New Jersey
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22-1441806
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(State of incorporation)
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(IRS Employer Identification Number)
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One Branca Road, East Rutherford, New Jersey
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07073
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(Address of principal executive offices)
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(Zip Code)
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Former Address: 728 Garden Street, Carlstadt, NJ 07072
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|||
Registrant's telephone number, including area code: (201) 933-1600
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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(Do not check if a smaller reporting company)
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PAGE
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||
Part I – Financial Information
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||
Item 1.
|
3
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3
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||
4
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||
5
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||
6
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||
Item 2.
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16
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Item 4.
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22
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Part II – Other Information
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||
Item 1.
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23
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Item 2.
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23
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Item 6.
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23
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24
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September 30, 2011
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March 31, 2011
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|||||||
(unaudited)
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||||||||
ASSETS
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||||||||
Current assets:
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||||||||
Cash and cash equivalents
|
$ | 932,289 | $ | 123,955 | ||||
Accounts receivable, net
|
1,455,363 | 2,585,619 | ||||||
Unbilled government receivables
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1,466,623 | 1,466,623 | ||||||
Inventories, net
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2,645,818 | 2,970,378 | ||||||
Prepaid expenses and other
|
121,608 | 70,970 | ||||||
Deferred debt expense
|
108,321 | 108,321 | ||||||
Deferred income tax asset
|
1,103,599 | 1,131,175 | ||||||
Total current assets
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7,833,621 | 8,457,041 | ||||||
Equipment and leasehold improvements, net
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420,134 | 330,694 | ||||||
Deferred debt expenses – long-term
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318,945 | 373,105 | ||||||
Deferred income tax asset – non-current
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1,461,664 | 1,461,664 | ||||||
Other assets
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62,670 | 35,235 | ||||||
Total assets
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$ | 10,097,034 | $ | 10,657,739 | ||||
LIABILITIES & STOCKHOLDERS’ EQUITY
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||||||||
Current liabilities:
|
||||||||
Current portion long-term debt
|
504,617 | 282,798 | ||||||
Capital lease obligations
|
10,445 | 15,685 | ||||||
Accounts payable
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437,241 | 1,598,679 | ||||||
Progress billings
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- | 424,202 | ||||||
Deferred revenues – current portion
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23,731 | 28,382 | ||||||
Accrued payroll, vacation pay and payroll taxes
|
419,109 | 445,738 | ||||||
Accrued expenses
|
1,900,369 | 1,287,034 | ||||||
Total current liabilities
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3,295,512 | 4,082,518 | ||||||
Subordinated notes payable-related parties
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250,000 | 250,000 | ||||||
Capital lease obligations – long-term
|
57,327 | |||||||
Deferred revenues
|
8,969 | 15,381 | ||||||
Warranty Liability
|
429,832 | 366,137 | ||||||
Long-term debt, net of debt discount
|
1,744,682 | 1,979,114 | ||||||
Total liabilities
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5,786,322 | 6,693,150 | ||||||
Commitments
|
||||||||
Stockholders' equity:
|
||||||||
Common stock, par value $.10 per share, 2,652,315 and
2,646,215 issued and outstanding as of September 30,
2011 and March 31, 2011, respectively
|
265,231 | 264,621 | ||||||
Additional paid-in capital
|
5,777,879 | 5,711,531 | ||||||
Accumulated deficit
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(1,732,398 | ) | (2,011,563 | ) | ||||
Total stockholders' equity
|
4,310,712 | 3,964,589 | ||||||
Total liabilities and stockholders' equity
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$ | 10,097,034 | $ | 10,657,739 |
Three Months Ended
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Six Months Ended
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|||||||||||||||
September 30, 2011
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September 30, 2010
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September 30, 2011
|
September 30, 2010
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|||||||||||||
Net sales
|
$ | 3,674,354 | $ | 3,055,933 | $ | 7,664,565 | $ | 5,511,213 | ||||||||
Cost of sales
|
2,191,127 | 1,586,698 | 4,319,707 | 2,959,598 | ||||||||||||
Gross margin
|
1,483,227 | 1,469,235 | 3,344,858 | 2,551,615 | ||||||||||||
Operating expenses:
|
||||||||||||||||
Selling, general and administrative
|
667,874 | 692,631 | 1,466,696 | 1,450,675 | ||||||||||||
Engineering, research and development
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677,933 | 861,090 | 1,526,971 | 1,618,436 | ||||||||||||
Total operating expenses
|
1,345,807 | 1,553,721 | 2,993,667 | 3,069,111 | ||||||||||||
Income (loss) from operations
|
137,420 | (84,486 | ) | 351,191 | (517,496 | ) | ||||||||||
Other income (expense):
|
||||||||||||||||
Amortization of debt discount
|
(13,396 | ) | (8,745 | ) | (26,791 | ) | (14,514 | ) | ||||||||
Amortization of debt expense
|
(27,080 | ) | (6,018 | ) | (54,160 | ) | (6,018 | ) | ||||||||
Change in fair value of common stock Warrants
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104,891 | (63,695 | ) | |||||||||||||
Gain on sale of capital asset
|
- | - | - | 3,600 | ||||||||||||
Proceeds from life insurance policy
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- | - | 300,029 | - | ||||||||||||
Interest income
|
101 | 101 | 194 | 148 | ||||||||||||
Interest expense
|
(96,416 | ) | (47,194 | ) | (199,110 | ) | (70,699 | ) | ||||||||
Income (loss) before income taxes
|
105,520 | (146,342 | ) | 307,658 | (604,979 | ) | ||||||||||
Income tax expense (benefit)
|
2,204 | (58,348 | ) | 28,493 | (241,573 | ) | ||||||||||
Net income (loss)
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103,316 | (87,994 | ) | 279,165 | (363,406 | ) | ||||||||||
Basic income (loss) per common share
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$ | 0.04 | $ | (0.03 | ) | $ | 0.11 | $ | (0.14 | ) | ||||||
Diluted income (loss) per common share
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$ | 0.04 | $ | (0.03 | ) | $ | 0.10 | $ | (0.14 | ) | ||||||
Weighted average shares outstanding:
|
||||||||||||||||
Basic
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2,650,063 | 2,622,415 | 2,648,608 | 2,619,038 | ||||||||||||
