SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
_x_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THESECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 1996
___ 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:
1,961,246 shares of Common stock, $.10 par value as of January 31, 1997.
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
TABLE OF CONTENTS
PAGE
----
Financial Statements (Unaudited)
Condensed Comparative Balance Sheets
December 28, 1996 and March 31, 1996 1
Condensed Comparative Statements of Operations -
Three and Nine Months Ended December 28, 1996 and December 30,1995 2
Condensed Comparative Statements of Cash Flows -
Nine Months Ended December 28, 1996 and December 30, 1995 3-4
Notes to Condensed Financial Statements 5-6
Management's Discussion and Analysis of Financial Condition
And Results of Operations 7-9
Other SEC Reporting Requirements 10
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE BALANCE SHEETS
(Unaudited)
December 28, March 31,
1996 1996
------------- -------------
ASSETS
Current assets:
Cash $ 253,314 $ 22,625
Accounts receivable, net 253,943 359,494
Inventories 342,407 346,874
Other current assets 13,483 7,135
------------- -------------
Total current assets 863,147 736,128
Office and manufacturing equipment, net 55,326 41,825
Other assets, net 45,529 46,653
------------- -------------
Total assets 964,002 824,606
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Convertible subordinated note -
related party 30,000 30,000
Convertible subordinated note 35,000 35,000
Accrued payroll, deferred wages and
vacation pay 426,455 590,353
Accounts payable and accrued expenses 512,337 580,974
------------- -------------
Total current liabilities 1,003,792 1,236,327
Note payable - related party 100,000 100,000
Redeemable preferred stock -- 606,643
------------- -------------
Total liabilities 1,103,792 1,942,970
------------- -------------
Stockholders' deficiency
Common stock 196,127 160,383
Additional paid-in capital 3,856,371 3,151,432
Accumulated deficit (4,192,288) (4,430,179)
Total stockholders deficiency (139,790) (1,118,364)
------------- -------------
Total liabilities and
stockholders' deficiency $ 964,002 $ 824,606
============= =============
See accompanying notes to condensed financial statements.
1
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 28, December 30, December 28, December 30,
1996 1995 1996 1995
Sales:
<S> <C> <C> <C> <C>
Government, net $ 672,740 $ 216,700 $ 1,457,114 $ 818,441
Commercial, net 267,996 290,765 718,830 909,540
------------ ------------ ----------- ------------
Total sales 940,736 507,465 2,175,944 1,727,981
Cost of sales 414,320 190,690 918,472 690,598
------------ ------------ ------------ ------------
Gross margin 526,416 316,775 1,257,472 1,037,383
------------ ------------ ------------ ------------
Operating expenses
Selling, general and 221,904 188,755 634,009 564,553
administrative
Engineering, research and 117,734 107,909 338,063 287,202
development
------------ ------------ ------------ ------------
Total operating expenses 339,638 296,664 972,072 851,755
------------ ------------ ------------ ------------
Profit from operations 186,778 20,111 285,400 185,628
Other income (expenses):
Interest income 6 329 615 512
Interest expense (15,017) (17,558) (48,124) (53,032)
------------ ------------ ------------ ------------
Net profit $ 171,767 $ 2,882 $ 237,891 $ 133,108
============ ============ ============ ============
Earnings per share-primary $ 0.08 $ 0.00 $ 0.13 0.08
Primary shares 2,049,629 1,603,606 1,803,769 1,603,806
Earnings per share-full $ 0.08 $ 0.00 $ 0.13 $ 0.08
diluted
Fully diluted shares 2,049,629 1,603,606 1,866,785 1,603,806
Dividends declared per share none none none none
</TABLE>
See accompanying notes to condensed financial statements
2
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
December 28, December 30,
1996 1995
------------ ------------
Increase (decrease) in cash:
Cash flows from operating activities:
Cash received from customers $ 2,290,911 $ 1,748,678
Cash paid to vendors and employees (2,053,226) (1,684,567)
Interest received 615 512
Interest paid (61,173) (10,313)
----------- -----------
Net cash provided by
operating activities 177,127 54,310
----------- -----------
Cash flows from investing activities:
Cash purchases of property,
plant and equipment (33,938) (10,203)
----------- -----------
Net cash used in investing activities (33,938) (10,203)
----------- -----------
Cash flows from financing activities:
Repayment of debt -- (16,667)
Proceeds from issuance of common stock 87,500 --
----------- -----------
Net cash provided by (used in)
financing activities 87,500 (16,667)
----------- -----------
Net Increase in cash 230,689 27,440
Cash at beginning of period 22,625 38,768
----------- -----------
Cash at end of period $ 253,314 $ 66,208
=========== ===========
Supplemental Schedule of non
cash financing items:
Preferred stock redeemed &
exchanged for common stock 606,643 --
Stocks issued to related party
for liabilities due 46,540 --
Redeemable Preferred Stock
Dividends Accrued -- 22,500
See accompanying notes to condensed financial statements.
