-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KTOBKUxWUJH77S+vL5ZRh6CqyYhKZjVuUhmWoVOkNf/8urMGvlDLpEkJNaFmBP6A voaXptFMNl3F3Aiyjs8n6w== /in/edgar/work/20000814/0000891092-00-000711/0000891092-00-000711.txt : 20000921 0000891092-00-000711.hdr.sgml : 20000921 ACCESSION NUMBER: 0000891092-00-000711 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEL INSTRUMENT ELECTRONICS CORP CENTRAL INDEX KEY: 0000096885 STANDARD INDUSTRIAL CLASSIFICATION: [3670 ] IRS NUMBER: 221441806 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-18978 FILM NUMBER: 700771 BUSINESS ADDRESS: STREET 1: 728 GARDEN ST CITY: CARLSTADT STATE: NJ ZIP: 07072 BUSINESS PHONE: 2019331600 MAIL ADDRESS: STREET 1: 728 GARDEN ST CITY: CARLSTADT STATE: NJ ZIP: 07072 10-Q 1 0001.txt FORM 10-Q UNITED STATES 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 June 30, 2000 ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 33-18978 TEL-INSTRUMENT ELECTRONICS CORP. (Exact name of the Registrant as specified in Charter) New Jersey 22-1441806 (State of Incorporation) (I.R.S. Employer ID Number) 728 Garden Street, Carlstadt, New Jersey 07072 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone No. including Area Code: 201-933-1600 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 ____ ----- Indicate the number of shares outstanding of the issuer's common stock, as of the latest practical date: 2,109,957 shares of Common stock, $.10 par value as of August 9, 2000. TEL-INSTRUMENT ELECTRONICS CORPORATION TABLE OF CONTENTS PAGE ---- Item 1. Financial Statements (Unaudited): Condensed Comparative Balance Sheets June 30, 2000 and March 31, 2000 1 Condensed Comparative Statements of Operations - Three Months Ended June 30, 2000 and 1999 2 Condensed Comparative Statements of Cash Flows - Three Months Ended June 30, 2000 and 1999 3 Notes to Condensed Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-8 SIGNATURES 9 Item 1 - Financial Statements TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE BALANCE SHEETS
(Unaudited) (Audited) ASSETS June 30, March 31, 2000 2000 ------------ --------- Current assets: Cash $ 120,620 $ 172,836 Accounts receivable, net of allowance for doubtful accounts of $11,598 at June 30, 2000 and at March 31, 2000 1,354,931 1,099,425 Inventories 1,490,945 1,486,885 Prepaid expenses and other current assets 47,850 56,020 Deferred income tax benefit - current 215,000 215,000 ----------- ----------- Total current assets 3,229,346 3,030,166 Property, plant and equipment, net 328,713 350,872 Other assets 34,778 28,628 Deferred income tax benefit 466,892 523,099 ----------- ----------- Total assets 4,059,729 3,932,765 =========== =========== LIABILITES & STOCKHOLDERS EQUITY Current liabilities: Note payable - related party - current portion 150,000 150,000 Note payable - bank 250,000 250,000 Convertible subordinated notes - related party 15,000 15,000 Capitalized lease obligations - current portion 58,063 56,376 Advance payments 141,824 176,193 Accrued payroll, vacation pay, deferred wages payroll taxes and interest on deferred wages 463,658 350,286 Accounts payable and accrued expenses 1,088,762 1,111,181 ----------- ----------- Total current liabilities 2,167,307 2,109,036 Notes payable - related party - non-current portion 200,000 200,000 Capitalized lease obligations - excluding current port 85,224 101,682 ----------- ----------- Total liabilities 2,452,531 2,410,718 Stockholders' equity: Common stock 211,372 211,332 Additional paid-in capital 3,928,545 3,927,921 Accumulated deficit (2,532,719) (2,617,206) ----------- ----------- Total stockholders' equity 1,607,198 1,522,047 ----------- ----------- Total liabilities and stockholders' equity $ 4,059,729 $ 3,932,765 =========== ===========
See accompanying notes to condensed financial statements 1 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, 2000 1999 ---------- ---------- Sales - government, net $ 917,113 $ 553,428 Sales - commercial, net 572,890 558,401 ---------- ---------- Total sales 1,490,003 1,111,829 Cost of sales 786,709 465,424 ---------- ---------- Gross margin 703,294 646,405 Operating expenses: Selling, general and administrative 353,443 290,559 Engineering, research and development 181,998 278,443 ---------- ---------- Total operating expenses 535,441 569,002 ---------- ---------- Income from operations 167,853 77,403 Other income (expenses): Interest income 3,454 1,615 Interest expenses (30,613) (13,588) ---------- ---------- Income before taxes 140,694 65,430 Provision for income taxes 56,207 26,140 ---------- ---------- Net income 84,487 39,290 ========== ========== Basic and diluted income per common share $ 0.04 $ 0.02 ========== ========== Dividends per share None None Weighted average shares outstanding: Basic 2,113,390 2,109,957 Diluted 2,146,183 2,119,452 See accompanying notes to condensed financial statements 2 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended June 30, 2000 1999 --------- ---------- (Decrease) increase in cash: Cash flows from operating activities: Net income $ 84,487 39,290 Adjustments to reconcile net income to cash used in operating activities: Deferred income taxes 56,207 26,140 Depreciation 23,045 13,274 Changes in assets and liabilities: Increase in accounts receivable (255,506) (233,144) Increase in inventories (4,060) (216,154) Decrease (increase) in prepaid expenses 8,170 (3,957) and other current assets Increase in other assets (6,150) (364) Increase in accrued payroll, deferred wages and vacation pay 113,372 45,692 (Decrease) increase in accounts payable, advance payments and accrued expenses (56,788) 77,427 --------- --------- Net cash used in operations (37,223) (251,796) --------- --------- Cash flows from investing activities: Cash purchases of property, plant and equipment (886) (12,911) --------- --------- Net cash used in investing activities (886) (12,911) --------- --------- Cash flows from financing activities: Proceeds from the exercise of stock options 664 -- Proceeds from notes payable - bank -- 250,000 Repayment of capitalized lease obligations (14,771) (2,079) --------- --------- Net cash (used in) provided by financing activities (14,107) 247,921 --------- --------- Net decrease in cash (52,216) (16,786) Cash at beginning of period 172,836 70,617 --------- --------- Cash at end of period $ 120,620 $ 53,831 ========= =========
See accompanying notes to condensed financial statements 3 TEL-INSTRUMENT ELECTRONICS CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS Note 1 Basis of Presentation In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of Tel-Instrument Electronics Corp. as of June 30, 2000, the results of operations for the three months ended June 30, 2000 and June 30, 1999, and statements of cash flows for the three months ended June 30, 2000 and June 30, 1999. These results are not necessarily indicative of the results to be expected for the full year. The financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include disclosures normally made in an Annual Report on Form 10-K. The March 31, 2000 results included herein have been derived from the audited financial statements included in the Company's annual report on Form 10-K. Accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2000. Note 2 Accounts Receivable The following table sets forth the components of accounts receivable: June 30, March 31, 2000 2000 ---- ---- Commercial $ 303,400 $ 345,209 Government 1,063,129 765,814 Allowance for bad debts (11,598) (11,598) ----------- ----------- Total $ 1,354,931 $ 1,099,425 =========== =========== Note 3 Inventories Inventories consist of: June 30, March 31, 2000 2000 ------------------------ Purchased parts $ 898,912 $ 921,185 Work-in-process 618,771 609,824 Less: Reserve for obsolescence (26,738) (44,124) ------------------------ $1,490,945 $1,486,885 ======================== 4 TEL-INSTRUMENT ELECTRONICS CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued) Note 4 Income Taxes The Company, in accordance with FASB 109, has recognized a deferred income tax benefit based upon the expected utilization of net operating loss carryforwards as the Company believes that it is more likely than not that it will realize a portion of its operating losses before they expire. For the three months ended June 30, 2000, the Company recorded a tax provision of $56,207, which represents the effective federal and state tax rate on the Company's net income before taxes of $140,694. The Company has no federal tax liability. The $56,207 decreased the Company's deferred income tax benefit by the same amount in the accompanying balance sheet. The Company expects to utilize this deferred income tax benefit in the future for tax reporting purposes. Note 5 Earnings Per Share The Company's basic income per share is based on net income for the relevant period, divided by the weighted average number of common shares outstanding during the period. Diluted income per share is based on net income, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding stock options. Note 6 Government and Commercial Sales In 1999, the Company adopted SFAS 131. Presented below is information about the Company's government and commercial