SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 33-18978
TEL-INSTRUMENT ELECTRONICS CORPORATION
(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 each of the issuer's classes of
common stock, as of the latest practical date:
1,603,806 shares of Common stock, $.10 par value as of January 30, 1996.
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TEL-INSTRUMENT ELECTRONICS CORPORATION
TABLE OF CONTENTS
PAGE
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Financial Statements (Unaudited)
Condensed Comparative Balance Sheets
December 30, 1995 and March 31, 1995 1
Condensed Comparative Statements of Operations -
Three and Nine Months Ended - December 30, 1995 and 1994 2
Condensed Comparative Statements of Cash Flows -
Nine Months Ended December 30, 1995 and 1994 3 - 4
Notes to Condensed Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 7
Signature 7
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TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE BALANCE SHEETS
(Unaudited)
December 30, 1995 and March 31, 1995
December 30, March 31,
1995 1995
----------- -----------
ASSETS
Current assets:
Cash $ 66,208 38,768
Accounts receivable, net 218,782 239,479
Inventories 455,592 482,273
Other current assets 34,464 35,103
----------- -----------
Total current assets 775,046 795,623
Office and manufacturing equipment, net 37,522 40,218
Other assets, net 37,727 36,601
----------- -----------
Total assets 850,295 872,442
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable 0 16,667
Accrued payroll, deferred wages
and vacation pay 574,471 560,870
Accounts payable and accrued expenses 585,116 737,305
----------- -----------
Total current liabilities 1,159,587 1,314,842
Note payable - related party 100,000 100,000
Convertible subordinated notes 65,000 65,000
Redeemable preferred stock 599,143 576,643
----------- -----------
Total liabilities 1,923,730 2,056,485
----------- -----------
Stockholders' deficiency:
Common stock 160,383 160,383
Additional paid-in capital 3,158,932 3,181,432
Accumulated deficit (4,392,750) (4,525,858)
----------- -----------
Total stockholders' deficiency (1,073,435) (1,184,043)
----------- -----------
Total liabilities and stockholders'
deficiency $ 850,295 872,442
=========== ===========
See accompanying notes to condensed financial statements.
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TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 30, December 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales:
Government, net $ 216,700 127,411 818,441 243,219
Commercial, net 290,765 399,486 909,540 1,024,801
----------- ----------- ----------- -----------
Total sales 507,465 526,897 1,727,981 1,268,020
Cost of sales 190,690 247,341 690,598 591,572
----------- ----------- ----------- -----------
Gross margin 316,775 279,556 1,037,383 676,448
Operating expenses:
Selling, general and administrative 188,755 150,336 564,553 450,662
Engineering,research and development 107,909 74,407 287,202 221,006
----------- ----------- ----------- -----------
Total operating expenses 296,664 224,743 851,755 671,668
----------- ----------- ----------- -----------
Profit (loss) from operations 20,111 54,813 185,628 4,780
Other income (expenses):
Interest income 329 0 512 0
Interest expense (17,556) (20,858) (53,032) (63,480)
----------- ----------- ----------- -----------
Net profit (loss) before
extraordinary item 2,882 33,955 133,108 (58,700)
Extraordinary item -- 18,942 -- 18,942
----------- ----------- ----------- -----------
Net profit (loss) $ 2,882 52,897 133,108 (39,758)
=========== =========== =========== ===========
Net profit (loss) per common share
before extraordinary item $ 0.00 0.02 0.08 (0.04)
=========== =========== =========== ===========
Net profit (loss) per common share $ 0.00 0.03 0.08 (0.02)
=========== =========== =========== ===========
Dividends per share None None
Weighted average shares outstanding 1,603,806 1,603,806 1,603,806 1,603,806
</TABLE>
See accompanying notes to condensed financial statements.
-2-
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
Dec. 30,
1995 1994
----------- -----------
Increase (decrease) in cash:
Cash flows from operating activities:
Cash received from customers $ 1,748,678 1,499,254
Cash paid to vendors and employees (1,684,567) (1,354,101)
Interest received 512 --
Interest paid (10,313) (18,063)
----------- -----------
Net cash provided by
operating activities 54,310 127,090
Cash flows from investing activities:
Cash purchases of property, plant and
equipment (10,203) (7,810)
----------- -----------
Net cash used in investing activities (10,203) (7,810)
----------- -----------
Cash flows from financing activities:
Repurchase of shares -- (12)
Repayment of debt (16,667) (48,000)
----------- -----------
Net cash used in financing activities (16,667) (48,012)
----------- -----------
Net increase (decrease) in cash 27,440 71,268
Cash at beginning of period 38,768 15,970
----------- -----------
Cash at end of period $ 66,208 87,238
=========== ===========
See accompanying notes to condensed financial statements.
-3-
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS, continued
(Unaudited)
Nine Months Ended
Dec. 30,
1995 1994
----------- -----------
Net profit (loss) $ 133,108 (39,758)
Adjustments:
Depreciation 12,899 7,403
Gain on Extinguishment of debt (18,942)
Changes in assets and liabilities:
Decrease in accounts receivable 20,697 40,441
Decrease (increase) in inventories 26,681 (77,036)
Decrease (increase) in other
current assets 639 (367)
(Increase) decrease in other assets (1,126) 30,491
Increase in progress billings 167,698
Increase in accrued payroll,
deferred wages and vacation pay 13,601 14,341
(Decrease) increase in accounts payable
and accrued expenses (152,189) 2,819
----------- -----------
Net cash provided by
operating activities $ 54,310 129,090
=========== ===========
Non-cash investing and financing activities:
Redeemable preferred stock dividends
accrued 22,500 22,500
See accompanying notes to condensed financial statements.
