-----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, QWqO4JUYqGqINokuepCTIFW4f7jqU8MKJj4++MSWfFKbk9plRpPVnRIZTHELKIzU BSHmyl4+t4eanNwkEOdvrQ== 0000891092-98-000241.txt : 19980624 0000891092-98-000241.hdr.sgml : 19980624 ACCESSION NUMBER: 0000891092-98-000241 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980623 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-K SEC ACT: SEC FILE NUMBER: 033-18978 FILM NUMBER: 98652413 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-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year Commission File No. ended March 31, 1998 33-18978 TEL-INSTRUMENT ELECTRONICS CORP. (Exact name of Registrant as specified in its charter) New Jersey 22-1441806 (State of incorporation) (IRS Employer Identification Number) 728 Garden Street Carlstadt, New Jersey 07072 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (201) 933-1600 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by checkmark 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___. The aggregate market value of the voting Common Stock (par value $.10 per share) held by non-affiliates on June 03, 1998 was $2,650,012 using the price of the last trade on June 3, 1998. 2,094,735 shares of Common Stock were outstanding as of June 03, 1998. Total Pages - 36 Exhibit Index - pages 33-34 PART I Item 1. Business General Tel-Instrument Electronics Corp. ("Tel" or the "Company") designs, manufactures and sells test equipment to the general aviation and commercial aviation market and to the government/military aviation market, both domestically and internationally. The Company has been in business since 1947. The Company continued its growth in fiscal year 1998 with sales increasing approximately 25% from the prior fiscal year and income before income taxes increasing approximately 18% for the same period. This growth was accomplished in conjunction with the Company's significant investment in engineering, research and development for which expenditures increased more than 85% from the prior fiscal year and with expenses for investigating new markets for new products. The Company continues to focus its efforts in the government market and has been very active in responding to requests from the U.S. Government for quotations, in addition to adapting its product designs to respond to these requests. On August 12, 1997, the Company received notice that it was awarded a major contract from the U.S. Navy. The initial order is for $949,324 to provide five T-47M IFF (Identification Friend or Foe) test sets for Navy evaluation and for the associated documentation. This work, to be completed during calendar year 1998, represents a major milestone for the Company and its engineering efforts 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 calendar year 2001. There is no assurance that these options will be exercised by the Navy or that the gross margin on this contract will be at the current level. The Company has presented the initial design to the U.S. Navy for this contract and the Company believes that such review was favorable. Tel's instruments are used to test navigation and communications equipment installed in aircraft and range in list price from $7,000 to $22,000 per unit. Tel is constantly revising and improving its test instruments (see "Research and Development") in anticipation of customers' needs. The development of multifunction "smart" testers, for example, has made it easier for customers to perform ramp tests with less training. The table below sets forth the composition of Tel's sales for the last three fiscal years. Year Ended Year Ended Year Ended March 31, March 31, March 31, 1998 1997 1996 ---- ---- ---- Commercial $1,489,563 $1,140,779 $1,274,606 Government 2,469,679 2,024,895 1,043,482 In the fiscal year ended March 31, 1995, Tel won a competitive solicitation from the United States Air Force (USAF) for the Model T-30CM. Sales derived from this contract 2 Item 1. Business General (Continued) represented 34%, 46% and 37% of total government sales for the years ended March 31, 1998, 1997 and 1996, respectively. As a result of completing this contract, the Company's backlog has been reduced. Foreign commercial sales are made direct or through American export agents at a discount reflecting the 15% selling commission under oral, year-to-year arrangements. For the years ended March 31, 1998, 1997 and 1996, foreign commercial sales were 21%, 14% and 27%, respectively, of total commercial sales. In June 1998, the Company signed an exclusive agreement with Muirhead Avionics based in the United Kingdom to represent the Company in parts of Europe. The Company has received from Muirhead Avionics a $323,000 contract for its T-48I. Tel sells its products either directly or through distributors to its commercial customers. There is no written agreement with the distributors who receive a 15% discount for stocking and selling these products. Tel also gives a 5% to 10% discount to non-stocking distributors depending on their sales volume and promotional effort. Independent sales representatives receive 5% to 10% commissions depending on their sales volume and promotional efforts. Set forth below is Tel's backlog at March 31, 1998 and 1997. Sales increased again in fiscal year 1998 because of government orders. (See Management's Discussion - Item 7 and Markets - Item 1). Tel believes that all of the backlog at March 31, 1998 will be delivered during the fiscal year ending March 31, 1999. Commercial Government Total ---------- ---------- ----- March 31, 1998 $ 65,800 $1,655,678 $1,721,478 March 31, 1997 174,600 2,276,952 2,451,552 All of the backlog is pursuant to purchase orders and all of the government contracts are fully funded. However, government contracts are always susceptible to termination for convenience. Tel obtains its purchased parts from a number of suppliers. These materials are standard in the industry and Tel foresees no difficulty in obtaining purchased parts, as needed, at acceptable prices. Markets The general aviation market consists of some 1,000 repair and maintenance service shops, at private and commercial airports in the United States, which purchase test equipment to repair aircraft electronics. The airline market consists of approximately 80 domestic and foreign commercial airlines. The civilian market for avionic testing equipment is dominated by three manufacturers, of which Tel is believed to be the third largest. The market is relatively small. The Company 3 Item 1. Business (Continued) Markets (Continued) believes that the foreign commercial market represents a better opportunity than the US commercial market for growth. The foreign market is larger than the domestic market and many foreign airlines are upgrading to meet U.S. requirements. Future domestic growth will depend on whether the U.S. Federal Aviation Administration (FAA) implements plans to upgrade the U.S. air traffic control system and on continuing recent trends towards more sophisticated avionics systems, both of which would require the design and manufacture of new test equipment. The Company continues to analyze the needs of the market in order to develop new and improved instruments to meet emerging FAA requirements and redesign models to add functions and reduce the cost of manufacturing. The Company believes its test equipment is recognized by its customers for its quality, durability and reliability. Tel sells to many commercial customers. One domestic distributor accounted for 15% of commercial sales for the year ended March 31, 1998. In fiscal 1997, no end user customer or distributor accounted for more than 10% of commercial sales. In fiscal year 1996, the only customers purchasing over 10% of Tel's commercial sales were two distributors (14% and 12%) who sell to many end users. The military market is large, but is dominated by large corporations with substantially greater resources than Tel. Tel bids for government contracts on competitive bids, on the basis of "small business set asides" (i.e., statutory provisions requiring the military to entertain bids only from statutorily defined small businesses), and on bids for sub-contracts from major government suppliers. The Company's government sales have increased from $244,289 in fiscal year 1992 to $2,469,679 in fiscal year 1998. Because of the larger size of the military market, in contrast to the limited civilian market, Tel has been increasing its efforts to obtain military contracts and sub-contracts. Although it is anticipated that the total defense budget will continue to decline, management believes that the portion devoted to operation and maintenance of existing and improved avionics will be less adversely affected. Tel has increased its concentration on meeting end user needs by modifying commercial designs to satisfy special government/military requirements. This approach appears to be viable as Tel has been able to sell the T-36M, T-49C, T-49CF, T-47 family, and T-48I to government agencies and prime contractors with a growing list of other prospective buyers. Government small purchase procedures allow Tel to sell test sets to contractors and users who could have influence on future government purchases. Tel will also continue its efforts to penetrate the export market. Competition In the general aviation and airline market, Tel competes principally with IFR, an independent firm, and with JC Air, a division of BF Goodrich. This market is highly competitive. Tel has generally been successful because of its high quality products, prices, and responsive service. Tel also provides customers with calibration and repair services. 4 Item 1. Business (Continued) Competition (Continued) The military market is dominated by large corporations with greater operating experience with the military. Tel competes in this market by selling applicable "best commercial practice" test equipment adapted to government standards, by bidding for small business set asides and by subcontracting with larger corporations to produce subsystems. Tel's equipment is both capable and durable, and less expensive than its competitors. Tel's past ability to compete in the civil aviation market and the military market has been restricted because of limited financial resources. However, the improvement in financial position allows it to compete more effectively (see Liquidity and Capital Resources in Item 7). Tel has no patents or licenses which are material to its business. Research and Development In the fiscal years ended March 31, 1998, 1997 and 1996, Tel spent $902,250, $486,884, and $390,399, respectively, on the research and development of new and improved products. None of these amounts were sponsored by customers. Tel's management believes that continued and increased expenditures for research and development are necessary to enable Tel to expand its sales and generate profits. In fiscal year 1997, the development of the military version of the T-36 (T-36M) using a microprocessor for control, and an IFF interrogator test version of the T-47C (T-47N) were completed. A contract for the T-36M for $324,795 was received in April 1996 and a proposal for a modified T-47N (T-47M) was submitted to the U.S. Navy in May 1997. On August 12, 1997, the Company was awarded a contract from the U.S. Navy for the T-47M IFF test sets. Engineering, research and development expenditures in 1998 were directed primarily toward finalization of the design of the T-47M and new products for other targeted markets, such as the T-49CF. Personnel Tel has ten manufacturing, six administrative and sales, and five research and development employees, none of whom belongs to a union. Tel does not believe that there will be any difficulty in adding personnel as required. The Company also uses several part-time consultants on an as needed basis. During fiscal year 1998, the Company employed a number of engineering consultants to finalize the development of the T-47M IFF test sets for the U.S. Navy. Item 2. Properties The Company leases 11,164 square feet in Carlstadt, New Jersey as its manufacturing plant and administrative offices, pursuant to a five year lease expiring in August, 1998. The Company is currently negotiating a long-term lease on the same premises. Tel is unaware of any environmental problems in connection with its location and, because of the nature of its manufacturing activities, does not anticipate such problems. 