10-Q 1 e14285_10q.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 December 31, 2002 [ ] 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: 2,135,801 shares of Common stock, $.10 par value as of February 7, 2003. TEL-INSTRUMENT ELECTRONICS CORPORATION TABLE OF CONTENTS PAGE ---- Item 1. Financial Statements (Unaudited): Condensed Comparative Balance Sheets December 31, 2002 and March 31, 2002 1 Condensed Comparative Statements of Operations - Three and Nine Months Ended December 31, 2002 and 2001 2 Condensed Comparative Statements of Cash Flows - Nine Months Ended December 31, 2002 and 2001 3 Notes to Condensed Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-10 Item 4. Controls and Procedures 10 Part II Other Information Item 4. Submission of matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 Certifications 13-14 Item 1 - Financial Statements TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE BALANCE SHEETS December 31, 2002 and March 31, 2002
ASSETS (Unaudited) December 31, 2002 March 31, 2002 ----------------- -------------- Current assets: Cash $2,448,086 $1,198,191 Accounts receivable, net of allowance for doubtful accounts of $36,598 at December 31, 2002 and March 31, 2002 1,879,409 937,849 Inventories 1,809,884 2,481,680 Prepaid expenses and other current assets 56,200 47,956 Deferred income tax benefit - current 561,629 669,000 ---------- ---------- Total current assets 6,755,208 5,334,676 Property, plant, and equipment, net 724,412 822,010 Other assets 82,461 76,886 ---------- ---------- Total assets $7,562,081 $6,233,572 ========== ========== LIABILITIES & STOCKHOLDERS EQUITY Current liabilities: Note payable - related party - current portion $ 150,000 $ 250,000 Convertible subordinated notes - related party 7,500 7,500 Capitalized lease obligations - current portion 63,692 108,845 Deferred revenues 592,232 518,103 Accrued payroll, vacation pay, deferred wages, payroll taxes and interest on deferred wages 463,739 399,437 Accounts payable and accrued expenses 1,532,484 896,710 ---------- ---------- Total current liabilities 2,809,647 2,180,595 Notes payable - related party - non-current portion 100,000 100,000 Capitalized lease obligations - excluding current portion -- 52,183 ---------- ---------- Total liabilities 2,909,647 2,332,778 Stockholders' equity: Common stock 213,583 213,338 Additional paid-in capital 3,944,812 3,941,967 Retained earnings (accumulated deficit) 494,039 (254,511) ---------- ---------- Total stockholders' equity 4,652,434 3,900,794 ---------- ---------- Total liabilities and stockholders' equity $7,562,081 $6,233,572 ========== ==========
See accompanying notes to condensed financial statement. 1 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002 Dec. 31, 2001 ------------- ------------- ------------- ------------- Sales Government, net $ 2,435,114 $ 1,601,158 $7,448,690 $5,061,879 Commercial, net 631,689 438,195 1,450,748 1,725,645 ----------- ----------- ---------- ---------- Total Sales 3,066,803 2,039,353 8,899,438 6,787,524 Cost of sales 1,437,563 1,009,736 4,209,428 3,436,913 ----------- ----------- ---------- ---------- Gross margin 1,629,240 1,029,617 4,690,010 3,350,611 Operating expenses: Selling, general & administrative 803,872 399,761 2,167,533 1,249,656 Engineering, research, & development 391,690 318,867 1,260,736 1,113,417 ----------- ----------- ---------- ---------- Total operating expenses 1,195,562 718,628 3,428,269 2,363,073 Income from operations 433,678 310,989 1,261,741 987,538 Other income (expense): Interest income 17,954 968 33,743 10,296 Interest expense (15,653) (19,580) (48,941) (63,155) ----------- ----------- ---------- ---------- Income before taxes 435,979 292,377 1,246,543 934,679 Provision for income taxes, net 174,173 116,806 497,993 373,405 ----------- ----------- ---------- ---------- Net income $ 261,806 $ 175,571 $ 748,550 $ 561,274 =========== =========== ========== ========== Basic and diluted income per common share $ 0.12 $ 0.08 $ 0.35 $ 0.26 Dividends per share None None None None Weighted average shares outstanding Basic 2,135,801 2,128,351 2,135,536 2,127,111 Diluted 2,159,985 2,158,264 2,158,985 2,157,024
See accompanying notes to condensed financial statements. 2 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended Nine Months Ended December 31, 2002 December 31,2001 ----------------- ----------------- Cash flows from operating activities Net income $ 748,550 $ 561,274 Adjustments to reconcile net income to cash used In operating activities: Deferred income taxes 107,371 272,179 Depreciation 188,135 155,335 Reserve for obsolescence 45,000 -- Changes in assets or liabilities: Increase in accounts receivable, net (941,560) (126,550) Decrease (increase) in inventories, net 626,796 (204,154) (Increase) decrease in prepaid expenses and other current assets (8,244) 19,239 Increase in other assets (5,575) (17,447) Increase in deferred revenues 74,129 821,181 Increase (decrease) in accrued payroll, vacation pay, deferred wages, Payroll taxes and interest on deferred wages 64,302 (60,226) Increase (decrease) in accounts payable and accrued expenses 635,774 (573,076) ---------- ---------- Net cash provided by operations 1,534,678 847,755 ---------- ---------- Cash flows from investing activities: Cash purchases of property, plant