Diluted
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2,736,993 | 2,622,415 | 2,733,850 | 2,619,038 |
Six Months ended
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||||||||
Sept 30,2011
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Sept 30, 2010
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|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$ | 279,165 | $ | (363,406 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
|
||||||||
Deferred income taxes
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27,576 | (244,288 | ) | |||||
Depreciation and amortization
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112,265 | 109,447 | ||||||
Provision for inventory obsolescence
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(260,000 | ) | - | |||||
Gain on sale of asset
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- | (3,600 | ) | |||||
Amortization of debt discount
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26,791 | - | ||||||
Increase in cash surrender value of life insurance
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2,011 | - | ||||||
Gain on proceeds from life insurance policy
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(300,029 | ) | - | |||||
Change in fair value of common stock warrant
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63,695 | - | ||||||
Non-cash stock-based compensation
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46,494 | 49,028 | ||||||
Changes in assets and liabilities:
|
||||||||
Decrease (increase) in accounts receivable
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1,130,256 | (1,092,481 | ) | |||||
Decrease (increase) in inventories
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584,560 | (1,169,537 | ) | |||||
(Increase) decrease in prepaid expenses & other
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(50,638 | ) | 4,776 | |||||
(Increase) decrease in other assets
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(42,100 | ) | 8,302 | |||||
(Decrease) increase in accounts payable
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(1,161,438 | ) | 788,491 | |||||
(Decrease) increase in accrued payroll, vacation pay & withholdings
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(26,629 | ) | 145,740 | |||||
Decrease in deferred revenues
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(11,063 | ) | (26,412 | ) | ||||
(Decrease) increase in progress billings
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(424,202 | ) | 446,090 | |||||
Increase in accrued expenses
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613,335 | 321,269 | ||||||
Net cash provided by (used in) operating activities
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610,049 | (1,026,581 | ) | |||||
Cash flows from investing activities:
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||||||||
Proceeds from the sale of capital asset
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- | 3,600 | ||||||
Purchases of equipment
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(79,772 | ) | (93,890 | ) | ||||
Net cash used in investing activities
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(79,772 | ) | (90,290 | ) | ||||
Cash flows from financing activities:
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||||||||
Proceeds from the issuance of common stock
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- | 50,000 | ||||||
Proceeds from the exercise of stock options
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20,464 | 9,925 | ||||||
Proceeds from long-term debt
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- | 2,500,000 | ||||||
Expenses associated with long-term debt
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- | (527,796 | ) | |||||
Repayment of long-term debt
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(39,405 | ) | - | |||||
Repayment of capitalized lease obligations
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(15,685 | ) | - | |||||
Proceeds from borrowings from line of credit
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- | 400,000 | ||||||
Repayment of line of credit
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- | (1,000,000 | ) | |||||
Proceeds from life insurance policy
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312,683 | - | ||||||
Net cash provided by financing activities
|
278,057 | 1,432,129 | ||||||
Net increase in cash and cash equivalents
|
808,334 | 315,258 | ||||||
Cash and cash equivalents at beginning of period
|
123,955 | 173,048 | ||||||
Cash and cash equivalents at end of period
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$ | 932,289 | $ | 488,306 | ||||
Taxes paid
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$ | - | $ | - | ||||
Interest paid
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$ | 173,882 | $ | 49,221 | ||||
Capitalized lease obligations
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$ | 67,772 | $ | - |
September 30, 2011
|
March 31, 2011
|
|||||||
Government
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$ | 1,238,856 | $ | 2,344,438 | ||||
Commercial
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253,177 | 277,851 | ||||||
Less: Allowance for doubtful accounts
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(36,670 | ) | (36,670 | ) | ||||
$ | 1,455,363 | $ | 2,585,619 |
September 30, 2011
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March 31, 2011
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|||||||
Purchased parts
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$ | 2,024,014 | $ | 2,119,957 | ||||
Work-in-process
|
766,569 | 1,184,812 | ||||||
Finished goods
|
40,235 | 110,609 | ||||||
Less: Inventory reserve
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(185,000 | )) | (445,000 | )) | ||||
$ | 2,645,818 | $ | 2,970,378 |
Three Months Ended
|
Three Months Ended
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|||||||
September 30,
2011
|
September 30,
2010
|
|||||||
Basic net income (loss) per share computation:
|
||||||||
Net income (loss) attributable to common stockholders
|
$ | 103,316 | $ | (87,994 | ) | |||
Weighted-average common shares outstanding
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$ | 2,650,063 | 2,622,415 | |||||
Basic net income (loss) per share attributable to common stockholders
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$ | 0.04 | $ | (0.03 | ) | |||
Diluted net income (loss) per share computation
|
||||||||
Net income (loss) attributable to common stockholders
|
$ | 103,316 | $ | (87,994 | ) | |||
Weighted-average common shares outstanding
|
2,650,063 | 2,622,415 | ||||||
Incremental shares attributable to the assumed exercise of
outstanding stock options
|
86,930 | - | ||||||
Total adjusted weighted-average shares
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2,736,993 | 2,622,415 | ||||||
Diluted net income (loss) per share attributable to common stockholders
|
$ | 0.04 | $ | (0.03 | ) |
Six Months Ended
|
Six Months Ended
|
|||||||
September 30,
2011
|
September 30,
2010
|
|||||||
Basic net income (loss) per share computation:
|
||||||||
Net income (loss) attributable to common stockholders
|
$ | 279,165 | $ | (363,406 | ) | |||
Weighted-average common shares outstanding
|
2,648,608 | 2,619,038 | ||||||
Basic net income (loss) per share attributable to common stockholders
|
$ | 0.11 | $ | (0.14 | ) | |||
Diluted net income (loss) per share computation
|
||||||||
Net income (loss) attributable to common stockholders
|
$ | 279,165 | $ | (363,406 | ) | |||
Weighted-average common shares outstanding
|
2,648,608 | 2,615,038 | ||||||
Incremental shares attributable to the assumed exercise of
outstanding stock options
|
85,242 | - | ||||||
Total adjusted weighted-average shares
|
2,733,850 | 2,615,038 | ||||||
Diluted net income (loss) per share attributable to common stockholders
|
$ | 0.10 | $ | (0.14 | ) |
Three Months Ended
September 30, 2011
|
Avionics
Gov’t
|
Avionics
Comm’l.