5 Item 3. Pending Legal Proceedings There are no material pending legal proceedings. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters 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 year ended March 31, 1998, the Company's Common Stock had the high and low bids of $1.875 and $.875, respectively. These quotations reflect inter-dealer prices, without retail markup or commission and may not necessarily represent actual transactions. On June 3, 1998, the low bid was $2.125 and the high bid was $2.625. Approximate Number of Equity Security Holders Number of Record Holders as of Title of Class March 31, 1998 -------------- -------------- Common Stock, par value 838 $.10 per share Dividends Registrant has not paid dividends on its Common Stock and does not expect to pay such dividends in the foreseeable future. 6 Item 6. Selected Financial Data TEL-INSTRUMENT ELECTRONICS CORP. SUMMARY OF FINANCIAL INFORMATION
Years Ended March 31, ----------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Statement of Operations Data: Net revenues $ 3,959,242 $ 3,165,674 $ 2,318,088 $ 1,865,492 $ 1,308,939 ----------- ----------- ----------- ----------- ----------- Operating costs and expenses: Cost of sales 1,559,542 1,325,659 1,022,942 888,213 619,165 Selling, general and administrative 909,505 854,093 739,912 575,124 506,595 Engineering, research and development 902,250 486,884 390,399 315,331 236,206 ----------- ----------- ----------- ----------- ----------- 3,371,297 2,666,636 2,153,253 1,778,668 1,361,966 ----------- ----------- ----------- ----------- ----------- Income (loss) from operations 587,945 499,038 164,835 86,824 (53,027) Other expenses, net (68,847) (57,954) (69,156) (76,348) (66,116) ----------- ----------- ----------- ----------- ----------- Income/(loss) before extraordinary item and income taxes 519,098 441,084 95,679 10,476 (119,143) Extraordinary item -- -- -- 12,000 -- ----------- ----------- ----------- ----------- ----------- Income/(loss) before income taxes 519,098 441,084 95,679 22,476 (119,143) Income taxes, net of income tax benefit (2) 58,719 340,200 -- -- -- ----------- ----------- ----------- ----------- ----------- Net income (loss) $ 577,817 $ 781,284 $ 95,679 $ 22,476 $ (119,143) =========== =========== =========== =========== =========== Income/(loss) per share from continuing operations: diluted before extraordinary item (1) $ 0.28 $ 0.41 $ 0.04 $ (0.01) $ (0.09) ----------- ----------- ----------- ----------- ----------- Extraordinary item -- -- -- 0.01 -- ----------- ----------- ----------- ----------- ----------- Income/(loss) per common share $ 0.28 $ 0.41 $ 0.04 $ -- $ (0.09) =========== =========== =========== =========== =========== Years Ended March 31, -------------------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Balance Sheet Data: Working capital (deficiency) $ 864,061 $ 440,978 $ (500,199) $ (519,207) $ (506,519) Total assets 1,941,141 1,648,066 824,606 872,442 780,825 Long-term debt 300,000 365,000 100,000 165,000 200,000 Redeemable preferred stock -- -- 606,643 576,643 546,643 Stockholders' equity (deficiency) 1,060,068 455,254 (1,118,364) (1,184,031) (1,176,507)
(1) The earnings/(loss) per share is calculated on the weighted average number of shares outstanding. For the years 1994 to 1996 the preferred stock dividends of $30,000 per year were deducted from income/(loss) before extraordinary item and income taxes. (2) Income taxes recorded in accordance with FASB 109. 7 Item 7. Management's Discussion and Analysis of Financial Condition and 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 costs and availability of its raw materials; the actions of 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. Results of Operations 1998 Compared to 1997 Overview The Company continued its growth in fiscal year 1998 with sales increasing approximately 25% from the prior fiscal year and income before income taxes increasing approximately 18% for the same period. This growth was accomplished in conjunction with the Company's significant investment in engineering, research and development for which expenditures increased more than 85% from the prior fiscal year and with expenses for investigating new markets for new products. Engineering, research and development expenditures were directed primarily toward finalization of the design of the T-47M for the U.S. Navy and new products for other targeted markets. In August 1997, the Company was awarded a major contract from the U.S. Navy for the T-47M IFF test sets. This contract could be a source of significant revenues which could include options for up to 1,300 units which the U.S. Navy can exercise through calendar year 2001. In April 1998, the Company completed a second design review with the U.S. Navy without any major technical issues needing resolution. If field evaluations are successful, it is anticipated that shipments could begin early in Company fiscal year 2000. However, there can be no assurance that these options will be exercised by the U.S. Navy. 8 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations 1998 Compared to 1997 (Continued) Sales For the fiscal year ended March 31, 1998 sales increased $793,568 (25.1%) as compared to the same period last year. Government sales increased as a result of contracts with the Government and from several Department of Defense prime contractors. Commercial sales increased modestly as a result of the continuing economic improvement of the aviation industry as a whole. During fiscal year 1998, 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 approximately 34% of total government sales for fiscal year 1998 as compared to 46% in the prior fiscal year. As a result of completing this substantial production contract, sales will be lower during the first half of fiscal year 1999. However, management believes that this decline is temporary and new contracts can be obtained to increase sales (see discussion of T-47M above). In June 1998, the Company signed an exclusive agreement with Muirhead Avionics based in the United Kingdom to represent the Company in Europe. The Company has received a $323,000 contract from Muirhead for the T-48I. Gross Margin Gross margin increased $559,685 (30.4%) for the twelve months ended March 31, 1998 as compared to the twelve months ended March 31, 1997. The increase in gross margin is primarily attributed to the higher sales volume. Gross margin as a percent of sales was 60.6% for the year ended March 31, 1998 as compared to 58.1% for the year ended March 31, 1997. Operating Expenses Selling, general and administrative expenses increased $55,412 (6.5%) for the fiscal year ended March 31, 1998 as compared to the fiscal year ended March 31, 1997. This increase is primarily the result of expenses incurred related to the Company's efforts to explore new markets for its technology, higher commission expenses to independent sales representatives attributed to the higher sales, and expenses associated with the Company's efforts to obtain ISO 9001 certification, partially offset by the reversal of certain accounting adjustments. Engineering, research and development expenditures increased $415,366 or 85.3% for the twelve month period ended March 31, 1998 as compared to the same twelve-month period in the prior fiscal year. Engineering, research and development expenditures represented 22.8% of sales for the year ended March 31, 1998 as compared to 15.4% in the prior fiscal year. Research and development expenditures in 1998 were directed primarily toward finalization of the design of the T-47M for the U.S. Navy, new products for other targeted markets, and maintaining its competitiveness within the industry. During 1998, the Company continued to invest in engineering through the expansion of its management and staff levels to handle the increased research and development activity. Recruitment costs also contributed to the increase in engineering, research and development expenses in 1998. 9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations 1998 Compared to 1997 (Continued) Interest Interest income increased as a result of the higher cash balances, but such increase was partially offset by interest on the convertible debentures. Income Before Taxes Income before taxes increased $78,014 or 17.7% for the current fiscal year as compared to the prior fiscal year even though the Company significantly increased its expenditures in 1998 as discussed above. Income Taxes For the year ended March 31, 1998, the Company recorded income tax expense of $207,379 and in the fourth quarter of fiscal year 1998 recorded an income tax benefit of $266,098, reducing the valuation allowance to reflect the deferred tax assets utilized to offset income tax expense. The recognized deferred tax asset is based upon the Company's belief that it will realize a portion of the deferred tax asset. The inability to obtain new profitable contracts or the failure of the Company's engineering development efforts could reduce estimates of future profitability in the new term, which could affect the Company's ability to utilize the deferred tax asset on the balance sheet. This amount is only an estimate and may differ from actual results. See Note 8 in the Notes to Financial Statements. Results of Operations 1997 Compared to 1996 For the year ended March 31, 1997 sales increased $847,586 (36.6%) to $3,165,674, as compared to the year ended March 31, 1996. This increase in sales is attributed to the government segment and specifically sales associated with a contract with the USAF. The uncertainty of the commercial market continues and, as such, the Company has been emphasizing its efforts in the government market. The Company has been very active in responding to requests for proposal from the U.S. Government and continues to modify its products to respond to these requests. The Company is also seeking to expand its business into other markets to capitalize on its test equipment technology. However, there can be no assurance that the Company will be successful in this endeavor. Gross margin increased $544,869 (42.1%) for the year ended March 31, 1997 as compared to the prior year. This increase is primarily attributed to the higher volume. There were no significant price