and equipment (90,537) (210,660) ---------- ---------- Net cash used in investing activities (90,537) (210,660) ---------- ---------- Cash flows from financing activities: Proceeds from exercise of stock options 3,090 3,256 Repayment of note payable - related party (100,000) -- Repayment of notes payable to bank -- (150,000) Repayment of capitalized lease obligations (97,336) (65,683) ---------- ---------- Net cash used in financing activities (194,246) (212,427) ---------- ---------- Net increase in cash 1,249,895 424,668 Cash at beginning of period 1,198,191 433,438 ---------- ---------- Cash at end of period $2,448,086 $ 858,106 ========== ========== Interest paid $ 77,243 $ 43,772 ========== ========== Taxes paid $ 428,029 $ 121,676 ========== ========== Assets acquired through capital leases $ -- $ 61,857 ========== ==========
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 December 31, 2002, the results of operations for the three and nine months ended December 31, 2002 and December 31, 2001, and statements of cash flows for the nine months ended December 31, 2002 and December 31, 2001. 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, 2002 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, 2002. Note 2 Accounts Receivable The following table sets forth the components of accounts receivable: December 31, 2002 March 31, 2002 ----------------- -------------- Commercial $ 385,263 $ 238,690 Government 1,530,744 735,757 Allowance for Bad Debts (36,598) (36,598) ----------- ---------- Total $ 1,879,409 $ 937,849 =========== ========== Note 3 Inventories Inventories consist of: December 31, 2002 March 31, 2002 ----------------- -------------- Purchased Parts $ 655,114 $ 913,917 Work-in-Process 1,225,997 1,584,701 Finished Goods 59,086 68,375 Less: Reserve for Obsolescence (130,313) (85,313) --------- ----------- Total $1,809,884 $ 2,481,680 ========== =========== 4 TEL-INSTRUMENT ELECTRONICS CORP NOTES TO CONDENSED FINANCIAL STATEMENTS Note 4 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 5 Government and Commercial Sales The Company is organized 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 commercial market also includes sales related to repairs and calibration which have a lower gross margin. 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 December 31, 2002 December 31, 2001 Government Commercial Government Commercial ---------- ---------- ----------- ----------- Sales $2,435,114 $ 631,689 $ 1,601,158 $ 438,195 Cost of Sales 1,126,062 311,501 819,142 190,594 ---------- ---------- ----------- ---------- Gross Margin $1,309,052 $ 320,188 $ 782,016 $ 247,601 ========== ========== =========== ========== Nine Months Ended Nine Months Ended December 31, 2002 December 31, 2001 Government Commercial Government Commercial ---------- ---------- ---------- ---------- Sales $7,448,690 $1,450,748 $ 5,061,879 $1,725,645 Cost of Sales 3,436,478 772,950 2,648,907 788,006 ---------- ---------- ----------- ---------- Gross Margin $4,012,212 $ 677,798 $ 2,412,972 $ 937,639 ========== ========== =========== ========== 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION 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 previous filings with the Securities and Exchange Commission. Critical Accounting Policies In preparing our financial statements and accounting for the underlying transactions and balances, we apply our accounting policies as disclosed in Note 2 of our Notes to Financial Statements included in our Form 10-K. The Company's accounting policies that require a higher degree of judgment and complexity used in the preparation of financial statements include: Revenue recognition - revenues are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right to return exists. Revenues under service contracts are recognized when the services are performed. Property and equipment - property and equipment are stated at cost, less accumulated depreciation. Depreciation is provided using the straight-line method over the estimated useful lives of the respective assets over periods ranging from three to eight years. Useful lives are estimated at the time the asset is acquired and are based upon historical experience with similar assets as well as taking into account anticipated technological or other changes. Leasehold improvements are amortized over the term of the lease or the useful life of the asset, whichever is shorter. Inventory reserves - inventory reserves or write-downs are estimated for excess, slow-moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. These estimates are based on current assessments about future demands, market conditions and related management initiatives. If market conditions and actual demands are less favorable than those projected by management, additional inventory write-downs may be required. Warranty reserves - warranty reserves are estimated based upon historical rates and specific items that are identifiable and can be estimated at time of sale. While warranty costs have historically been within our expectations and the provisions established, future warranty costs could be in excess of our warranty reserves. A significant increase in these costs could adversely affect our operating results for the period and the periods these additional costs materialize. Warranty reserves are adjusted from time to time when actual warranty claim experience differs from estimates. 