|
Avionics
Total
|
Corporate
Items
|
Total
|
|||||||||||||||
Net sales
|
3,161,291 | 513,063 | 3,674,354 | - | 3,674,354 | |||||||||||||||
Cost of Sales
|
1,826,234 | 364,893 | 2,191,127 | - | 2,191,127 | |||||||||||||||
Gross Margin
|
1, 335,057 | 148,170 | 1,483,227 | - | 1,483,227 | |||||||||||||||
Engineering, research, and development
|
677,933 | 677,933 | ||||||||||||||||||
Selling, general, and admin.
|
326,027 | 341,847 | 667,874 | |||||||||||||||||
Amortization of debt discount
|
- | 13,396 | 13,396 | |||||||||||||||||
Amortization of debt expense
|
- | 27,080 | 27,080 | |||||||||||||||||
Change in fair value of common stock warrants
|
- | (104,891 | ) | (104,891 | ) | |||||||||||||||
Interest (income) expense, net
|
- | 96,315 | 96,315 | |||||||||||||||||
Total expenses
|
1,003,960 | 373,747 | 1,377,707 | |||||||||||||||||
Income (loss) before income taxes
|
$ | 479,267 | $ | (373,747 | ) | $ | 105,520 |
Three Months Ended
September 30, 2010
|
Avionics
Gov’t
|
Avionics
Comm’l.
|
Avionics
Total
|
Corporate
Items
|
Total
|
|||||||||||||||
Net sales
|
$ | 2,397,847 | $ | 658,086 | $ | 3,055,933 | $ | - | $ | 3,055,933 | ||||||||||
Cost of Sales
|
1,179,606
|
407,092
|
1,586,698 | - | 1,586,698 | |||||||||||||||
Gross Margin
|
1,218,241 | 250,994 | 1,469,235 | - | 1,469,235 | |||||||||||||||
Engineering, research, and development
|
861,090 | - | 861,090 | |||||||||||||||||
Selling, general, and admin.
|
347,704 | 344,927 | 692,631 | |||||||||||||||||
Amortization of debt discount
|
8,745 | 8,745 | ||||||||||||||||||
Amortization of debt expense
|
6,018 | 6,018 | ||||||||||||||||||
Interest (income) expense, net
|
- | 47,093 | 47,093 | |||||||||||||||||
Total expenses
|
1,208,794 | 406,783 | 1,615,577 | |||||||||||||||||
Income (loss) before income taxes
|
$ | 260,441 | $ | (406,783 | ) | $ | (146,342 | ) |
Six Months Ended
September 30, 2011
|
Avionics
Gov’t
|
Avionics
Comm’l.
|
Avionics
Total
|
Corporate
Items
|
Total
|
|||||||||||||||
Net sales
|
6,306,883 | 1,357,682 | 7,664,565 | - | 7,664,565 | |||||||||||||||
Cost of Sales
|
3,501,047 | 818,660 | 4,319,707 | - | 4,319,707 | |||||||||||||||
Gross Margin
|
2,805,836 | 539,022 | 3,344,858 | - | 3,344,858 | |||||||||||||||
Engineering, research, and development
|
1,526,971 | 1,526,971 | ||||||||||||||||||
Selling, general, and admin.
|
687,843 | 778,853 | 1,466,696 | |||||||||||||||||
Amortization of debt discount
|
- | 26,791 | 26,791 | |||||||||||||||||
Amortization of debt expense
|
- | 54,160 | 54,160 | |||||||||||||||||
Change in fair value of common stock warrants
|
- | 63,695 | 63,695 | |||||||||||||||||
Proceeds from life insurance
|
- | (300,029 | ) | (300,029 | ) | |||||||||||||||
Interest (income) expense, net
|
- | 198,916 | 198,916 | |||||||||||||||||
Total expenses
|
2,214,814 | 822,386 | 3,037,200 | |||||||||||||||||
Income (loss) before income taxes
|
$ | 1,130,044 | $ | (822,386 | ) | $ | 307,658 |
Six Months Ended
September 30, 2010
|
Avionics
Gov’t
|
Avionics
Comm’l.