activities. The Company is organized primarily on the basis of its avionics products. The government market consists primarily of the sale of test equipment to U.S. and foreign governments and militaries either direct or through distributors. The commercial market consists of sales of test equipment to domestic and foreign airlines and to commercial distributors. The Company primarily develops and designs test equipment for the avionics industry and, as such, the Company's products and designs may be sold in the government and commercial markets. The table below presents information about sales and gross margin. Cost of sales includes certain allocation factors for indirect costs. Three Months Ended Three Months Ended June 30, 2000 June 30, 1998 Government Commercial Government Commercial ---------- ---------- ---------- ---------- Sales $917,113 572,890 $553,428 558,401 Cost of sales 496,744 289,965 233,966 231,458 -------- ------- -------- ------- Gross margin $420,369 282,925 319,462 326,943 ======== ======= ======= ======= 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations A number of the statements made by the Company in this report may be regarded as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, statements concerning the Company's outlook, pricing trends and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. All predictions as to future results contain a measure of uncertainty and accordingly, actual results could differ materially. Among the factors that could cause a difference are: changes in the general economy; changes in demand for the Company's products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation; environmental matters; and other unforeseen circumstances. A number of these factors are discussed in the Company's filings with the Securities and Exchange Commission. Overview In June 2000, deliveries of the AN/APM-480 IFF (Identification, Friend or Foe) Transponder Set Test Set (TSTS ) to the U.S. Navy began. The Company has received orders for more than 960 units, totaling over $12.5 million to be delivered over the next three to four fiscal years. The AN/APM-480 is a militarized avionics ramp tester used to simulate IFF Transponder/ Interrogator and TCAS (collision avoidance) functions to provide accurate go, no-go testing of avionics equipment installed in U.S. Navy aircraft on the flightline and aircraft carrier deck. The Company has also received an order for commercial avionics test sets exceeding $900,000 from a major freight carrier through a domestic distributor, which the Company expects to ship during the current fiscal year. In, addition, the Company shipped all of the T-76 Precision DME Ramp Test Sets under the contract with Marconi Communications through its Italian intermediary, M.P.G. Instruments s.r.l. Precision DME is directed solely to the European market. For the first quarter of fiscal year 2001 sales increased 34% to $1,490,003, and net income before taxes more than doubled to $140,694, as compared to the first quarter of the prior fiscal year. The Company's backlog at June 30, 2000, including the production order from the U.S. Navy of approximately $12,250,000 million, exceeds $16,500,000. The Company expects to ship the backlog over the next three to four fiscal years. 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) Sales For the three months ended June 30, 2000, net sales increased $378,174 (34.0%) as compared to the three months ended June 30, 1999. Commercial sales increased $14,489 (2.6%) and government sales increased $363,685 (65.7%). The increase in sales is primarily attributed to the shipment of the T-76 Precision DME Ramp Tests under the contract with Marconi Communications through its Italian intermediary, M.P.G. Instruments s.r.l., and the shipment of the AN/APM-480 IFF (Identification, Friend or Foe) Transponder Set Test Set (TSTS) to the U.S. Navy. These increases were partially offset by lower sales of the T-47 family of IFF test sets. Gross Margin Gross margin dollars increased $56,889 (8.8%) for the three months ended June 30, 2000 as compared to the same three months in the prior fiscal year. The increase in gross margin, for the most part, is attributed to an increase in sales volume. However, gross margin, as a percentage of sales, was reduced by the introduction of new products, such as the T-76 and the AN/APM-480, and the associated learning curve in building and testing these new and more sophisticated products, and the lower gross profit on the T-76 and AN/APM-480 contracts. The gross margin percentage for the three months