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Critical Accounting Policies (continued) Accounts receivable - the Company performs ongoing credit evaluations of its customers and adjusts credit limits based on customer payment and current credit worthiness, as determined by review of their current credit information. The Company continuously monitors credits and payments from its customers and maintains provision for estimated credit losses based on its historical experience and any specific customer issues that have been identified. While such credit losses have historically been within our expectation and the provision established, the Company cannot guarantee that it will continue to receive positive results. Income taxes - deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when such differences are expected to reverse. These amounts are periodically evaluated. The deferred tax asset is reduced, if necessary, by a valuation allowance for any tax benefit which is not more likely than not to be realized. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in the period that such tax rate changes are enacted. Overview For the nine months ended December 31, 2002, sales increased 31% to $8,899,438 and net income before taxes increased 33% to $1,246,543. In the prior fiscal year and in accordance with Staff Accounting Bulletin No.101, "Revenue Recognition in Financial Statements" ("SAB101"), government revenues of approximately $578,000, for units requiring a software upgrade prior to shipment, were deferred until the fourth quarter when the upgrade was completed. Deliveries of the AN/APM 480 IFF (Identification, Friend or Foe) Transponder Test Set to the U.S. Navy continue and accounted for 56.3% of total sales for the nine months ended December 31, 2002. In February 2003, the U.S. Navy exercised the remaining options for approximately $1,450,000. The Company now has received orders for all 1,300 units under the contract. The Company has shipped 863 units through December 31, 2002 and expects shipments under this contract to continue until sometime in the fourth quarter of calendar year 2003. Government sales remain strong primarily as a result of the deliveries of the AN/APM 480 to the U.S. Navy. This program firmly established the Company as one of the leading suppliers in the avionics test equipment industry, and improved its market position. The current backlog is approximately $7,500,000 and is expected to be shipped within the next twelve months. The Company continues to invest heavily in new product development to meet the expected demands of its customers and remain one of the leaders in the industry. The Company continues its work on the next generation of IFF test sets in anticipation of U.S. and NATO requirements for more sophisticated IFF testing and believes that most of the AN/APM-480's will need to be upgraded in the future to accommodate this more sophisticated IFF testing. The Company recently introduced the TR-220, a Multi-Function ramp test set and the T-36C Nav/Comm ramp test set, into the commercial market. The T-47S and the T-47G Multi-Function ramp testers were introduced into the military market. The Company also continues development of a new bench test set. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Overview (continued) As previously announced, the Company strengthened its management team with the addition of a new Chief Operating Officer and a Director of Business Development. The Company has been active in responding to customer requests for quotation, in addition to adapting its product designs to respond to these requests. The Company continues actively to pursue opportunities in both the commercial and government markets, both domestically and internationally. Exploration of opportunities in other government and commercial markets also continues in an attempt to broaden the Company's product line. The Company continues its efforts with Semaphore Capital Advisors LLC to pursue growth through acquisitions and alliances of compatible businesses or technologies. Results of Operations Sales For the three months ended December 31, 2002, net sales increased $1,027,450 (50.4%) as compared to the three months ended December 31, 2001. In the December 31, 2001 fiscal period and in accordance with of Staff Accounting Bulletin No.101, "Revenue Recognition in Financial Statements" ("SAB101"), government revenues of approximately $578,000, for units requiring a software upgrade prior to shipment, were deferred until the fourth quarter when the upgrade was completed. Government sales increased $833,956 (52.1%) to $2,435,114 as compared to $1,601,158 for the three months ended December 31, 2001. The increase in government sales is mainly attributed to the shipment of the AN/APM 480 to the U.S. Navy, which accounted for 50.7% of the total sales for the current quarter. Government sales in the third quarter also increased as a result of shipments of the T-30D to the U.S. Government. Commercial sales increased $193,494 (44.2%) for the third quarter ended December 31, 2002 as compared to the third quarter of the previous fiscal year. This increase is primarily the result of an increase in sales of the Company's