-----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, GtwfskuJ4GKpBJL9W0OIjdNS/BmCeIz3E6kU5PWg/qYylZb7jKE2bMCkmjf+r/0/ 2yu9PSlbDCk/hl3BqTGXSw== 0000891092-97-000437.txt : 19971114 0000891092-97-000437.hdr.sgml : 19971114 ACCESSION NUMBER: 0000891092-97-000437 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEL INSTRUMENT ELECTRONICS CORP CENTRAL INDEX KEY: 0000096885 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [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: 97713755 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 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 September 30, 1997 ___ 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: 2,035,181 shares of Common stock, $.10 par value as of November 6, 1997. TEL-INSTRUMENT ELECTRONICS CORPORATION TABLE OF CONTENTS PAGE ---- Item 1. Financial Statements (Unaudited): Condensed Comparative Balance Sheets September 30, 1997 and March 31, 1997 1 Condensed Comparative Statements of Operations - Three and Six Months Ended September 30, 1997 and 1996 2 Condensed Comparative Statements of Cash Flows - Six Months Ended September 30, 1997 and 1996 3 Notes to Condensed Financial Statements 4 Item 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition 5-7 SIGNATURES 7 Item 1 - Financial Statements TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE BALANCE SHEETS September 30, 1997 and March 31, 1997 (Unaudited) ASSETS September 30, March 31, 1997 1997 ------------- ----------- Current assets: Cash $ 347,974 $ 528,636 Accounts receivable, net of allowance for doubtful accounts of $58,821 at September 30, 1997 and $65,521 at March 31, 1997 554,171 302,737 Inventories 446,166 352,173 Other current assets 21,076 6,944 Deferred income tax benefit - current 78,300 78,300 ----------- ----------- Total current assets 1,447,687 1,268,790 Office and manufacturing equipment, net 74,747 45,492 Other assets, net 86,884 71,884 Deferred income tax benefit 168,436 261,900 ----------- ----------- Total assets 1,777,754 1,648,066 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accrued payroll, deferred wages and vacation pay 356,711 342,432 Accounts payable and accrued expenses 458,655 485,380 ----------- ----------- Total current liabilities 815,366 827,812 Convertible subordinated notes - related parties 365,000 365,000 ----------- ----------- Total liabilities 1,180,366 1,192,812 =========== =========== Stockholders' equity: Common stock 203,521 203,097 Additional paid-in capital 3,902,216 3,901,052 Accumulated deficit (3,508,349) (3,648,895) ----------- ----------- Total stockholders' equity 597,388 455,254 ----------- ----------- Total liabilities and stockholders' equity $ 1,777,754 $ 1,648,066 =========== =========== See accompanying notes to condensed financial statements 1 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 1997 1996 1997 1996 ---- ---- ---- ---- Sales Government, net 567,191 353,335 1,124,705 784,374 Commercial, net 276,850 248,266 590,159 450,834 --------- --------- --------- --------- Total sales 844,041 601,601 1,714,864 1,235,208 Cost of sales 351,674 224,558 687,894 504,152 --------- --------- --------- --------- Gross margin 492,367 377,043 1,026,970 731,056 Operating expenses Selling, general & administrative 184,245 196,740 403,175 412,105 Engineering, research & development 205,981 109,078 363,926 220,329 --------- --------- --------- --------- Total operating expenses 390,226 305,818 767,101 632,434 Income from operations 102,141 71,225 259,869 98,622 Other income (expense): Interest income 5,651 384 11,733 609 Interest expense (19,849) (16,221) (37,592) (33,107) --------- --------- --------- --------- Income before taxes 87,943 55,388 234,010 66,124 Provision for income taxes 35,125 -- 93,464 -- --------- --------- --------- --------- Net income 52,818 55,388 140,546 66,124 ========= ========= ========= ========= Income per common share 0.03 0.03 0.07 0.04 Dividends per share None None None None Weighted average shares outstanding 2,101,067 1,782,526 2,096,531 1,705,932
See accompanying notes to condensed finanical statements 2 CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended September 30, 1997 1996 ---- ---- Increase (decrease) in cash: Cash flows from operating activities Net income $ 140,546 $ 66,124 Adjustments to reconcile net income to cash provided by operating activities: Deferred income taxes 93,464 -- Depreciation 12,535 11,754 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net (251,434) 232,954 (Increase) decrease in inventories (93,993) (98,196) (Increase) decrease in other current assets (14,132) 3,873 (Increase) decrease in other assets (15,000) 1,127 Increase (decrease) in accrued payroll, deferred wages and vacation pay 14,279 (121,683) (Decrease) increase in accounts payable and accrued expenses (26,725) 16,607 --------- --------- Net cash (used in) provided by operations (140,460) 112,560 --------- --------- Cash flows from investing activities: Cash purchases of property, plant and equipment (41,790) (16,196) --------- --------- Net cash used in investing activities (41,790) 16,196 --------- --------- Cash flows from financing activities: Procees from exercise of stock options 1,588 -- Proceeds from issuance of common stock -- 87,500 --------- --------- Net cash provided by financing activities 1,588 87,500 --------- --------- Net (decrease) increase in cash (180,662) 183,864 Cash at beginning of period 528,636 22,625 --------- --------- Cash at end of period $ 347,974 $ 206,489 ========= ========= Non-Cash Items: Preferred stock redeemed and exchanged for common stock -- $ 606,643 Stock issued to related party for liabilities -- $ 46,540 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 September 30, 1997, the results of operations for the three and six months ended September 30, 1997 and September 30, 1996, and statements of cash flows for the six months ended September 30, 1997 and September 30, 1996. 