|
Avionics
Total
|
Corporate
Items
|
Total
|
|||||||||||||||
Net sales
|
$ | 4,246,320 | $ | 1,264,893 | $ | 5,511,213 | $ | - | $ | 5,511,213 | ||||||||||
Cost of Sales
|
_2,120,278
|
_839,320
|
2,959,598 | - | 2,959,598 | |||||||||||||||
Gross Margin
|
2,126,042 | 425,573 | 2,551,615 | - | 2,551,615 | |||||||||||||||
Engineering, research, and
Development
|
1,618,436 | - | 1,618,436 | |||||||||||||||||
Selling, general, and admin.
|
695,799 | $ | 754,876 | 1,450,675 | ||||||||||||||||
Gain on sale of asset
|
- | (3,600 | ) | (3,600 | ) | |||||||||||||||
Amortization of debt discount
|
14,514 | 14,514 | ||||||||||||||||||
Amortization of debt expense
|
6,018 | 6,018 | ||||||||||||||||||
Interest (income) expense, net
|
- | 70,551 | 70,551 | |||||||||||||||||
Total expenses
|
2,314,235 | 842,349 | 3,156,594 | |||||||||||||||||
Income (loss) before income taxes
|
$ | 237,380 | $ | (842,349 | ) | $ | (604,979 | ) |
September 30, 2011
|
Level I
|
Level II
|
Level III
|
Total
|
||||||||||||
Total Assets
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
|
$ |
-
|
||||
|
||||||||||||||||
Warrant liability
|
-
|
-
|
429,832
|
429,832
|
||||||||||||
Total Liabilities
|
$
|
-
|
$
|
-
|
$
|
429,832
|
$
|
429,832
|
March 31, 2011
|
Level I
|
Level II
|
Level III
|
Total
|
||||||||||||
Total Assets
|
$ | - | $ | - | $ | - | $ | - | ||||||||
|
||||||||||||||||
Warrant liability
|
- | - | 366,137 | 366,137 | ||||||||||||
Total Liabilities
|
$ | - | $ | - | $ | 366,137 | $ | 366,137 |
At Inception
|
March 31, 2011
|
September 30, 2011
|
||||||||||
Risk free interest rate
|
2.81 | % | 3.47 | % | 1.92 | % | ||||||
Expected life in years
|
9 | 8.45 | 7.95 | |||||||||
Expected volatility
|
28.51 | % | 29.11 | % | 41.21 | % | ||||||
Fair market value per share
|
$ | 6.70 | ) | $ | 7.63 | ) | $ | 7.99 | ) | |||
Exercise price
|
$ | 6.70 | $ | 6.70 | $ | 6.70 | ||||||
Warrant Liability
|
$ | 281,656 | $ | 366,137 | $ | 429,832 |
31.1 Certification by CEO pursuant to Rule 13(a) – 14(a) under the Securities Exchange Act. | |
31.2 Certification by CFO pursuant to Rule 13(a) – 14(a) under the Securities Exchange Act. | |
32.1 Certification by CEO and CFO pursuant to 18 U.S.C. Section 1350 and Rule 13(a) – 14(b) under the Securities Exchange Act. | |
**101.INS XBRL Instance Document | |
**101.SCH XBRL Taxonomy Extension Schema | |
**101.CAL XBRL Taxonomy Extension Calculation Linkbase | |
**101.DEF XBRL Taxonomy Extension Definition Linkbase | |
**101.LAB XBRL Taxonomy Extension Label Linkbase | |
**101.PRE XBRL Taxonomy Extension Presentation Linkbase |
TEL-INSTRUMENT ELECTRONICS CORP. | |||
Date: November 14, 2011
|
By:
|
/s/ Jeffrey C. O’Hara | |
Jeffrey C. O’Hara | |||
CEO |
Date: November 14, 2011
|
By:
|
/s/ Joseph P. Macaluso | |
Joseph P. Macaluso | |||
Principal Accounting Officer |
1.
