SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year Commission File No.
ended March 31, 1998 33-18978
TEL-INSTRUMENT ELECTRONICS CORP.
(Exact name of Registrant as specified in its charter)
New Jersey 22-1441806
(State of incorporation) (IRS Employer Identification Number)
728 Garden Street
Carlstadt, New Jersey 07072
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 933-1600
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by checkmark 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___.
The aggregate market value of the voting Common Stock (par value $.10 per share)
held by non-affiliates on June 03, 1998 was $2,650,012 using the price of the
last trade on June 3, 1998.
2,094,735 shares of Common Stock were outstanding as of June 03, 1998.
Total Pages - 36
Exhibit Index - pages 33-34
<PAGE>
PART I
Item 1. Business
General
Tel-Instrument Electronics Corp. ("Tel" or the "Company") designs,
manufactures and sells test equipment to the general aviation and
commercial aviation market and to the government/military aviation market,
both domestically and internationally. The Company has been in business
since 1947.
The Company continued its growth in fiscal year 1998 with sales increasing
approximately 25% from the prior fiscal year and income before income
taxes increasing approximately 18% for the same period. This growth was
accomplished in conjunction with the Company's significant investment in
engineering, research and development for which expenditures increased
more than 85% from the prior fiscal year and with expenses for
investigating new markets for new products.
The Company continues to focus its efforts in the government market and
has been very active in responding to requests from the U.S. Government
for quotations, in addition to adapting its product designs to respond to
these requests.
On August 12, 1997, the Company received notice that it was awarded a
major contract from the U.S. Navy. The initial order is for $949,324 to
provide five T-47M IFF (Identification Friend or Foe) test sets for Navy
evaluation and for the associated documentation. This work, to be
completed during calendar year 1998, represents a major milestone for the
Company and its engineering efforts since this contract could be a
significant source of future revenues. This contract includes options for
up to 1,300 units which the Navy can exercise through calendar year 2001.
There is no assurance that these options will be exercised by the Navy or
that the gross margin on this contract will be at the current level. The
Company has presented the initial design to the U.S. Navy for this
contract and the Company believes that such review was favorable.
Tel's instruments are used to test navigation and communications equipment
installed in aircraft and range in list price from $7,000 to $22,000 per
unit. Tel is constantly revising and improving its test instruments (see
"Research and Development") in anticipation of customers' needs. The
development of multifunction "smart" testers, for example, has made it
easier for customers to perform ramp tests with less training.
The table below sets forth the composition of Tel's sales for the last
three fiscal years.
Year Ended Year Ended Year Ended
March 31, March 31, March 31,
1998 1997 1996
---- ---- ----
Commercial $1,489,563 $1,140,779 $1,274,606
Government 2,469,679 2,024,895 1,043,482
In the fiscal year ended March 31, 1995, Tel won a competitive
solicitation from the United States Air Force (USAF) for the Model T-30CM.
Sales derived from this contract
2
<PAGE>
Item 1. Business
General (Continued)
represented 34%, 46% and 37% of total government sales for the years ended
March 31, 1998, 1997 and 1996, respectively. As a result of completing
this contract, the Company's backlog has been reduced.
Foreign commercial sales are made direct or through American export agents
at a discount reflecting the 15% selling commission under oral,
year-to-year arrangements. For the years ended March 31, 1998, 1997 and
1996, foreign commercial sales were 21%, 14% and 27%, respectively, of
total commercial sales.
In June 1998, the Company signed an exclusive agreement with Muirhead
Avionics based in the United Kingdom to represent the Company in parts of
Europe. The Company has received from Muirhead Avionics a $323,000
contract for its T-48I.
Tel sells its products either directly or through distributors to its
commercial customers. There is no written agreement with the distributors
who receive a 15% discount for stocking and selling these products. Tel
also gives a 5% to 10% discount to non-stocking distributors depending on
their sales volume and promotional effort. Independent sales
representatives receive 5% to 10% commissions depending on their sales
volume and promotional efforts.
Set forth below is Tel's backlog at March 31, 1998 and 1997. Sales
increased again in fiscal year 1998 because of government orders. (See
Management's Discussion - Item 7 and Markets - Item 1).
Tel believes that all of the backlog at March 31, 1998 will be delivered
during the fiscal year ending March 31, 1999.
Commercial Government Total
---------- ---------- -----
March 31, 1998 $ 65,800 $1,655,678 $1,721,478
March 31, 1997 174,600 2,276,952 2,451,552
All of the backlog is pursuant to purchase orders and all of the
government contracts are fully funded. However, government contracts are
always susceptible to termination for convenience.
Tel obtains its purchased parts from a number of suppliers. These
materials are standard in the industry and Tel foresees no difficulty in
obtaining purchased parts, as needed, at acceptable prices.
Markets
The general aviation market consists of some 1,000 repair and maintenance
service shops, at private and commercial airports in the United States,
which purchase test equipment to repair aircraft electronics. The airline
market consists of approximately 80 domestic and foreign commercial
airlines.
The civilian market for avionic testing equipment is dominated by three
manufacturers, of which Tel is believed to be the third largest. The
market is relatively small. The Company
3
<PAGE>
Item 1. Business (Continued)
Markets (Continued)
believes that the foreign commercial market represents a better
opportunity than the US commercial market for growth. The foreign market
is larger than the domestic market and many foreign airlines are upgrading
to meet U.S. requirements.
Future domestic growth will depend on whether the U.S. Federal Aviation
Administration (FAA) implements plans to upgrade the U.S. air traffic
control system and on continuing recent trends towards more sophisticated
avionics systems, both of which would require the design and manufacture
of new test equipment. The Company continues to analyze the needs of the
market in order to develop new and improved instruments to meet emerging
FAA requirements and redesign models to add functions and reduce the cost
of manufacturing. The Company believes its test equipment is recognized by
its customers for its quality, durability and reliability.
Tel sells to many commercial customers. One domestic distributor accounted
for 15% of commercial sales for the year ended March 31, 1998. In fiscal
1997, no end user customer or distributor accounted for more than 10% of
commercial sales. In fiscal year 1996, the only customers purchasing over
10% of Tel's commercial sales were two distributors (14% and 12%) who sell
to many end users.
The military market is large, but is dominated by large corporations with
substantially greater resources than Tel. Tel bids for government
contracts on competitive bids, on the basis of "small business set asides"
(i.e., statutory provisions requiring the military to entertain bids only
from statutorily defined small businesses), and on bids for sub-contracts
from major government suppliers. The Company's government sales have
increased from $244,289 in fiscal year 1992 to $2,469,679 in fiscal year
1998.
Because of the larger size of the military market, in contrast to the
limited civilian market, Tel has been increasing its efforts to obtain
military contracts and sub-contracts. Although it is anticipated that the
total defense budget will continue to decline, management believes that
the portion devoted to operation and maintenance of existing and improved
avionics will be less adversely affected. Tel has increased its
concentration on meeting end user needs by modifying commercial designs to
satisfy special government/military requirements. This approach appears to
be viable as Tel has been able to sell the T-36M, T-49C, T-49CF, T-47
family, and T-48I to government agencies and prime contractors with a
growing list of other prospective buyers. Government small purchase
procedures allow Tel to sell test sets to contractors and users who could
have influence on future government purchases. Tel will also continue its
efforts to penetrate the export market.
Competition
In the general aviation and airline market, Tel competes principally with
IFR, an independent firm, and with JC Air, a division of BF Goodrich. This
market is highly competitive. Tel has generally been successful because of
its high quality products, prices, and responsive service. Tel also
provides customers with calibration and repair services.
4
<PAGE>
Item 1. Business (Continued)
Competition (Continued)
The military market is dominated by large corporations with greater
operating experience with the military. Tel competes in this market by
selling applicable "best commercial practice" test equipment adapted to
government standards, by bidding for small business set asides and by
subcontracting with larger corporations to produce subsystems. Tel's
equipment is both capable and durable, and less expensive than its
competitors.
Tel's past ability to compete in the civil aviation market and the
military market has been restricted because of limited financial
resources. However, the improvement in financial position allows it to
compete more effectively (see Liquidity and Capital Resources in Item 7).
Tel has no patents or licenses which are material to its business.
Research and Development
In the fiscal years ended March 31, 1998, 1997 and 1996, Tel spent
$902,250, $486,884, and $390,399, respectively, on the research and
development of new and improved products. None of these amounts were
sponsored by customers. Tel's management believes that continued and
increased expenditures for research and development are necessary to
enable Tel to expand its sales and generate profits.
In fiscal year 1997, the development of the military version of the T-36
(T-36M) using a microprocessor for control, and an IFF interrogator test
version of the T-47C (T-47N) were completed. A contract for the T-36M for
$324,795 was received in April 1996 and a proposal for a modified T-47N
(T-47M) was submitted to the U.S. Navy in May 1997. On August 12, 1997,
the Company was awarded a contract from the U.S. Navy for the T-47M IFF
test sets. Engineering, research and development expenditures in 1998 were
directed primarily toward finalization of the design of the T-47M and new
products for other targeted markets, such as the T-49CF.
Personnel
Tel has ten manufacturing, six administrative and sales, and five research
and development employees, none of whom belongs to a union. Tel does not
believe that there will be any difficulty in adding personnel as required.
The Company also uses several part-time consultants on an as needed basis.
During fiscal year 1998, the Company employed a number of engineering
consultants to finalize the development of the T-47M IFF test sets for the
U.S. Navy.
Item 2. Properties
The Company leases 11,164 square feet in Carlstadt, New Jersey as its
manufacturing plant and administrative offices, pursuant to a five year
lease expiring in August, 1998. The Company is currently negotiating a
long-term lease on the same premises. Tel is unaware of any environmental
problems in connection with its location and, because of the nature of its
manufacturing activities, does not anticipate such problems.
5
<PAGE>
Item 3. Pending Legal Proceedings
There are no material pending legal proceedings.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market Information
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 fiscal year ended March 31, 1998, the
Company's Common Stock had the high and low bids of $1.875 and $.875,
respectively. These quotations reflect inter-dealer prices, without retail
markup or commission and may not necessarily represent actual
transactions. On June 3, 1998, the low bid was $2.125 and the high bid was
$2.625.
Approximate Number of Equity Security Holders
Number of Record
Holders as of
Title of Class March 31, 1998
-------------- --------------
Common Stock, par value 838
$.10 per share
Dividends
Registrant has not paid dividends on its Common Stock and does not expect
to pay such dividends in the foreseeable future.
6
<PAGE>
Item 6. Selected Financial Data
TEL-INSTRUMENT ELECTRONICS CORP.