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, 1997 amounts included herein have been derived from the audited financial statements included in the Company's annual report on Form 10-K. 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, 1997. Note 2 Inventories Inventories consist of: September 30, March 31, 1997 1997 ---------------------------- Purchased parts $ 271,562 $ 213,842 Work-in-process 242,909 206,750 Less: Reserve for obsolescence (68,305) (68,419) ---------------------------- $ 446,166 $ 352,173 ============================ Note 3 Reclassifications Certain reclassifications have been made to the fiscal year 1997 financial statements to be consistent with the fiscal year 1998 presentation. Note 4 Income Taxes At March 31, 1997, the Company, in accordance with FASB 109, reduced the valuation allowance and recognized a deferred income tax benefit of $340,200. The recognized deferred income tax benefit is based upon the expected utilization of net operating loss carryforwards as the Company believes it is more likely than not that it will realize a portion of its net operating losses before they expire. For the six months ended September 30, 1997, the Company recorded a provision for income taxes of $93,464, which represents the effective federal and state tax rate on the Company's net income before taxes of $234,010. The Company has no tax liability. The $93,464 tax provision reduced the Company's deferred income tax by the same amount at September 30, 1997. This amount represents a portion of the net operating loss tax benefit as stated on the March 31, 1997 Balance Sheet that the Company previously recognized for financial statement reporting purposes and expects to utilize in the future for tax reporting purposes. 4 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations The Company continues to increase sales and income from operations while increasing its research and development expenditures. This investment in research and development is necessary to sustain the growth and profitability of the Company by producing innovative, state-of-the-art products. Sales Sales increased $242,440 (40.3%) and $479,656 (38.8%) for the three and six months ended September 30, 1997, respectively, as compared to the same periods last year. The sales increases were both in the government and commercial markets. Government sales increased $213,856 (60.5%) and $340,331 (43.4%) related to a contract with the USAF. Commercial sales increased $28,584 (11.5%) and $139,325 (30.1%) for the three and six months ended September 30, 1997, respectively, as compared to the three and six months ended September 30, 1996. The Company continues to focus its efforts in the government market, has been very active in responding to requests from the U.S. Government for quotations, and has been adapting its product designs to respond to these requests. During the first quarter of this year, the Company identified certain technical issues with one of its products scheduled to be delivered during the second quarter of Fiscal 1998. The Company corrected such technical issues and most of the units will be shipped during the third quarter. As such, second quarter results were adversely affected but, the Company expects that such shipments will have a positive affect on the third quarter. On August 12, 1997 the Company received notice that it had been awarded a major contract from the U.S. Navy. The initial order is for $949,324 to provide five T-47M IFF test sets, for Navy evaluation, and associated documentation. This work, to be completed within the next 12 months, represents a major milestone for the Company since this contract could be a significant source of future revenues. The contract includes options for up to 1,300 units which the Navy can exercise through the year 2001. There is no assurance that these options will be exercised by the Navy. During September 1997, the U.S. Navy conducted a Program Design Review (PDR) for this contract and the Company believes that such review was favorable. The Company continues to explore expanding into other markets in order to capitalize on its technology. Gross Margin Gross margin increased $115,324 (30.6%) and $295,914 (40.5%) for the three and six months ended September 30, 1997, respectively, as compared to the same periods in the prior fiscal year. Gross margin as a percent of sales was 58.3% and 59.9% for the three and six months ended September 30, 1997, respectively, as compared to 62.7% and 59.2% for the three and six months ended September 30, 1996, respectively. For the six months ended September 30, 1997, the increase in gross margin primarily reflects the higher volume. However, the second quarter gross margin increase attributed to volume was partially offset by lower prices on certain government sales, as a result of the higher quantity ordered, and lower gross profit on milestone billings on the contract for the U.S. Navy. 