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, 19961997 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___.[X]. No [ ].
The aggregate market value of the voting Common Stock (par value $.10 per share)
held by non-affiliates on June 1, 199619, 1997 was $630,240.
1,603,806$ 1,008,014.
2,030,948 shares of Common Stock and 125,025 shares of Redeemable Preferred Stock were outstanding as of June 1, 1996.19, 1997.
Total Pages - 35
Exhibit Index - page 30pages 32-33
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.
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.
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. The total contract was valued at $1,679,265 and orders for
$869,711 were received in fiscal year 1995. An additional $907,334 in
orders for that contract were received in the fiscal year ended March
31, 1996.Company is also reviewing possible ways to expand its business into
other markets to capitalize on its technology.
The charttable 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,
1997 1996 1995 1994
---- ---- ----
Commercial $ 1,274,606 $ 1,268,422 $ 1,091,600$1,140,779 $1,274,606 $1,268,422
Government 2,024,895 1,043,482 597,070
297,319
Tel received, respectively, forIn the periods indicated above, 27%, 17%
and 12% of its commercial revenues from foreign commercial sales. For
thefiscal year ended March 31, 1996,1995, Tel won a competitive solicitation
from the United States Air Force (USAF) for the Model T-30CM. Sales derived
from this contract represented 46% and 37% of total government sales were
attributed to the USAF contract for
the T-30CMyears ended March 31, 1997 and 30%1996, respectively. In March 1997, the
Company received a $710,703 order from Allied Signal to be shipped in the
first half of fiscal 1998. The end user is in the Far East. The Company has
sufficient backlog to maintain the current level for a Canadian
Defense Forces (CDF) contractgovernment sales for
the T-47C.next fiscal year.
Foreign commercial sales are made direct or through an American export agentagents
at a discount reflecting the 15% selling commission under an oral,
year-to-year arrangement. The Company also sells at a discount reflecting selling
commission to other exporters who in turn sell Tel's product overseas.
The amountarrangements. For the years ended March 31, 1997, 1996 and
1995, foreign commercial sales were 14%, 27% and 17%, respectively, of
sales made by these exporters is not readily
determinable and, therefore, not included in the aforementioned
amounts of foreign sales, reflected as a percentage of sales above.total commercial sales.
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 55% to 10% discount to non-stocking distributors depending on
their sales volume and promotional effort. Independent sales
representatives receive 55% to 10% commissions depending on their sales
volume and promotional efforts.
2
Item 1. Business (Continued)
General (Continued)
Set forth below is Tel's backlog at March 31, 19961997 and 1995.1996. Sales
increased again in fiscal year 1997 because of government orders. (See
Management's Discussion - Item 7 and Markets - Item 1).
Tel believes that approximately $1,711,947all of the commercial and
government backlog at March 31, 19961997 will be delivered
during the fiscal year ending March 31, 1997.1998.
Commercial Government Total
---------- ---------- -----
March 31, 19961997 $ 9,900 $1,756,602 $1,766,502174,600 2,276,952 2,451,552
March 31, 1995 84,235 1,279.387 1,363,6221996 9,900 1,756,602 1,766,502
All of the backlog is pursuant to purchase orders and all of the government
contracts are fully funded. Sales increased again this past year, mainly because ofHowever, government orders. Commercial sales increased slightly. (See Management's
Discussion - Item 7 and Markets - Item 1).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 smallsmall. While sales to domestic and managementforeign commercial
customers declined in 1997, the Company believes that it will
continue to be depressed. Commercial sales appear to be coming more
and more fromthe foreign
customers whilecommercial market represents a better opportunity than the US commercial
market for growth.
Future domestic sales continue to
decline. Future 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. Between March 31, 1985 and
March 31, 1996,The Company continues to analyze the Company expended approximately $3,950,000needs 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.
Over the last several years the commercial demand for new avionic test
equipment has been flat. However, the airline industry as a whole has
become profitable again and some operators have started buying capital
equipment. Changes in the law governing the liability of manufacturers
of
3
Item 1. Business (Continued)
Markets (Continued)
small planes has caused some manufacturers to produce small aircraft
for general aviation. In addition, airlines' base of ramp testers is
aging and may require replacement over the next few years. New avionic
systems such as Global Positioning Systems (GPS) will create a market
for a new ramp test set.