increases during 1997. The gross margin as a percentage of sales for the year ended March 31, 1997 was 58.1% as compared to 55.9% for the year ended March 31, 1996 and improved due to reductions in manufacturing cost. Total selling, general and administrative expenses increased $114,181 (15.4%) for the year ended March 31, 1997 as compared to the previous year. This increase is due to higher selling expenses associated with increased commissions as a result of higher government sales, increased professional fees, and employee incentive compensation. Engineering, 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations 1997 Compared to 1996 (Continued) research and development expenses increased $96,485 (24.7%) due to increased new product development efforts and employee incentive compensation. Net income before income taxes and income tax benefit was $441,084 for the year ended March 31, 1997, as compared to $95,679 for the year ended March 31, 1996. For the year ended March 31, 1997, the Company recorded an income tax benefit of $340,200 as the Company believes it is more likely than not that it will realize a portion of its net operating losses before they expire. The inability to obtain new profitable contracts or the failure of the Company's engineering development efforts could reduce estimates of future profitability in the near term, which could affect the Company's ability to utilize the deferred tax asset on the balance sheet or its loss carryforwards. This amount is only an estimate and may differ from actual future results. See Note 8 in the Notes to Financial Statements. Net income for the year ended March 31, 1997 was $781,284 or $0.41 per share as compared to $95,679 or $0.04 per share for the year ended March 31, 1996. Liquidity and Capital Resources At March 31, 1998 the Company had positive working capital of $864,061 as compared to $440,978 at March 31, 1997. The Company's liquidity and capital position was improved primarily by the Company's increased profitability. However, during fiscal year 1998 the Company significantly reduced its outstanding liabilities and, as a result, cash provided by operations was $98,371 for the year ended March 31, 1998 as compared to $464,557 for the year ended March 31, 1997. The decrease in accrued expenses and accounts payable and increases in accounts receivable and inventories was offset mostly by the Company's net income. The Company's net worth has increased to $1,060,068 primarily as a result of the Company's increased profitability and to a lesser extent the repurchase of the redeemable preferred stock at a favorable discount. See Note 7 to Notes to Financial Statements. The Company continues to explore additional opportunities to find ways 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 over the next twelve months and on a long term basis. At present, the Company does not expect to incur significant needs for capital outside of its normal operating activities. The Company has received a letter of interest from a major bank for a line of credit in the amount of $350,000. This arrangement is expected to be finalized in July 1998. There was no significant impact on the Company's operations as a result of inflation for the year ended March 31, 1998. 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Year 2000 Issue The Company is reviewing its computer programs and systems to ensure that the programs and systems will function properly and be Year 2000 compliant. The Company presently believes that the Year 2000 problem will not pose significant operational problems for the Company's computer systems. The estimated cost of these efforts are not expected to be material to the Company's financial position or any year's result of operations, although there can be no assurance to this effect. In addition, the Year 2000 problem may impact other entities with which the Company transacts business, and the Company cannot predict the effect of the Year 2000 problem on such entities. 12 Item 8. Financial Statements and Supplementary Data Pages ----- (1) Financial Statements: Report of Independent Accountants 14 Balance Sheets - March 31, 1998 and 1997 15 Statements of Operations - Years Ended March 31, 1998, 1997 and 1996 16 Statements of Changes in Stockholders' Equity/(Deficiency) - Years Ended March 31, 1998, 1997 and 1996 17 Statements of Cash Flows - Years Ended March 31, 1998, 1997 and 1996 18 Notes to Financial Statements 19-28 (2) Financial Statement Schedule: II - Valuation and Qualifying Accounts 29 Financial statement schedules not included in this annual report on Form 10-K have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 13 Report of Independent Accountants Stockholders and Board of Directors of Tel-Instrument Electronics Corp. We have audited the financial statements and financial statement schedule of Tel-Instrument Electronics Corp. listed in item 14(a) of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tel-Instrument Electronics Corp. as of March 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1998, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole presents fairly, in all material respects, the information required to be included therein. COOPERS & LYBRAND L.L.P. New York, New York May 22, 1998 14 TEL-INSTRUMENT ELECTRONICS CORP. Balance Sheets March 31, --------------------------- ASSETS 1998 1997 ----------- ------------ Current assets: Cash $ 585,281 $ 528,636 Accounts receivable, net of allowance for doubtful accounts of $16,064 and $65,521 at March 31, 1998 and 1997, respectively 374,506 302,737 Inventories, net 383,030 352,173 Prepaid expenses and other current assets 24,017 6,944 Deferred income tax benefit - current 78,300 78,300 ----------- ----------- Total current assets 1,445,134 1,268,790 Office and manufacturing equipment, net 79,321 45,492 Other assets 96,067 71,884 Deferred income tax benefit 320,619 261,900 ----------- ----------- Total assets $ 1,941,141 $ 1,648,066 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Note payable - related party - current portion $ 50,000 $ -- Convertible subordinated note - related party 15,000 -- Accounts payable 68,613 89,344 Accrued payroll, vacation pay and deferred wages 211,400 342,432 Accrued expenses - related parties 46,730 70,480 Other accrued expenses 189,330 325,556 ----------- ----------- Total current liabilities 581,073 827,812 - Note payable - related party 300,000 350,000 Convertible subordinated note - related party -- 15,000 ----------- ----------- Total liabilities 881,073 1,192,812 Stockholders' equity Common stock, par value $.10 per share, 2,094,735 and 2,030,948 issued and outstanding as of March 31, 1998 and 1997,respectively 209,476 203,097 Additional paid-in capital 3,921,670 3,901,052 Accumulated deficit (3,071,078) (3,648,895) ----------- ----------- Total stockholders' equity 1,060,068 455,254 ----------- ----------- Total liabilities and stockholders' equity $ 1,941,141 $ 1,648,066 =========== =========== The accompanying notes are an integral part of the financial statements 15 TEL-INSTRUMENT ELECTRONICS CORP. Statements of Operations For the years ended March 31, ----------------------------------------- 1998 1997 1996 ----------- ------------ ----------- Sales - commercial, net $ 1,489,563 $ 1,140,779 $ 1,274,606 Sales - government, net 2,469,679 2,024,895 1,043,482 ----------- ----------- ----------- Total Sales 3,959,242 3,165,674 2,318,088 Cost of sales 1,559,542 1,325,659 1,022,942 ----------- ----------- ----------- Gross margin 2,399,700 1,840,015 1,295,146 ----------- ----------- ----------- Operating expenses: Selling, general and administrative 909,505 854,093 739,912 Engineering, research and development 902,250 486,884 390,399 ----------- ----------- ----------- Total operating expenses 1,811,755 1,340,977 1,130,311 ----------- ----------- ----------- Income from operations 587,945 499,038 164,835 Other income/(expense): Interest income 27,872 5,183 -- Interest expense (60,669) (51,137) (57,570) Interest expense - related parties (36,050) (12,000) (12,100) Other, net -- -- 514 ----------- ----------- ----------- Income before income taxes 519,098 441,084 95,679 Income tax, net of income tax benefit 58,719 340,200 -- ----------- ----------- ----------- Net Income $ 577,817 $ 781,284 $ 95,679 =========== =========== =========== Income per common share: Basic $ 0.28 $ 0.43 $ 0.04 =========== =========== =========== Diluted $ 0.28 0.41 0.04 =========== =========== =========== Weighted average number of shares outstanding Basic 2,044,075 1,829,131 1,603,806 =========== =========== =========== Diluted 2,070,503 1,894,737 1,603,806 =========== =========== =========== The accompanying notes are an integral part of the financial statements. 16 TEL-INSTRUMENT ELECTRONICS CORP. Statements Of Changes In Stockholders' Equity (Deficiency)
Common Stock -------------------------------- Additional Number of Shares Paid-In Accumulated Authorized Issued Amount Capital Deficit Total ---------- ------ ------ ------- ------- ----- Balances March 31, 1995 2,000,000 1,603,806 $160,383 $3,181,444 $(4,525,858) $(1,184,031) Net income 95,679 95,679 Repurchase of shares (12) (12) Redeemable preferred stock dividends accrued (30,000) (30,000) --------- --------- -------- ---------- ----------- ---------- Balances March 31, 1996 2,000,000 1,603,806 $160,383 $3,151,432 $(4,430,179) $(1,118,364) Increase in authorized shares 2,000,000 Net income 781,284 781,284 Exchange of redeemable preferred stock for common stock and stock purchase warrants 178,720 17,872 588,771 606,643 Issuance of common stock and stock purchase warrants 178,720 17,872 116,168 134,040 Issuance of common stock in connection with the exercise of stock 68,035 6,803 44,223 51,026 purchase warrants Issuance of common stock in connection with the exercise of stock options 1,667 167 458 625 --------- --------- -------- ---------- ----------- ---------- Balances March 31, 1997 4,000,000 2,030,948 $203,097 $3,901,052 $(3,648,895) 455,254 Net income 577,817 577,817 Issuance of common stock in connection with the exercise of stock purchase warrants 2,734 273 3,828 -- 4,101 Issuance of common stock in connection with the exercise of stock options 61,053 6,106 16,790 -- 22,896 --------- --------- -------- ---------- ----------- ---------- Balances March 31, 1998 4,000,000 2,094,735 $209,476 $3,921,670 $(3,071,078) $1,060,068 ========= ========= ======== ========== =========== ==========
The accompanying notes are an integral part of the financial statements. 17 TEL-INSTRUMENT ELECTRONICS CORP. Statements Of Cash Flows Increase (Decrease) In Cash