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Operating Expenses Selling, general and administrative expenses decreased $12,495 (6.4%) and $8,390 (2.2%) for the three and six months ended September 30, 1997, respectively as compared to the same periods last year. Lower selling expenses, administrative salaries and legal costs were partially offset by increased commissions associated with the higher government sales and expenses incurred related to the Company's efforts to explore additional markets. Engineering, research and development expenses increased $96,903 (88.8%), for the same period and $143,597 (65.2%) reflecting the Company's commitment and efforts to develop new products. Interest Interest income increased as a result of the higher cash balances. Income Before Taxes Income before taxes increased $32,555 to $87,943 for the three months ended September 30, 1997, and $167,886 to $234,010 for the six months ended September 30, 1997 as compared to the same periods last year. Provision for Income Taxes A provision for income taxes was not recognized in the prior fiscal year because the Company applied a full valuation allowance. At March 31, 1997, the Company reduced the valuation allowance and recorded the resulting deferred income tax benefit. For the six months ended September 30, 1997, the Company has recorded a provision for income taxes utilizing the estimated effective Federal and State income tax rates for fiscal 1998. The Company has no tax liability. The Company will continue to monitor the amount of deferred (net operating loss carryforward) which can be recovered through future taxable income. Net Income Net income for the three months ended September 30, 1997 was $52,818 or $0.03 per share, as compared to $55,388 or $0.03 per share in for the three months ended September 30, 1997. Net income for the six months ended September 30, 1997 was $140,546 or $0.07 per share as compared to $66,124 or $0.04 per share in for the six months ended September 30, 1996. The improvement in net income per common share was partially offset by the increase in the number of shares outstanding and by the tax provision. Net income in the six months ending September 30, 1997 was reduced by a $93,464 tax provision as described in the preceding paragraph. The net for the comparable fiscal year 1996 period was not reduced. Liquidity and Capital Resources At September 30, 1997 the Company had positive working capital of $632,321 as compared to $440,978 at March 31, 1997. The Company's liquidity position continues to improve. The Company's net worth improved to $597,388 at September 30, 1997, as compared to $455,254 at March 31, 1997. For the six months ended September 30, 1997, cash used in operations was $140,460 as compared to cash provided 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Liquidity and Capital Resources (continued) by operations of $112,560 for the six months ended September 30, 1996. The decrease in cash provided by operations is primarily a result of an increase in accounts receivable for items shipped late in the quarter, an increase in inventories associated with orders to be shipped in the current fiscal year partially offset by the Company's net income, including such non-cash items as depreciation and deferred income taxes. The Company continues to explore opportunities to improve its profitability and cash flow. Based upon the current backlog and cash on hand, the Company believes that it should have sufficient working capital to fund its plans for the next twelve months. At present, the Company does not expect to incur significant long-term needs for capital outside of its normal operating activities. The Company has preliminary approval for progress payments on the contract with the U.S. Navy. 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, 1997. Recent Pronouncements In June 1997 the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes the standards for reporting and displaying comprehensive income and its components (revenues, expenses, gains, and losses) as part of a full set of financial statements. This statement requires that all elements of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The statement is effective for fiscal years beginning after December 15, 1997. For the Company, the standard becomes effective April 1, 1998. Since this standard applies only to the presentation of comprehensive income, it will not have any impact on the Company's results of operations, financial position, or cash flows. 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: 10 November 1997 By: /s/ Harold K. Fletcher ------------------------------ /s/ Harold K. Fletcher Chairman and President EX-27 2 FDS --
5 1,000 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 348 0 613 59 446 1,413 75 15 1,778 815 0 0 0 204 393 1,778 1,715 1,715 688 1,455 767 0 38 234 93 141 0 0 0 141 .07 .07
-----END PRIVACY-ENHANCED MESSAGE-----