Tel sells to many commercial customers. In fiscal 1996,1997, no end user
customer or distributor accounted for more than 10% of commercial sales. TheIn
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. Since early
1983, when Tel first started bidding for government jobs, it had
increased itsThe Company's government sales has increased
from $84,853 in fiscal year 1983 to
over $1,000,000 per year in fiscal years 1989 through 1991. However,$244,289 in fiscal year 1992 military sales fell to $244,289 as military
spending was delayed and/or curtailed due to changes in the world
political climate. As the result of continuing marketing efforts,
government sales$2,024,895 in fiscal year 1995 were more than double of what
they were in fiscal year 1994 and increased another 75% in fiscal year
1996 as compared to fiscal year 1995.1997.
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.affected and, therefore, the market for
test equipment will increase. 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-36,T-36M, T-49C, T-47CT-49CF, T-47 Family and T-48I to
government agencies and sub-contractorsprime contractors with a growing list of other
prospective buyers. Government small purchase procedures allow Tel to sell
test sets into areas thatto users who could have influence on future government purchases.
Tel will also continue its efforts to penetrate the export market.market and is
actively seeking a European distributor.
Competition
In the general aviation and airline market, Tel competes principally with
IFR, an independent firm, and with JC Air, a division of B.F.
Goodrich.BFGoodrich. This
market is highly competitive. Tel has generally been successful because of
its high quality products, competitive prices, and responsive service. Tel
also provides customers with calibration and repair services.
The military market is dominated by large corporations with greater
operating experience with the military. Tel can competecompetes 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.
4
Item 1. Business (Continued)
Competition (Continued)
Tel's past ability to compete in the civil aviation market and the military
market has been restricted because of limited financial resources.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, 1997, 1996 1995 and 1994,1995, Tel spent
$486,884, $390,399 $315,331 and $236,206$315,331, respectively, on the research and
development of new and improved products. None of these amounts werewas
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 1996,1997, the T-30D model was completed and several were
delivered to commercial customers. Developmentdevelopment of athe military version of ourthe T-36
(T-36M) using a microprocessor for control, and an IFF interrogator test
version of the T-47C (T-47N) were started with completion
expected in fiscal year 1997.completed. A contract for the T-36M for
$324,795 was received in April 1996 and a solicitationproposal for a modified T-47N
(T-47M) was submitted to the T-47N is
expectedU.S. Navy in the first quarter of fiscal yearMay 1997.
Item 2. Properties and Personnel
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. Tel is unaware of any environmental
problems in connection with its location and, because of the nature of its
manufacturing activities, does not anticipate anysuch problems.
Tel has nineten manufacturing, sixseven administrative and sales, and three
research and development employees, none of whom belongs to a union. Tel
does not anticipate any difficulty in adding personnel as required. The
Company also uses several part-time consultants on an as needed basis.
Item 3. Pending Legal Proceedings
There are no material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Securities Holders
The Company did not hold an annual meeting of the shareholders during
the fiscal year ended March 31, 1996.
5
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 or Redeemable Preferred 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. OnDuring the fiscal year ended March 31, 1996, as reported by1997, the
market maker for theCompany's Common Stock had the high and low bids were $.75of $1.75 and $.56,$0.75,
respectively. These quotations reflect inter-dealer prices, without retail
markup or commission and may not necessarily represent actual transactions.
Approximate Number of Equity Security Holders
Number of Record
Holders as of
Title of Class March 31, 19961997
-------------- --------------
Common Stock, par value
$.10 per share 851
Redeemable Preferred Stock,
par value $3.00 per share One846
Dividends
Registrant has not paid dividends on its Common Stock and does not expect
to pay such dividends in the foreseeable future.
6
Item 6. Selected Financial Data
TEL-INSTRUMENT ELECTRONICS CORP.