For the years ended March 31, ----------------------------------- 1998 1997 1996 ----------------------------------- Cash flows from operating activities: Net income $ 577,817 $ 781,284 $ 95,679 Adjustments to reconcile net income to cash provided by operating activities: Deferred income taxes (58,719) (340,200) -- Depreciation and amortization 34,894 18,222 17,994 Provision for losses on accounts receivable (6,700) -- 15,000 Provision for inventory obsolescence -- 8,298 -- Changes in assets and liabilities: (Increase)/decrease in accounts receivable (65,069) 56,757 (135,015) (Increase)/decrease in inventories (30,857) (13,597) 135,399 (Increase)/decrease in other assets (41,256) (25,040) 17,916 (Decrease)/increase in accounts payable (20,731) (4,445) (152,313) (Decrease)/increase in accrued expenses (291,008) (16,722) 25,477 --------- --------- --------- Net cash provided by operating activities 98,371 464,557 20,137 --------- --------- --------- Cash flows from investing activities: Additions to office and manufacturing equipment (68,723) (21,889) (19,601) --------- --------- --------- Net cash used in investing activities (68,723) (21,889) (19,601) --------- --------- --------- Cash flows from financing activities: Repayment of notes payable -- -- (16,667) Proceeds from issuance of shares and warrants -- 87,500 -- Proceeds from exercise of warrants and options 26,997 25,843 (12) Repayment of convertible subordinated note -- (50,000) -- --------- --------- --------- Net cash provided by (used in) financing activities 26,997 63,343 (16,679) --------- --------- --------- Net increase (decrease) in cash 56,645 506,011 (16,143) Cash - beginning of year 528,636 22,625 38,768 --------- --------- --------- Cash - end of year $ 585,281 $ 528,636 $ 22,625 ========= ========= ========= Non-cash investing and financing activities: Redeemable preferred stock dividends accrued $ -- $ -- $ 30,000 ========= ========= ========= Conversion of accrued expenses to convertible subordinated note -- 250,000 -- ========= ========= ========= Conversion of accrued expenses for common stock in lieu of payment -- 72,348 -- ========= ========= ========= Exchange of redeemable preferred stock for common stock and stock purchase warrants (see note 7) Supplemental information: Interest paid $ 77,666 $ 219,481 $ 20,153 ========= ========= =========
The accompanying notes are an integral part of the financial statements. 18 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements 1. Business and Organization Tel-Instrument Electronics Corp. ("Tel" or the "Company") has been in business since 1947. The Company designs, manufactures, and markets avionic test equipment for the general and commercial aviation markets and for the government/military aviation markets. The Company's instruments are used to test navigation and communications equipment installed in aircraft. The Company sells its equipment to both the domestic and international markets. 2. Summary of Significant Accounting Policies Revenue Recognition: Revenues are recognized at the time of shipment and provisions, when appropriate, are made where the right to return exists. Revenue under service contracts is accounted for as the services are performed. Cash and Cash Equivalents: For purposes of the statements of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are carried at cost which approximates market value. Financial Instruments: The carrying amounts of cash and cash equivalents and other current assets and liabilities approximate fair value due to the short-term maturity of these investments. The Company does not determine a fair value for its related party debt since such debt does not have a readily determinable market. Concentrations of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company's customer base is primarily comprised of airlines and the U.S. Government. As of March 31, 1998, the Company believes it has no concentration of credit risk with its accounts receivable. Inventories: Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out basis. In accordance with industry practice, service parts inventory is included in current assets, although parts are carried for established requirements during the serviceable lives of the products and, therefore, are not expected to be sold within one year. 19 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) Office and Manufacturing Equipment: Office and manufacturing equipment are stated at cost. Depreciation and amortization is provided on a straight-line basis over periods ranging from 3 to 10 years. Maintenance, repairs, and renewals that do not materially add to the value of the equipment nor appreciably prolong its life are charged to expense as incurred. Leasehold improvements are amortized over the term of the lease or the useful life of the asset, whichever is shorter. When assets are retired or otherwise disposed, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in the Statements of Operations. Research and Development Costs: Research and development costs are expensed as incurred. Income/(Loss) Per Common Share: During fiscal year 1998, the Company adopted Statement of Financial Accounting Standard No. 128 "Earnings Per Share" (SFAS 128). SFAS 128 supercedes Accounting Principles Board Opinion No. 15, Earnings Per Share and specifies the computation, presentation and disclosure requirements for earnings per share for entities with publicly held common stock. SFAS 128 is effective for financial statements ending after December 15, 1997. 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 for the relevant period, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding stock options and warrants of 26,428 and 80,624, respectively, for fiscal years 1998 and 1997 using the treasury stock method. In fiscal 1996, stock dividends were considered when determining per share amounts. Accounting for 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 IAWs that will be in effect when such differences are expected to reverse. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefit which is not expected 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. 20 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) 2. Summary of Significant Accounting Policies (Continued) Stock Option Plan: Prior to April 1, 1996, the Company accounted for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. As such, compensation expense would be recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. On April 1, 1996, the Company adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which permits companies to recognize as expense over the vesting period the fair value of all stock-based awards on the date of grant. Alternatively SFAS 123 allows companies to continue to apply the provisions of APB Opinion No. 25 and provide pro forma net income and pro forma earnings per share disclosures for employee stock option grants made in fiscal year 1996 and future years as if the fair-value-based method as defined in SFAS No. 123 has been applied. The Company has elected to continue to apply the provisions of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS No. 123. Long-Lived Assets To Be Disposed Of: In accordance with SFAS No. 121, the Company reviews long-lived assets for impairment whenever events or changes in business circumstances occur that indicate that the carrying amount of the assets may not be recoverable. The Company assesses the recoverability of long-lived assets held and to be used based on undiscounted cash flows, and measures the impairment, if any, using discounted cash flows. The Company has not recorded any impairment in fiscal year 1998. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include taxes, inventory and accounts receivable valuation. Reclassification Certain amounts have been reclassified to conform to the current year presentation. 21 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) 3. Accounts Receivable The following tabulation sets forth the components of accounts receivable: March 31, ----------------------- 1998 1997 --------- -------- Government $ 93,440 $189,124 Commercial 297,130 179,134 Less: Allowance for doubtful accounts (16,064) (65,521) -------- -------- $374,506 $302,737 ======== ======== 4. Inventories Inventories consist of: March 31, ----------------------- 1998 1997 -------- -------- Purchased parts $253,616 $213,842 Work-in-process 165,034 206,750 Less: Reserve for obsolescence (35,620) (68,419) -------- -------- $383,030 $352,173 ======== ======== The work-in-process includes $27,152 and $71,943 for government contracts at March 31, 1998 and March 31, 1997, respectively. 5. Office and Manufacturing Equipment March 31, ------------------------ 1998 1997 --------- --------- Leasehold Improvements $ 53,294 $ 39,657 Machinery and equipment 533,457 487,672 Sales equipment 79,964 70,663 Less: Accumulated depreciation (587,394) (552,500) --------- --------- $ 79,321 $ 45,492 ========= ========= 22 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) 6. Accrued Expenses Accrued payroll, vacation pay and deferred wages consists of the following: March 31, ----------------------- 1998 1997 -------- -------- Deferred salary and wages and interest $ 31,114 $169,955 Accrued vacation pay 64,813 53,157 Accrued salary, and payroll taxes 12,503 24,851 Accrued profit sharing 102,970 94,469 -------- -------- $211,400 $342,432 ======== ======== Through March 31, 1994, the Company maintained a salary and wage deferral plan which was applicable for all employees. The deferrals were scaled in proportion to an employees salary level. Interest is accrued on the amount of deferred salary and wages. Such deferred amounts have been recognized as expense in the period incurred. The Company's management level employees also deferred a portion of their salaries in the fiscal years ending March 31, 1997 and March 31, 1996. Other accrued expenses of $189,330 and $325,556 at March 31, 1998 and 1997, respectively, consist primarily of professional service costs for legal, accounting and consulting services and of product related costs, such as warranty. 7. Redeemable Preferred Stock In July 1996, a group of the Company's employees and creditors (the "Group") agreed to purchase the Company's outstanding redeemable preferred stock (the "Preferred Stock") from the preferred stockholder. The Group purchased the Preferred Stock from the preferred stockholder for $111,700 and exchanged the Preferred Stock for unregistered shares, legended, of the Company's common stock and common stock purchase warrants (the warrants). The Company had been previously obligated to the Group for certain incurred liabilities and these funds were used by the Group to purchase the Preferred Stock. The Company's Board of Directors approved the exchange of the Preferred Stock and accrued dividends for 178,720 newly issued unregistered shares, legended, of common stock and warrants to purchase an additional 35,744 shares of common stock. A total of 35,025 warrants to purchase 35,025 shares of common stock were exercised and the remaining 719 warrants are exercisable at a price of $2.25 until March 31, 1999. The issuance of 178,720 common shares was recorded based upon the estimated market value of the stock at the time of the transaction. The difference between the market value and par value was credited to additional paid-in capital. The redemption of the Preferred Stock in exchange for common stock resulted in a difference of $494,943 23 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) between the carrying value of the Preferred Stock ($606,643) and the market value ($111,700) of the Company's common stock and such difference was recorded as an increase to additional paid-in capital. Based upon the application of an option pricing model, the warrants were estimated to have a fair value of $6,434 which amount was recorded in connection with this transaction. The exchange of the Preferred Stock and accrued dividends for unregistered shares, legended, of common stock and warrants was recorded as a non-cash financing transaction. 