ended June 30, 2000 was 47.2% as compared to 58.1% for the three months ended June 30, 1999. Operating Expenses Selling, general and administrative expenses increased $62,884 (21.6%) for the three months ended June 30, 2000 as compared to the three months ended June 30, 1999. This increase is attributed to higher sales and marketing expenses, including hiring a Director of Business Development, and an increase in salaries. Engineering, research and development expenses decreased $96,445 (34.6%). This decrease is associated with activities that were funded through contracts and, therefore, are included in the cost of sales. Income Taxes In accordance with SFAS 109, a provision for income taxes was recognized in the amount of $56,207 for the three months ended June 30, 2000, which represents the effective federal and state tax rate on the Company's net loss before taxes of $140,694. The Company currently does not have any federal tax liability. (See Note 4 to Notes to Condensed Comparative Financial Statements). 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) Liquidity and Capital Resources At June 30, 2000 the Company had positive working capital of $1,062,309, as compared to $921,130 at March 31, 2000. For the three months ended June 30, 2000, cash used in operations was $37,223 as compared to $251,796 for the three months ended June 30, 1999. This reduction in cash used in operations is primarily attributed to the improvement in the Company's operating income, an increase in liabilities, and the fact that inventories have only slightly increased from the March 31, 2000 level. In August 2000, the Company received a commitment letter from Summit Bank under terms that will increase the Company's available credit to $600,000 from its previous limit of $250,000. The line of credit bears an interest rate of 1% above the lender's prevailing base rate, which is payable monthly, based upon the outstanding balance. At June 30, 2000, the Company had an outstanding balance of $250,000. The line of credit is collateralized by substantially all of the assets of the Company and expires in June 2001. This credit facility requires the Company to maintain certain financial covenants. As of June 30, the Company was in compliance with all financial covenants. During the first quarter of the current fiscal year, the Company began shipping AN/APM-480s to the U.S. Navy and delivered all the T-76 Ramp Test Sets. Management believes that these events will have a positive effect on its cash flow. Based upon the current backlog, available line of credit, and cash balance, the Company believes that it has sufficient working capital to fund its plans for the next twelve months. At present, the Company does not anticipate significant long-term needs for capital outside its normal operating activities. There was no significant impact on the Company's operations as a result of inflation for the three months ended June 30, 2000. These financial statements should be read in conjunction with the Company's annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended March 31, 2000. New Accounting Pronouncement Staff Accounting Bulletin 101 ("SAB 101"), Revenue Recognition in Financial Statements, was issued on December 3, 1999 with an original effective date of the first fiscal quarter of fiscal years beginning after December 15, 1999. SAB 101 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. On June 26, 2000, the SEC staff issued SAB 101B to provide registrants with additional time to implement guidance contained in SAB 101. SAB 101B delays the implementation date of SAB 101 until no later than the fourth fiscal quarter of fiscal years beginning after December 15, 1999. This provides an additional six months for companies with fiscal year ends in December, January, or February. Companies with other fiscal year ends will have an additional nine months. The Company does not believe that implementation of SAB 101 will have a material impact on its financial statements. 8 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. TEL-INSTRUMENT ELECTRONICS CORP. Date: August 14, 2000 By: /s/ Harold K. Fletcher ---------------------- /s/ Harold K. Fletcher Chairman and President Date: August 14, 2000 By: /s/ Joseph P. Macaluso ---------------------- /s/ Joseph P. Macaluso Principal Accounting Officer EX-27 2 0002.txt FDS --
5 3-MOS MAR-31-2001 APR-01-2000 JUN-30-2000 121 0 1,367 (12) 1,491 3,229 1,042 (713) 4,060 2,167 0 0 0 211 1,396 4,060 1,490 1,490 787 1,322 0 0 (27) 141 56 84 0 0 0 84 .04 .04
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