SUMMARY OF FINANCIAL INFORMATION
Years Ended March 31,
- ----------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Statement of Operations Data:
Net Revenues $2,318,088 $1,865,492$ 3,165,674 $ 2,318,088 $ 1,865,492 $1,308,939 $1,430,923 $2,199,690$ 1,430,923
----------- ----------- ----------- ---------- ---------- ---------- ---------- ---------------------
Operating costs and expenses:
Cost of sales 1,325,659 1,022,942 888,213 619,165 772,312
1,060,489
Selling, general and
administrative 854,093 739,912 575,124 506,595 486,455
597,517
Engineering, research
and development 486,884 390,399 315,331 236,206 317,937
436,398----------- ----------- ----------- ---------- -----------
$ 2,666,636 $ 2,153,253 $ 1,778,668 $1,361,966 $ 1,576,704
----------- ----------- ----------- ---------- ---------- ---------- ----------
$2,153,253 $1,788,668 $1,361,966 $1,576,704 $2,094,404
---------- ---------- ---------- ---------- ---------------------
Operating income/(loss) 499,038 164,835 86,824 (53,027) (145,781)
105,286
---------- ---------- ---------- ---------- ----------
Other expenses, net (57,954) (69,156) (76,348) (66,116) (54,815)
(20,966)----------- ----------- ----------- ---------- ---------- ---------- ---------- ---------------------
Income/(loss) from continuing
operations,
before extraordinary 441,084 95,679 10,476 (119,143) (200,596)
item $ 95,679 $ 10,476 $ (119,143) $ (200,596) $ 84,320
========== ========== ========== ========== ==========and income taxes
Extraordinary item -- -- 12,000 -- --
----------- ----------- ----------- ---------- -----------
Net income before income taxes 441,084 95,679 22,476 (119,143) (200,596)
Income tax benefit 340,200 -- ========== ========== ========== ========== ==========-- -- --
----------- ----------- ----------- ---------- -----------
Net income/(loss)Income $ 781,284 $ 95,679 $ 22,476 $ (119,143) $ (200,596)
$ 84,320=========== =========== =========== ========== ===========
Income/(loss) per share from
continuing operations:
Before extraordinary item (1) $ .040.41 $ (.01)0.04 $ (.09) (.14)(0.01) $ .03(0.09) $ (0.14)
Extraordinary item -- .01 -- 0.01 -- --
----------- ----------- ----------- ---------- ----------- ------------
Income/(loss) per
common share $ .040.41 $ 0.04 $ -- $ (.09) (.14)(0.09) $ .03(0.14)
=========== =========== =========== ========== ===========
Years Ended March 31,
-------------------------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
1992
---- ----- ---- --------- ---- ----
Balance Sheet Data:
Working capital (deficiency) $ 440,978 $ (500,199) $ (519,207) $ (506,519) $ (385,862)
$ (175,842)
Total assets 1,648,066 824,606 872,442 780,825 640,435
825,891
Long-term debt 365,000 100,000 165,000 200,000 200,000 200,000
Redeemable preferred stock -- 606,643 576,643 546,643 516,643
495,075
Stockholders' equity (deficiency) 455,254 (1,118,364) (1,184,031) (1,176,507) (1,027,364) (796,768)
(1) The earning/(loss) per share is calculated on the weighted average number
of shares outstanding. PreferredFor the years 1993 to 1996 the preferred stock
dividends of $30,000 per year arewere deducted from income/(loss) from continuing operations, before
extraordinary item.item and income taxes.
7
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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 for specific
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, 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
carryfowards. 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.
Results of Operations 1996 Compared to 1995
Net sales increased $452,596 (24.3%) for the year ended March 31, 1996 as
compared to the year ended March 31, 1995. Commercial sales increased
$6,184 (0.5%) and government sales increased $446,412 (74.8%). New product
introductions to the commercial market and the award of additional
contracts from the government sector
8
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Results of Operations 1996 Compared to 1995 (Continued)
account for these increases. While commercial sales increased, the
commercial airline market remainsremained stagnant. The Company was awarded a
contract from the CDF in fiscal year 1994 in the amount of $630,700 of
which $309,400 was shipped during fiscal year 1996 to complete the
contract. In fiscal year 1995 the Company won an open quantity contract
from the USAF of which firm orders have been received in the amount
of
$1,777,045of$1,777,045 and $386,742 of these orders were shipped in fiscal year 1996.