3
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
Nine Months Ended
December 28, December 30,
1996 1995
------------ ------------
Net profit $ 237,891 $ 133,108
Adjustments
Depreciation 18,344 12,899
Disposal of Sales Equipment 2,093 --
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 105,551 20,697
Decrease in inventories 4,467 26,681
Decrease (increase) in other current assets (6,348) 639
Decrease (increase) in other assets 1,124 (1,126)
Decrease in accounts payable
and accrued expenses (68,637) (152,189)
(Decrease) increase in accrued
payroll, deferred wages and
vacation pay (117,358) 13,601
--------- ---------
Net cash provided by operating activities $ 177,127 $ 54,310
========= =========
See accompanying notes to condensed financial statements.
4
<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 28, 1996, the results of operations for the
three and nine months ended December 28, 1996 and December 30, 1995 and
statements of cash flows for the nine months ended December 28, 1996 and
December 30, 1995. 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, 1996.
Note 2
Certain reclassifications have been made to the fiscal year 1996 financial
statements to conform with the fiscal year 1997 presentation.
Note 3
Primary and fully diluted earnings per share are based on the weighted average
number of common shares and common share equivalents outstanding. Common share
equivalents include stock options and warrants using the treasury stock method.
Note 4
In July, 1996 a group of the Company's employees and creditors purchased the
preferred stock and dividends and exchanged such stock for common stock of the
Company. The Preferred Stock and dividends were exchanged for 178,720 shares of
newly issued common stock and stock purchase warrants for additional 35,744
shares of common stock. The purchase warrants are exercisable at price per share
of $0.75 until March 31, 1997, $1.50 until March 31, 1998, and $2.25, until
March 31, 1999.
5
<PAGE>
Note 5
In September the Company offered all shareholders the right to purchase an
additional 178,720 shares of common stock at $0.75 per share and issued, to such
participating shareholders 35,744 in stock purchase warrants with the same terms
as those described above. This stock has been fully subscribed and the stock
certificates and warrants have been issued. The Company received $87,500 in cash
for 116,667 shares and satisfied its liabilities of $46,540 for 62,053 shares
that were issued to the Company President. These shares and warrants were sold
pursuant to an exemption from registration under the Securities Act of 1933
pursuant to section 4, paragraph (2) as a transaction by an issuer not involving
any public offering. The shares were sold to a limited number of knowledgeable
and sophisticated employees, creditors and shareholders and the stock
certificates bear a legend restricting transfer.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION
RESULTS OF OPERATION
Sales
Net sales increased $433,271 (85.4%) and $447,963 (25.9%) for the three and nine
months ended December 28, 1996, respectively, as compared to the same periods in
the prior fiscal year. The increase in sales is attributed to the government
segment for shipments associated with a contract with the United States Air
Force. The uncertainty of the commercial segment continues and led to a decline
in commercial sales which offset some of 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 to which firm orders
have been received in the amount of $2,304,896. Shipments against this contract
began in the first quarter of fiscal year 1996 and will continue through the
third quarter of the next fiscal year. Both commercial and government sales were
held down in the second quarter because of missed shipments of key parts by one
vendor whose problems have since been remedied. These missed shipments were
shipped in this quarter causing better than expected sales for this quarter. The
future growth and profitability continue to be dependent on a turnaround of the
commercial airline market, the introduction and acceptance of new products, and
the award of additional government contracts.
Gross Margin
Gross margin increased $209,641 (66.2%) and $220,089 (21.2%) for the three and
nine months ended December 28, 1996, respectively, as compared to the
corresponding periods in the prior fiscal year. This increase is attributed to
the higher volume. The gross margin percentage was 57.8% for the nine months
ended December 28, 1996 as compared to 60% for the same period last year. The
lower percentage gross margin is attributed to shipment of the lower margin
products for the Air Force contract.
7
<PAGE>
Operating Expenses
Total selling, general and administrative expenses increased $33,149 (17.6%) and
$69,456 (12.3%)for the three and nine months ended December 28, 1996,
respectively, as compared to the same periods in the prior fiscal year. The
increase is attributed to an increase in selling expenses and commissions
associated with government sales and accrued employee incentive compensation.
Engineering, research and development expenditures increased $9,825 (9.1%) for
the three month period ending December 28, 1996, and increased $50,861 (17.7%)
for the nine month period ending December 28, 1996, due to increased new product
development efforts and accrued employee incentive compensation.
The net income for the three months ended December 28, 1996 was $171,767 or $.08
per share as compared to a net income of $2,882 or $0.00 per share for the three
months ended December 30, 1995.
The net income for the nine months ended December 28, 1996 was $237,891 or $0.13
per share as compared to a net income of $133,108 or $0.08 per share for the
nine months ended December 30, 1995.