SUMMARY OF FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Years Ended March 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues $ 3,959,242 $ 3,165,674 $ 2,318,088 $ 1,865,492 $ 1,308,939
----------- ----------- ----------- ----------- -----------
Operating costs and expenses:
Cost of sales 1,559,542 1,325,659 1,022,942 888,213 619,165
Selling, general and administrative 909,505 854,093 739,912 575,124 506,595
Engineering, research and development 902,250 486,884 390,399 315,331 236,206
----------- ----------- ----------- ----------- -----------
3,371,297 2,666,636 2,153,253 1,778,668 1,361,966
----------- ----------- ----------- ----------- -----------
Income (loss) from operations 587,945 499,038 164,835 86,824 (53,027)
Other expenses, net (68,847) (57,954) (69,156) (76,348) (66,116)
----------- ----------- ----------- ----------- -----------
Income/(loss) before extraordinary
item and income taxes 519,098 441,084 95,679 10,476 (119,143)
Extraordinary item -- -- -- 12,000 --
----------- ----------- ----------- ----------- -----------
Income/(loss) before income taxes 519,098 441,084 95,679 22,476 (119,143)
Income taxes, net of income tax benefit (2) 58,719 340,200 -- -- --
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 577,817 $ 781,284 $ 95,679 $ 22,476 $ (119,143)
=========== =========== =========== =========== ===========
Income/(loss) per share from
continuing operations: diluted
before extraordinary item (1) $ 0.28 $ 0.41 $ 0.04 $ (0.01) $ (0.09)
----------- ----------- ----------- ----------- -----------
Extraordinary item -- -- -- 0.01 --
----------- ----------- ----------- ----------- -----------
Income/(loss) per common share $ 0.28 $ 0.41 $ 0.04 $ -- $ (0.09)
=========== =========== =========== =========== ===========
<CAPTION>
Years Ended March 31,
--------------------------------------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficiency) $ 864,061 $ 440,978 $ (500,199) $ (519,207) $ (506,519)
Total assets 1,941,141 1,648,066 824,606 872,442 780,825
Long-term debt 300,000 365,000 100,000 165,000 200,000
Redeemable preferred stock -- -- 606,643 576,643 546,643
Stockholders' equity (deficiency) 1,060,068 455,254 (1,118,364) (1,184,031) (1,176,507)
</TABLE>
(1) The earnings/(loss) per share is calculated on the weighted average number
of shares outstanding. For the years 1994 to 1996 the preferred stock dividends
of $30,000 per year were deducted from income/(loss) before extraordinary item
and income taxes.
(2) Income taxes recorded in accordance with FASB 109.
7
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
A number of the statements made by the Company in this report may be
regarded as "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995.
Forward-looking statements include, among others, statements concerning
the Company's outlook, pricing trends and forces within the industry, the
completion dates of capital projects, expected sales growth, cost
reduction strategies and their results, long-term goals of the Company and
other statements of expectations, beliefs, future plans and strategies,
anticipated events or trends and similar expressions concerning matters
that are not historical facts.
All predictions as to future results contain a measure of uncertainty and
accordingly, actual results could differ materially. Among the factors
that could cause a difference are: changes in the general economy; changes
in demand for the Company's products or in the costs and availability of
its raw materials; the actions of competitors; the success of our
customers; technological change; changes in employee relations; government
regulations; litigation, including its inherent uncertainty; difficulties
in plant operations and materials transportation; environmental matters;
and other unforeseen circumstances. A number of these factors are
discussed in the Company's filings with the Securities and Exchange
Commission.
Results of Operations 1998 Compared to 1997
Overview
The Company continued its growth in fiscal year 1998 with sales increasing
approximately 25% from the prior fiscal year and income before income
taxes increasing approximately 18% for the same period. This growth was
accomplished in conjunction with the Company's significant investment in
engineering, research and development for which expenditures increased
more than 85% from the prior fiscal year and with expenses for
investigating new markets for new products.
Engineering, research and development expenditures were directed primarily
toward finalization of the design of the T-47M for the U.S. Navy and new
products for other targeted markets. In August 1997, the Company was
awarded a major contract from the U.S. Navy for the T-47M IFF test sets.
This contract could be a source of significant revenues which could
include options for up to 1,300 units which the U.S. Navy can exercise
through calendar year 2001. In April 1998, the Company completed a second
design review with the U.S. Navy without any major technical issues
needing resolution. If field evaluations are successful, it is anticipated
that shipments could begin early in Company fiscal year 2000. However,
there can be no assurance that these options will be exercised by the U.S.
Navy.
8
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations 1998 Compared to 1997 (Continued)
Sales
For the fiscal year ended March 31, 1998 sales increased $793,568 (25.1%)
as compared to the same period last year. Government sales increased as a
result of contracts with the Government and from several Department of
Defense prime contractors. Commercial sales increased modestly as a result
of the continuing economic improvement of the aviation industry as a
whole. During fiscal year 1998, the Company fulfilled its obligation and
delivered the final units of the T-30CM to the U.S. Air Force. Sales
derived from this contract represented approximately 34% of total
government sales for fiscal year 1998 as compared to 46% in the prior
fiscal year. As a result of completing this substantial production
contract, sales will be lower during the first half of fiscal year 1999.
However, management believes that this decline is temporary and new
contracts can be obtained to increase sales (see discussion of T-47M
above).
In June 1998, the Company signed an exclusive agreement with Muirhead
Avionics based in the United Kingdom to represent the Company in Europe.
The Company has received a $323,000 contract from Muirhead for the T-48I.
Gross Margin
Gross margin increased $559,685 (30.4%) for the twelve months ended March
31, 1998 as compared to the twelve months ended March 31, 1997. The
increase in gross margin is primarily attributed to the higher sales
volume. Gross margin as a percent of sales was 60.6% for the year ended
March 31, 1998 as compared to 58.1% for the year ended March 31, 1997.
Operating Expenses
Selling, general and administrative expenses increased $55,412 (6.5%) for
the fiscal year ended March 31, 1998 as compared to the fiscal year ended
March 31, 1997. This increase is primarily the result of expenses incurred
related to the Company's efforts to explore new markets for its
technology, higher commission expenses to independent sales
representatives attributed to the higher sales, and expenses associated
with the Company's efforts to obtain ISO 9001 certification, partially
offset by the reversal of certain accounting adjustments.
Engineering, research and development expenditures increased $415,366 or
85.3% for the twelve month period ended March 31, 1998 as compared to the
same twelve-month period in the prior fiscal year. Engineering, research
and development expenditures represented 22.8% of sales for the year ended
March 31, 1998 as compared to 15.4% in the prior fiscal year. Research and
development expenditures in 1998 were directed primarily toward
finalization of the design of the T-47M for the U.S. Navy, new products
for other targeted markets, and maintaining its competitiveness within the
industry. During 1998, the Company continued to invest in engineering
through the expansion of its management and staff levels to handle the
increased research and development activity. Recruitment costs also
contributed to the increase in engineering, research and development
expenses in 1998.
9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations 1998 Compared to 1997 (Continued)
Interest
Interest income increased as a result of the higher cash balances, but
such increase was partially offset by interest on the convertible
debentures.
Income Before Taxes
Income before taxes increased $78,014 or 17.7% for the current fiscal year
as compared to the prior fiscal year even though the Company significantly
increased its expenditures in 1998 as discussed above.
Income Taxes
For the year ended March 31, 1998, the Company recorded income tax expense
of $207,379 and in the fourth quarter of fiscal year 1998 recorded an
income tax benefit of $266,098, reducing the valuation allowance to
reflect the deferred tax assets utilized to offset income tax expense. The
recognized deferred tax asset is based upon the Company's belief that it
will realize a portion of the deferred tax asset. The inability to obtain
new profitable contracts or the failure of the Company's engineering
development efforts could reduce estimates of future profitability in the
new term, which could affect the Company's ability to utilize the deferred
tax asset on the balance sheet. This amount is only an estimate and may
differ from actual results. See Note 8 in the Notes to Financial
Statements.
Results of Operations 1997 Compared to 1996
For the year ended March 31, 1997 sales increased $847,586 (36.6%) to
$3,165,674, as compared to the year ended March 31, 1996. This increase in
sales is attributed to the government segment and specifically sales
associated with a contract with the USAF. The uncertainty of the
commercial market continues and, as such, the Company has been emphasizing
its efforts in the government market. The Company has been very active in
responding to requests for proposal from the U.S. Government and continues
to modify its products to respond to these requests. The Company is also
seeking to expand its business into other markets to capitalize on its
test equipment technology. However, there can be no assurance that the
Company will be successful in this endeavor.
Gross margin increased $544,869 (42.1%) for the year ended March 31, 1997
as compared to the prior year. This increase is primarily attributed to
the higher volume. There were no significant price increases during 1997.
The gross margin as a percentage of sales for the year ended March 31,
1997 was 58.1% as compared to 55.9% for the year ended March 31, 1996 and
improved due to reductions in manufacturing cost.
Total selling, general and administrative expenses increased $114,181
(15.4%) for the year ended March 31, 1997 as compared to the previous
year. This increase is due to higher selling expenses associated with
increased commissions as a result of higher government sales, increased
professional fees, and employee incentive compensation. Engineering,
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations 1997 Compared to 1996 (Continued)
research and development expenses increased $96,485 (24.7%) due to
increased new product development efforts and employee incentive
compensation.
Net income before income taxes and income tax benefit was $441,084 for the
year ended March 31, 1997, as compared to $95,679 for the year ended March
31, 1996.
For the year ended March 31, 1997, the Company recorded an income tax
benefit of $340,200 as the Company believes it is more likely than not
that it will realize a portion of its net operating losses before they
expire. The inability to obtain new profitable contracts or the failure of
the Company's engineering development efforts could reduce estimates of
future profitability in the near term, which could affect the Company's
ability to utilize the deferred tax asset on the balance sheet or its loss
carryforwards. This amount is only an estimate and may differ from actual
future results. See Note 8 in the Notes to Financial Statements.
Net income for the year ended March 31, 1997 was $781,284 or $0.41 per
share as compared to $95,679 or $0.04 per share for the year ended March
31, 1996.
Liquidity and Capital Resources
At March 31, 1998 the Company had positive working capital of $864,061 as
compared to $440,978 at March 31, 1997. The Company's liquidity and
capital position was improved primarily by the Company's increased
profitability. However, during fiscal year 1998 the Company significantly
reduced its outstanding liabilities and, as a result, cash provided by
operations was $98,371 for the year ended March 31, 1998 as compared to
$464,557 for the year ended March 31, 1997. The decrease in accrued
expenses and accounts payable and increases in accounts receivable and
inventories was offset mostly by the Company's net income.