8. Income Taxes The benefit for income taxes is comprised of the following: March 31, March 31, 1998 1997 --------- ---------- Current: Federal $ -- $ -- State and Local -- -- -------- --------- Total Current Benefit $ -- $ -- ======== ========= Deferred: Federal $ (8,842) $(299,000) State and Local (49,877) (41,200) -------- --------- Total Deferred Benefit $(58,719) $(340,200) ======== ========= The components of the Company's deferred taxes at March 31, 1998 and 1997 are as follows: March 31, March 31, 1998 1997 ---------- ---------- Net operating loss carryforwards $1,085,000 $1,222,000 Asset reserves 21,000 53,000 Deferred wages and accrued interest 153,000 206,000 Provision for estimated expenses 69,000 70,000 ---------- ---------- Deferred tax asset 1,328,000 1,551,000 Less, valuation allowance 929,081 1,210,800 ---------- ---------- Deferred tax asset $ 398,919 $ 340,200 ========== ========== As of March 31, 1998, the Company has Federal tax net operating loss carryforwards of approximately $3,140,000 which begin to expire in 2002. As of March 31, 1998 and 1997, 24 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) the Company reduced the valuation allowance to reflect the deferred tax assets utilized to offset income tax expense. During 1998, the Company, in accordance with SFAS 109, reduced the valuation allowance to recognize in the financial statements a deferred tax asset of $398,919 at March 31, 1998. The recognized deferred tax asset 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. The remaining valuation allowance consists of the estimated amount of deferred tax assets which may not be realized due to the expiration of net operating losses. The foregoing amounts are management's estimates and the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually obtaining and fulfilling new profitable contracts and modifying products. The inability to obtain new profitable contracts or the failure of the Company's engineering development efforts could reduce estimates of future profitability, which could effect the Company's ability to utilize the deferred tax asset on the balance sheet or its loss carryforwards. A reconciliation of the income tax expense at the statutory Federal tax rate of 34% to the income tax expense recognized in the financial statements is as follows: 1998 1997 ---- ---- Income tax expense - statutory rate $176,500 $ 150,000 Income tax expenses - state and local, net of federal benefit (32,919) 27,200 Reduction of valuation allowance (183,731) (542,600) Other (18,569) 25,200 -------- --------- Income tax benefit recognized in financial statements $(58,719) $(340,200) ======== ========= 9. Related Party Transactions On March 31, 1997, the Company's Chairman/President renegotiated the terms of the non-current note payable-related party. This note, along with $250,000 of other accrued expenses due to the Company's Chairman/President, were converted into seven $50,000 convertible subordinated notes (the "Notes") totaling $350,000. The Notes become due in consecutive years beginning March 31, 1999 with the last note due March 31, 2005. The Notes bear interest at a rate of 10% per annum, payable semi-annually on the last day of September and March of each year. The Company is required to prepay the outstanding balance of the Notes and any accrued interest thereon, if the Company sells all or substantially all of its assets. The Notes can be converted into newly issued common shares of the Company at the conversion price of $1.50 per share until March 31, 1998, and thereafter at $2.50 per share. The conversion prices shall be adjusted for any stock dividends, stock issuances or capital reorganizations. The Notes may be redeemed by the Company prior to maturity upon giving written notice of not less than 30 days or more than 60 days at a redemption price equal to 120% of the principal if redeemed two years or more prior to the maturity date or 110% of the principal if redeemed more than one year, but less than two years prior to the maturity date. 25 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) 9. Related Party Transactions (Continued) Accrued payroll, vacation pay and deferred wages and related interest includes, $21,591 and $114,555 at March 31, 1998 and 1997, respectively, which is due to officers of the Company. Accrued expenses-related parties consists of interest and expenses due to an officer/stockholder of the Company of approximately $6,000 and $16,000 at March 31, 1998 and 1997, respectively. In addition, accrued expenses-related parties includes interest and professional fees of approximately $41,000 and $54,000 due to a second non-employee officer/stockholder of the Company at March 31, 1998 and 1997, respectively. Tel has obtained professional services from this officer/stockholder with the related fees amounting to approximately $35,600, $35,600 and $21,000 which are included in selling, general and administrative expenses for the years ended March 31, 1998, 1997 and 1996, respectively. The Company's $30,000 convertible subordinated note-related party matured on March 31, 1997. The Company renegotiated such note and satisfied $15,000 of this obligation and extended the maturity date of the remaining $15,000 until March 31, 1999. This note accrues interest semi-annually at a rate of 7%. The subordinate note is for past professional fees and services converted into a note payable due to an officer/stockholder of the Company. The notes are convertible to common stock at the option of the holder at $1.50 per share, at any time prior to maturity. 10. Leases The Company rents its office space and manufacturing facility under a lease agreement expiring in August, 1998. Future minimum lease payments are $18,608 in fiscal year 1999. Under terms of the lease, the Company pays all real estate taxes and utility costs for the premises. The Company is currently negotiating a long-term lease on the same premises. Total rent expense, including real estate taxes, was approximately $80,000, $80,000, and $84,000 for the years ended March 31, 1998, 1997 and 1996, respectively. 11. Significant Customer Concentrations One domestic distributor accounted for 15% of commercial sales for the year ended March 31, 1998. No distributor or end user customer accounted for more than 10% of commercial sales for the year ended March 31, 1997. Sales to two major commercial distributors accounted for 14% and 12% of total commercial revenue for the year ended March 31, 1996. Foreign commercial sales were 21%, 14% and 27% of total commercial sales for the years ended March 31, 1998, 1997 and 1996, respectively. 26 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) 11. Significant Customer Concentrations (Continued) Government sales to the USAF were 34% and 46% of total government sales, respectively, for the years ended March 31, 1998 and 1997. Government sales to the Canadian Defense Forces and US Army for the fiscal year ended March 31, 1996 were 30% and 18% of total government sales, respectively. 12. Stock Option Plan The Company has a stock option plan that provides for the granting of options to employees and directors. Activity during 1998, 1997 and 1996 is summarized below (in number of options): 1998 1997 1996 ------ ------- ------- Held at beginning of year 93,219 107,886 54,153 Granted -- 6,933 53,733 Exercised 61,053 1,667 -- Canceled or expired -- 19,933 -- ------ ------- ------- Held at end of year 32,166 93,219 107,886 ====== ======= ======= As of March 31, 1998, the Company had 32,166 options outstanding of which 25,233 are exercisable at $0.375 per share with a weighted average remaining contractual life of 2.1 years and 6,933 are exercisable at $0.72 per share with a weighted average remaining contractual life of 3.1 years. For the years ended March 31, 1998, 1997 and 1996 16,323, 59,130 and 38,100 of options outstanding and exercisable. The per share weighted-average fair value of stock options granted during 1997 was $0.64 on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: expected dividend yield of 0.0%, risk-free interest rate of 5%, volatility factor of 135%, and an expected life of 5 years. No stock options were granted in 1998. The Company applies Accounting Principles Board Opinion No. 25 in accounting for its stock options and, accordingly, no compensation expense has been recognized for its stock options in the financial statements. Had the Company determined compensation cost based on the fair market value at the grant date for its stock options under SFAS No. 123, the Company's net income would not have been materially affected. The pro forma amounts are indicated below: 27 TEL-INSTRUMENT ELECTRONICS CORP. Notes To Financial Statements (Continued) 12. Stock Option Plan (Continued) 1998 1997 --------- -------- Net income - as reported $577,817 $781,284 Net income - pro forma 571,840 775,526 Basic earnings per share - as reported $ 0.28 0.41 Basic earnings per share - pro forma 0.28 0.41 Diluted earnings per share - as reported $ 0.28 0.41 Diluted earnings per share - pro forma 0.28 0.41 In accordance with SFAS No. 123, pro forma net income and earnings per share data reflect only options granted in 1996 and 1997. Therefore, the full impact of calculating compensation expense for stock options under SFAS No. 123 is not reflected in the pro forma amounts presented above since compensation expense for options granted prior to April 1, 1995 was not considered. On June 3, 1998, the Board adopted a new stock option plan covering 250,000 shares subject to approval by the shareholders. 13. New Accounting Pronouncements Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, was issued in June 1997 and is effective for fiscal years beginning after December 15, 1997. This pronouncement establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Company will adopt this pronouncement in fiscal year 1999 and does not expect its implementation will have a material effect on the Company's financial statements as currently presented. Statements of Financial Accounting Standards No. 131, Disclosures About Segments of an Enterprise and Related Information, was also issued in June 1997 and is effective for fiscal periods beginning after December 15, 1997. This pronouncement established the way in which publicly held business enterprises report information about operating segments in annual financial statements and interim reports to stockholders. The Company is in the process of determining the impact of this statement on the Company's financial statements. 28 TEL-INSTRUMENT ELECTRONICS CORP. Schedule II - Valuation and Qualifying Accounts
Balance at Charged to Charged to Beginning Costs and Other Balance at Description of Period Expenses Accounts Deductions End of Year - ------------------------------------------------------------------------------------------------------------- Year ended March 31, 1996: Allowance for doubtful accounts $ 51,090 $15,000 $66,090 ======== ======= ======= Allowance for obsolete inventory $104,036 $(1,673) $42,242 (1) $60,121 ======== ======= ======= ======= Year ended March 31, 1997: Allowance for doubtful accounts $ 66,090 $ 569 (2) $65,521 ======== ======= ======= Allowance for obsolete inventory $ 60,121 8,298 68,419 ======== ======= ======= Year ended March 31, 1998: Allowance for doubtful accounts $ 65,521 $(6,700) 42,757 (2) $16,064 ======== ======= ======= ======= Allowance for obsolete inventory $ 68,419 $ -- $32,799 (1) $35,620 ======== ======= ======= =======
