-----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, K7n4PRv5j6eRDkjo7Y/x5wu77PSL77eHaWwEi1R7ShVTPIFMIa0D7CoNoxwrZmdf tXY7okl9EemNrxQXzDhmwQ== 0000891092-98-000277.txt : 19980806 0000891092-98-000277.hdr.sgml : 19980806 ACCESSION NUMBER: 0000891092-98-000277 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980805 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEL INSTRUMENT ELECTRONICS CORP CENTRAL INDEX KEY: 0000096885 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS & ACCESSORIES [3670] IRS NUMBER: 221441806 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-18978 FILM NUMBER: 98677491 BUSINESS ADDRESS: STREET 1: 728 GARDEN ST CITY: CARLSTADT STATE: NJ ZIP: 07072 BUSINESS PHONE: 2019331600 MAIL ADDRESS: STREET 1: 728 GARDEN ST CITY: CARLSTADT STATE: NJ ZIP: 07072 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 33-18978 TEL-INSTRUMENT ELECTRONICS CORP. (Exact name of the Registrant as specified in Charter) New Jersey 22-1441806 (State of Incorporation) (I.R.S. Employer ID Number) 728 Garden Street, Carlstadt, New Jersey 07072 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone No. including Area Code: 201-933-1600 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ____ Indicate the number of shares outstanding of the issuer's common stock, as of the latest practical date: 2,094,735 shares of Common stock, $.10 par value as of July 22, 1998. TEL-INSTRUMENT ELECTRONICS CORPORATION TABLE OF CONTENTS PAGE ---- Item 1. Financial Statements (Unaudited): Condensed Comparative Balance Sheets June 30, 1998 and March 31, 1998 1 Condensed Comparative Statements of Operations - Three Months Ended June 30, 1998 and 1997 2 Condensed Comparative Statements of Cash Flows - Three Months Ended June 30, 1998 and 1997 3 Notes to Condensed Financial Statements 4-5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6-8 SIGNATURES 9 Item 1 - Financial Statements TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE BALANCE SHEETS June 30, 1998 and March 31, 1998 (Unaudited) (Audited) ASSETS June 30, March 31, 1998 1998 ---------- --------- Current assets: Cash $ 242,048 $ 585,281 Accounts receivable, net of allowance for doubtful 473,169 374,506 accounts of $16,064 at June 30, 1998 and March 31, 1998 Inventories 478,852 383,030 Prepaid expenses and other current assets 35,344 24,017 Deferred income tax benefit - current 78,300 78,300 ----------- ----------- Total current assets 1,307,713 1,445,134 Property, plant and equipment, net 81,688 79,321 Other assets 115,735 96,067 Deferred income tax benefit 375,135 320,619 ----------- ----------- Total assets 1,880,271 1,941,141 ----------- ----------- LIABILITES & STOCKHOLDERS EQUITY Current liabilities: Note payable - related party - current portion 50,000 50,000 Convertible subordinated notes - related party 15,000 15,000 Accrued payroll, vacation pay, deferred wages payroll taxes and interest on deferred wages 195,211 211,400 Accounts payable and accrued expenses 341,938 304,673 ----------- ----------- Total current liabilities 602,149 581,073 Notes payable - related party - non-current portion 300,000 300,000 ----------- ----------- Total liabilities 902,149 881,073 Stockholders' equity: Common stock 209,476 209,476 Additional paid-in capital 3,921,670 3,921,670 Accumulated deficit (3,153,024) (3,071,078) ----------- ----------- Total stockholders' equity 978,122 1,060,068 Total liabilities and stockholders' equity $ 1,880,271 $ 1,941,141 =========== =========== See accompanying notes to condensed financial statements 1 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended June 30, 1998 1997 ----------- ----------- Sales - government, net $ 382,740 $ 557,514 Sales - commercial, net 282,453 313,309 ----------- ----------- Total sales 665,193 870,823 Cost of sales 339,306 336,220 ----------- ----------- Gross margin 325,887 534,603 Operating expenses: Selling, general and administrative 214,524 218,930 Engineering, research and development 242,012 157,945 ----------- ----------- Total operating expenses 456,536 376,875 ----------- ----------- (Loss)/Income from operations (130,649) 157,728 Other income (expenses): Interest income 6,070 6,082 Interest expenses (11,883) (17,743) ----------- ----------- (Loss)/Income before taxes (136,462) 146,067 (Benefit)/Provision for income taxes (54,516) 58,339 ----------- ----------- Net (loss)/income (81,946) 87,728 =========== =========== Basic and diluted income (loss) per common share $ (0.04) $ 0.04 ----------- ----------- Dividends per share None None Weighted average shares outstanding Basic 2,094,735 2,030,948 Diluted 2,094,735 2,091,071 See accompanying notes to condensed financial statements 2 TEL-INSTRUMENT ELECTRONICS CORPORATION CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended June 30, 1998 1997 --------- -------- (Decrease) increase in cash: Cash flows from operating activities Net (loss) income $ (81,946) 87,728 Adjustments to reconcile net (loss) income to cash used in operating activities: Deferred income taxes (54,516) 58,339 Depreciation 10,909 6,614 Changes in assets and liabilities: (Increase) decrease in accounts receivable (98,663) (203,569) (Increase) decrease in inventories (95,822) (101,031) (Increase) decrease in prepaid expenses and other current assets (11,327) 423 (Increase) decrease in other assets (19,668) -- (Decrease) increase in accrued payroll, deferred wages and vacation pay (16,189) 5,314 (Decrease) increase in accounts payable and accrued expenses 37,265 (50,331) --------- --------- Net cash used in operations (329,957) (196,513) --------- --------- Cash flows from investing activities: Cash purchases of property, plant and equipment (13,276) (3,643) --------- --------- Net cash used in investing activities (13,276) (3,643) --------- --------- Net decrease in cash (343,233) (200,156) Cash at beginning of period 585,281 528,636 --------- --------- Cash at end of period $ 242,048 $ 328,480 ========= ========= Interest Paid $ 2,609 $ 7,536 ========= ========= See accompanying notes to condensed financial statements 3 TEL-INSTRUMENT ELECTRONICS CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS Note 1 Basis of Presentation In the opinion of management, the accompanying unaudited condensed financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position of Tel-Instrument Electronics Corp. as of June 30, 1998, the results of operations for the three months ended June 30, 1998 and June 30, 1997, and statements of cash flows for the three months ended June 30, 1998 and June 30, 1997. These results are not necessarily indicative of the results to be expected for the full year. The financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include disclosures normally made in an Annual Report on Form 10-K. The March 31, 1998 results included herein have been derived from the audited financial statements included in the Company's annual report on Form 10-K. Accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998. Note 2 Inventories Inventories consist of: June 30, March 31. 1998 1998 -------- --------- Purchased parts $265,382 $253,616 Work-in-process 249,090 165,034 Less: Reserve for obsolescense (35,620) (35,620) -------- -------- $478,852 $383,030 ======== ======== Note 3 Income Taxes The Company, in accordance with FASB 109, has recognized a deferred income tax benefit based upon the expected utilization of net operating loss carryforwards as the Company believes that it is more likely than not that it will realize a portion of its operating losses before they expire. For the three months ended June 30, 1998, the Company recorded an additional deferred income tax of $54,516, which represents the effective federal and state tax rate on the Company's net loss before taxes of $136,462. The Company has no tax liability nor will it receive a refund for this amount. The $54,516 increased the Company's deferred income tax benefit by the same amount in the accompanying balance sheet. The Company expects to utilize this deferred income tax benefit in the future for tax reporting purposes. Note 4 Reclassifications Certain reclassifications have been made to the fiscal year 1998 financial statements to be consistent with the fiscal year 1999 presentation. 4 TEL-INSTRUMENT ELECTRONICS CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued) Note 5 Earnings Per Share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 128 "Earnings Per Share" (SFAS 128). SFAS 128 supersedes 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 relating to both interim and annual periods ending after December 15, 1997. Basic income (loss) per share is based on net income (loss) for the relevant period, divided by the weighted average number of common shares outstanding during the period. Diluted loss per share for June 30, 1998 is based on net loss, divided by the weighted average number of common shares outstanding during the period. Common share equivalents, such as outstanding stock options, are not included in the calculation for the three months ended June 30, 1998 since the effect would be antidilutive. 5 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations A number of the statements made by the Company in this report may be regarded as "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, among others, statements concerning the Company's outlook, pricing trends and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. All predictions as to future results contain a measure of uncertainty and accordingly, actual results could differ materially. Among the factors that could cause a difference are: changes in the general economy; changes in demand for the Company's products or in the cost and availability if its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances. A number of these factors are discussed in the Company's filings with the Securities and Exchange Commission. Overview The Company continues to invest heavily in engineering, research, and development as expenditures increased by 53% for the first three months of the current fiscal year as compared to the first three months in the prior fiscal year. Engineering, research, and development expenditures continue to be primarily devoted to the finalization of the design of the T-47M IFF test set for the U.S. Navy. In April 1998, the Company completed its second design review with the U.S. Navy without any major technical issues requiring resolution. If field evaluations are successful and the Navy exercises production options, it is anticipated that shipments could begin early in the next fiscal year. This contract could be a source of significant revenues which could include options for up to 1300 units, which the U.S. Navy can exercise through calendar year 2001. However, there can be no assurance that the Navy will exercise its purchase options under this contact. In addition, the Company continues the development of the T-36M, under a U.S. Army contract, and the development of new products for other markets. Currently, the off shore commercial market is larger than the domestic market because many foreign airlines are upgrading to meet U.S. requirements. Part of the Company's strategy is to attempt to further penetrate the foreign market. As part of this strategy, 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 recently received from Muirhead Avionics a $382,900 contract for its