-----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, NK5OZ418p1XtrizXq18Y4PIsyYxEvFZjvFgwwEl+WhxCN01g5OcWh9on2Jy3A8k5 MalilDc9J8jyse410SLLQw== 0000891092-98-000046.txt : 19980218 0000891092-98-000046.hdr.sgml : 19980218 ACCESSION NUMBER: 0000891092-98-000046 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980217 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: 98543595 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 December 31, 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: 2,052,781 shares of Common stock, $.10 par value as of February 6, 1998. TEL-INSTRUMENT ELECTRONICS CORPORATION TABLE OF CONTENTS PAGE ---- Item 1. Financial Statements (Unaudited) Condensed Comparative Balance Sheets December 31, 1997 and March 31, 1997 1 Condensed Comparative Statements of Operations - Three and Nine Months Ended December 31, 1997 and December 31,1996 2 Condensed Comparative Statements of Cash Flows - Nine Months Ended December 31, 1997 and December 31, 1996 3 Notes to Condensed Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition And Results of Operations 5-8 Part II Other Information 9 SIGNATURES 9 Item 1 - Financial Statements TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE BALANCE SHEETS) (Unaudited) December 31, 1997 and March 31, 1997 December 31, March 31, 1997 1997 ----------- ----------- ASSETS Current assets: Cash $ 463,058 $ 528,636 Accounts receivable, net of allowance for doubtful accounts of $16,074 at December 31, 1997 and $65,521 at March 31, 1997 785,590 302,737 Inventories 397,491 352,173 Other current assets 25,538 6,944 Deferred income tax benefit - current 78,300 78,300 ----------- ----------- Total current assets 1,749,977 1,268,790 Office and manufacturing equipment, net 83,492 45,492 Other assets, net 86,884 71,884 Deferred income tax benefit 29,602 261,900 ----------- ----------- Total assets 1,949,955 1,648,066 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Advanced billings 57,061 -- Accrued payroll, deferred wages and vacation pay 336,685 342,432 Accounts payable and accrued expenses 379,174 485,380 ----------- ----------- Total current liabilities 772,920 827,812 Convertible subordinated notes - related parties Total liabilities 365,000 365,000 ----------- ----------- 1,137,920 1,192,812 =========== =========== Stockholders' equity: Common stock 205,281 203,097 Additional paid-in capital 3,907,056 3,901,052 Accumulated deficit (3,300,302) (3,648,895) ----------- ----------- Total stockholders' equity 812,035 455,254 ----------- ----------- Total liabilities and stockholders' equity $ 1,949,955 $ 1,648,066 =========== =========== See accompanying notes to condensed financial statements. 1 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended ------------------------------ ------------------------------ December 31, December 31, December 31, December 31, 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Sales Government, net $ 1,133,538 672,740 $ 2,258,243 1,457,114 Commercial, net 348,495 267,996 938,654 718,830 ------------- ------------- ------------- ------------- Total sales 1,482,033 940,736 3,196,897 2,175,944 Cost of sales 505,202 414,320 1,193,096 918,472 ------------- ------------- ------------- ------------- Gross margin 976,831 526,416 2,003,801 1,257,472 Operating expenses Selling, general & administrative 334,208 221,904 737,383 634,009 Engineering, research & development 284,309 117,734 648,235 338,063 ------------- ------------- ------------- ------------- Total operating expenses 618,517 339,638 1,385,618 972,072 Profit from operations 358,314 186,778 618,183 285,400 Other income (expense): Interest income 6,145 6 17,878 615 Interest expense (17,578) (15,017) (55,170) (48,124) ------------- ------------- ------------- ------------- Income before taxes 346,881 171,767 580,891 237,891 Provision for income taxes 138,834 -- 232,298 -- ------------- ------------- ------------- ------------- Net income $ 208,047 171,767 $ 348,593 237,891 ============= ============= ============= ============= Basic and diluted earnings per share $ 0.10 0.08 $ 0.17 0.13 Dividends per share None None None None Weighted average shares outstanding 2,093,989 2,049,629 2,089,656 1,866,785
See accompanying notes to condensed finanical statements 2 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended December 31, 1997 1996 --------- --------- Increase (decrease) in cash: Cash flows from operating activities Net income $ 348,593 $ 237,891 Adjustments to reconcile net income to cash provided by operating activities: Deferred income taxes 232,298 -- Depreciation 24,483 18,344 Disposal of sales equipment -- 2,093 Changes in assets and liabilities: (Increase) decrease in accounts receivable, net (482,853) 105,551 (Increase) decrease in inventories (45,318) 4,467 (Increase) decrease in other current assets (18,594) (6,348) (Increase) decrease in other assets (15,000) 1,124 Increase in advanced billings 57,061 -- Increase (decrease) in accrued payroll, deferred wages and vacation pay (5,747) (117,358) (Decrease) increase in accounts payable and accrued expenses (106,206) (68,637) --------- --------- Net cash (used in) provided by operations (11,283) 177,127 --------- --------- Cash flows from investing activities: Purchases of office and manufacturing equipment (62,483) (33,938) --------- --------- Net cash used in investing activities (62,483) (33,938) --------- --------- Cash flows from financing