(1) Amounts represent disposals of obsolete inventory. (2) Amount represents write off of accounts receivable. 29 TEL-INSTRUMENT ELECTRONICS CORP. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure No disagreements arose between the Registrant and its independent auditors' regarding accounting and financial matters during the twelve months preceding March 31, 1998. PART III Item 10. Directors and Executive Officers of the Registrant DIRECTORS AND EXECUTIVE OFFICERS Year First Elected a Name (age) Position Director ---------- -------- -------- Harold K. Fletcher Chairman of the Board, 1982 (73) President and Chief Executive Officer since 1982. George J. Leon Director; Investment 1986 (54) Manager and beneficiary of the George Leon Family Trust (investments) since 1986. Robert H. Walker Director; Retired; Executive Vice 1984 (62) President, Robotic Vision Systems, Inc. (design and manufacture of robotic vision systems), 1983-1997. There are no family relationships between any of the Directors and Officers of the Registrant. In June 1998, the Board of Directors appointed two additional members to the Board of Directors until the next shareholders meeting. Officers Donald S. Bab Secretary and General Counsel since 1982. Richard J. Wixson Vice President of Manufacturing, employed by Tel in his present capacity since 1987. 30 Item 11. Executive Compensation The following table and accompanying notes set forth information concerning compensation for the fiscal years ended March 31, 1997 1996 and 1995. Stock Other Name and Principal Position Year Salary (1) Options Compensation - ------------------------------------------------------------------------------ Harold K. Fletcher 1998 $100,000 $ 20,000 (2) Chairman of Board 1997 100,000 -- President and Chief 1996 86,250 -- Executive Officer (1) Salaries includes wages deferred in 1997 and 1996 of $5,193 and $1,250, respectively. (2) Represents bonus based on the Company's profitability. 31 TEL-INSTRUMENT ELECTRONICS CORP. Item 12. Security Ownership of Certain Beneficial Owners and Management The following tables set forth, as of March 31, 1997, the number and percentage of the outstanding shares of common stock, beneficially owned by each director and by each beneficial owner of 5% or more of such shares, and by all officers and directors as a group. Number of Shares Percentage Name and Address Beneficially Owned of Class (1) ---------------- ------------------ ------------ Harold K. Fletcher, Director 496,102 (2) 23.7% 728 Garden Street Carlstadt, New Jersey 07072 George J. Leon, Director 304,133 (3) 14.5% 116 Glenview Toronto, Ontario Canada M4R1P8 Robert H. Walker, Director 22,316 (4) 1.1% 425 Robro Drive East Hauppague, New York 11788 Donald S. Bab, Secretary 330 Madison Avenue New York, NY 10017 65,634 3.1% All Officers and Directors 929,774 (5) 44.1% as a Group (6 persons) (1) The class includes 2,094,735 shares outstanding. The common stock deemed to be owned which is not outstanding but subject to currently exercisable options is deemed to be outstanding for determining the percentage of all outstanding stock owned. (2) Includes 24,681 shares owned by Mr. Fletcher's wife, 4,254 shares owned by his son, 261,295 owned by a family partnership in which Mr. Fletcher is a partner.. Mr. Fletcher disclaims beneficial ownership of the shares owned by his wife and son and by the partnership. (3) Includes 299,516 shares owned by the George Leon Family Trust, of which Mr. Leon is a beneficiary, and 4,617 shares subject to currently exercisable stock option. Mr. Leon disclaims beneficial ownership of the shares owned by the trust. (4) Includes 5,983 shares subject to currently exercisable stock options. 32 TEL-INSTRUMENT ELECTRONICS CORP. Item 12. Security Ownership of Certain Beneficial Owners and Management (Continued) (5) Includes 12,822 shares subject to currently exercisable options held by all executive offices and directors of the Company (including those individually named above). Item 13. Certain Relationships and Related Transactions The disclosures required by this item are contained in Note 9 to the financial statements included on pages 24-25 of this document. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K a.) The following documents are filed as a part of this report: Pages ----- (1) Financial Statements: Report of Independent Accountants 14 Balance Sheets - March 31, 1998 and 1997 15 Statements of Operations - Years Ended March 31, 1998, 1997 and 1996 16 Statements of Changes in Stockholders' Equity/(Deficiency) - Years Ended March 31, 1998, 1997 and 1996 16 Statements of Cash Flows - Years Ended March 31, 1998, 1997 and 1996 17 Notes to Financial Statements 19-28 (2) Financial Statement Schedule: II - Valuation and Qualifying Accounts 29 (3) Distributor Agreement with Muirhead Avionics & Accessories Ltd. Naval Air Warfare Center Aircraft Division Contract No. N68335-97-D-0060 b.) No reports on Form 8-K were filed during the fourth quarter of 1998. 33 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K (Continued) c. ) Exhibits identified in parentheses below on file with the Securities and Exchange Commission, are incorporated herein by reference as exhibits hereto. * (3.1) Tel-Instrument Electronics Corp.'s Certificate of Incorporation, as amended. * (3.2) Tel-Instrument Electronics Corp.'s By-Laws, as amended. * (3.3) Tel-Instrument Electronics Corp.'s Restated Certificate of Incorporation dated November 8, 1996. * (4.1) Specimen of Tel-Instrument Electronics Corp.'s Common Stock Certificate. * (4.2) Specimen of Tel-Instrument Electronics Corp.'s Convertible Preferred Stock Certificate. (10.1) Lease dated August 15, 1994, by and between Registrant and 210 Garibaldi Avenue Corp. (10.2) 7%, $30,000 Convertible Subordinated Note dated March 31, 1992 between Registrant and Donald S. Bab.. ** (27.) Financial Data Schedule * Incorporated by reference to Registration 33-18978 dated November 7, 1988. ** Financial Data Schedule which is submitted electronically to the Securities and Exchange Commission for information only and is not filed. The Company will furnish, without charge to a security holder, upon request, copy of the documentary portions which are incorporated by reference, and will furnish any other exhibit at cost. 34 TEL-INSTRUMENT ELECTRONICS CORP. Signatures Pursuant to the requirements of Section 13 or 15(d) 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. (Registrant) Dated: June 22, 1998 By: /s/ Harold K. Fletcher ---------------------- President and Director (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated and by signature hereto. Signature Title Date --------- ----- ---- /s/ Harold K. Fletcher Director June 22, 1998 --------------------------- /s/ Harold K. Fletcher /s/ George J. Leon Director June 22, 1998 --------------------------- /s/ George J. Leon /s/ Robert H. Walker Director June 22, 1998 --------------------------- /s/ Robert H. Walker Supplemental Information to be Furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. No annual report to security holders covering the fiscal year ended March 31, 1997, except in the form set forth in this Form 10-K, has been prepared. No proxy statement, form of proxy, or other proxy soliciting material has been sent to shareholders with respect to any annual or other meeting of shareholders. No annual report or proxy material is contemplated. 35 DISTRIBUTOR AGREEMENT Agreement made this 15th day of May 1998, by and between Muirhead Avionics & Accessories Ltd., having their principle place of business at 16, Imperial Way, Purley Way, Croydon, Surrey, CR0 4RR, Great Britain (hereinafter called DISTRIBUTOR) and Tel-Instrument Electronics Corp. whose place of business is located at 728 Garden Street, Carlstadt, NJ 07072, USA (hereinafter called the COMPANY). WHEREAS the COMPANY desires to secure competent representation and; WHEREAS the DISTRIBUTOR is an independent and bona fide established selling concern. NOW THEREFORE, the parties hereto, in consideration of the mutual covenants herein expressed, and intending to be legally bound, do hereby agree as follows; 1. DISTRIBUTOR (a) The DISTRIBUTOR is appointed as COMPANY'S exclusive sales DISTRIBUTOR for sales within the DISTRIBUTOR'S territory of the COMPANY'S products. The DISTRIBUTOR will not promote, sell, or offer for sale, any products which complete with those offered by the COMPANY. (b) The DISTRIBUTOR has adequate knowledge of the products, services, fields of competency, and organization of the COMPANY'S products and/or services. (c) The DISTRIBUTOR agrees to promote vigorously the sale of products in the Territory and to comply with the laws of that Territory and applicable military regulations in that Territory. 2. PRODUCTS Products are defined as Commercial and Military Avionics Test Equipment. 3. MARKET & TERRITORY UNITED KINGDOM, THE IRISH REPUBLIC, FRANCE, GERMANY AND POLAND are to be the exclusive designated areas of operations of the DISTRIBUTOR for the sale of the products of the COMPANY. Unless specifically named, any colonies, island groups, or provinces associated with the territory are not included in the exclusive designated area of operations. 4. DURATION This agreement shall remain valid for a period of 1 (one) year beginning the 15th day of May 1998, and ending one calendar year later. This agreement may be terminated by the DISTRIBUTOR or by the COMPANY without cause by written notice; and in the event of such termination, the effective date of termination shall be 90 (ninety) days after which notice 1 was sent by certified mail, return receipt requested, to the address shown at the beginning of this agreement. This agreement may be terminated immediately by the COMPANY with cause by written notice sent by certified mail, return receipt requested. Within 30 (thirty) days of the date of termination, the DISTRIBUTOR shall submit a list of pending quotations/projects to the COMPANY. In the spirit of this mutual endeavour, the two parties should consult prior to terminating the Agreement in an attempt to resolve any differences that might arise. The COMPANY and the DISTRIBUTOR shall mutually determine the validity of each listed quotation/project. For a period of six months after termination, COMPANY will compensate DISTRIBUTOR as outlined in paragraph 6 on orders received from customers within the territory that are named on the quotation/project list. This agreement shall be automatically renewed each year thereafter unless cancelled by either party, in writing, 30 (thirty) days prior to the end of each successive year. (a) The two parties will review their performance and the other party's 60 days prior to the yearly anniversary. The two parties will exchange these reviews no later than 45 days prior to the anniversary. (b) Termination does not affect obligation existing either for payment of money or as indicated below (e.g. paragraphs 8, 10, 14, 18). (c) The DISTRIBUTOR will not make or sell COMPANY product after termination. (d) The COMPANY is free to appoint a new DISTRIBUTOR in the TERRITORY in the event of termination as outlined above. (e) In the event the COMPANY terminates the Agreement, it will buy back the DISTRIBUTOR'S inventory. 