The balance of the orders from the USAF are expected to be delivered in
fiscal years 1997 and 1998.
There is no assurance that such sales will continue after these contracts
have been completed. Future growth and profitability continue to be
dependent on a turnaround of the commercial airline industry, introduction
and acceptance of new products, and the award of additional government
contracts.
Gross margin increased $317,867 (32.5%) for the year ended March 31, 1996
as compared to the previous year. Gross margin as a percent of sales
increased to 55.9% in 1996 from 52.4% in 1995. The higher gross margin is
attributed to the higher sales volume and the sale of higher margin
products. Tel does not expect to maintain this higher gross margin
percentage due to the higher mix of lower margin government sales expected
in the coming fiscal year.
Total selling, general and administrative expenses increased $164,788
(28.7%) for the year ended March 31, 1996 as compared to the last fiscal
year. The increase is attributed to the hiring of a director of marketing
and increased travel and trade show expenses. Engineering, research and
development expenditures increased $75,068 (23.8%) for the same period due
to increased development efforts as a result of increased proposal
activity.
The net income for the year was $95,679 as compared to a net income of
$22,476 in the prior fiscal year ended March 31, 1995.
8
Item 7. Management's DiscussionLiquidity and Analysis of Financial
Condition and Results of Operations (Continued)
Results of Operations 1995 Compared to 1994
Net sales for the year endedCapital Resources
At March 31, 1995 increased $556,553 (42.5%)
as compared to1997 the previous fiscal year. The stagnant conditions
experienced both in the commercial airline industry and in the
government sector continue to affect the Company's sales. The Company however, was awarded a contract from the USAF in the second quarter in
the amounthad positive working capital of $1,679,265 which should be shipped over the next two
fiscal years. There is no assurance that such sales will continue.
Future growth and profitability are dependent on the growth of the
commercial airline industry and the award of additional government
contracts.
Gross margin increased $287,505 (41.7%) but gross margin percentage
decreased slightly to 52.4% from 52.7% as a result of product mix and
continuing cost reduction measures within the manufacturing process.
Total selling, general and administrative expenses increased $68,529
(13.5%) due primarily to training and documentation costs.
Engineering, research and development expenditures increased $79,125
(33.5%) because of increased development efforts as a result of
increased proposal activity.
The net income for the year was $22,476$440,978 as
compared to a net loss of
$119,143 in the prior fiscal year.
Liquidity and Capital Resources
The working capital deficiency wasof $500,199 at March 31, 1996 as
compared to $519,207 at March 31, 1995.1996. The
Company's ability to
continue is dependent upon its ability to generate sufficient cash
flow from operations or to obtain additional financing. Sinceliquidity and capital position was improved primarily by the
Company's ability to obtain financing from traditional sources is
limited, short-term liquidity must continue to be provided by cash
generated from operations.
Management continues to improveincreased profitability, and cashflow through its
continued sales efforts and incremental revenues derived from new
product developments and cost reduction measures.
In July, 1996 a groupthe redemption of the Company's employees and creditors (the
"Group") agreed to purchase the Company's outstanding
redeemable preferred stock (the "Preferred Stock") from(see Note 7 to Notes to
the preferred stockholderFinancial Statements), and the conversion of certain current
liabilities to long-term debt (see Note 10 to Notes to the Financial
Statements). Cash provided by operations was $464,557 for $111,700 and to exchange the Preferred Stock for common stock. The
Company's Board of Directors approved the exchange of the Preferred
Stock and accrued dividends for 178,720 shares of newly issued common
stock and stock purchase warrants for an additional 35,744 shares of
common stock. The purchase warrants are exercisable at a price per
share of $.75 untilyear ended
March 31, 1997 $1.50 untilas compared to $20,137 for the year ended March 31, 19981996.