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<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position of Tel Instrument
Electronics Corp as of December 30, 1995, the results of operations for the
three and nine months ended December 30, 1995 and December 30, 1994 and
statements of cash flows for the nine months ended December 30, 1995 and
December 30, 1994. These results are not necessarily indicative of the results
to be expected for the full year.
These statements should be read in conjunction with the Company's Annual Report
to the Securities and Exchange Commission on Form 10-K for the year ended March
31, 1995.
Note 2
Certain reclassifications have been made to the 1995 financial statements to be
consistent with the fiscal year 1996 presentation.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION
RESULTS OF OPERATIONS
Sales
Net sales decreased $19,432 (3.7%) and increased $459,961 (36.3%) for the three
and nine months ended December 30, 1995, respectively, as compared to the same
periods in the prior fiscal year. The increase in sales for the nine months
period is primarily attributed to the government segment for shipments
associated with contracts with the Canadian Defense Forces and the United States
Air Force. The decrease in sales for the three month period is primarily due to
the suspension of shipments to the United States Air Force in that period and a
weakening in commercial sales. The uncertainty of the commercial segment
continues and resulted in a decline in commercial sales which offset the
increase in government sales. While sales increased, the stagnant conditions
experienced in both the commercial airline and government segments continue. In
fiscal year 1995 the Company was awarded an open quantity contract by the U.S.
Air Force in the amount of $1,679,265 of which firm orders have been received in
the amount of $1,436,260. Shipments against this contract began in May 1995. In
July 1995, the U.S. Air Force placed a hold on further shipments until certain
design specifications have been clarified and incorporated. An agreement with
the U.S Air Force has been signed and shipments should resume in the final
quarter of fiscal year 1996. A small contract for $183,000 has been received
from the U.S. Army and was shipped in the third quarter of fiscal year 1996. The
future growth and profitability continue to be dependent on a turnaround of the
commercial airline industry, introduction and acceptance of new products, and
the award of additional government contracts.
Gross Margin
Gross margin increased $37,219 (13.3%) and $360,935 (53.4%) for the three and
nine months ended December 30, 1995, respectively, as compared to the
corresponding periods in the prior fiscal year. This increase is attributed to
the higher volume, sale of higher margin products, and the additional absorption
of overhead expenses. The gross margin percentage was 60.0% for the nine months
ended December 30, 1995 as compared to 53.3% for the same period last year. The
higher percentage gross margin is not expected to continue once Tel starts
shipping the lower margin products for the Air Force contract.
Operating Expenses
Total selling, general and administrative expenses increased $38,419 (25.6%) and
$113,891 (25.3%) for the three and nine months ended December 30, 1995,
respectively, as compared to the same periods in the prior fiscal year. The
increase is attributed to an increase in selling expenses associated with the
addition to staff of a Director of Marketing and commissions associated with
government sales. Engineering, research and development expenditures increased
$33,502 (45.0%) and $66,196 (30.0%), respectively, for the same periods due to
increased development efforts.
The net income for the three months ended December 30, 1995 was $2,883 or $0.00
per share as compared to a net income of $52,897 or $0.03 per share for the
three months ended December 30, 1994.
The net income for the nine months ended December 30, 1995 was $133,107 or $0.08
per share as compared to a net loss of $39,758 or $0.02 per share for the nine
months ended December 30, 1994.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The working capital deficiency decreased $134,678 for the first nine months of
fiscal year 1996 to $384,541. The improvement in working capital is primarily
due to the improvement in operations. The Company has been able to satisfy its
cash needs as a result of the recent improvements in operations. The Company's
ability to continue is dependent upon its ability to generate sufficient cash
flow from operations or to obtain additional financing. Since securing financing
from traditional sources is difficult, short term liquidity must continue to be
provided by cash generated from operations.
Management's plans to improve profitability and cash flow are based on cost
reduction measures, continued sales efforts, and incremental revenues derived
from new product developments.
Management continues to evaluate various means of restructuring and/or extending
the payment terms of the redeemable preferred stock.
There was no significant impact on the Company's operations as a result of
inflation for the nine months ended December 30, 1995.
These statements should be read in conjunction with the Company's annual report
to the Securities and Exchange Commission on Form 10-K for fiscal year ending
March 31, 1995.
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____________________ Harold K. Fletcher
Chairman and President
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<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> DEC-30-1995
<CASH> 66
<SECURITIES> 0
<RECEIVABLES> 269
<ALLOWANCES> (51)
<INVENTORY> 455
<CURRENT-ASSETS> 775
<PP&E> 38
<DEPRECIATION> 13
<TOTAL-ASSETS> 850
<CURRENT-LIABILITIES> 1,159
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599
0
<COMMON> 160
<OTHER-SE> (1,234)
<TOTAL-LIABILITY-AND-EQUITY> 850
<SALES> 1,728
<TOTAL-REVENUES> 1,728
<CGS> 691
<TOTAL-COSTS> 691
<OTHER-EXPENSES> 852
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53
<INCOME-PRETAX> 133
<INCOME-TAX> 0
<INCOME-CONTINUING> 133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
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