|
I have reviewed this quarterly report on Form 10-Q of Tel-Instrument Electronics Corp;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a) - 15(f) and 15(d)-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation, and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Tel-Instrument Electronics Corp;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13(a) - 15(f) and 15(d)-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation, and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
|
c)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
d)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $) | Sep. 30, 2011 | Mar. 31, 2011 |
---|---|---|
Common stock, par value (in Dollars per share) | $ 0.10 | $ 0.10 |
Common stock, shares issued | 2,652,315 | 2,646,215 |
Common stock, shares outstanding | 2,652,315 | 2,646,215 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Net sales | $ 3,674,354 | $ 3,055,933 | $ 7,664,565 | $ 5,511,213 |
Cost of sales | 2,191,127 | 1,586,698 | 4,319,707 | 2,959,598 |
Gross margin | 1,483,227 | 1,469,235 | 3,344,858 | 2,551,615 |
Operating expenses: | ||||
Selling, general and administrative | 667,874 | 692,631 | 1,466,696 | 1,450,675 |
Engineering, research and development | 677,933 | 861,090 | 1,526,971 | 1,618,436 |
Total operating expenses | 1,345,807 | 1,553,721 | 2,993,667 | 3,069,111 |
Income (loss) from operations | 137,420 | (84,486) | 351,191 | (517,496) |
Other income (expense): | ||||
Amortization of debt discount | (13,396) | (8,745) | (26,791) | (14,514) |
Amortization of debt expense | (27,080) | (6,018) | (54,160) | (6,018) |
Change in fair value of common stock Warrants | 104,891 | (63,695) | ||
Gain on sale of capital asset | 3,600 | |||
Proceeds from life insurance policy | 300,029 | |||
Interest income | 101 | 101 | 194 | 148 |
Interest expense | (96,416) | (47,194) | (199,110) | (70,699) |
Income (loss) before income taxes | 105,520 | (146,342) | 307,658 | (604,979) |
Income tax expense (benefit) | 2,204 | (58,348) | 28,493 | (241,573) |
Net income (loss) | $ 103,316 | $ (87,994) | $ 279,165 | $ (363,406) |
Basic income (loss) per common share (in Dollars per share) | $ 0.04 | $ (0.03) | $ 0.11 | $ (0.14) |
Diluted income (loss) per common share (in Dollars per share) | $ 0.04 | $ (0.03) | $ 0.10 | $ (0.14) |
Weighted average shares outstanding: | ||||
Basic (in Shares) | 2,650,063 | 2,622,415 | 2,648,608 | 2,619,038 |
Diluted (in Shares) | 2,736,993 | 2,622,415 | 2,733,850 | 2,619,038 |
Document And Entity Information | 6 Months Ended | |
---|---|---|
Sep. 30, 2010 | Nov. 10, 2010 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | TEL INSTRUMENT ELECTRONICS CORP | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --03-31 | |
Entity Common Stock, Shares Outstanding | 2,652,315 | |
Amendment Flag | false | |
Entity Central Index Key | 0000096885 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Filer Category | Smaller Reporting Company | |
Entity Well-known Seasoned Issuer | No | |
Document Period End Date | Sep. 30, 2010 | |
Document Fiscal Year Focus | 2012 | |
Document Fiscal Period Focus | Q2 |
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Note 7 Stock Options | 6 Months Ended |
---|---|
Sep. 30, 2010 | |
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] |
Note
7
Stock
Options
The
Company adopted FASB ASC 718, utilizing the modified
prospective method. FASB ASC 718 requires the measurement of
stock-based compensation based on the fair value of the award
on the date of grant. Under the modified prospective method,
the provisions of ASC 718 apply to all awards granted after
the date of adoption. The Company recognizes compensation
cost on awards on a straight-line basis over the vesting
period, typically four years. As a result of adopting ASC
718, operations were charged $22,263 and $46,494 for three
and six months ended September 30, 2011 respectively, as
compared to $25,363 and $49,028 for the three and six months
ended September 30, 2010, respectively. The Company estimates
the fair value of each option using the Black Scholes
option-pricing model with the following weighted-average
assumptions: expected dividend yield of 0.0%, risk-free
interest rate of 2.09% to 2.74%, volatility at 38.71% to
43.06% of the Company’s stock, and an expected life of
5 years for options granted for the six months ended
September 30, 2010. The Company did not grant any stock
options for the six months ended September 30,
2011. The Company estimates forfeiture rate based
on historical data. Based on an analysis of historical
information, the Company has applied a forfeiture rate of
8%.
|
Note 12 Litigation | 6 Months Ended |
---|---|
Sep. 30, 2010 | |
Legal Matters and Contingencies [Text Block] |
Note
12
Litigation
On
March 24, 2009, Aeroflex Wichita, Inc.
(“Aeroflex”) filed a petition against the Company
and two of its employees in the District Court, Sedgwick
County, Kansas, Case No. 09 CV 1141 (the “Aeroflex
Action”), alleging that the Company and its two
employees misappropriated Aeroflex’s proprietary
technology in connection with the Company winning a
substantial contract from the U.S. Army (the
“Award”), to develop new Mode-5 radar test sets
and kits to upgrade the existing TS-4530 radar test sets to
Mode 5. Aeroflex’s petition alleges that in connection
with the award, the Company and its named employees
misappropriated Aeroflex’s trade secrets; tortiously
interfered with its business relationship; conspired to harm
Aeroflex and tortiously interfered with its contract and
seeks injunctive relief and damages. The crux of all the
claims in the Aeroflex Action is that the Company
misappropriated and used Aeroflex proprietary technology in
winning the Award.
In
February 2009, subsequent to the Award to the Company,
Aeroflex filed a protest of the Award with the Government
Accounting Office (“GAO”). In its protest,
Aeroflex alleged, inter alia, that the Company used
Aeroflex’s proprietary technology in order to win the
Award, the same material allegations as were later alleged in
the Aeroflex Action. On or about March 17, 2009, the Army
Contracts Attorney and the Army Contracting Officer each
filed a statement with the GAO, expressly rejecting
Aeroflex’s allegations that the Company used or
infringed Aeroflex proprietary technology in winning the
Award, and concluding that the Company had used only its own
proprietary technology. On April 6, 2009, Aeroflex withdrew
its protest.
In
December 2009, the Kansas court dismissed the Aeroflex civil
suit against the Company. While this decision was based on
jurisdictional issues, the ruling did note that Aeroflex,
after discovery proceedings, did not provide any evidence
that Tel or its employees misappropriated Aeroflex trade
secrets. The Kansas ruling also referenced the Army’s
findings, in its response to the General Accountability
Office (“GAO”), which rejected Aeroflex’s
claims and determined that Tel used its own proprietary
technology on this program. Aeroflex has elected to appeal
this Kansas decision and has agreed to stay any action
against the two former employees until a decision is reached.