activities: Proceeds from exercise of stock options 8,188 -- Proceeds from issuance of common stock -- 87,500 --------- --------- Net cash provided by financing activities 8,188 87,500 --------- --------- Net (decrease) increase in cash (65,578) 230,689 Cash at beginning of period 528,636 22,625 --------- --------- Cash at end of period $ 463,058 $ 253,314 ========= ========= Interest Paid: $ 45,041 $ 61,173 ========= ========= 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 December 31, 1997, the results of operations for the three and nine months ended December 31, 1997 and December 31, 1996, and statements of cash flows for the nine months ended December 31, 1997 and December 31, 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: December 31, March 31, 1997 1997 ------------------------------ Purchased parts $ 289,213 $ 213,842 Work-in-process 176,583 206,750 Less: Reserve for obsolescence (68,305) (68,419) ------------------------------ $ 397,491 $ 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. These reclassifications have no effect on the financial results. 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 nine months ended December 31, 1997, the Company recorded a provision for income taxes of $232,298, which represents the effective federal and state tax rate on the Company's net income before taxes of $580,891. The Company has no tax liability. The $232,298 tax provision reduced the Company's deferred income tax by the same amount at December 31, 1997. This amount represents a portion of the net operating loss carryforward 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 FINANCIAL POSITION AND RESULTS OF OPERATIONS Results of Operations The Company has continued to increase sales and income from operations while increasing its research and development expenditures, which grew by over 91% from the prior fiscal year, to over 20% of sales. This investment in research and development is necessary to perform on existing contracts, to sustain the growth and profitability of the Company, and to continue producing innovative, state-of-the-art products. This increase includes several temporary engineers employed to finalize the U.S. Navy T-47M design, as mentioned below. The Company continues to focus its principal efforts in the government market and has been very active in responding to requests for quotation, from the U.S. Government, in addition to adapting its product designs to respond to these requests. 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 for the associated tests and documentation. This work, to be completed during calendar year 1998, represents a major milestone for the Company since this contract could be a significant source of future revenues. This 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. In the third quarter of the current fiscal year the Company fulfilled its obligation and delivered the final units of the T-30CM to the U.S. Air Force. Sales derived from this contract represented 35% of total sales for the nine months ended December 31, 1997 as compared to 46% for fiscal year 1997. As a result, the next several quarters may not exhibit the growth the Company has experienced over the last few years. However, while the Company believes that the future still remains positive based on the Navy contract and other outstanding proposals, there can be no assurance that these sales will materialize. Sales Sales increased $541,297 (57.5%) and $1,020,953 (46.9%) for the three and nine months ended December 31, 1997, respectively, as compared to the same periods last year. The sales increases were both in the government and commercial markets. Government sales increased $460,798 (68.5%) and $801,129 (55.0%) related to contracts with the government and from several Department of Defense prime contractors. Commercial sales increased $80,499 (30.0%) and $219,824 (30.6%) for the three and nine months ended December 31, 1997, respectively , as compared to the three and nine months ended December 31, 1996. These increases cannot be assured for the future. During the first quarter of the current fiscal year the Company had identified certain technical issues with one of its products scheduled to be delivered during the second quarter. The Company corrected such technical issues and all of the remaining units were shipped during the third quarter. As such, these delayed shipments had a positive affect on the third quarter results. 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATION Sales (continued) The Company continues to explore expansion into other markets in order to capitalize on its test equipment technology. Gross Margin Gross margin increased $450,415 (85.6%) and $746,329 (59.4%) for the three and nine months ended December 31, 1997, respectively, as compared to the same periods in the prior fiscal year. Gross margin as a percent of sales was 65.9% and 62.7% for the three and nine months ended December 31, 1997, respectively, as compared to 56.0% and 57.8% for the three and nine months ended December 31, 1996, respectively. The increase in gross margin primarily reflects the higher volume and cannot be assured for the future. Operating Expenses Selling, general, and administrative expenses increased $112,304 (50.6%) and $103,374 (16.3%) for the three and nine months ended December 31, 1997 as compared to the prior fiscal year. These increases are the result of expenses incurred related