The Company's net worth has increased to $1,060,068 primarily as a result
of the Company's increased profitability and to a lesser extent the
repurchase of the redeemable preferred stock at a favorable discount. See
Note 7 to Notes to Financial Statements.
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 and on a
long term basis. At present, the Company does not expect to incur
significant needs for capital outside of its normal operating activities.
The Company has received a letter of interest from a major bank for a line
of credit in the amount of $350,000. This arrangement is expected to be
finalized in July 1998.
There was no significant impact on the Company's operations as a result of
inflation for the year ended March 31, 1998.
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Year 2000 Issue
The Company is reviewing its computer programs and systems to ensure that
the programs and systems will function properly and be Year 2000
compliant. The Company presently believes that the Year 2000 problem will
not pose significant operational problems for the Company's computer
systems. The estimated cost of these efforts are not expected to be
material to the Company's financial position or any year's result of
operations, although there can be no assurance to this effect. In
addition, the Year 2000 problem may impact other entities with which the
Company transacts business, and the Company cannot predict the effect of
the Year 2000 problem on such entities.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data
Pages
-----
(1) Financial Statements:
Report of Independent Accountants 14
Balance Sheets - March 31, 1998 and 1997 15
Statements of Operations - Years Ended
March 31, 1998, 1997 and 1996 16
Statements of Changes in Stockholders'
Equity/(Deficiency) - Years Ended March 31,
1998, 1997 and 1996 17
Statements of Cash Flows - Years Ended
March 31, 1998, 1997 and 1996 18
Notes to Financial Statements 19-28
(2) Financial Statement Schedule:
II - Valuation and Qualifying Accounts 29
Financial statement schedules not included in this annual report on Form 10-K
have been omitted because they are not applicable or the required information is
shown in the financial statements or notes thereto.
13
<PAGE>
Report of Independent Accountants
Stockholders and Board of Directors of Tel-Instrument Electronics Corp.
We have audited the financial statements and financial statement schedule
of Tel-Instrument Electronics Corp. listed in item 14(a) of this Form
10-K. These financial statements and the financial statement schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and the financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Tel-Instrument
Electronics Corp. as of March 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period
ended March 31, 1998, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
New York, New York
May 22, 1998
14
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Balance Sheets
March 31,
---------------------------
ASSETS 1998 1997
----------- ------------
Current assets:
Cash $ 585,281 $ 528,636
Accounts receivable, net of allowance
for doubtful accounts of $16,064
and $65,521 at March 31, 1998
and 1997, respectively 374,506 302,737
Inventories, net 383,030 352,173
Prepaid expenses and other current assets 24,017 6,944
Deferred income tax benefit - current 78,300 78,300
----------- -----------
Total current assets 1,445,134 1,268,790
Office and manufacturing equipment, net 79,321 45,492
Other assets 96,067 71,884
Deferred income tax benefit 320,619 261,900
----------- -----------
Total assets $ 1,941,141 $ 1,648,066
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable - related party - current portion $ 50,000 $ --
Convertible subordinated note - related party 15,000 --
Accounts payable 68,613 89,344
Accrued payroll, vacation pay
and deferred wages 211,400 342,432
Accrued expenses - related parties 46,730 70,480
Other accrued expenses 189,330 325,556
----------- -----------
Total current liabilities 581,073 827,812
-
Note payable - related party 300,000 350,000
Convertible subordinated note - related party -- 15,000
----------- -----------
Total liabilities 881,073 1,192,812
Stockholders' equity
Common stock, par value $.10 per share,
2,094,735 and 2,030,948 issued and
outstanding as of March 31, 1998
and 1997,respectively 209,476 203,097
Additional paid-in capital 3,921,670 3,901,052
Accumulated deficit (3,071,078) (3,648,895)
----------- -----------
Total stockholders' equity 1,060,068 455,254
----------- -----------
Total liabilities and stockholders' equity $ 1,941,141 $ 1,648,066
=========== ===========
The accompanying notes are an integral part of the financial statements
15
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Statements of Operations
For the years ended March 31,
-----------------------------------------
1998 1997 1996
----------- ------------ -----------
Sales - commercial, net $ 1,489,563 $ 1,140,779 $ 1,274,606
Sales - government, net 2,469,679 2,024,895 1,043,482
----------- ----------- -----------
Total Sales 3,959,242 3,165,674 2,318,088
Cost of sales 1,559,542 1,325,659 1,022,942
----------- ----------- -----------
Gross margin 2,399,700 1,840,015 1,295,146
----------- ----------- -----------
Operating expenses:
Selling, general and
administrative 909,505 854,093 739,912
Engineering, research
and development 902,250 486,884 390,399
----------- ----------- -----------
Total operating expenses 1,811,755 1,340,977 1,130,311
----------- ----------- -----------
Income from operations 587,945 499,038 164,835
Other income/(expense):
Interest income 27,872 5,183 --
Interest expense (60,669) (51,137) (57,570)
Interest expense -
related parties (36,050) (12,000) (12,100)
Other, net -- -- 514
----------- ----------- -----------
Income before income taxes 519,098 441,084 95,679
Income tax, net of income
tax benefit 58,719 340,200 --
----------- ----------- -----------
Net Income $ 577,817 $ 781,284 $ 95,679
=========== =========== ===========
Income per common share:
Basic $ 0.28 $ 0.43 $ 0.04
=========== =========== ===========
Diluted $ 0.28 0.41 0.04
=========== =========== ===========
Weighted average number
of shares outstanding
Basic 2,044,075 1,829,131 1,603,806
=========== =========== ===========
Diluted 2,070,503 1,894,737 1,603,806
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Statements Of Changes In Stockholders' Equity (Deficiency)
<TABLE>
<CAPTION>
Common Stock
-------------------------------- Additional
Number of Shares Paid-In Accumulated
Authorized Issued Amount Capital Deficit Total
---------- ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances March 31, 1995 2,000,000 1,603,806 $160,383 $3,181,444 $(4,525,858) $(1,184,031)
Net income 95,679 95,679
Repurchase of shares (12) (12)
Redeemable preferred stock
dividends accrued (30,000) (30,000)
--------- --------- -------- ---------- ----------- ----------
Balances March 31, 1996 2,000,000 1,603,806 $160,383 $3,151,432 $(4,430,179) $(1,118,364)
Increase in authorized shares 2,000,000
Net income 781,284 781,284
Exchange of redeemable
preferred stock for common
stock and stock purchase warrants 178,720 17,872 588,771 606,643
Issuance of common stock and
stock purchase warrants 178,720 17,872 116,168 134,040
Issuance of common stock in
connection
with the exercise of stock 68,035 6,803 44,223 51,026
purchase warrants
Issuance of common stock in
connection
with the exercise of stock
options 1,667 167 458 625
--------- --------- -------- ---------- ----------- ----------
Balances March 31, 1997 4,000,000 2,030,948 $203,097 $3,901,052 $(3,648,895) 455,254
Net income 577,817 577,817
Issuance of common stock in
connection
with the exercise of stock
purchase warrants 2,734 273 3,828 -- 4,101
Issuance of common stock in
connection
with the exercise of stock
options 61,053 6,106 16,790 -- 22,896
--------- --------- -------- ---------- ----------- ----------
Balances March 31, 1998 4,000,000 2,094,735 $209,476 $3,921,670 $(3,071,078) $1,060,068
========= ========= ======== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Statements Of Cash Flows
Increase (Decrease) In Cash
<TABLE>
<CAPTION>
For the years ended March 31,
-----------------------------------
1998 1997 1996
-----------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 577,817 $ 781,284 $ 95,679
Adjustments to reconcile net income to cash
provided by operating activities:
Deferred income taxes (58,719) (340,200) --
Depreciation and amortization 34,894 18,222 17,994
Provision for losses on accounts receivable (6,700) -- 15,000
Provision for inventory obsolescence -- 8,298 --
Changes in assets and liabilities:
(Increase)/decrease in accounts receivable (65,069) 56,757 (135,015)
(Increase)/decrease in inventories (30,857) (13,597) 135,399
(Increase)/decrease in other assets (41,256) (25,040) 17,916
(Decrease)/increase in accounts payable (20,731) (4,445) (152,313)
(Decrease)/increase in accrued expenses (291,008) (16,722) 25,477
--------- --------- ---------
Net cash provided by operating
activities 98,371 464,557 20,137
--------- --------- ---------
Cash flows from investing activities:
Additions to office and manufacturing equipment (68,723) (21,889) (19,601)
--------- --------- ---------
Net cash used in investing activities (68,723) (21,889) (19,601)
--------- --------- ---------
Cash flows from financing activities:
Repayment of notes payable -- -- (16,667)
Proceeds from issuance of shares and warrants -- 87,500 --
Proceeds from exercise of warrants and options 26,997 25,843 (12)
Repayment of convertible subordinated note -- (50,000) --
--------- --------- ---------
Net cash provided by (used in)
financing activities 26,997 63,343 (16,679)
--------- --------- ---------
Net increase (decrease) in cash 56,645 506,011 (16,143)
Cash - beginning of year 528,636 22,625 38,768
--------- --------- ---------
Cash - end of year $ 585,281 $ 528,636 $ 22,625
========= ========= =========
Non-cash investing and financing activities:
Redeemable preferred stock dividends accrued $ -- $ -- $ 30,000
========= ========= =========
Conversion of accrued expenses to
convertible subordinated note -- 250,000 --
========= ========= =========
Conversion of accrued expenses for
common stock in lieu of payment -- 72,348 --
========= ========= =========
Exchange of redeemable preferred
stock for common stock and
stock purchase warrants
(see note 7)
Supplemental information:
Interest paid $ 77,666 $ 219,481 $ 20,153
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements
1. Business and Organization
Tel-Instrument Electronics Corp. ("Tel" or the "Company") has been in
business since 1947. The Company designs, manufactures, and markets
avionic test equipment for the general and commercial aviation markets and
for the government/military aviation markets. The Company's instruments
are used to test navigation and communications equipment installed in
aircraft. The Company sells its equipment to both the domestic and
international markets.
2. Summary of Significant Accounting Policies
Revenue Recognition:
Revenues are recognized at the time of shipment and provisions, when
appropriate, are made where the right to return exists. Revenue under
service contracts is accounted for as the services are performed.
Cash and Cash Equivalents:
For purposes of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash equivalents are carried at
cost which approximates market value.
Financial Instruments:
The carrying amounts of cash and cash equivalents and other current assets
and liabilities approximate fair value due to the short-term maturity of
these investments. The Company does not determine a fair value for its
related party debt since such debt does not have a readily determinable
market.