The appeal was argued in the Kansas Supreme Court in January
2011 and the Company does not anticipate a decision for some
time. Tel remains confident as to the outcome of this appeal
and any potential follow-on litigation. An estimate of
possible loss, if any cannot be made in view of, among other
things, the Army findings and the decision of the Kansas
Court, discussed above, as well as the fact that there has
not yet been full discovery of the merits of the claims and
defenses.
|
Note 3 Accounts Receivable, net | 6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2010 | ||||||||||||||||||||||||||||||||||||||||||||||
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] |
Note
3 Accounts
Receivable, net
The
following table sets forth the components of accounts
receivable:
|
Note 9 Income Taxes | 6 Months Ended |
---|---|
Sep. 30, 2010 | |
Income Tax Disclosure [Text Block] |
Note
9 Income
Taxes
The
Company adopted FASB ASC 740-10, Accounting for Uncertainty
in Income Taxes, effective April 1, 2007. ASC 740-10
prescribes a recognition threshold and measurement attribute
for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return.
The Company has analyzed filing positions in all of the
federal and state jurisdictions where it is required to file
income tax returns, as well as all open tax years in these
jurisdictions. The Company does not
have any unrecognized tax benefits.
The
tax effect of temporary differences, primarily net operating
loss carryforwards, asset reserves and accrued liabilities,
gave rise to the Company's deferred tax asset in the
accompanying September 30, 2011 and March 31, 2011
consolidated balance sheets. Deferred income taxes are
recognized for the tax consequence of such temporary
differences at the enacted tax rate expected to be in effect
when the differences reverse. (See Critical Accounting
Policies – Income Taxes)
|
Note 10 Fair Value Measurements | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] |
Note
10
Fair
Value Measurements
FASB
ASC 820-10, Fair Value Measurements and Disclosures defines
fair value, establishes a framework for measuring fair value
under generally accepted accounting principles and expands
disclosures about fair value measurements
As
defined in ASC 820-10, fair value is the price that would be
received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date (exit price). The Company utilizes market
data or assumptions that market participants would use in
pricing the asset or liability, including assumptions about
risk and the risks inherent in the inputs to the valuation
technique. These inputs can be readily observable, market
corroborated, or generally unobservable. The Company
classifies fair value balances based on the observability of
those inputs. ASC 820-10 establishes a fair value hierarchy
that prioritizes the inputs used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities
(level 1 measurement) and the lowest priority to unobservable
inputs (level 3 measurement).
The
three levels of the fair value hierarchy defined by ASC
820-10 are as follows:
Level
1 – Quoted prices are available in active markets for
identical assets or liabilities as of the reporting date.
Active markets are those in which transactions for the asset
or liability occur in sufficient frequency and volume to
provide pricing information on an ongoing basis. Level 1
primarily consists of financial instruments such as
exchange-traded derivatives, marketable securities and listed
equities.
Level
2 – Pricing inputs are other than quoted prices in
active markets included in level 1, which are either directly
or indirectly observable as of the reported date. Level 2
includes those financial instruments that are valued using
models or other valuation methodologies. These models are
primarily industry-standard models that consider various
assumptions, including quoted forward prices for commodities,
time value, volatility factors, and current market and
contractual prices for the underlying instruments, as well as
other relevant economic measures. Substantially all of these
assumptions are observable in the marketplace throughout the
full term of the instrument, can be derived from observable
data or are supported by observable levels at which
transactions are executed in the marketplace. Instruments in
this category generally include non-exchange-traded
derivatives such as commodity swaps, interest rate swaps,
options and collars.
Level
3 – Pricing inputs include significant inputs that are
generally less observable from objective sources. These
inputs may be used with internally developed methodologies
that result in management’s best estimate of fair
value.
The
valuation techniques that may be used to measure fair value
are as follows:
Market
approach — Uses prices and other relevant information
generated by market transactions involving identical or
comparable assets or liabilities
Income approach — Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about those future amounts, including present value techniques, option-pricing models and excess earnings method
Cost
approach — Based on the amount that currently would be
required to replace the service capacity of an asset
(replacement cost)
The
carrying value of the Company’s borrowings is a
reasonable estimate of its fair value as borrowings under the
Company’s credit facility reflect currently available
terms and conditions for similar debt.
The
following table sets forth by level within the fair value
hierarchy the Company’s financial assets and
liabilities that were accounted for at fair value as of
September 30, 2011 and March 31, 2011. As required by FASB
ASC 820-10, financial assets and liabilities are classified
in their entirety based on the lowest level of input that is
significant to the fair value measurement.
The
Company’s assessment of the significance of a
particular input to the fair value measurement requires
judgment, and may affect the valuation of fair value assets
and liabilities and their placement within the fair value
hierarchy levels.
The Company adopted the guidance of ASC 815, which requires that we mark the value of our warrant liability (see Note 6) to market and recognize the change in valuation in our statement of operations each reporting period. Determining the warrant liability to be recorded requires us to develop estimates to be used in calculating the fair value of the warrant. The fair value of the warrant is calculated using the Black-Scholes valuation model.
The
common stock warrant was not issued with the intent of
effectively hedging any future cash flow, fair value of any
asset, liability or any net investment in a foreign
corporation. The warrants do not qualify for hedge
accounting, and, as such, all changes in the fair value of
these warrants are recognized as other income/expense in the
statement of operations until such time as the warrants are
exercised or expire. Since these common stock warrants do not
trade in an active securities market, the Company recognizes
a warrant liability and estimates the fair value of these
warrants using the Black-Scholes options model using the
following assumptions:
The
volatility calculation was based on the 21 months for the
Company’s stock price prior to the measurement date,
utilizing January 1, 2010 as the initial period, as the
Company believes that this is the best indicator of future
performance, and the source of the risk free interest rate is
the US Treasury rate related to 10 year notes. The exercise
price is per the agreement, the fair market value is the
closing price of our stock on the date of measurement, and
the expected life is based on management’s current
estimate of when the warrants will be exercised. All inputs
to the Black-Scholes options model are evaluated each
reporting period.
|
Note 8 Segment Information | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting Disclosure [Text Block] |
Note
8 Segment
Information
In
accordance with FASB ASC 280, “Disclosures about
Segments of an Enterprise and related information”, the
Company determined it has two reportable segments - avionics
government and avionics commercial. There are no
inter-segment revenues.