to the Company's efforts to explore additional markets for its technology, additional employee incentive compensation, and higher sales commissions. These increases were partially offset by lower selling and administrative salaries. Engineering, research and development expenses increased $166,575 (141.4%) and $310,172 (91.7%) for the three and nine months ended December 31, 1997 as compared to the prior fiscal year, reflecting the Company's commitment and effort to develop new products, especially the aforementioned contract with the U.S. Navy. Interest Income Interest income increased as a result of higher cash balances. Income Before Taxes Income before taxes increased $175,114 to $346,881 for the three months ended December 31, 1997, and $343,000 to $580,891 for the nine months ended December 31, 1997 as compared to the same period 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 nine months ended December 31, 1997, the Company has 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATION Provision For Income Taxes (continued) recorded a provision for income taxes utilizing estimated effective Federal and State income tax rates for fiscal year 1998. The Company has no tax liability. The Company will continue to monitor the amount of deferred tax benefit (net operating loss carryforward) which can be currently recognized from future taxable income. Net Income Net income for the three months ended December 31, 1997 was $208,047 or $0.10 per share, as compared to $171,767 or $0.08 per share for the three months ended December 31, 1996. Net income for the nine months ended December 31, 1997 was $348,593 or $0.17 per share as compared to $237,891 or $0.13 per share for the nine months ended December 31, 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 for the nine months ended December 31, 1997 was reduced by a $232,298 tax provision as described in the preceding paragraph. The net income for the comparable fiscal 1997 period was not reduced. Liquidity and Capital Resources At December 31, 1997 the Company had positive working capital of $977,057 as compared to $440,978 at March 31, 1997. The Company's financial position continues to improve. The Company's net worth improved to $812,035 at December 31, 1997 as compared to $455,254 at March 31, 1997. For the nine months ended December 31, 1997, cash flows from operations used $11,283 of cash as compared to providing cash of $177,127 during the nine months ended December 31, 1996. This decrease in operating cash flows resulted from increases in accounts receivable of $482,853 and decreases in accounts payable and accrued expenses of $106,206. The increase in accounts receivable is directly related to the increase in sales and the decrease in accounts payable and accrued expenses is due to significant payments made to vendors upon the completion of certain contracts. These uses of cash were offset by the Company's income before taxes and depreciation expense of $605,374. The Company continues to devote its efforts to new product and market development, and 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 year. At present, the Company does not expect to incur significant long-term needs for capital outside of its normal operating activities. The Company received in the current fiscal quarter approval to apply 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 year ended March 31, 1997. 7 Market Information There has been no established public trading market for Registrant's Common Stock. Subsequent to the public offering of the Company's Common Stock in December 1988, the Common Stock has traded sporadically in the over-the-counter market. During the fiscal quarter ended December 31, 1997, the Company's Common Stock was reported as having the high and low trades of $1.94 and $1.25, respectively. These trades reflect reported inter-dealer prices without retail markup or commission. 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 3, 1997 (the "Annual Meeting"). (b) Not applicable because (i) proxies for the Annual Meeting were not solicited pursuant to Regulation 14A under the Securities and 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 management's nominees for election as directors of the Company as follows: For Against --- ------- Harold K. Fletcher 1,388,721 0 Robert J. Walker 1,388,721 0 George F. Leon 1,388,721 0 The shareholders also voted all 1,388,721 shares in favor of Coopers and Lybrand as the Corporation's certified public accountants for the fiscal year ending March 31, 1998. The shareholders also voted all 1,388,721 shares for ratification of the Company's issuance of 10% convertible notes, in aggregate amount of $350,000, to Harold K. Fletcher. (d) Not applicable. 8 Item 6. Exhibits and Reports on Form 8-K (a) The exhibits filed or incorporated by reference as part of this Quarterly Report on Form 10-Q are listed in the attached Index to Exhibits. (b) During the quarter ended December 31, 1997, the Company did not file any current Reports on Form 8-K. 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: 12 February 1998 /s/ Harold K. Fletcher --------------------- Harold K. Fletcher Chairman and President 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS MAR-31-1998 APR-01-1997 DEC-31-1997 463 0 802 (16) 397 1,750 671 (588) 1,950 773 0 0 0 205 607 1,950 3,191 3,191 1,193 1,193 1,386 0 (37) 581 232 349 0 0 0 349 0.17 0.17
-----END PRIVACY-ENHANCED MESSAGE-----