Concentrations of Credit Risk:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable. The Company's customer base is primarily comprised of airlines
and the U.S. Government. As of March 31, 1998, the Company believes it has
no concentration of credit risk with its accounts receivable.
Inventories:
Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out basis. In accordance with industry practice,
service parts inventory is included in current assets, although parts are
carried for established requirements during the serviceable lives of the
products and, therefore, are not expected to be sold within one year.
19
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
Office and Manufacturing Equipment:
Office and manufacturing equipment are stated at cost. Depreciation and
amortization is provided on a straight-line basis over periods ranging
from 3 to 10 years.
Maintenance, repairs, and renewals that do not materially add to the value
of the equipment nor appreciably prolong its life are charged to expense
as incurred.
Leasehold improvements are amortized over the term of the lease or the
useful life of the asset, whichever is shorter.
When assets are retired or otherwise disposed, the cost and related
accumulated depreciation are removed from the accounts and the resulting
gain or loss is included in the Statements of Operations.
Research and Development Costs:
Research and development costs are expensed as incurred.
Income/(Loss) Per Common Share:
During fiscal year 1998, the Company adopted Statement of Financial
Accounting Standard No. 128 "Earnings Per Share" (SFAS 128). SFAS 128
supercedes Accounting Principles Board Opinion No. 15, Earnings Per Share
and specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock. SFAS
128 is effective for financial statements ending after December 15, 1997.
The Company's basic income per share is based on net income for the
relevant period, divided by the weighted average number of common shares
outstanding during the period. Diluted income per share is based on net
income for the relevant period, divided by the weighted average number of
common shares outstanding during the period, including common share
equivalents, such as outstanding stock options and warrants of 26,428 and
80,624, respectively, for fiscal years 1998 and 1997 using the treasury
stock method. In fiscal 1996, stock dividends were considered when
determining per share amounts.
Accounting for Income Taxes:
Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and
are measured using enacted tax rates and IAWs that will be in effect when
such differences are expected to reverse. The measurement of deferred tax
assets is reduced, if necessary, by a valuation allowance for any tax
benefit which is not expected to be realized. The effect on deferred tax
assets and liabilities of a change in tax rate is recognized in the period
that such tax rate changes are enacted.
20
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
Stock Option Plan:
Prior to April 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On April 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), which permits companies to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively SFAS 123 allows
companies to continue to apply the provisions of APB Opinion No. 25 and
provide pro forma net income and pro forma earnings per share disclosures
for employee stock option grants made in fiscal year 1996 and future years
as if the fair-value-based method as defined in SFAS No. 123 has been
applied. The Company has elected to continue to apply the provisions of
APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS
No. 123.
Long-Lived Assets To Be Disposed Of:
In accordance with SFAS No. 121, the Company reviews long-lived assets for
impairment whenever events or changes in business circumstances occur that
indicate that the carrying amount of the assets may not be recoverable.
The Company assesses the recoverability of long-lived assets held and to
be used based on undiscounted cash flows, and measures the impairment, if
any, using discounted cash flows. The Company has not recorded any
impairment in fiscal year 1998.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The most significant estimates include taxes, inventory and accounts
receivable valuation.
Reclassification
Certain amounts have been reclassified to conform to the current year
presentation.
21
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
3. Accounts Receivable
The following tabulation sets forth the components of accounts receivable:
March 31,
-----------------------
1998 1997
--------- --------
Government $ 93,440 $189,124
Commercial 297,130 179,134
Less: Allowance for doubtful accounts (16,064) (65,521)
-------- --------
$374,506 $302,737
======== ========
4. Inventories
Inventories consist of:
March 31,
-----------------------
1998 1997
-------- --------
Purchased parts $253,616 $213,842
Work-in-process 165,034 206,750
Less: Reserve for obsolescence (35,620) (68,419)
-------- --------
$383,030 $352,173
======== ========
The work-in-process includes $27,152 and $71,943 for government contracts
at March 31, 1998 and March 31, 1997, respectively.
5. Office and Manufacturing Equipment
March 31,
------------------------
1998 1997
--------- ---------
Leasehold Improvements $ 53,294 $ 39,657
Machinery and equipment 533,457 487,672
Sales equipment 79,964 70,663
Less: Accumulated depreciation (587,394) (552,500)
--------- ---------
$ 79,321 $ 45,492
========= =========
22
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
6. Accrued Expenses
Accrued payroll, vacation pay and deferred wages consists of the
following:
March 31,
-----------------------
1998 1997
-------- --------
Deferred salary and wages and interest $ 31,114 $169,955
Accrued vacation pay 64,813 53,157
Accrued salary, and payroll taxes 12,503 24,851
Accrued profit sharing 102,970 94,469
-------- --------
$211,400 $342,432
======== ========
Through March 31, 1994, the Company maintained a salary and wage deferral
plan which was applicable for all employees. The deferrals were scaled in
proportion to an employees salary level. Interest is accrued on the amount
of deferred salary and wages. Such deferred amounts have been recognized
as expense in the period incurred. The Company's management level
employees also deferred a portion of their salaries in the fiscal years
ending March 31, 1997 and March 31, 1996.
Other accrued expenses of $189,330 and $325,556 at March 31, 1998 and
1997, respectively, consist primarily of professional service costs for
legal, accounting and consulting services and of product related costs,
such as warranty.
7. Redeemable Preferred Stock
In July 1996, a group of the Company's employees and creditors (the
"Group") agreed to purchase the Company's outstanding redeemable preferred
stock (the "Preferred Stock") from the preferred stockholder. The Group
purchased the Preferred Stock from the preferred stockholder for $111,700
and exchanged the Preferred Stock for unregistered shares, legended, of
the Company's common stock and common stock purchase warrants (the
warrants). The Company had been previously obligated to the Group for
certain incurred liabilities and these funds were used by the Group to
purchase the Preferred Stock. The Company's Board of Directors approved
the exchange of the Preferred Stock and accrued dividends for 178,720
newly issued unregistered shares, legended, of common stock and warrants
to purchase an additional 35,744 shares of common stock. A total of 35,025
warrants to purchase 35,025 shares of common stock were exercised and the
remaining 719 warrants are exercisable at a price of $2.25 until March 31,
1999.
The issuance of 178,720 common shares was recorded based upon the
estimated market value of the stock at the time of the transaction. The
difference between the market value and par value was credited to
additional paid-in capital. The redemption of the Preferred Stock in
exchange for common stock resulted in a difference of $494,943
23
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
between the carrying value of the Preferred Stock ($606,643) and the
market value ($111,700) of the Company's common stock and such difference
was recorded as an increase to additional paid-in capital. Based upon the
application of an option pricing model, the warrants were estimated to
have a fair value of $6,434 which amount was recorded in connection with
this transaction. The exchange of the Preferred Stock and accrued
dividends for unregistered shares, legended, of common stock and warrants
was recorded as a non-cash financing transaction.
8. Income Taxes
The benefit for income taxes is comprised of the following:
March 31, March 31,
1998 1997
--------- ----------
Current:
Federal $ -- $ --
State and Local -- --
-------- ---------
Total Current Benefit $ -- $ --
======== =========
Deferred:
Federal $ (8,842) $(299,000)
State and Local (49,877) (41,200)
-------- ---------
Total Deferred Benefit $(58,719) $(340,200)
======== =========
The components of the Company's deferred taxes at March 31, 1998 and 1997
are as follows:
March 31, March 31,
1998 1997
---------- ----------
Net operating loss carryforwards $1,085,000 $1,222,000
Asset reserves 21,000 53,000
Deferred wages and accrued interest 153,000 206,000
Provision for estimated expenses 69,000 70,000
---------- ----------
Deferred tax asset 1,328,000 1,551,000
Less, valuation allowance 929,081 1,210,800
---------- ----------
Deferred tax asset $ 398,919 $ 340,200
========== ==========
As of March 31, 1998, the Company has Federal tax net operating loss
carryforwards of approximately $3,140,000 which begin to expire in 2002.
As of March 31, 1998 and 1997,
24
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
the Company reduced the valuation allowance to reflect the deferred tax
assets utilized to offset income tax expense. During 1998, the Company, in
accordance with SFAS 109, reduced the valuation allowance to recognize in
the financial statements a deferred tax asset of $398,919 at March 31,
1998. The recognized deferred tax asset is based upon the expected
utilization of net operating loss carryforwards as the Company believes it
is more likely than not that it will realize a portion of its net
operating losses before they expire. The remaining valuation allowance
consists of the estimated amount of deferred tax assets which may not be
realized due to the expiration of net operating losses. The foregoing
amounts are management's estimates and the actual results could differ
from those estimates. Future profitability in this competitive industry
depends on continually obtaining and fulfilling new profitable contracts
and modifying products. The inability to obtain new profitable contracts
or the failure of the Company's engineering development efforts could
reduce estimates of future profitability, which could effect the Company's
ability to utilize the deferred tax asset on the balance sheet or its loss
carryforwards.
A reconciliation of the income tax expense at the statutory Federal tax
rate of 34% to the income tax expense recognized in the financial
statements is as follows:
1998 1997
---- ----
Income tax expense - statutory rate $176,500 $ 150,000
Income tax expenses - state and local,
net of federal benefit (32,919) 27,200
Reduction of valuation allowance (183,731) (542,600)
Other (18,569) 25,200
-------- ---------
Income tax benefit recognized in
financial statements $(58,719) $(340,200)
======== =========
9. Related Party Transactions
On March 31, 1997, the Company's Chairman/President renegotiated the terms
of the non-current note payable-related party. This note, along with
$250,000 of other accrued expenses due to the Company's
Chairman/President, were converted into seven $50,000 convertible
subordinated notes (the "Notes") totaling $350,000. The Notes become due
in consecutive years beginning March 31, 1999 with the last note due March
31, 2005. The Notes bear interest at a rate of 10% per annum, payable
semi-annually on the last day of September and March of each year. The
Company is required to prepay the outstanding balance of the Notes and any
accrued interest thereon, if the Company sells all or substantially all of
its assets. The Notes can be converted into newly issued common shares of
the Company at the conversion price of $1.50 per share until March 31,
1998, and thereafter at $2.50 per share. The conversion prices shall be
adjusted for any stock dividends, stock issuances or capital
reorganizations. The Notes may be redeemed by the Company prior to
maturity upon giving written notice of not less than 30 days or more than
60 days at a redemption price equal to 120% of the principal if redeemed
two years or more prior to the maturity date or 110% of the principal if
redeemed more than one year, but less than two years prior to the maturity
date.
25
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
9. Related Party Transactions (Continued)
Accrued payroll, vacation pay and deferred wages and related interest
includes, $21,591 and $114,555 at March 31, 1998 and 1997, respectively,
which is due to officers of the Company.