This improvement is due to the increased profitability and $2.25 until March 31, 1999.to a decrease in
accounts receivable which was partially offset by an increase in
inventories and other assets.
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 expect to incur long-term material
needs for capital outside of its normal operating activities.
The Company has received a letter of intent from a related party for
financing a future significant government contract.
9
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
At March 31, 1996, the Preferred StockLiquidity and accrued dividends had a
face value of $606,643, as reflected on the accompanying balance
sheet. The effect of this transaction will be to reduce liabilities by
approximately $700,000 and the Company's negative net worth by
approximately $600,000. Also, as a result of canceling the Preferred
Stock, the dividends will no longer accrue.
The Board of Directors also authorized the Company to offer all
shareholders the right to purchase an additional 178,720 shares of
common stock at $.75 per share and to issue, to such participating
shareholders, up to 35,744 in stock purchase warrants with the same
terms as those described above.Capital Resources (Continued)
There was no significant impact on the Company's operations as a result of
inflation for the year ended March 31, 1996.
Attention is directed to the report of independent accountants and
Note 1 to the financial statements included elsewhere herein.1997.
Other Accounting Matters
During 1995In February of 1997 the Financial Accounting Standards Board issued
Statement Ofof Financial Accounting Standard No. 123 "Accounting For Stock Based
Compensation"No 128 "earnings Per Share"
(SFAS 123)128). SFAS 123 will be128 supersedes Accounting Principles Board Opinion No. 15,
Earnings Per Share (APB 15) and specifies the computation, presentation,
and disclosure requirements for earnings per share for entities with
publicly held common stock. SFAS 128 is effective for fiscal yearfinancial statements
for both interim and annual periods ending March 31, 1997, and givesafter December 15, 1997.
The Company does not expect the company the optionadoption of adopting
its provisions and recognizing compensation expense basedSFAS 128 to have a material
impact on the fair
value of the stock option at the grant date or disclosing the pro
forma effects on the Company's net income and earnings per share.
Management intends to adopt the disclosure requirements of SFAS 123.Company.
10
Item 8. Financial Statements and Supplementary Data
Pages
-----
(1) Financial Statements:
Report of Independent Accountants 12-1312
Balance Sheets - March 31, 1997 and 1996 and 1995 1413
Statements of Operations - Years Ended
March 31, 1997, 1996 and 1995 and 1994 1514
Statements of Changes in Stockholders'
DeficiencyEquity/(Deficiency) - Years Ended March 31,
1997, 1996 and 1995 and 1994 1615
Statements of Cash Flows - Years Ended
March 31, 1997, 1996 and 1995 and 1994 1716
Notes to Financial Statements 18-2517-27
(2) Financial Statement Schedule:
II - Valuation and Qualifying Accounts 2628
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.
11
{LETTERHEAD OF COOPERS & LYBRAND L.L.P.]
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, 19961997 and 1995,1996, and the results of its
operations and its cash flows for each of the three years in the period
ended March 31, 1996,1997, 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.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. However, as discussed in Note 1 to the
financial statements, the Company has a working capital deficiency and a
deficiency in stockholders' capital at March 31, 1996. In addition, the
Company's ability to meet its obligations on both a short-term and long-term
basis requires the Company to continue to increase revenue, operating profits
and operating cash flow and to fulfill its manufacturing contracts. These
circumstances raise substantial doubt about the ability of the Company to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
May 31, 1996,
-13-30, 1997
12
TEL-INSTRUMENT ELECTRONICS CORP.