The
Company is organized primarily on the basis of its avionics
products. The avionics government segment consists
primarily of the design, manufacture, and sale of test
equipment to the U.S. and foreign governments and militaries
either directly or through distributors. The
avionics commercial segment consists of design, manufacture,
and sale of test equipment to domestic and foreign airlines,
directly or through commercial distributors, and to general
aviation repair and maintenance shops. The Company develops
and designs test equipment for the avionics industry and as
such, the Company’s products and designs cross
segments.
The
table below presents information about reportable segments
within the avionics business for the periods ending September
30, 2011 and 2010:
|
Note 1 Basis of Presentation | 6 Months Ended |
---|---|
Sep. 30, 2010 | |
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] |
Note
1 Basis of
Presentation
In
the opinion of management, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments necessary to present fairly the financial
position of Tel-Instrument Electronics Corp. as of September
30, 2011, the results of operations for the three and six
months ended September 30, 2011 and September 30, 2010, and
statements of cash flows for the six months ended September
30, 2011 and September 30, 2010. 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, 2011
balance sheet included herein was derived from the audited
financial statements included in the Company’s annual
report on Form 10-K as of that date. 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, 2011.
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Note 4 Inventories, net | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Inventory Disclosure [Text Block] |
Note
4
Inventories,
net
Inventories
consist of:
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Note 5 Income (Loss) Per Share | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Earnings Per Share [Text Block] |
Note
5 Income
(Loss) Per Share
Financial
Accounting Standards Board (“FASB”) ASC 260
requires presentation of basic earnings per share ("basic
EPS") and diluted earnings per share ("diluted EPS").
The
Company’s basic income (loss) per common 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 income (loss) per common share
is based on net income (loss), divided by the weighted
average number of common shares outstanding during the
period, including common share equivalents, such as
outstanding stock options. Diluted loss per share for the
periods ended September 30, 2010 does not include common
stock equivalents, as these stock equivalents would be
anti-dilutive.
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Note 13 New Accounting Pronouncements | 6 Months Ended |
---|---|
Sep. 30, 2010 | |
Schedule of New Accounting Pronouncements and Changes in Accounting Principles [Table Text Block] |
In
May 2011, the Financial Accounting Standards Board (FASB)
issued ASU 2011-04, guidance to improve consistency in
application of existing fair value measurement and disclosure
requirements. The standard is intended to clarify
the application of the requirements, not to establish
valuation standards or affect valuation practices outside of
financial reporting. The guidance is effective for
interim and annual periods beginning on or after December 15,
2011, with early adoption prohibited.
In
June 2011, the FASB issued ASU 2011-05, guidance to improve
the comparability, consistency, and transparency of financial
reporting and to increase the prominence of items reported in
other comprehensive income. The standard
eliminates the current option to present components of other
comprehensive income as part of the statement of changes in
stockholders’ equity. The amendment requires
that all non-owner changes in stockholders’ equity be
presented either in a single continuous statement of
comprehensive income or in two separate but consecutive
statements. The amendment does not affect how
earnings per share is calculated or presented. The
guidance is effective for interim and annual periods
beginning after December 15, 2011. Early adoption
is permitted. The Company currently does not have other
comprehensive income. Should the company have other
comprehensive income in the future, we will determine if we
will present it on a single continuous statement of
comprehensive income or in two separate but consecutive
statements.
In
September 2011, the FASB issued ASU 2011-08,
“Intangibles — Goodwill and Other (Topic
350).” The objective of this Update is to simplify how
entities test goodwill for impairment. This Update permits an
entity to first assess qualitative factors to determine
whether it is more likely than not that the fair value of a
reporting unit is less than its carrying amount as a basis
for determining whether it is necessary to perform the
two-step goodwill impairment test. The Update is effective
for annual and interim goodwill impairment tests performed
for fiscal years beginning after December 15, 2011.
Early adoption is permitted, including for annual and interim
goodwill impairment tests performed as of a date before
September 15, 2011. We do not have any goodwill recorded
in our financial statements.
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Note 6 Long-Term Debt | 6 Months Ended |
---|---|
Sep. 30, 2010 | |
Long-term Debt [Text Block] |
Note
6 Long-Term
Debt
In
September 2010 the Company entered into an agreement with BCA
Mezzanine Fund LLP (“BCA”) to loan the Company
$2.5 million in the form of a Promissory Note (“the
“Note”). The Company incurred expenses of
$541,604 in connection with this loan, including legal fees,
investment banking fees and other transaction fees. These
expenses are included as deferred debt expense in the
accompanying balance sheet, and these expenses will be
amortized over the term of the loan.
The
features of the note are as follows:
1. The
Note has a term of five (5) years with an annual interest
rate of 14% on the outstanding principal amount. Payments
for the first year are interest only and amounted to
$28,762 monthly and commencing in September 2011, the
Company will make monthly payments of interest and
principal of approximately $69,000 for the remaining term
of the loan.