Accrued expenses-related parties consists of interest and expenses due to
an officer/stockholder of the Company of approximately $6,000 and $16,000
at March 31, 1998 and 1997, respectively.
In addition, accrued expenses-related parties includes interest and
professional fees of approximately $41,000 and $54,000 due to a second
non-employee officer/stockholder of the Company at March 31, 1998 and
1997, respectively. Tel has obtained professional services from this
officer/stockholder with the related fees amounting to approximately
$35,600, $35,600 and $21,000 which are included in selling, general and
administrative expenses for the years ended March 31, 1998, 1997 and 1996,
respectively.
The Company's $30,000 convertible subordinated note-related party matured
on March 31, 1997. The Company renegotiated such note and satisfied
$15,000 of this obligation and extended the maturity date of the remaining
$15,000 until March 31, 1999. This note accrues interest semi-annually at
a rate of 7%. The subordinate note is for past professional fees and
services converted into a note payable due to an officer/stockholder of
the Company. The notes are convertible to common stock at the option of
the holder at $1.50 per share, at any time prior to maturity.
10. Leases
The Company rents its office space and manufacturing facility under a
lease agreement expiring in August, 1998. Future minimum lease payments
are $18,608 in fiscal year 1999. Under terms of the lease, the Company
pays all real estate taxes and utility costs for the premises. The Company
is currently negotiating a long-term lease on the same premises.
Total rent expense, including real estate taxes, was approximately
$80,000, $80,000, and $84,000 for the years ended March 31, 1998, 1997 and
1996, respectively.
11. Significant Customer Concentrations
One domestic distributor accounted for 15% of commercial sales for the
year ended March 31, 1998. No distributor or end user customer accounted
for more than 10% of commercial sales for the year ended March 31, 1997.
Sales to two major commercial distributors accounted for 14% and 12% of
total commercial revenue for the year ended March 31, 1996. Foreign
commercial sales were 21%, 14% and 27% of total commercial sales for the
years ended March 31, 1998, 1997 and 1996, respectively.
26
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
11. Significant Customer Concentrations (Continued)
Government sales to the USAF were 34% and 46% of total government sales,
respectively, for the years ended March 31, 1998 and 1997. Government
sales to the Canadian Defense Forces and US Army for the fiscal year ended
March 31, 1996 were 30% and 18% of total government sales, respectively.
12. Stock Option Plan
The Company has a stock option plan that provides for the granting of
options to employees and directors. Activity during 1998, 1997 and 1996 is
summarized below (in number of options):
1998 1997 1996
------ ------- -------
Held at beginning of year 93,219 107,886 54,153
Granted -- 6,933 53,733
Exercised 61,053 1,667 --
Canceled or expired -- 19,933 --
------ ------- -------
Held at end of year 32,166 93,219 107,886
====== ======= =======
As of March 31, 1998, the Company had 32,166 options outstanding of which
25,233 are exercisable at $0.375 per share with a weighted average
remaining contractual life of 2.1 years and 6,933 are exercisable at $0.72
per share with a weighted average remaining contractual life of 3.1 years.
For the years ended March 31, 1998, 1997 and 1996 16,323, 59,130 and
38,100 of options outstanding and exercisable.
The per share weighted-average fair value of stock options granted during
1997 was $0.64 on the date of grant using the Black Scholes option-pricing
model with the following weighted-average assumptions: expected dividend
yield of 0.0%, risk-free interest rate of 5%, volatility factor of 135%,
and an expected life of 5 years. No stock options were granted in 1998.
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its stock options and, accordingly, no compensation expense
has been recognized for its stock options in the financial statements. Had
the Company determined compensation cost based on the fair market value at
the grant date for its stock options under SFAS No. 123, the Company's net
income would not have been materially affected. The pro forma amounts are
indicated below:
27
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
12. Stock Option Plan (Continued)
1998 1997
--------- --------
Net income - as reported $577,817 $781,284
Net income - pro forma 571,840 775,526
Basic earnings per share - as reported $ 0.28 0.41
Basic earnings per share - pro forma 0.28 0.41
Diluted earnings per share - as reported $ 0.28 0.41
Diluted earnings per share - pro forma 0.28 0.41
In accordance with SFAS No. 123, pro forma net income and earnings per
share data reflect only options granted in 1996 and 1997. Therefore, the
full impact of calculating compensation expense for stock options under
SFAS No. 123 is not reflected in the pro forma amounts presented above
since compensation expense for options granted prior to April 1, 1995 was
not considered.
On June 3, 1998, the Board adopted a new stock option plan covering
250,000 shares subject to approval by the shareholders.
13. New Accounting Pronouncements
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, was issued in June 1997 and is effective for fiscal
years beginning after December 15, 1997. This pronouncement establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The
Company will adopt this pronouncement in fiscal year 1999 and does not
expect its implementation will have a material effect on the Company's
financial statements as currently presented.
Statements of Financial Accounting Standards No. 131, Disclosures About
Segments of an Enterprise and Related Information, was also issued in June
1997 and is effective for fiscal periods beginning after December 15,
1997. This pronouncement established the way in which publicly held
business enterprises report information about operating segments in annual
financial statements and interim reports to stockholders. The Company is
in the process of determining the impact of this statement on the
Company's financial statements.
28
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Schedule II - Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Balance at
Description of Period Expenses Accounts Deductions End of Year
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended March 31, 1996:
Allowance for doubtful
accounts $ 51,090 $15,000 $66,090
======== ======= =======
Allowance for obsolete
inventory $104,036 $(1,673) $42,242 (1) $60,121
======== ======= ======= =======
Year ended March 31, 1997:
Allowance for doubtful
accounts $ 66,090 $ 569 (2) $65,521
======== ======= =======
Allowance for obsolete
inventory $ 60,121 8,298 68,419
======== ======= =======
Year ended March 31, 1998:
Allowance for doubtful
accounts $ 65,521 $(6,700) 42,757 (2) $16,064
======== ======= ======= =======
Allowance for obsolete
inventory $ 68,419 $ -- $32,799 (1) $35,620
======== ======= ======= =======
</TABLE>
(1) Amounts represent disposals of obsolete inventory.
(2) Amount represents write off of accounts receivable.
29
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
No disagreements arose between the Registrant and its independent
auditors' regarding accounting and financial matters during the twelve
months preceding March 31, 1998.
PART III
Item 10. Directors and Executive Officers of the Registrant
DIRECTORS AND EXECUTIVE OFFICERS
Year First
Elected a
Name (age) Position Director
---------- -------- --------
Harold K. Fletcher Chairman of the Board, 1982
(73) President and Chief
Executive Officer
since 1982.
George J. Leon Director; Investment 1986
(54) Manager and beneficiary of
the George Leon Family Trust
(investments) since 1986.
Robert H. Walker Director; Retired; Executive Vice 1984
(62) President, Robotic Vision
Systems, Inc. (design and
manufacture of robotic
vision systems),
1983-1997.
There are no family relationships between any of the Directors and
Officers of the Registrant.
In June 1998, the Board of Directors appointed two additional members to
the Board of Directors until the next shareholders meeting.
Officers
Donald S. Bab Secretary and General Counsel since 1982.
Richard J. Wixson Vice President of Manufacturing, employed
by Tel in his present capacity since 1987.
30
<PAGE>
Item 11. Executive Compensation
The following table and accompanying notes set forth information
concerning compensation for the fiscal years ended March 31, 1997 1996 and
1995.
Stock Other
Name and Principal Position Year Salary (1) Options Compensation
- ------------------------------------------------------------------------------
Harold K. Fletcher 1998 $100,000 $ 20,000 (2)
Chairman of Board 1997 100,000 --
President and Chief 1996 86,250 --
Executive Officer
(1) Salaries includes wages deferred in 1997 and 1996 of $5,193 and $1,250,
respectively.
(2) Represents bonus based on the Company's profitability.
31
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following tables set forth, as of March 31, 1997, the number and
percentage of the outstanding shares of common stock, beneficially owned
by each director and by each beneficial owner of 5% or more of such
shares, and by all officers and directors as a group.
Number of Shares Percentage
Name and Address Beneficially Owned of Class (1)
---------------- ------------------ ------------
Harold K. Fletcher, Director 496,102 (2) 23.7%
728 Garden Street
Carlstadt, New Jersey 07072
George J. Leon, Director 304,133 (3) 14.5%
116 Glenview
Toronto, Ontario
Canada M4R1P8
Robert H. Walker, Director 22,316 (4) 1.1%
425 Robro Drive East
Hauppague, New York 11788
Donald S. Bab, Secretary
330 Madison Avenue
New York, NY 10017 65,634 3.1%
All Officers and Directors 929,774 (5) 44.1%
as a Group (6 persons)
(1) The class includes 2,094,735 shares outstanding. The common stock
deemed to be owned which is not outstanding but subject to currently
exercisable options is deemed to be outstanding for determining the
percentage of all outstanding stock owned.
(2) Includes 24,681 shares owned by Mr. Fletcher's wife, 4,254 shares
owned by his son, 261,295 owned by a family partnership in which Mr.
Fletcher is a partner.. Mr. Fletcher disclaims beneficial ownership
of the shares owned by his wife and son and by the partnership.
(3) Includes 299,516 shares owned by the George Leon Family Trust, of
which Mr. Leon is a beneficiary, and 4,617 shares subject to
currently exercisable stock option. Mr. Leon disclaims beneficial
ownership of the shares owned by the trust.
(4) Includes 5,983 shares subject to currently exercisable stock
options.
32
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(Continued)
(5) Includes 12,822 shares subject to currently exercisable options held
by all executive offices and directors of the Company (including
those individually named above).
Item 13. Certain Relationships and Related Transactions
The disclosures required by this item are contained in Note 9 to the
financial statements included on pages 24-25 of this document.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K
a.) The following documents are filed as a part of this report:
Pages
-----
(1) Financial Statements:
Report of Independent Accountants 14
Balance Sheets - March 31, 1998 and 1997 15
Statements of Operations - Years Ended
March 31, 1998, 1997 and 1996 16
Statements of Changes in Stockholders'
Equity/(Deficiency) - Years Ended March 31,
1998, 1997 and 1996 16
Statements of Cash Flows - Years Ended
March 31, 1998, 1997 and 1996 17
Notes to Financial Statements 19-28
(2) Financial Statement Schedule:
II - Valuation and Qualifying Accounts 29
(3) Distributor Agreement with Muirhead
Avionics & Accessories Ltd.
Naval Air Warfare Center Aircraft Division
Contract No. N68335-97-D-0060
b.) No reports on Form 8-K were filed during the fourth quarter of 1998.