T-48I IFF test set. As reported in the Form 10-K, during fiscal year 1998 the Company fulfilled its obligation and delivered the final units of the T-30CM ILS test set to the U.S. Air Force. As a result of completing this substantial contract, it was anticipated that the Company would have lower sales during the first half of fiscal year 1999. The Company continues to believe that this decline is temporary and new contracts can be obtained to increase sales. For example, in June and July 1998, the Company received a $382,900 order from 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION Overview (Continued) Muirhead Avionics (see above) and an order in the amount of $192,300 from a major air freight carrier. Both of these contracts are expected to be completed in the current fiscal year. The Company's backlog in mid-July is approximately $2,160,000, an increase of approximately 25% from March 31, 1998. It is expected that substantially all of this back log will be shipped in the current fiscal year. Sales For the three months ended June 30, 1998, net sales decreased $205,630 (23.6%) as compared to the three months ended June 30, 1997. While commercial sales declined by $30,856 (9.8%), government sales decreased $174,774 (31.3%). The decrease in government sales is primarily due to the fact that the T-30CM ILS contract with the U.S. Air Force was completed and shipments have not yet begun on the contract with the U.S. Navy. Sales for the first three months of the prior fiscal year attributed to the contract with the U.S. Air Force amounted to $220,794 or 25.4% of total sales. This decrease was partially offset by revenues from the U.S. Navy associated with documentation and testing to be provided under the U.S. Navy T-47M IFF test sets contract. In addition, the Company identified and corrected a technical issue with one of its products and, as a result, certain shipments have been delayed. Gross Margin Gross Margin decreased $208,716 (39.0%) for the three months ended June 30, 1998 as compared to the same three months in the prior fiscal year. The decrease in gross margin is attributed to lower volume and lower gross margin associated with the documentation and testing portion of the U.S. Navy T-47M contract. Operating Expenses Selling, general and administrative expenses decreased $4,406 (2.0%) for the three months ended June 30, 1998 as compared to the three months ended June 30, 1997. This decrease is, for the most part, attributed to lower selling commissions. Engineering, research and development expenses increased $84,067 (53.2%) primarily associated with the finalization of the design of the T-47M IFF test sets for the U.S. Navy. Income Taxes In accordance with SFAS 109, a provision for income taxes was recognized in the amount of $58,339 for the months ended June 30, 1997. For the three months ended June 30, 1998, the Company recorded a deferred income tax benefit of $54,516, which represents the effective federal and state tax rate on the Company's net loss before taxes of $136,642. (See Note 3 to Notes to Condensed Financial Statements). 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) Liquidity and Capital Resources At June 30, 1998 the Company had positive working capital of $705,564 as compared to $864,061 at March 31, 1998. For the three months ended June 30, 1998, cash used in operations was $329,957 as compared to $196,513 for the three months ended June 30, 1997. This reduction in available cash is primarily associated with the Company's loss from operations, increases in accounts receivable and inventories, and payment of deferred wages. These amounts were partially offset by an increase in accounts payable and accrued expenses. The Company continues to spend heavily in research and development. The Company expects these investments will finalize the design for the U.S. Navy contract and also introduce other new products which will increase sales, cash flow, and profits. However, there is no assurance that sales and profits will increase. Based upon the current backlog and available working capital, the Company believes that it has sufficient working capital to fund its plans for the next year. At present, the Company does not expect to incur significant long-term needs for capital outside of its normal operating activities. The Company has received a letter of interest for a credit line of $350,000 from a major bank. This arrangement has been approved by the Board of Directors and is expected to be finalized by August 1998. There was no significant impact on the Company's operations as a result of inflation for the three months ended June 30, 1998. These financial statements should be read in conjunction with the Company's Annual Report on Form 10-K to the Securities and Exchange Commission for the fiscal year ended March 31, 1998. New Accounting Pronouncements Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, was issued in June 1998 and is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. This statement establishes accounting and reporting standards for derivative instruments and hedging activities. The Company does not expect its implementation will have a material effect on the Company's financial statements as currently presented. 8 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEL-INSTRUMENT ELECTRONICS CORP. Date: By: /s/ Harold K. Fletcher ----------------------------- /s/ Harold K. Fletcher Chairman and President EX-27 2 FDS --
5 1,000 12-MOS MAR-31-1998 APR-01-1998 JUN-30-1998 242 0 489 66 479 1,308 82 11 1,880 602 0 0 0 209 769 1,880 665 665 339 796 457 0 12 (136) (55) (82) 0 0 0 (82) (.04) (.04)
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