T-49C Transponder/TCAS ramp test set, as a result of a sales promotion, and the introduction of the TR-220 Multi-Function test set. For the nine months ended December 31, 2002, net sales increased $2,111,914 (31.1%) as compared to the nine months ended December 31, 2001. In the prior fiscal year and in accordance with Staff Accounting Bulletin No.101, "Revenue Recognition in Financial Statements" ("SAB101"), government revenues of approximately $578,000, for units requiring a software upgrade prior to shipment, were deferred until the fourth quarter when the upgrade was completed. Government sales increased $2,286,811 (47.2%) to $7,448,690 as compared to $5,061,879 for the nine months ended December 31, 2001. The increase in government sales is mainly attributed to the shipment of the AN/APM 480 to the U.S. Navy, which accounted for 56.3% of the total sales for the nine months ended December 31, 2002. Government sales for the nine months also increased as a result of shipments of the T-36M and the AN/APM 480 to customers other than the U.S. Navy. However, these increases were partially offset by a decline in other government products. Commercial sales decreased $274,897 (15.9%) for the nine months ended December 31, 2002 as compared to the first nine months of the previous fiscal year. This decrease is primarily the result of the completion of a contract to a major freight carrier, and the inability as yet to replace this contract with a new contract due to the financial difficulties encountered within the commercial airline industry. This decrease was partially offset by an increase in sales of the Company's Transponder/TCAS ramp test set, as a result of a sales promotion, and the introduction of the TR-220 Multi-Function test set during the current quarter. However, the commercial market remains weak, primarily as a result of the financial condition of most of the commercial airlines. 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) Results of Operations (continued) Gross Margin Gross margin dollars increased $599,623 (58.2%) for the three months ended December 31, 2002 as compared to the same period last year. This increase, for the most part, is attributed to the increase in sales volume and, to a lesser extent, to production efficiencies obtained as a result of the higher volume. The gross margin percentage for the three months ended December 31, 2002 was 53.1% as compared to 50.5% for the three months ended December 31, 2001. Gross margin dollars increased $1,339,399 (40%) for the nine months ended December 31, 2002 as compared to the same period last year. This increase, for the most part, is attributed to the increase in sales volume, higher prices for limited units of the AN/APM 480, and, to a lesser extent, to production efficiencies obtained as a result of the higher volume. The gross margin percentage for the nine months ended December 31, 2002 was 52.7% as compared to 49.4% for the nine months ended December 31, 2001. Operating Expenses Selling, general and administrative expenses increased $404,111 (101.l%) and $917,877 (73.5%), respectively, for the three and nine months ended December 31, 2002 as compared to the three and nine months ended December 31, 2001. These increases are attributed to added sales and marketing activities, higher commission expenses, the addition of a Customer Support Manager, a new sales representative, and a Director of Business Development, including relocation expenses for the Director of Business Development. Selling, general and administrative expenses also increased as a result of higher legal and audit fees and investment-banking services. The Company also strengthened its staff with the addition of a new Chief Operating Officer (COO). Fiscal year 2003 expenses include recruitment and relocation costs for the COO. The addition of these personnel will add to the Company's expenses, but management believes these additions are necessary for the Company to continue its growth and diversification and to provide for an orderly succession of key personnel. Engineering, research and development expenses increased $72,823 (22.8%) and $147,317 (13.2%) for the same periods. The higher level of expenditures is associated with an increase in research and development activities, including the TR-220 Multi-Function ramp test set, enhancements of existing products, including the T-36C, T-47G and the T-49C, as well as continued effort on the next generation of IFF test sets. Income Taxes Income taxes increased $57,367 and $124,588, respectively, for the three and nine months ended December 31, 2002 as compared to the same periods last year. These increases are a result of an improvement in the Company's income. The provision for income taxes represents the effective federal and state tax rate on the Company's income before taxes. The Company has used up all its net operating loss carryforwards and the Company will pay federal taxes this fiscal year. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) Liquidity and Capital Resources At December 31, 2002 the Company had positive working capital of $3,945,561 as compared to $3,154,081 at March 31, 2002. For the nine months ended December 31, 2002, cash provided by operations was $1,534,678 as compared to $847,755 for the nine months ended December 31, 2001. This increase in cash from operations is primarily attributable to an increase in the Company's net income, a reduction in inventories resulting from an increase in sales, and an increase in accounts payable and accrued expenses offset partially by an increase in accounts receivable. The Company increased its line of credit to $1,750,000 from Fleet Bank in November 2002. The line of credit bears an interest rate of 0.5% above the lender's prevailing base rate, which is payable monthly, based upon the outstanding balance. At December 31, 2002, the Company had no outstanding balance. The line of credit is collateralized by substantially all of the assets of the company. The credit facility requires the Company to maintain certain financial covenants. As of December 31, 2002, the Company was in compliance with all financial covenants. The line of credit expires at September 30, 2003. Based upon the current backlog, its existing credit line, and cash balance, the Company believes that it has sufficient working capital to fund its operating plans for at least the next twelve months. However, as the Company pursues additional opportunities, the need for additional capital may arise. The Company will evaluate its alternatives when these opportunities arise. The Company has also retained Semaphore Capital Advisors as its investment bankers to help pursue acquisitions and alliances and, if needed, to help raise capital. The Company maintains its cash balance primarily in a money market account for use in operations or in the event that it needs these funds for an acquisition. There was no significant impact on the Company's operations as a result of inflation for the nine months ended December 31, 2002. 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, 2002. Item 4. Controls and Procedures The Company adopted disclosure controls and procedures, as called for by the recently adopted legislation and rules of the Securities and Exchange Commission. Under rules promulgated by the S.E.C., disclosure controls and procedures are defined as "those controls or other procedures of the issuer that are designed to ensure that information required to be disclosed by the issuer in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms." The Chief Executive Officer and the Principal Accounting Officer of the Company evaluated the Company's disclosure controls and procedures at January 31, 2003, and concluded that they are effective. Furthermore, there were no significant changes in the Company's internal controls, or in other factors that could significantly affect these controls after January 31, 2003, the date of the evaluation by the Chief Executive Officer and the Principal Accounting Officer. 10 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) Part II Other Information Item 4 Submission of Matters to a Vote of Security Holders (a) The Annual Meeting of Shareholders was held on December 12, 2002 (the "Annual Meeting"). (b) Not applicable because (i) proxies for the Annual Meeting were not solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934; (ii) there was no solicitation in opposition to management's nominees as listed in the Company's proxy statement; and (iii) all of such nominees were elected. (c) At the Annual Meeting, the Company's shareholders voted in favor of re-electing management's nominees for election as directors of the Company as follows: For Against --- ------- Harold K. Fletcher 1,513,534 0 George J. Leon 1,513,534 0 Robert J. Melnick 1,513,534 0 Jeff C. O'Hara 1,513,534 0 Robert H. Walker 1,513,534 0 The shareholders also voted all 1,513,534 shares in favor of ratifying the audit committee's appointment of BDO Seidman LLP, as the Company's independent auditors for the fiscal year ending March 31, 2003. (d) Not applicable Item 6. Exhibits and Reports on Form 8-K a. Exhibits None. b. Reports on Form 8-K. Report on Form 8-KA regarding changes in certifying auditors was submitted on November 20, 2002 under Item 4. Report on Form 8-K regarding changes in certifying auditors was submitted on November 20, 2002 under Item 4. Report on Form 8-K regarding changes in certifying auditors was submitted on December 11, 2002 under Item 4. 11 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: February 14, 2002 By: /s/ Harold K. Fletcher ---------------------- /s/ Harold K. Fletcher Chairman and President Date: February 14, 2002 By: /s/ Joseph P. Macaluso ---------------------- /s/ Joseph P. Macaluso Principal Accounting Officer 12 Tel-Instrument Electronics Corp CEO Certification I, Harold K. Fletcher, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tel-Instrument Electronics Corp; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others within registrant, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 11, 2003 /s/ Harold K. Fletcher ---------------------- /s/ Harold K. Fletcher Chairman and President 13 Tel-Instrument Electronics Corp CFO Certification I, Joseph P. Macaluso, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Tel-Instrument Electronics Corp; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to us by others within registrant, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: February 11, 2003 /s/ Joseph P. Macaluso ---------------------- /s/ Joseph P. Macaluso Principal Accounting Officer 14