33
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 10-K
(Continued)
c. ) Exhibits identified in parentheses below on file with the Securities
and Exchange Commission, are incorporated herein by reference as
exhibits hereto.
* (3.1) Tel-Instrument Electronics Corp.'s Certificate of
Incorporation, as amended.
* (3.2) Tel-Instrument Electronics Corp.'s By-Laws,
as amended.
* (3.3) Tel-Instrument Electronics Corp.'s Restated
Certificate of Incorporation dated November 8, 1996.
* (4.1) Specimen of Tel-Instrument Electronics Corp.'s
Common Stock Certificate.
* (4.2) Specimen of Tel-Instrument Electronics Corp.'s
Convertible Preferred Stock Certificate.
(10.1) Lease dated August 15, 1994, by and between Registrant
and 210 Garibaldi Avenue Corp.
(10.2) 7%, $30,000 Convertible Subordinated Note dated March
31, 1992 between Registrant and Donald S. Bab..
** (27.) Financial Data Schedule
* Incorporated by reference to Registration 33-18978 dated November
7, 1988.
** Financial Data Schedule which is submitted electronically to the
Securities and Exchange Commission for information only and is
not filed.
The Company will furnish, without charge to a security holder, upon
request, copy of the documentary portions which are incorporated by
reference, and will furnish any other exhibit at cost.
34
<PAGE>
TEL-INSTRUMENT ELECTRONICS CORP.
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
(Registrant)
Dated: June 22, 1998 By: /s/ Harold K. Fletcher
----------------------
President and Director
(Principal Executive
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated and by
signature hereto.
Signature Title Date
--------- ----- ----
/s/ Harold K. Fletcher Director June 22, 1998
---------------------------
/s/ Harold K. Fletcher
/s/ George J. Leon Director June 22, 1998
---------------------------
/s/ George J. Leon
/s/ Robert H. Walker Director June 22, 1998
---------------------------
/s/ Robert H. Walker
Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered
Securities Pursuant to Section 12 of the Act.
No annual report to security holders covering the fiscal year ended March
31, 1997, except in the form set forth in this Form 10-K, has been
prepared. No proxy statement, form of proxy, or other proxy soliciting
material has been sent to shareholders with respect to any annual or other
meeting of shareholders. No annual report or proxy material is
contemplated.
35
<PAGE>
DISTRIBUTOR AGREEMENT
Agreement made this 15th day of May 1998, by and between Muirhead Avionics &
Accessories Ltd., having their principle place of business at 16, Imperial Way,
Purley Way, Croydon, Surrey, CR0 4RR, Great Britain (hereinafter called
DISTRIBUTOR) and Tel-Instrument Electronics Corp. whose place of business is
located at 728 Garden Street, Carlstadt, NJ 07072, USA (hereinafter called the
COMPANY).
WHEREAS the COMPANY desires to secure competent representation and;
WHEREAS the DISTRIBUTOR is an independent and bona fide established selling
concern.
NOW THEREFORE, the parties hereto, in consideration of the mutual covenants
herein expressed, and intending to be legally bound, do hereby agree as follows;
1. DISTRIBUTOR
(a) The DISTRIBUTOR is appointed as COMPANY'S exclusive sales DISTRIBUTOR for
sales within the DISTRIBUTOR'S territory of the COMPANY'S products. The
DISTRIBUTOR will not promote, sell, or offer for sale, any products which
complete with those offered by the COMPANY.
(b) The DISTRIBUTOR has adequate knowledge of the products, services, fields
of competency, and organization of the COMPANY'S products and/or services.
(c) The DISTRIBUTOR agrees to promote vigorously the sale of products in the
Territory and to comply with the laws of that Territory and applicable
military regulations in that Territory.
2. PRODUCTS
Products are defined as Commercial and Military Avionics Test Equipment.
3. MARKET & TERRITORY
UNITED KINGDOM, THE IRISH REPUBLIC, FRANCE, GERMANY AND POLAND are to be the
exclusive designated areas of operations of the DISTRIBUTOR for the sale of the
products of the COMPANY. Unless specifically named, any colonies, island groups,
or provinces associated with the territory are not included in the exclusive
designated area of operations.
4. DURATION
This agreement shall remain valid for a period of 1 (one) year beginning the
15th day of May 1998, and ending one calendar year later. This agreement may be
terminated by the DISTRIBUTOR or by the COMPANY without cause by written notice;
and in the event of such termination, the effective date of termination shall be
90 (ninety) days after which notice
1
<PAGE>
was sent by certified mail, return receipt requested, to the address shown at
the beginning of this agreement. This agreement may be terminated immediately by
the COMPANY with cause by written notice sent by certified mail, return receipt
requested. Within 30 (thirty) days of the date of termination, the DISTRIBUTOR
shall submit a list of pending quotations/projects to the COMPANY.
In the spirit of this mutual endeavour, the two parties should consult prior to
terminating the Agreement in an attempt to resolve any differences that might
arise.
The COMPANY and the DISTRIBUTOR shall mutually determine the validity of each
listed quotation/project. For a period of six months after termination, COMPANY
will compensate DISTRIBUTOR as outlined in paragraph 6 on orders received from
customers within the territory that are named on the quotation/project list.
This agreement shall be automatically renewed each year thereafter unless
cancelled by either party, in writing, 30 (thirty) days prior to the end of each
successive year.
(a) The two parties will review their performance and the other party's 60
days prior to the yearly anniversary. The two parties will exchange these
reviews no later than 45 days prior to the anniversary.
(b) Termination does not affect obligation existing either for payment of
money or as indicated below (e.g. paragraphs 8, 10, 14, 18).
(c) The DISTRIBUTOR will not make or sell COMPANY product after termination.
(d) The COMPANY is free to appoint a new DISTRIBUTOR in the TERRITORY in the
event of termination as outlined above.
(e) In the event the COMPANY terminates the Agreement, it will buy back the
DISTRIBUTOR'S inventory.
5. PRODUCT WARRANTY
Product warranty will be the responsibility of the DISTRIBUTOR in recognition of
which an additional 4 percent discount is agreed in addition to the discount in
paragraph 6 below.
6. DISCOUNT
(a) The COMPANY shall offer a 15 percent discount from its price list on all
products F.O.B. Carlstadt, N.J., USA.
(b) On Special Project sales where a substantial part of the overall sale is
purchased by the COMPANY from non-exclusive vendors, the commission rate
shall be by negotiation at the earliest possible opportunity.
(c) On sales where more than one DISTRIBUTOR and/or more than one territory is
involved, the total commission shall be split by negotiation.
2
<PAGE>
(d) If credit is granted or refund is made to the customer by the COMPANY
because of returned products, any commissions already paid on such
returned merchandise shall be deducted from the next commission payment or
refunded by the DISTRIBUTOR, within 30 (thirty) days, whichever occurs
first. Freight costs associated with the return of merchandise shall be
prepaid. In the case of any disagreement, the COMPANY shall be the final
arbiter at no cost to any of the parties involved.
(e) The term "order" is defined to mean any purchase order, OEM agreement,
annual contract or any other type of contractual agreement for the
products from the TERRITORY. All sales are deemed made in Carlstadt, N.J.,
USA,
7. CREDIT
(a) Purchases of the COMPANY'S products by the DISTRIBUTOR for resale within
the DISTRIBUTOR'S assigned territory shall be on a net 45 day basis with
approved credit, unless other terms have been arranged.
(b) On direct sales by the COMPANY to customers within the DISTRIBUTOR
territory, the DISTRIBUTOR agrees to protect the COMPANY to the best of
its ability against loss, by reporting any available credit information
and by assisting in collection when requested by COMPANY. The DISTRIBUTOR
agrees to forward immediately to the COMPANY any and all monies or
remittances in any form which it may collect for the COMPANY or which may
be placed in its hands by customers and is owed to the COMPANY.
8. ADVERTISING MATERIAL
The COMPANY will supply the DISTRIBUTOR, at no charge, with literature,
catalogs, advertising reprints, and other promotional material that becomes
available for distribution from time to time. This material will remain the
property of the COMPANY until it is distributed to customers in the territory.
Upon termination of this Agreement, all undistributed material will be returned
to the COMPANY. The DISTRIBUTOR will treat this promotional material, as well as
pricing and other information, as proprietary to Tel-Instruments Corp. and
highly confidential. Shipping charges for rush or extraordinary requests for
promotional material will be paid for by DISTRIBUTOR.
9. EXPENSE
The DISTRIBUTOR shall pay all costs and expenses incurred by the DISTRIBUTOR in
its territory, or otherwise including, but not limited to, maintenance of sales
office, telephone calls and telefax/telexes (including those sent to COMPANY),
travel and entertainment expenses, payment of personnel expenses pursuant to the
furtherance of sales, mailings, promotional activities and advertising, taxes
and other expenses of conducting its business.
3
<PAGE>
10. RESTRICTIONS OF AUTHORITY
(a) Neither party shall have authority to bind the other to any contract of
employment, and each party is solely responsible for its own salesmen and
for their acts and omission and the things done by them. Neither party
shall have authority to endorse the other party's checks or commercial
paper or carry bank accounts of the other.
(b) Neither party shall have authority under any circumstances either
expressly or by implication to incur any liability or obligations on the
others behalf.
(c) Neither party shall have authority to perform any of the actions
prohibited by this Agreement or to represent that it has the authority to
incur any liability or obligation of the other's behalf neither agent nor
joint venture.
11. SALES LEADS
With regards to sales leads, the following is agreed;
(a) The COMPANY will furnish the DISTRIBUTOR with copies, or originals, of
pertinent information concerning enquiries received by it from customers
in the TERRITORY.
(b) The DISTRIBUTOR will follow-up these sales leads provided by the COMPANY.
(c) The DISTRIBUTOR will keep the COMPANY currently informed as to field
conditions and the results of follow-up methods used by the DISTRIBUTOR.
This information should reflect feedback from the customers as to
additional requirements, desired modifications or optional equipment.
Copies of visit reports will be forwarded to COMPANY on a monthly basis.
Quarterly projections on future sales will be made by DISTRIBUTOR to
COMPANY.
(d) If the COMPANY receives a sales lead from DISTRIBUTOR'S territory, the
COMPANY will immediately notify DISTRIBUTOR of this potential sale and
refer enquiry to DISTRIBUTOR by telefax. If no response is received by the
COMPANY from DISTRIBUTOR within 10 (ten) days after receipt of lead,
COMPANY will proceed with actions to secure the sale. In such instances
where DISTRIBUTOR fails to follow-up within 10 (ten) days, COMPANY will
perform all sales functions and retain any commission that may result from
that sale.
