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 September 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 November 6, 1995.
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TEL-INSTRUMENT ELECTRONICS CORPORATION
TABLE OF CONTENTS
PAGE
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Financial Statements (Unaudited)
Condensed Comparative Balance Sheets
September 30, 1995 and March 31, 1995 1
Condensed Comparative Statements of Operations -
Three and Six Months Ended September 30, 1995 and 1994 2
Condensed Comparative Statements of Cash Flows -
Six Months Ended September 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)
September 30, 1995 and March 31, 1995
September 30, March 31,
1995 1995
----------- -----------
ASSETS
Current assets:
Cash $ 43,685 38,768
Accounts receivable, net 273,177 239,479
Inventories 445,207 482,273
Other current assets 32,811 35,103
----------- -----------
Total current assets 794,880 795,623
Office and manufacturing equipment, net 35,364 40,218
Other assets, net 37,730 36,601
----------- -----------
Total assets 867,974 872,442
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable -- 16,667
Accrued payroll, deferred wages
and vacation pay 587,324 560,870
Accounts payable and accrued expenses 592,824 737,305
----------- -----------
Total current liabilities 1,180,148 1,314,842
Note payable - related party 100,000 100,000
Convertible subordinated notes 65,000 65,000
Redeemable preferred stock 591,643 576,643
----------- -----------
Total liabilities 1,936,791 2,056,485
----------- -----------
Stockholders' deficiency:
Common stock 160,383 160,383
Additional paid-in capital 3,166,432 3,181,432
Accumulated deficit (4,395,632) (4,525,858)
----------- -----------
Total stockholders' deficiency (1,068,817) (1,184,043)
----------- -----------
Total liabilities and stockholders'
deficiency $ 867,974 872,442
=========== ===========
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 Six Months Ended
September 30, September 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales:
Government, net 259,403 47,262 604,741 115,808
Commercial, net 333,745 313,825 618,775 625,315
----------- ----------- ----------- -----------
Total sales 593,148 361,087 1,223,516 741,123
Cost of sales 238,570 147,903 499,908 344,231
----------- ----------- ----------- -----------
Gross margin 354,578 213,184 720,608 396,892
Operating expenses:
Selling, general and administrative 173,487 145,084 375,798 300,326
Engineering, research and development 89,246 73,759 179,293 146,599
----------- ----------- ----------- -----------
Total operating expenses 262,733 218,843 555,091 446,925
----------- ----------- ----------- -----------
Profit (loss) from operations 91,845 (5,659) 165,517 (50,033)
Other income (expenses):
Interest income 185 0 185 0
Interest expense (17,966) (21,156) (35,476) (42,622)
----------- ----------- ----------- -----------
Net profit (loss) $ 74,064 (26,815) 130,226 (92,655)
=========== =========== =========== ===========
Dividends per share $ 0.05 (0.02) 0.08 (0.06)
=========== =========== =========== ===========
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)
Six Months Ended
Sept. 30,
1995 1994
----------- -----------
Increase (decrease) in cash:
Cash flows from operating activities:
Cash received from customers $ 1,194,547 960,670
Cash paid to vendors and employees (1,168,197) (928,436)
Interest received 183 --
Interest paid (1,494) (6,935)
----------- -----------
Net cash provided by
operating activities 25,039 25,299
Cash flows from investing activities:
Cash purchases of property, plant and
equipment (3,455) (12,795)
----------- -----------
Net cash used in investing activities (3,455) (12,795)
----------- -----------
Cash flows from financing activities:
Repurchase of shares -- (12)
Repayment of debt (16,667) (12,500)
----------- -----------
Net cash used in financing activities (16,667) (12,512)
----------- -----------
Net increase (decrease) in cash 4,917 (8)
Cash at beginning of period 38,768 15,970
----------- -----------
Cash at end of period $ 43,685 15,962
=========== ===========
See accompanying notes to condensed financial statements.
-3-
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS, continued
(Unaudited)
Six Months Ended
Sept. 30,
1995 1994
--------- ---------
Net profit (loss) $ 130,226 (92,655)
Adjustments:
Depreciation 8,309 4,888
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (33,698) 32,170
Decrease (increase) in inventories 37,066 (66,483)
Decrease in other current assets 2,292 4,724
(Increase) decrease in other assets (1,129) 342
Increase in accrued payroll,
deferred wages and vacation pay 26,454 6,870
(Decrease) increase in accounts payable
and accrued expenses (144,481) 135,443
--------- ---------
Net cash provided by
operating activities $ 25,039 25,299
========= =========
Non-cash investing and financing activities:
Redeemable preferred stock dividends
accrued 15,000 15,000
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 September 30, 1995, the results of operations for the
three and six months ended September 30, 1995 and September 30, 1994 and
statements of cash flows for the six months ended September 30, 1995 and
September 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.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION
RESULTS OF OPERATIONS
Sales
Net sales increased $232,061 (64.3%) and $479,393 (64.7%) for the three and six
months ended September 30, 1995, respectively, as compared to the same periods
in the prior fiscal year. The increase in sales is primarily attributed to the
government segment for shipments associated with contracts with the Canadian
Defense Forces and the United States Air Force. The uncertainty of the
commercial segment continues and led to a slight 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 the first quarter of fiscal year 1996. In July 1995, the U.S. Air Force
placed a hold on further shipments until certain design specifications have been
clarified and incorporated. A significant portion of the Company's sales for
fiscal 1996 were to be derived from this contract. Fiscal year 1996 sales are
dependent upon a favorable resolution of the contract with the U.S. Air Force. A
small contract for $183,000 has been received from the U.S. Army and should be
shipped in the 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 $145,394 (68.2%) and $323,716 (81.6%) for the three and
six months ended September 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 59.0% for the six months
ended September 30, 1995 as compared to 53.5% 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 $28,403 (19.6%) and
$75.472 (25.2%) for the three and six months ended September 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
$15,487 (21.1%) and $32,694 (22.3%) for the same period due to increased
development efforts.
The net income for the three months ended September 30, 1995 was $74,064 or
$0.05 per share as compared to a net loss of $26,815 or $.02 per share for the
three months ended September 30, 1994.
The net income for the six months ended September 30, 1995 was $130,226 or $0.08
per share as compared to a net loss of $92,655 or $.06 per share for the six
months ended September 30, 1994.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The working capital deficiency decreased $133,951 for the first six months of
fiscal year 1996 to $385,268. 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. However, as noted above, the Company's liquidity
can be significantly affected if the contract with the U.S. Air Force is
terminated.
Management continues to evaluate various means of restructuring and/or extending
the payment terms of this redeemable preferred stock.
There was no significant impact on the Company's operations as a result of
inflation for the six months ended September 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 13 November 95 /s/ Harold K. Fletcher
-------------------------------
Harold K. Fletcher
Chairman and President
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 44
<SECURITIES> 0
<RECEIVABLES> 324
<ALLOWANCES> (51)
<INVENTORY> 445
<CURRENT-ASSETS> 795
<PP&E> 35
<DEPRECIATION> 8
<TOTAL-ASSETS> 868
<CURRENT-LIABILITIES> 1,180
<BONDS> 0
592
0
<COMMON> 160
<OTHER-SE> (1,229)
<TOTAL-LIABILITY-AND-EQUITY> 868
<SALES> 1,224
<TOTAL-REVENUES> 1,224
<CGS> 500
<TOTAL-COSTS> 500
<OTHER-EXPENSES> 555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 130
<INCOME-TAX> 0
<INCOME-CONTINUING> 130
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