5. PRODUCT WARRANTY Product warranty will be the responsibility of the DISTRIBUTOR in recognition of which an additional 4 percent discount is agreed in addition to the discount in paragraph 6 below. 6. DISCOUNT (a) The COMPANY shall offer a 15 percent discount from its price list on all products F.O.B. Carlstadt, N.J., USA. (b) On Special Project sales where a substantial part of the overall sale is purchased by the COMPANY from non-exclusive vendors, the commission rate shall be by negotiation at the earliest possible opportunity. (c) On sales where more than one DISTRIBUTOR and/or more than one territory is involved, the total commission shall be split by negotiation. 2 (d) If credit is granted or refund is made to the customer by the COMPANY because of returned products, any commissions already paid on such returned merchandise shall be deducted from the next commission payment or refunded by the DISTRIBUTOR, within 30 (thirty) days, whichever occurs first. Freight costs associated with the return of merchandise shall be prepaid. In the case of any disagreement, the COMPANY shall be the final arbiter at no cost to any of the parties involved. (e) The term "order" is defined to mean any purchase order, OEM agreement, annual contract or any other type of contractual agreement for the products from the TERRITORY. All sales are deemed made in Carlstadt, N.J., USA, 7. CREDIT (a) Purchases of the COMPANY'S products by the DISTRIBUTOR for resale within the DISTRIBUTOR'S assigned territory shall be on a net 45 day basis with approved credit, unless other terms have been arranged. (b) On direct sales by the COMPANY to customers within the DISTRIBUTOR territory, the DISTRIBUTOR agrees to protect the COMPANY to the best of its ability against loss, by reporting any available credit information and by assisting in collection when requested by COMPANY. The DISTRIBUTOR agrees to forward immediately to the COMPANY any and all monies or remittances in any form which it may collect for the COMPANY or which may be placed in its hands by customers and is owed to the COMPANY. 8. ADVERTISING MATERIAL The COMPANY will supply the DISTRIBUTOR, at no charge, with literature, catalogs, advertising reprints, and other promotional material that becomes available for distribution from time to time. This material will remain the property of the COMPANY until it is distributed to customers in the territory. Upon termination of this Agreement, all undistributed material will be returned to the COMPANY. The DISTRIBUTOR will treat this promotional material, as well as pricing and other information, as proprietary to Tel-Instruments Corp. and highly confidential. Shipping charges for rush or extraordinary requests for promotional material will be paid for by DISTRIBUTOR. 9. EXPENSE The DISTRIBUTOR shall pay all costs and expenses incurred by the DISTRIBUTOR in its territory, or otherwise including, but not limited to, maintenance of sales office, telephone calls and telefax/telexes (including those sent to COMPANY), travel and entertainment expenses, payment of personnel expenses pursuant to the furtherance of sales, mailings, promotional activities and advertising, taxes and other expenses of conducting its business. 3 10. RESTRICTIONS OF AUTHORITY (a) Neither party shall have authority to bind the other to any contract of employment, and each party is solely responsible for its own salesmen and for their acts and omission and the things done by them. Neither party shall have authority to endorse the other party's checks or commercial paper or carry bank accounts of the other. (b) Neither party shall have authority under any circumstances either expressly or by implication to incur any liability or obligations on the others behalf. (c) Neither party shall have authority to perform any of the actions prohibited by this Agreement or to represent that it has the authority to incur any liability or obligation of the other's behalf neither agent nor joint venture. 11. SALES LEADS With regards to sales leads, the following is agreed; (a) The COMPANY will furnish the DISTRIBUTOR with copies, or originals, of pertinent information concerning enquiries received by it from customers in the TERRITORY. (b) The DISTRIBUTOR will follow-up these sales leads provided by the COMPANY. (c) The DISTRIBUTOR will keep the COMPANY currently informed as to field conditions and the results of follow-up methods used by the DISTRIBUTOR. This information should reflect feedback from the customers as to additional requirements, desired modifications or optional equipment. Copies of visit reports will be forwarded to COMPANY on a monthly basis. Quarterly projections on future sales will be made by DISTRIBUTOR to COMPANY. (d) If the COMPANY receives a sales lead from DISTRIBUTOR'S territory, the COMPANY will immediately notify DISTRIBUTOR of this potential sale and refer enquiry to DISTRIBUTOR by telefax. If no response is received by the COMPANY from DISTRIBUTOR within 10 (ten) days after receipt of lead, COMPANY will proceed with actions to secure the sale. In such instances where DISTRIBUTOR fails to follow-up within 10 (ten) days, COMPANY will perform all sales functions and retain any commission that may result from that sale. 12. OTHER DISTRIBUTORS The COMPANY shall not at any time during the term of this Agreement, without previous written consent of the DISTRIBUTOR, appoint any other DISTRIBUTOR(s) in the territory listed in paragraph 2 of this Agreement to sell for the COMPANY any of its listed products. 4 13. TRADE SHOWS The DISTRIBUTOR is expected at its own cost to attend and participate in trade shows and industry meetings, shows and conventions in the territory that in its considered judgement will advance the sales of the products of the COMPANY. 14. CONFIDENTIAL INFORMATION The DISTRIBUTOR shall not make use or disclosure, except for the benefit of the COMPANY, at any time during the term of this Agreement or for five years thereafter, of any information, knowledge or data which they may obtain or receive from Tel concerning inventions and improvements, business, engineering and/or production methods and/or trade secrets of the COMPANY related to this product line that is not already in the public domain. 15. INDEPENDENT CONTRACTOR The COMPANY shall exercise no control over nor have the right to control the activities or operations of the DISTRIBUTOR except as provided hereunder; and the DISTRIBUTOR shall be considered an independent contractor and not a servant or employee of the COMPANY. Neither party is responsible for the taxes of the other party. 16. ASSIGNMENT This Agreement shall not be transferable or assignable by the DISTRIBUTOR without the prior consent of the COMPANY. Any attempt to transfer shall be null and void. 17. RECORD KEEPING The DISTRIBUTOR agrees to comply with US Export Administration Regulations record keeping provision as described in Part 787.13 of the Regulations. 18. GENERAL CONDITIONS (a) The Domestic Laws of the State of New York shall apply to the parties hereto in any and all questions arising hereunder regardless of the jurisdiction in which any action or proceeding may be initiated or maintained. Any legal action or proceeding arising out of or relating to this agreement may be initiated in the Courts of the State of New York or of the United States of America in the Southern District of New York and the parties submit to the jurisdiction of each such court on any such action. Each party will be responsible for its legal fees. All disputes between the two parties that cannot be amicably settled that represents less than $75,000.00 will be brought before the American Arbitration Association in accordance with their rules. 5 (b) Any provisions of the Agreement which in any way violates Federal, State or Local Laws or regulations shall not be deemed a part of the Agreement and the remainder of this Agreement shall continue in full force and effect. (c) No amendments, changes, revisions or discharges of this Agreement, in whole or in part, shall have any force or effect unless set forth in writing and signed by the parties hereto. Any and all such amendments, in whole or in part, shall be binding upon the parties hereto despite any lack of legal consideration, so long as the same shall be set forth in writing and duly signed by the parties hereto. (d) The failure of either party to enforce, at any time, or for a period of time, the provisions of this Agreement shall not be construed as a waiver of such provisions or of the right of such party thereafter to enforce each and every provision. (e) Paragraph headings are inserted herein for convenience only and do not form part of this Agreement. (f) This Agreement supersedes any and all previous Agreements in existence between the COMPANY and the DISTRIBUTOR and represents the entire understanding of the parties. (g) This Agreement is not retrospective and does not apply to orders placed before the commencement date. DISTRIBUTOR COMPANY Signature /s/ D. Dunbar Signature /s/ R. J. Wixson ----------------------------- ------------------------ Name D. Dunbar Name Richard J. Wixson Title Managing Director Title Vice President Date 18 May 1998 Date 6/12/98 6 - -------------------------------------------------------------------------------- ORDER FOR SUPPLIES OR SERVICES Form Approved PAGE 1 OF 6 (Contractor must submit four copies of invoice.) OMB No. 0704-0187 Expires Dec. 31, 1993 Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Defense, Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project, (0704-0187), Washington, DC 20503. PLEASE DO NOT RETURN YOUR FORM TO EITHER OF THESE ADDRESSES. SEND YOUR COMPLETED FORM TO THE PROCUREMENT OFFICIAL IDENTIFIED IN ITEM 6. - -------------------------------------------------------------------------------- 1. CONTRACT/ 2. DELIVERY 3. DATE OF ORDER 4. REQUISITION 5.PRIORITY PURCH ORDER NO. ORDER NO. /PURCH REQUEST NO. N68335-97-D-0060 0001 11 AUG 1997 N68335-96-PR-6317-0888 DO-C9e - -------------------------------------------------------------------------------- 6. ISSUED BY: CODE N68335 7. ADMINISTERED BY CODE S3101A 8. DELIVERY FOB (if other than 6.) [X] DEST ----------------------------------- [ ] OTHER Naval Air Warfare Center DCMC Springfield (See Schedule Aircraft Division BLDG. 1, ARDEG if other) Code 213000B129-2 Picatinny, NJ 07806-5000S Highway 547 Lakehurst NJ 08733-5082 - -------------------------------------------------------------------------------- 9. CONTRACTOR CODE 92606 FACULTY CODE 10. DELIVER TO 11.MARK IF BUSINESS IS FOB POINT BY [X] SMALL (Date) [ ] SMALL DISAD- (YYMMDD) VANTAGED ---------------- [ ] WOMEN-OWNED NAME AND TEL-INSTRUMENT IAW Clause F.1 ADDRESS ELECTRONICS of Contract CORPORATION 728 GARDEN STREET CARLSTADT, NJ 07072 -------------------------------------- 12. DISCOUNT TERMS 1.0% 10; 0.5% 20; NET 30 -------------------------------------- 13. MAIL INVOICES TO SEE BLOCK 15 - -------------------------------------------------------------------------------- 14. SHIP TO CODE 15. PAYMENT WILL BE MADE BY CODE SC1018 SEE SCHEDULE DFAS Columbus Center MARK ALL DFAS-CO/Minuteman Division PACKAGES AND P.O. Box 182266 PAPERS WITH COLUMBUS, OH 43218-2266 CONTRACT OR ORDER NUMBER ---------------------------------------------------------- 16. DELIVERY _X_ This delivery order is issued on another Government agency TYPE or in accordance with and subject to terms and coonditions OF of above numbered contract ORDER ---------------------------------------------------------- -------------- PURCHASE Reference your furnish the following on terms specified herein ---------------------------------------------------------- ACCEPTANCE. THE CONTRACTOR HEREBY ACCEPTS THE OFFER REPRESENTED BY THE NUMBERED PURCHASE ORDER AS IT MAY PREVIOUSLY HAVE BEEN OR IS NOW MODIFIED, SUBJECT TO ALL OF THE TERMS AND CONDITIONS SET FORTH, AND AGREES TO PERFORM THE SAME. - -------------------------------------------------------------------------------- __________________ ________________ ____________________ ______________ NAME OF CONTRACTOR SIGNATURE TYPED NAME AND TITLE DATE SIGNED (YYMMDD) [ ] If this box is marked, supplier must sign Acceptance and return the following number of copies - -------------------------------------------------------------------------------- 17. ACCOUNTING AND APPROPRIATION DATA/LOCAL USE SEE PAGE 6 - -------------------------------------------------------------------------------- 18. 