Liquidity And Capital Resources
At December 31, 1996 the Company's working capital deficiency decreased $359,554
to $140,645 from March 31, 1996. Net cash provided by operating activities also
improved for the nine months ended December 28, 1996 to $177,127 as compared to
$25,039 for the same period last year..
The Company's liquidity and capital position was improved primarily by the
Company's increased profitability and the redemption of the outstanding
redeemable preferred stock (the "Preferred Stock"). In July, 1996 a group of the
Company's employees and creditor's purchased the Preferred Stock and dividends
from the preferred stockholder for $111,700 and exchanged the Preferred Stock
for common stock.
The Preferred Stock and dividends were exchanged for 178,720 shares of newly
issued common stock and stock purchase warrants for additional 35,744 shares of
common stock. The purchase warrants are exercisable at price per share of $0.75
until March 31, 1997, $1.50 until March 31, 1998, and $2.25, until March 31,
1999.
8
<PAGE>
In September the Company offered all shareholders the right to purchase
additional 178,720 shares of common stock at $0.75 per share and issued, to such
participating shareholders 35,744 in stock purchase warrants with the same terms
as those described above. This stock has been fully subscribed and the stock
certificates and warrants have been issued. The Company received $87,500 in cash
for 116,667 shares and satisfied its liabilities of $46,540 for 62,053 shares
that were issued to the Company President. These shares and warrants were sold
pursuant to an exemption from registration under the Securities Act of 1933
pursuant to Section 4 Paragraph (2) as a transaction by an issuer not involving
any public offering. The shares were sold to a limited number of knowledgeable
and sophisticated employees, creditors and shareholders and the stock
certificates bear a legend restricting transfer.
The Company continues to explore additional opportunities to find ways to
improve its profitability and cash flow. Based upon the current backlog and cash
on hand the Company believes that it should have sufficient working capital to
fund its plans over the next twelve months.
There has been no established public trading market for Registrant's Common
Stock. Subsequent to the public offering of the Company's Common Stock in
December 1988, the Common Stock has traded sporadically in the over-the-counter
market. During the three month period ended December 31, 1996, the high and low
bids were $1.31 and $.75, respectively. These quotations reflect inter-dealer
prices, without retail markup or commission and may not necessarily represent
actual transactions.
Inflation did not have a material impact on the results of the Company's
operations for the nine months ended December 28, 1996.
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, 1996.
9
<PAGE>
Other SEC Reporting Requirements
Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders was held on September 5, 1996 (the
"Annual Meeting").
(b) Not applicable because (i) proxies for the Annual Meeting were solicited
pursuant to Regulation 14A under the Securities Exchange Act of 1934; (ii) there
was no solicitation in opposition to management's nominees as listed in the
Company's proxy statement; and (iii) all of such nominees were elected.
(c) At the Annual Meeting, the Company's shareholders voted in favor of
management's nominees for election as directors of the Company as follows:
For Against
--- -------
Harold K. Fletcher 1,155,096 0
Robert J. Walker 1,155,096 0
George F. Leon 1,155,096 0
The shareholders also voted all 1,155,096 shares in favor of Coopers and Lybrand
as the Corporation's certified public accountants for the fiscal year ending
March 31, 1997.
The shareholders also voted all 1,155,096 shares for the redemption and
cancellation of the Redeemable Preferred Stock and all accrued dividends, in
exchange for 178,720 shares of common stock and warrants to purchase 35,744
shares of common stock.
The shareholders also voted all 1,155,096 shares in favor of the directors'
action to authorize the offer and sale to shareholders of 178,720 shares of
common stock and warrants to purchase 35,744 shares of common stock.
The shareholders voted all 1,155,096 share to amend the Corporation's
Certificate of Incorporation to increase the authorized common shares to
4,000,000 and preferred shares to 1,000,000.
(d) Not applicable.
Exhibits and Reports on Form 8-K
(a) The Company has not filed any exhibits as part of this Quarterly Report on
Form 10-Q.
(b) During the quarter ended December 31, 1995, the Company did not file any
current Reports on Form 8-K.
10
<PAGE>
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 February 21, 1997 /s/ Harold K. Fletcher
------------------------------
Harold K. Fletcher
Chairman and President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 253
<SECURITIES> 0
<RECEIVABLES> 319
<ALLOWANCES> 66
<INVENTORY> 342
<CURRENT-ASSETS> 863
<PP&E> 55
<DEPRECIATION> 18
<TOTAL-ASSETS> 964
<CURRENT-LIABILITIES> 1,004
<BONDS> 0
0
0
<COMMON> 196
<OTHER-SE> (336)
<TOTAL-LIABILITY-AND-EQUITY> 964
<SALES> 2,176
<TOTAL-REVENUES> 2,176
<CGS> 918
<TOTAL-COSTS> 918
<OTHER-EXPENSES> 972
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48
<INCOME-PRETAX> 238
<INCOME-TAX> 0
<INCOME-CONTINUING> 238
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 238
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