12. OTHER DISTRIBUTORS
The COMPANY shall not at any time during the term of this Agreement, without
previous written consent of the DISTRIBUTOR, appoint any other DISTRIBUTOR(s) in
the territory listed in paragraph 2 of this Agreement to sell for the COMPANY
any of its listed products.
4
<PAGE>
13. TRADE SHOWS
The DISTRIBUTOR is expected at its own cost to attend and participate in trade
shows and industry meetings, shows and conventions in the territory that in its
considered judgement will advance the sales of the products of the COMPANY.
14. CONFIDENTIAL INFORMATION
The DISTRIBUTOR shall not make use or disclosure, except for the benefit of the
COMPANY, at any time during the term of this Agreement or for five years
thereafter, of any information, knowledge or data which they may obtain or
receive from Tel concerning inventions and improvements, business, engineering
and/or production methods and/or trade secrets of the COMPANY related to this
product line that is not already in the public domain.
15. INDEPENDENT CONTRACTOR
The COMPANY shall exercise no control over nor have the right to control the
activities or operations of the DISTRIBUTOR except as provided hereunder; and
the DISTRIBUTOR shall be considered an independent contractor and not a servant
or employee of the COMPANY. Neither party is responsible for the taxes of the
other party.
16. ASSIGNMENT
This Agreement shall not be transferable or assignable by the DISTRIBUTOR
without the prior consent of the COMPANY. Any attempt to transfer shall be null
and void.
17. RECORD KEEPING
The DISTRIBUTOR agrees to comply with US Export Administration Regulations
record keeping provision as described in Part 787.13 of the Regulations.
18. GENERAL CONDITIONS
(a) The Domestic Laws of the State of New York shall apply to the parties
hereto in any and all questions arising hereunder regardless of the
jurisdiction in which any action or proceeding may be initiated or
maintained.
Any legal action or proceeding arising out of or relating to this
agreement may be initiated in the Courts of the State of New York or of
the United States of America in the Southern District of New York and the
parties submit to the jurisdiction of each such court on any such action.
Each party will be responsible for its legal fees.
All disputes between the two parties that cannot be amicably settled that
represents less than $75,000.00 will be brought before the American
Arbitration Association in accordance with their rules.
5
<PAGE>
(b) Any provisions of the Agreement which in any way violates Federal, State
or Local Laws or regulations shall not be deemed a part of the Agreement
and the remainder of this Agreement shall continue in full force and
effect.
(c) No amendments, changes, revisions or discharges of this Agreement, in
whole or in part, shall have any force or effect unless set forth in
writing and signed by the parties hereto. Any and all such amendments, in
whole or in part, shall be binding upon the parties hereto despite any
lack of legal consideration, so long as the same shall be set forth in
writing and duly signed by the parties hereto.
(d) The failure of either party to enforce, at any time, or for a period of
time, the provisions of this Agreement shall not be construed as a waiver
of such provisions or of the right of such party thereafter to enforce
each and every provision.
(e) Paragraph headings are inserted herein for convenience only and do not
form part of this Agreement.
(f) This Agreement supersedes any and all previous Agreements in existence
between the COMPANY and the DISTRIBUTOR and represents the entire
understanding of the parties.
(g) This Agreement is not retrospective and does not apply to orders placed
before the commencement date.
DISTRIBUTOR COMPANY
Signature /s/ D. Dunbar Signature /s/ R. J. Wixson
----------------------------- ------------------------
Name D. Dunbar Name Richard J. Wixson
Title Managing Director Title Vice President
Date 18 May 1998 Date 6/12/98
6
<PAGE>
- --------------------------------------------------------------------------------
ORDER FOR SUPPLIES OR SERVICES Form Approved PAGE 1 OF 6
(Contractor must submit four copies of invoice.) OMB No. 0704-0187
Expires Dec. 31, 1993
Public reporting burden for this collection of information is estimated to
average 1 hour per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to Department of Defense,
Washington Headquarters Services, Directorate for Information Operations and
Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and
to the Office of Management and Budget, Paperwork Reduction Project,
(0704-0187), Washington, DC 20503.
PLEASE DO NOT RETURN YOUR FORM TO EITHER OF THESE ADDRESSES.
SEND YOUR COMPLETED FORM TO THE PROCUREMENT OFFICIAL IDENTIFIED IN ITEM 6.
- --------------------------------------------------------------------------------
1. CONTRACT/ 2. DELIVERY 3. DATE OF ORDER 4. REQUISITION 5.PRIORITY
PURCH ORDER NO. ORDER NO. /PURCH REQUEST NO.
N68335-97-D-0060 0001 11 AUG 1997 N68335-96-PR-6317-0888 DO-C9e
- --------------------------------------------------------------------------------
6. ISSUED BY: CODE N68335 7. ADMINISTERED BY CODE S3101A 8. DELIVERY FOB
(if other than 6.) [X] DEST
----------------------------------- [ ] OTHER
Naval Air Warfare Center DCMC Springfield (See Schedule
Aircraft Division BLDG. 1, ARDEG if other)
Code 213000B129-2 Picatinny, NJ 07806-5000S
Highway 547
Lakehurst NJ 08733-5082
- --------------------------------------------------------------------------------
9. CONTRACTOR CODE 92606 FACULTY CODE 10. DELIVER TO 11.MARK IF BUSINESS IS
FOB POINT BY [X] SMALL
(Date) [ ] SMALL DISAD-
(YYMMDD) VANTAGED
---------------- [ ] WOMEN-OWNED
NAME AND TEL-INSTRUMENT IAW Clause F.1
ADDRESS ELECTRONICS of Contract
CORPORATION
728 GARDEN STREET
CARLSTADT, NJ 07072
--------------------------------------
12. DISCOUNT TERMS
1.0% 10; 0.5% 20; NET 30
--------------------------------------
13. MAIL INVOICES TO
SEE BLOCK 15
- --------------------------------------------------------------------------------
14. SHIP TO CODE 15. PAYMENT WILL BE MADE BY CODE SC1018
SEE SCHEDULE DFAS Columbus Center MARK ALL
DFAS-CO/Minuteman Division PACKAGES AND
P.O. Box 182266 PAPERS WITH
COLUMBUS, OH 43218-2266 CONTRACT OR
ORDER NUMBER
----------------------------------------------------------
16. DELIVERY _X_ This delivery order is issued on another Government agency
TYPE or in accordance with and subject to terms and coonditions
OF of above numbered contract
ORDER ----------------------------------------------------------
--------------
PURCHASE Reference your furnish the following on terms
specified herein
----------------------------------------------------------
ACCEPTANCE. THE CONTRACTOR HEREBY ACCEPTS THE OFFER
REPRESENTED BY THE NUMBERED PURCHASE ORDER AS IT MAY
PREVIOUSLY HAVE BEEN OR IS NOW MODIFIED, SUBJECT TO ALL OF
THE TERMS AND CONDITIONS SET FORTH, AND AGREES TO PERFORM
THE SAME.
- --------------------------------------------------------------------------------
__________________ ________________ ____________________ ______________
NAME OF CONTRACTOR SIGNATURE TYPED NAME AND TITLE DATE SIGNED
(YYMMDD)
[ ] If this box is marked, supplier must sign Acceptance and return the
following number of copies
- --------------------------------------------------------------------------------
17. ACCOUNTING AND APPROPRIATION DATA/LOCAL USE
SEE PAGE 6
- --------------------------------------------------------------------------------
18. 19. 20. 21. 22. 23.
ITEM NO. SCHEDULE OF SUPPLIES/SERVICE QUANTITY UNIT UNIT AMOUNT
ORDERED PRICE
- --------------------------------------------------------------------------------
SEE PAGES 2 THROUGH 6
FOR DOD ADMINISTRATIVE USE ONLY: PRIORITY:
- --------------------------------------------------------------------------------
* If quantity accepted by 24. UNITED STATES 25. TOTAL $949,324.00
the Government is same OF AMERICA --------------------------------
as quantity ordered, 29. DIFFERENCES -----------
indicate by X. If --------------------------------
different, enter /S/ BARBARA J. PETRZILKA
actual quantity ------------------------------------------------
accepted below BY: /S/ BARBARA J. PETRZILKA, CONTRACTING OFFICER
ordered and
encircle.
- --------------------------------------------------------------------------------
26. QUANTITY IN COLUMN 27. SHIP NO. 28. D.O VOUCHER NO. 30. INITIALS
20 HAS BEEN
[ ] INSPECTED [ ] RECEIVED [ ] PARTIAL
[ ] ACCEPTED, AND CONFORMS TO THE [ ] FINAL
CONTRACT EXCEPT AS NOTED
_________________ _________________________________________________
DATE SIGNATURE OF AUTHORIZED GOVERNMENT REPRESENTATIVE
- --------------------------------------------------------------------------------
36. I certify this account is 31. PAYMENT 32. PAID BY 33. AMOUNT VERIFIED
correct and proper for [ ] COMPLETE CORRECT FOR
payment. [ ] PARTIAL
[ ] FINAL -------------------
34. CHECK NUMBER
-------------------
35. BILL OF LADING
CO.
-------------------
_________________ _________________________________________________
DATE SIGNATURE AND TITLE OF CERTIFYING OFFICER
- --------------------------------------------------------------------------------
37. RECEIVED 38. RECEIVED 39. DATE 40. TOTAL 41. S/R 42. S/R VOUCHER
AT BY RECEIVED CONTAINERS ACCOUNT NO.
(Print) (YYMMDD) NUMBER
- --------------------------------------------------------------------------------
DD Form 1155 APR 93 PREVIOUS EDITIONS MAY BE USED
<PAGE>
Page 2 of 6
N68335-97-D-0060/0001
This delivery order is issued in accordance with the terms and conditions
Contract Number N68335-97-D-0060.
SECTION B - SUPPLIES/SERVICES AND PRICES/COSTS
ITEM NOMENCLATURE OTY UNIT UNIT AMOUNT
PRICE
0001 Identification Friend or Foe 5 ea. $ 19,911 $ 99,555
Interrogator Transponder Test
Set (IFFITTS)Preproduction Units
0002 Engineering Data Items in
accordance with Contract Data
Requirements List (CDRL),
Exhibit (E)
0002AA Master Test Plan/Program Test 1 lo. $ 5,948 $ 5,948
Plan IAW CDRL, Exhibit E, Seq.
No. E001
0002AB Configuration Control Program 1 lo. $ 21,807 $ 21,807
Plan, IAW CDRL, Exhibit E, Seq.
No. E002
0002AC Product Drawings and Associated 1 lo. $ 1,428 $ 1,428
Lists, IAW CDRL, Exhibit E, Seq.
No. E003
0002AD Reliability Program Plan, 1 lo. $ 29,550 $ 29,550
IAW CDRL, Exhibit E, Seq.