2. The
Company issued BCA a nine-year warrant for
136,090 shares, based upon 4.5% of the fully –diluted
outstanding shares of the Company’s common stock
exercisable at $6.70 per share, the average closing price
of the common stock over the three days preceding the loan
closing on the NYSE-Amex Exchange. In the event of specific
major corporate events or the maturity of the five-year
loan, BCA can require the Company to purchase the warrant
and warrant shares at the higher of the then Exchange
market price less the share exercise price, in the case of
the purchase of the warrant, or five times operating income
per share. In connection with the warrant issued in
conjunction with this debt, the Company recorded a debt
discount and warrant liability, which is being
marked to fair value at the end of each period (see Note 10
to Notes to the Condensed Consolidated Financial
Statements). The debt discount is to be amortized over the
life of the loan.
3. Loan
provisions also contain customary representations and
warranties.
4. BCA
has a lien on all of the Company’s assets. In
February 2011, BCA agreed to release part of its lien on
Company assets to the U.S. Government to allow for progress
billings up to $1,000,000.
5. The
Company may prepay a portion of the principal amount
provided that (i) any such prepayment shall be applied in
the inverse order of the maturity of the principal amount
of the Note, (ii) the Company shall pay to BCA an
additional amount equal to (A) 3% of the outstanding
principal amount being prepaid if such prepayment is made
during the first loan year, and (B) 2% of the outstanding
principal amount then being prepaid if such prepayment is
being made during the second loan year. Each payment must
be not less than $25,000 or multiples of $25,000 in excess
thereof.
6. Upon
the occurrence of a Change of Control (as defined in the
Agreement) or within five (5) Business Days of an
O’Hara Life Insurance Realization Event (as defined
in the Agreement), the Company shall, in each case at the
election of BCA, prepay by wire transfer the entire
outstanding principal amount of the Note in accordance with
the redemption prices (the “Mandatory Redemption
Prices”) set forth below (expressed as a percentage
of the outstanding principal amount being prepaid and shall
pay 103% in the first loan year, 102% in the second loan
year, and 100% thereafter), together with (x) Interest, if
any, accrued and unpaid on the outstanding principal amount
of the Note so prepaid through the date of such prepayment,
(y) all reasonable out-of-pocket costs and expenses
(including reasonable fees, charges and disbursements of
counsel), if any, associated with such prepayment, and (z)
all other costs, expenses and indemnities then payable
under this Agreement (such amounts, collectively the
“Mandatory Redemption Payment”). If
a Change of Control or O’Hara Life Insurance
Realization Event shall occur during any Loan Year set
forth below, the Mandatory Redemption Price shall be
determined based upon the percentage indicated above for
such Loan Year multiplied by the principal amount which is
being prepaid. At the election
of BCA, all or any portion of the Mandatory Redemption
Payment may be paid in the form of common stock of the
Company in marketable condition in lieu of cash and to the
extent available and to the extent not restricted by any
SBIC Regulations. In the event BCA makes the
election contemplated by the immediately preceding
sentence, the Issuer shall issue to Purchaser that number
of shares having an aggregate Current Market Price as of
such issuance date equal to that portion of the Mandatory
Redemption Payment subject to such election.
7. The
Note contains a number of affirmative and negative
covenants which could restrict our
operations. We were in compliance with all of
our covenants as of September 30, 2011.
8. The
Company and BCA have amended certain provisions to ease
some restrictions.
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Note 2 Revenue Recognition - Percentage-of-Completion - ITATS ("Intermediate Level TACAN Test Set") (AN/ARM-206) | 6 Months Ended |
---|---|
Sep. 30, 2010 | |
Revenue Recognition, Percentage-of-Completion Method [Policy Text Block] |
Note
2 Revenue
Recognition – Percentage-of-Completion – ITATS
(“Intermediate Level TACAN Test Set”)
(AN/ARM-206)
Due
to the unique nature of the ITATS program, wherein a
significant portion of this contract will not be delivered
for over a year, revenues under this contract are recognized
on a percentage-of-completion basis, which recognizes sales
and profit as they are earned, rather than at the time of
shipment. Revenues and profits are estimated using the
cost-to-cost method of accounting where revenues are
recognized and profits recorded based upon the ratio of costs
incurred to estimate of total costs at completion. The ratio
of costs incurred to date to the estimate of total costs at
completion is applied to the contract value to determine the
revenues and profits. When adjustments in estimated contract
revenues or estimated costs at completion are required, any
changes from prior estimates are recognized by recording
adjustments in the current period for the inception-to-date
effect of the changes on current and prior periods. The
Company also receives progress billings on this program,
which is a funding mechanism by the government to assist
contractors on long-term contracts prior to delivery. These
progress payments are applied to Unbilled Government
Receivables resulting from revenues recognized under
percentage-of-completion accounting. There have been no
progress billings or revenues recognized during the six
months ended September 30, 2011.
In
July 2011, the Company secured a $599,000 contract
modification from the U.S. Navy to incorporate product
enhancements to the ITATS AN/ARM-206 TACAN test set resulting
from Navy technical evaluation testing. These changes, and
the required product verification testing, are expected to
take an estimated nine to 12 months to complete. This
additional funding will not have a material bottom line
impact as most of the engineering work for this contract will
be sub-contracted to DRS Sustainment Systems located in St.
Louis. Production deliveries of the 102 ITATS units are now
expected to begin in the middle of the next calendar
year. (See Critical Accounting Policies –
Revenue Recognition).
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Note 11 Reclassifications | 6 Months Ended |
---|---|
Sep. 30, 2010 | |
Reclassifications [Text Block] |
Note
11
Reclassifications
Certain
prior year and period amounts have been reclassified to
conform to the current period presentation.
|