19. 20. 21. 22. 23. ITEM NO. SCHEDULE OF SUPPLIES/SERVICE QUANTITY UNIT UNIT AMOUNT ORDERED PRICE - -------------------------------------------------------------------------------- SEE PAGES 2 THROUGH 6 FOR DOD ADMINISTRATIVE USE ONLY: PRIORITY: - -------------------------------------------------------------------------------- * If quantity accepted by 24. UNITED STATES 25. TOTAL $949,324.00 the Government is same OF AMERICA -------------------------------- as quantity ordered, 29. DIFFERENCES ----------- indicate by X. If -------------------------------- different, enter /S/ BARBARA J. PETRZILKA actual quantity ------------------------------------------------ accepted below BY: /S/ BARBARA J. PETRZILKA, CONTRACTING OFFICER ordered and encircle. - -------------------------------------------------------------------------------- 26. QUANTITY IN COLUMN 27. SHIP NO. 28. D.O VOUCHER NO. 30. INITIALS 20 HAS BEEN [ ] INSPECTED [ ] RECEIVED [ ] PARTIAL [ ] ACCEPTED, AND CONFORMS TO THE [ ] FINAL CONTRACT EXCEPT AS NOTED _________________ _________________________________________________ DATE SIGNATURE OF AUTHORIZED GOVERNMENT REPRESENTATIVE - -------------------------------------------------------------------------------- 36. I certify this account is 31. PAYMENT 32. PAID BY 33. AMOUNT VERIFIED correct and proper for [ ] COMPLETE CORRECT FOR payment. [ ] PARTIAL [ ] FINAL ------------------- 34. CHECK NUMBER ------------------- 35. BILL OF LADING CO. ------------------- _________________ _________________________________________________ DATE SIGNATURE AND TITLE OF CERTIFYING OFFICER - -------------------------------------------------------------------------------- 37. RECEIVED 38. RECEIVED 39. DATE 40. TOTAL 41. S/R 42. S/R VOUCHER AT BY RECEIVED CONTAINERS ACCOUNT NO. (Print) (YYMMDD) NUMBER - -------------------------------------------------------------------------------- DD Form 1155 APR 93 PREVIOUS EDITIONS MAY BE USED Page 2 of 6 N68335-97-D-0060/0001 This delivery order is issued in accordance with the terms and conditions Contract Number N68335-97-D-0060. SECTION B - SUPPLIES/SERVICES AND PRICES/COSTS ITEM NOMENCLATURE OTY UNIT UNIT AMOUNT PRICE 0001 Identification Friend or Foe 5 ea. $ 19,911 $ 99,555 Interrogator Transponder Test Set (IFFITTS)Preproduction Units 0002 Engineering Data Items in accordance with Contract Data Requirements List (CDRL), Exhibit (E) 0002AA Master Test Plan/Program Test 1 lo. $ 5,948 $ 5,948 Plan IAW CDRL, Exhibit E, Seq. No. E001 0002AB Configuration Control Program 1 lo. $ 21,807 $ 21,807 Plan, IAW CDRL, Exhibit E, Seq. No. E002 0002AC Product Drawings and Associated 1 lo. $ 1,428 $ 1,428 Lists, IAW CDRL, Exhibit E, Seq. No. E003 0002AD Reliability Program Plan, 1 lo. $ 29,550 $ 29,550 IAW CDRL, Exhibit E, Seq. No. E004 0002AE Reliability Test Procedures, IAW 1 lo. $ 11,642 $ 11,642 CDRL, Exhibit E, Seq. No. E005 0002AF Reliability Test Reports, IAW 1 lo. $ 4,253 $ 4,253 CDRL, Exhibit E, Seq. No. E006 0002AG Preliminary Design Review 1 lo. $ 898 $ 898 Agenda, IAW CDRL, Exhibit E, Seq. No. E007 0002AH Preliminary Design Review 1 lo. $ 8,343 $ 8,343 Minutes, IAW CDRL, Exhibit E, Seq. No. E00B 0002AJ Critical Design Review Agenda, 1 lo. $ 898 $ 898 IAW CDRL, Exhibit E, Seq. No. E009 0002AK Critical Design Review Minutes, 1 lo. $ 8,343 $ 8,343 IAW CDRL, Exhibit E, Seq. No. E010 0002AL System Security Plan (SSP), IAW 1 lo. $ 9,444 $ 9,444 CDRL, Exhibit E, Seq. No. E011 0002AM Maintainability Test Report, IAW 1 lo. $ 23,471 $ 23,471 CDRL, Exhibit E, Seq. No. E012 Page 3 of 6 N68335-97-D-0060/0001 0002AN EMI Control Procedures, IAW 1 lo. $ 4,239 $ 4,239 CDRL, Exhibit E, Seq. No. E013 0002AP EMI Test Procedures, IAW CDRL, 1 lo. $ 1,744 $ 1,744 Exhibit E, Seq. No. E014 0002AQ EMI Test Report, IAW CDRL, 1 lo. $ 19,241 $ 19,241 Exhibit E, Seq. No. E015 0002AR Maintainability Demonstration, 1 lo. $ 36,160 $ 36,160 IAW CDRL, Exhibit E, Seq. No. E016 0002AS First Article Test Report, IAW 1 lo. $ 17,546 $ 17,546 CDRL, Exhibit E, Seq. No. E017 0002AT Environmental Stress Screening 1 lo. $ 2,700 $ 2,700 Report, IAW CDRL, Exhibit E, Seq. No. E01B 0002AU Acceptance Test Plan 1 lo. $ 16,368 $ 16,368 (Preproduction), IAW CDRL, Exhibit E, Seq. No. E019 0002AV Acceptance Test Plan 1 lo. $ 4,004 $ 4,004 (Production), IAW CDRL, Exhibit E, Seq. No. E020 0002AW Environmental Test Plan, IAW 1 lo. $ 10,503 $ 10,503 CDRL, Exhibit E, Seq. No. E021 0002AX Environmental Test Report, IAW 1 lo. $ 6,471 $ 6,471 CDRL, Exhibit E, Seq. No. E022 0002AY Non-Standard Part Battery 1 lo. $ 2,674 $ 2,674 Selection, IAW CDRL, Exhibit E, Seq. No. E023 0002AZ Hazard Analysis Report, IAW 1 lo. $ 11,392 $ 11,392 CDRL, Exhibit E, Seq. No. E024 0002BA Design Change Notice, IAW CDRL, 1 lo. $ 5,564 $ 5,564 Exhibit E, Seq. No. E025 0002BB Hazardous Materials Management 1 lo. $ 5,069 $ 5,069 Program Plan, 1 IAW CDRL, Exhibit E, Seq. No. E026 0002BC Hazardous Materials Management 1 lo. $ 2,734 $ 2,734 Program Report, IAW CDRL, Exhibit E, Seq. No. E027 0002BD Reliability Predictions Report, 1 lo. $ 35,061 $ 35,061 IAW CDRL, Exhibit E, Seq. No. E028 0003 ILS Data Items in accordance with Contract Data Requirements List (CDRL), Exhibit (A) Page 4 of 6 N68335-97-D-0060/0001 0003AA Conference Minutes IAW CDRL, 1 lo. $ 28,100 $ 28,100 Exhibit A, Seq. No. A00l 0003AB Logistics Support Analysis Plan 1 lo. $ 16,523 $ 16,523 (LSAP), IAW CDRL, Exhibit A, Seq. No. A002 0003AC Conference Agenda, IAW CDRL, 1 lo. $ 31,433 $ 31,433 Exhibit A, Seq. No. A003 0003AD Logistic Support Analysis 1 lo. $111,906 $111,906 Record, IAW CDRL, Exhibit A, Seq. No. A004 0003AE LSA-019 Task Analysis Report, 1 lo. $ 22,758 $ 22,758 IAW CDRL, Exhibit A, Seq. No. A005 0003AF Level of Repair Analysis, IAW 1 lo. $ 16,501 $ 16,501 CDRL, Exhibit A, Seq. No. A006 0003AG LSA-024 Maintenance Plan Report, 1 lo. $ 23,179 $ 23,179 IAW CDRL, Exhibit A, Seq. No. A007 0003AH Training Course Control 1 lo. $ 9,194 $ 9,194 Document, IAW CDRL, Exhibit A, Seq. No. D009 0003AJ Learning Analysis Report, IAW 1 lo. $ 5,952 $ 5,952 CDRL, Exhibit A, Seq. No. D00l 0003AK Instructional Media Package, IAW 1 lo. $ 3,564 $ 3,564 CDRL, Exhibit A, Seq. No. D008 0003AL Lesson Plan, IAW CDRL, Exhibit 1 lo. $ 5,694 $ 5,694 A, Seq. No. D005 0003AM Trainee Guide, IAW CDRL, Exhibit 1 lo. $ 10,972 $ 10,972 A, Seq. No. D006 0003AN Test Package, IAW CDRL, Exhibit 1 lo. $ 9,445 $ 9,445 A, Seq. No. D007 0003AP Trainee and Training Course 1 lo. $ 13,266 $ 13,266 Completion Report, IAW CDRL, Exhibit A, Seq. No. D010 0003AQ Support Material List, IAW CDRL, 1 lo. $ 24,513 $ 24,513 Exhibit A, Seq. No. A016 0003AR Supportability Assessment Plan, 1 lo. $ 18,676 $ 18,676 IAW CDRL, Exhibit A, Seq. No. A017 0003AS Test Article Configuration 1 lo. $ 7,123 $ 7,123 Report, IAW CDRL, Exhibit A, Seq. No. A018 0003AT Software Development Plan, IAW 1 lo. $ 2,615 $ 2,615 CDRL, Exhibit A, Seq. No. A021 Page 5 of 6 N68335-97-D-0060/0001 0003AU Engineering Change Proposal, IAW 1 lo. TBN TBN CDRL, Exhibit A, Seq. No. A022 0003AV Configuration Status Accounting 1 lo. $ 2,642 $ 2,642 Reporting, IAW CDRL, Exhibit A, Seq. No. A023 0003AW Support Equipment Depot Level 1 lo. $ 6,434 $ 6,434 Rework Standard, lAW CDRL, Exhibit A, Seq. No. A024 0003AX FMEA Report, IAW CDRL, Exhibit 1 lo. $ 21,706 $ 21,706 A, Seq. No. A025 NOTE: Exhibit A, Seq. Nos. A015, A019 and A020 have not been assigned. 0003AY Mission, Collective, Individual & 1 lo. $ 12,454 $ 12,454 Occup. TRNG Task Analysis Report, IAW CDRL, Exhibit D, Seq. No. D002 0003AZ Training System Implementation 1 lo. $ 12,454 $ 12,454 Plan, IAW CDRL, Exhibit D, Seq. No. D003 0003BA Training Program Development and 1 lo. $ 12,454 $ 12,454 Management Plan, IAW CDRL, Exhibit D, Seq. No. D004 0004 Data Requirements, IAW ILSSOW Attachments, Contract Data Requirements Lists (CDRLs) Seq. Nos. T00l (per TMCR), and 0001 through 0009 (per Provisioning Requirements Statement) 0004AA Technical Manuals IAW CDRL, TMCR 1 lo. $ 11,759 $ 11,759 No.19-96 dated 11 November 1995 (Attachment (A) to ILSSOW), Seq. No. T00l 0004AB Engineering Data for 1 lo. $ 14,045 $ 14,045 Provisioning IAW CDRL, Provisioning Requirements Statement (PRS)(Attachment (B) to ILSSOW), Seq. No. 0001 0004AC Provisioning and Other 1 lo. $ 6,774 $ 6,774 Preprocurement Screening Data IAW CDRL, PRS, Seq. No. 0002 0004AD Provisioning Technical 1 lo. $ 6,774 $ 6,774 Documentation, Long Lead Time Items List (LLTIL), IAW CDRL, PRS, Seq. No. 0003 0004AE Provisioning Technical 1 lo. $ 11,804 $ 11,804 Documentation, Provisioning Parts List, IAW CDRL, PRS, Seq. No.0004 0004AF Provisioning Parts List Index, 1 lo. $ 6,774 $ 6,774 IAW CDRL, PRS, Seq. No. 0005 Page 6 of 6 N68335-97-D-0060/0001 0004AG Statement of Prior Submission, 1 lo. $ 6,307 $ 6,307 IAW CDRL, PRS, Seq. No. 0006 0004AH Provisioning Technical 1 lo. $ 24,021 $ 24,021 Documentation, Design Change Notice (DCN), IAW CDRL, PRS, Seq. No. 0007 0004AJ Provisioning Technical 1 lo. $ 13,091 $ 13,091 Documentation, Interim Support Items List, IAW CDRL, PRS, Seq. No. 0008 0004AK Preservation and Packing Data, 1 lo. $ 11,337 $ 11,337 IAW CDRL, PRS, Seq. No. 0009 TOTAL DELIVERY ORDER: $949,324.00 SECTION D - Packing, packaging and marking shall be in accordance with best commercial practices to ensure safe delivery at destination, in accordance with clause D.10 of the basic contract. SECTION F - Delivery of the specified quantities shall be in accordance with Clause F.1 of the contract, entitled "Time of Delivery". Delivery of data item requirements shall be in accordance with the instructions provided on the DD Form 1423, Exhibits "A", "D", "E", and "T" of the contract. SECTION G - ACCOUNTING AND APPROPRIATION DATA: ACRN:AA 1771506.47C2 031 CCA54 0 068342 2B 000000 712000004030 $949,324.00 Direct Cite -- N000I997PDA3AGA; Doc. ID -- AOB; EE - 490; BLI - 038 NOTE: This order constitutes fulfillment of the minimum order requirements of the contract. EX-27 2 FDS --
5 1,000 12-MOS MAR-31-1998 APR-01-1997 MAR-31-1998 585 0 390 (16) 383 1,445 667 (587) 1,941 581 0 0 0 209 851 1,941 3,959 3,959 1,560 1,560 1,812 0 (69) 519 59 578 0 0 0 578 .28 .28
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