fair value of the warrants was recorded as deferred financing costs and totaled $569,600. This amount is being amortized to financing expense over the life of the Subordinated Secured Debentures and Senior Secured Loans.

NOTE 7 - SEGMENT INFORMATION

The Company's operations are classified into three reportable segments, Teltronics, ISI and Mexico. 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. Inter-segment 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 or (loss) before taxes, excluding nonrecurring gains or losses.

11

The following table presents information about reportable segment operations and assets.

		Three Months Ended March 31,
		2001	2000
Net Sales
	Teltronics	$18,140,000	$ 7,486,000
	Mexico	0	0
	ISI	110,000	98,000
	Total sales	$18,250,000	$ 7,584,000
Depreciation and Amortization
	Teltronics	$     557,000	$    242,000
	Mexico	0	0
	ISI	20,000	131,000
	Total depreciation and amortization	$     577,000	$    373,000
Interest and Financing Costs
	Teltronics	$     500,000	$    290,000
	Mexico	0	0
	ISI	0	0
	Total interest and financing costs	$     500,000	$    290,000
Segment Profits
	Teltronics	$    (661,000)	$   (373,000)
	Mexico	(89,000)	0
	ISI	(297,000)	(415,000)
	Net loss before taxes	$ (1,047,000)	$   (788,000)
Segment Assets
	Teltronics	$38,743,000	$14,473,000
	Mexico	48,000	0
	ISI	48,000	817,000
	Total segment assets	$38,839,000	$15,290,000
Acquisition of Property and Equipment
	Teltronics	$     233,000	$     138,000
	Mexico	14,000	0
	ISI	7,000	19,000
	Total acquisition of property and equipment	$     254,000	$     157,000

12

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 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 following unaudited tables set forth certain data, expressed as a percentage of revenue, from the company's consolidated Statements of Operations for the three month periods ended March 31, 2001 and 2000.

	Three Months Ended March 31,
	2001	2000
Net sales	100.0%	100.0%
Cost of goods sold	65.2%	59.3%
Gross profit	34.8%	40.7%
Operating expenses:
General and administrative	9.6%	12.9%
Sales and marketing	19.4%	21.5%
Research and development	8.6%	12.0%
	37.6%	46.4%
Income (loss) from operations	(2.8%)	(5.7%)
Other income (expense):
Interest	(2.3%)	(2.9%)
Financing	(0.4%)	(0.9%)
Litigation costs	0%	(1.0%)
Gain on dispositions	0%	0%
Other	(0.2%)	0.2%
	(2.9%)	(4.6%)
Income (loss) before income taxes	(5.7%)	(10.3%)
Income tax expense	0%	0%
Net income	(5.7%)	(10.3%)

Three Months Ended March 31, 2001 and 2000.

Sales were $18,250,000 for 2001 as compared to $7,584,000 for 2000. This increase was due to strong sales from the 20-20 acquisition.

Gross profit was $6,353,000 or 34.8% for 2001 as compared to $3,083,000 or 40.7% for 2000. The decrease was due to product mix, with increased low margin electronic manufacturing sales and cost increases on selected components.

13

General and administrative expenses were $1,747,000 for 2001 as compared to $980,000 for 2000. The increase was due to increased payroll and benefit plan expenses.

Sales and marketing expenses were $3,538,000 for 2001 as compared to $1,634,000 for 2000. The increase is due to increased payroll, travel and marketing expenses.

Research and development expenses were $1,575,000 for 2001 as compared to $908,000 for 2000.

The increased expenses above relate to additional personnel required for the 20-20 acquisition.

Loss from operations was $507,000 for 2001 as compared to $439,000 for 2000. This increase relates to lower gross profit and increased expenses.

Other expense was $535,000 for 2001 as compared to $350,000 for 2000. Interest and financing was $500,000 for 2001 as compared to $290,000 for 2000.

The net loss was $1,047,000 for 2001 as compared to net loss of $788,000 for 2000.

LIQUIDITY AND CAPITAL RESOURCES

Cash requirements were met with borrowings from The CIT Group/Credit Finance ("CIT").

The Company's working capital ratio was 1.11:1 at March 31, 2001 as compared to 1.26:1 at December 31, 2000. Net working capital was $3,104,000 at March 31, 2001 as compared to $4,699,000 at December 31, 2000.

Net cash decreased by $14,000 for the quarter ended March 31, 2001 as compared to a decrease of $338,000 for the quarter ended March 31, 2000. Net cash flows provided by operating activities were $5,185,000 for the quarter ended March 31, 2001 as compared to $24,000 for the quarter ended March 31, 2000.

Accounts receivable increased by $8,438,000 for the quarter ended March 31, 2001 as compared to a decrease of $308,000 for the quarter ended March 31, 2000. This increase was due to sales related to the New York Board of Education contract in the last month of the quarter. Inventories increased by $972,000 for the quarter ended March 31, 2001 as compared to an increase of $350,000 for the quarter ended March 31, 2000. This increase relates to inventory purchases made for production scheduled for the second quarter of 2001. Accounts payable increased by $4,893,000 for the quarter ended March 31, 2001 as compared to a decrease of $10,000 for the quarter ended March 31, 2000.

Net cash flows used in investing activities totaled $164,000 for the quarter as compared to $150,000 for the quarter ended March 31, 2000. Acquisition of property and equipment totaled $254,000 for the quarter ended March 31, 2001 as compared to $157,000 for the quarter ended March 31, 2000.

Cash flows used in financing activities totaled $5,034,000 for the quarter ended March 31, 2001 as compared to $212,000 for the quarter ended March 31, 2000. The Company repaid debt of $5,057,000 during the quarter ended March 31, 2001.

On May 12, 2000 and June 30, 2000, the Company amended and restated the $1,750,000 of Subordinated Secured Debentures Agreement with Finova Capital. The Company repaid $750,000 of the Debentures on September 29, 2000, $250,000 on October 31, 2000 and the remaining $750,000 was paid by March 30, 2001.

On May 12, 2000, the Company amended and restated the $1,000,000 Loan Agreement with Finova Capital 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 Loan 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 Loan contains certain financial covenants, including restrictions which could effect future funding of ISI by the Company.

The Company has engaged Dain Rauscher Wessels to raise up to $17.5 million in debt and equity financing.

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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 is being 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. 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 the time of resale. The Settlement payments are conditioned upon closing of a private equity placement by Intelliworxx which has not occurred. If the private placement is not consummated, it could result in a new trial in May, 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, Teltronics 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 Teltronics' 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 Teltronics under its purchase of certain rights and technology from one of the former shareholders of Cascade. Teltronics served an Answer with affirmative defenses and a counterclaim seeking delivery of the Escrow Stock to Teltronics.
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
ITEM 6A.	EXHIBITS - None
ITEM 6B.	REPORTS ON FORM 8-K - None

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     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.

	TELTRONICS, INC.
May 15, 2001	/s/ Ewen R. Cameron
	Ewen R. Cameron President & Chief Executive Officer

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