No. E004
0002AE Reliability Test Procedures, IAW 1 lo. $ 11,642 $ 11,642
CDRL, Exhibit E, Seq. No. E005
0002AF Reliability Test Reports, IAW 1 lo. $ 4,253 $ 4,253
CDRL, Exhibit E, Seq. No. E006
0002AG Preliminary Design Review 1 lo. $ 898 $ 898
Agenda, IAW CDRL, Exhibit E,
Seq. No. E007
0002AH Preliminary Design Review 1 lo. $ 8,343 $ 8,343
Minutes, IAW CDRL, Exhibit E,
Seq. No. E00B
0002AJ Critical Design Review Agenda, 1 lo. $ 898 $ 898
IAW CDRL, Exhibit E, Seq. No.
E009
0002AK Critical Design Review Minutes, 1 lo. $ 8,343 $ 8,343
IAW CDRL, Exhibit E, Seq. No.
E010
0002AL System Security Plan (SSP), IAW 1 lo. $ 9,444 $ 9,444
CDRL, Exhibit E, Seq. No. E011
0002AM Maintainability Test Report, IAW 1 lo. $ 23,471 $ 23,471
CDRL, Exhibit E, Seq. No. E012
<PAGE>
Page 3 of 6
N68335-97-D-0060/0001
0002AN EMI Control Procedures, IAW 1 lo. $ 4,239 $ 4,239
CDRL, Exhibit E, Seq. No. E013
0002AP EMI Test Procedures, IAW CDRL, 1 lo. $ 1,744 $ 1,744
Exhibit E, Seq. No. E014
0002AQ EMI Test Report, IAW CDRL, 1 lo. $ 19,241 $ 19,241
Exhibit E, Seq. No. E015
0002AR Maintainability Demonstration, 1 lo. $ 36,160 $ 36,160
IAW CDRL, Exhibit E, Seq. No.
E016
0002AS First Article Test Report, IAW 1 lo. $ 17,546 $ 17,546
CDRL, Exhibit E, Seq. No. E017
0002AT Environmental Stress Screening 1 lo. $ 2,700 $ 2,700
Report, IAW CDRL, Exhibit E,
Seq. No. E01B
0002AU Acceptance Test Plan 1 lo. $ 16,368 $ 16,368
(Preproduction), IAW CDRL,
Exhibit E, Seq. No. E019
0002AV Acceptance Test Plan 1 lo. $ 4,004 $ 4,004
(Production), IAW CDRL, Exhibit
E, Seq. No. E020
0002AW Environmental Test Plan, IAW 1 lo. $ 10,503 $ 10,503
CDRL, Exhibit E, Seq. No. E021
0002AX Environmental Test Report, IAW 1 lo. $ 6,471 $ 6,471
CDRL, Exhibit E, Seq. No. E022
0002AY Non-Standard Part Battery 1 lo. $ 2,674 $ 2,674
Selection, IAW CDRL, Exhibit E,
Seq. No. E023
0002AZ Hazard Analysis Report, IAW 1 lo. $ 11,392 $ 11,392
CDRL, Exhibit E, Seq. No. E024
0002BA Design Change Notice, IAW CDRL, 1 lo. $ 5,564 $ 5,564
Exhibit E, Seq. No. E025
0002BB Hazardous Materials Management 1 lo. $ 5,069 $ 5,069
Program Plan, 1 IAW CDRL,
Exhibit E, Seq. No. E026
0002BC Hazardous Materials Management 1 lo. $ 2,734 $ 2,734
Program Report, IAW CDRL,
Exhibit E, Seq. No. E027
0002BD Reliability Predictions Report, 1 lo. $ 35,061 $ 35,061
IAW CDRL, Exhibit E, Seq. No.
E028
0003 ILS Data Items in accordance
with Contract Data Requirements
List (CDRL), Exhibit (A)
<PAGE>
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N68335-97-D-0060/0001
0003AA Conference Minutes IAW CDRL, 1 lo. $ 28,100 $ 28,100
Exhibit A, Seq. No. A00l
0003AB Logistics Support Analysis Plan 1 lo. $ 16,523 $ 16,523
(LSAP), IAW CDRL, Exhibit A,
Seq. No. A002
0003AC Conference Agenda, IAW CDRL, 1 lo. $ 31,433 $ 31,433
Exhibit A, Seq. No. A003
0003AD Logistic Support Analysis 1 lo. $111,906 $111,906
Record, IAW CDRL, Exhibit A,
Seq. No. A004
0003AE LSA-019 Task Analysis Report, 1 lo. $ 22,758 $ 22,758
IAW CDRL, Exhibit A, Seq. No.
A005
0003AF Level of Repair Analysis, IAW 1 lo. $ 16,501 $ 16,501
CDRL, Exhibit A, Seq. No. A006
0003AG LSA-024 Maintenance Plan Report, 1 lo. $ 23,179 $ 23,179
IAW CDRL, Exhibit A, Seq. No.
A007
0003AH Training Course Control 1 lo. $ 9,194 $ 9,194
Document, IAW CDRL, Exhibit A,
Seq. No. D009
0003AJ Learning Analysis Report, IAW 1 lo. $ 5,952 $ 5,952
CDRL, Exhibit A, Seq. No. D00l
0003AK Instructional Media Package, IAW 1 lo. $ 3,564 $ 3,564
CDRL, Exhibit A, Seq. No. D008
0003AL Lesson Plan, IAW CDRL, Exhibit 1 lo. $ 5,694 $ 5,694
A, Seq. No. D005
0003AM Trainee Guide, IAW CDRL, Exhibit 1 lo. $ 10,972 $ 10,972
A, Seq. No. D006
0003AN Test Package, IAW CDRL, Exhibit 1 lo. $ 9,445 $ 9,445
A, Seq. No. D007
0003AP Trainee and Training Course 1 lo. $ 13,266 $ 13,266
Completion Report, IAW CDRL,
Exhibit A, Seq. No. D010
0003AQ Support Material List, IAW CDRL, 1 lo. $ 24,513 $ 24,513
Exhibit A, Seq. No. A016
0003AR Supportability Assessment Plan, 1 lo. $ 18,676 $ 18,676
IAW CDRL, Exhibit A, Seq. No.
A017
0003AS Test Article Configuration 1 lo. $ 7,123 $ 7,123
Report, IAW CDRL, Exhibit A,
Seq. No. A018
0003AT Software Development Plan, IAW 1 lo. $ 2,615 $ 2,615
CDRL, Exhibit A, Seq. No. A021
<PAGE>
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N68335-97-D-0060/0001
0003AU Engineering Change Proposal, IAW 1 lo. TBN TBN
CDRL, Exhibit A, Seq. No. A022
0003AV Configuration Status Accounting 1 lo. $ 2,642 $ 2,642
Reporting, IAW CDRL, Exhibit A,
Seq. No. A023
0003AW Support Equipment Depot Level 1 lo. $ 6,434 $ 6,434
Rework Standard, lAW CDRL,
Exhibit A, Seq. No. A024
0003AX FMEA Report, IAW CDRL, Exhibit 1 lo. $ 21,706 $ 21,706
A, Seq. No. A025
NOTE: Exhibit A, Seq. Nos. A015,
A019 and A020 have not been
assigned.
0003AY Mission, Collective, Individual & 1 lo. $ 12,454 $ 12,454
Occup. TRNG Task Analysis
Report, IAW CDRL, Exhibit D,
Seq. No. D002
0003AZ Training System Implementation 1 lo. $ 12,454 $ 12,454
Plan, IAW CDRL, Exhibit D, Seq.
No. D003
0003BA Training Program Development and 1 lo. $ 12,454 $ 12,454
Management Plan, IAW CDRL,
Exhibit D, Seq. No. D004
0004 Data Requirements, IAW ILSSOW
Attachments, Contract Data
Requirements Lists (CDRLs) Seq.
Nos. T00l (per TMCR), and 0001
through 0009 (per Provisioning
Requirements Statement)
0004AA Technical Manuals IAW CDRL, TMCR 1 lo. $ 11,759 $ 11,759
No.19-96 dated 11 November 1995
(Attachment (A) to ILSSOW), Seq.
No. T00l
0004AB Engineering Data for 1 lo. $ 14,045 $ 14,045
Provisioning IAW CDRL,
Provisioning Requirements
Statement (PRS)(Attachment (B)
to ILSSOW), Seq. No. 0001
0004AC Provisioning and Other 1 lo. $ 6,774 $ 6,774
Preprocurement Screening Data
IAW CDRL, PRS, Seq. No. 0002
0004AD Provisioning Technical 1 lo. $ 6,774 $ 6,774
Documentation, Long Lead Time
Items List (LLTIL), IAW CDRL,
PRS, Seq. No. 0003
0004AE Provisioning Technical 1 lo. $ 11,804 $ 11,804
Documentation, Provisioning
Parts List, IAW CDRL, PRS, Seq.
No.0004
0004AF Provisioning Parts List Index, 1 lo. $ 6,774 $ 6,774
IAW CDRL, PRS, Seq. No. 0005
<PAGE>
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N68335-97-D-0060/0001
0004AG Statement of Prior Submission, 1 lo. $ 6,307 $ 6,307
IAW CDRL, PRS, Seq. No. 0006
0004AH Provisioning Technical 1 lo. $ 24,021 $ 24,021
Documentation, Design Change
Notice (DCN), IAW CDRL, PRS,
Seq. No. 0007
0004AJ Provisioning Technical 1 lo. $ 13,091 $ 13,091
Documentation, Interim Support
Items List, IAW CDRL, PRS, Seq.
No. 0008
0004AK Preservation and Packing Data, 1 lo. $ 11,337 $ 11,337
IAW CDRL, PRS, Seq. No. 0009
TOTAL DELIVERY ORDER: $949,324.00
SECTION D - Packing, packaging and marking shall be in accordance with best
commercial practices to ensure safe delivery at destination, in accordance with
clause D.10 of the basic contract.
SECTION F - Delivery of the specified quantities shall be in accordance with
Clause F.1 of the contract, entitled "Time of Delivery". Delivery of data item
requirements shall be in accordance with the instructions provided on the DD
Form 1423, Exhibits "A", "D", "E", and "T" of the contract.
SECTION G - ACCOUNTING AND APPROPRIATION DATA:
ACRN:AA 1771506.47C2 031 CCA54 0 068342 2B 000000 712000004030 $949,324.00
Direct Cite -- N000I997PDA3AGA; Doc. ID -- AOB; EE - 490; BLI - 038
NOTE: This order constitutes fulfillment of the minimum order requirements of
the contract.
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
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<COMMON> 209
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