Balance Sheets
March 31,
-------------------------------
ASSETS 1996 1995
----------- -----------
Current assets:
Cash $ 22,625 $ 38,768
Accounts receivable, net of allowance for doubtful
accounts of $66,090 and $51,090 at March 31,
1996 and 1995, respectively 359,494 239,479
Inventories, net 346,874 482,273
Prepaid expenses and other current assets 7,135 35,103
----------- -----------
Total current assets 736,128 795,623
Office and manufacturing equipment, net 41,825 40,218
Other assets 46,653 36,601March 31,
--------------------
ASSETS 1997 1996
---- ----
Current assets:
Cash $ 528,636 $ 22,625
Accounts receivable, net of
allowance for doubtful accounts
of $65,521 and $66,090 at March 31,
1997 and 1996, respectively 302,737 359,494
Inventories, net 352,173 346,874
Prepaid expenses and other current assets 6,944 7,135
Deferred income tax benefit - current 78,300 --
----------- -----------
Total current assets 1,268,790 736,128
Office and manufacturing equipment, net 45,492 41,825
Other assets 71,884 46,653
Deferred income tax benefit 261,900 --
----------- -----------
Total assets $ 1,648,066 $ 824,606
=========== ===========
LIABILITIES AND STOCKHOLDERS'/ EQUITY/(DEFICIENCY)
Current liabilities:
Convertible subordinated note -
related party $ -- $ 30,000
Convertible subordinated note -- 35,000
Accounts payable 89,344 93,789
Accrued payroll, vacation pay and
deferred wages 342,432 590,353
Accrued expenses - related parties 70,480 136,086
Other accrued expenses 325,556 351,099
----------- -----------
Total current liabilities 827,812 1,236,327
Note payable - related party 350,000 100,000
Convertible subordinated note - related party 15,000 --
Redeemable preferred stock - redemption value
of $375,075, plus unpaid dividends -- 606,643
Stockholders' equity/(deficiency):
Common stock, par value $.10 per
share, 2,030,948 and 1,603,806
issued and outstanding as of
March 31, 1997 and 1996, respectively 203,097 160,383
Additional paid-in capital 3,901,052 3,151,432
Accumulated deficit (3,648,895) (4,430,179)
----------- -----------
Total stockholders'
equity/(deficiency) 455,254 (1,118,364)
----------- -----------
Total liabilities and stockholders'
equity/(deficiency) $ 1,648,066 $ 824,606 $ 872,442
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Note payable $ -- $ 16,667
Convertible subordinated note - related party 30,000 --
Convertible subordinated note 35,000 --
Accounts payable 93,789 246,102
Accrued payroll, vacation pay and deferred wages 590,353 560,870
Accrued expenses - related parties 136,086 105,613
Other accrued expenses 351,099 385,578
----------- -----------
Total current liabilities 1,236,327 1,314,830
Note payable - related party 100,000 100,000
Convertible subordinated note - related party -- 30,000
Convertible subordinated note -- 35,000
Redeemable preferred stock - redemption value
of $375,075, plus unpaid dividends 606,643 576,643
Stockholders' deficiency:
Common stock, par value $.10 per share 160,383 160,383
Additional paid-in capital 3,151,432 3,181,444
Accumulated deficit (4,430,179) (4,525,858)
----------- -----------
Total stockholders' deficiency (1,118,364) (1,184,031)
----------- -----------
Total liabilities and stockholders' deficiency $ 824,606 $ 872,442
=========== ===========
The accompanying notes are an integral part of the financial statementsstatements.
13
TEL-INSTRUMENT ELECTRONICS CORP.
Statements of Operations
For the years ended March 31,
---------------------------------
1997 1996 1995
---- ---- ----
Sales - commercial, net $ 1,140,779 $ 1,274,606 $ 1,268,422
Sales - government, net 2,024,895 1,043,482 597,070
----------- ----------- -----------
Total Sales 3,165,674 2,318,088 1,865,492
Cost of sales 1,325,659 1,022,942 888,213
----------- ----------- -----------
Gross margin 1,840,015 1,295,146 977,279
----------- ----------- -----------
Operating expenses:
Selling, general and
administrative 854,093 739,912 575,124
Engineering, research
and development 486,884 390,399 315,331
----------- ----------- -----------
Total Operating Expense 1,340,977 1,130,311 890,455
----------- ----------- -----------
Income from operations 499,038 164,835 86,824
Other income/(expense):
Interest income 5,183 -- --
Interest expense (51,137) (57,570) (60,748)
Interest expense -
related parties (12,000) (12,100) (15,600)
Other, net -- 514 --
----------- ----------- -----------
Income before extraordinary
item and income taxes 441,084 95,679 10,476
Extraordinary item -
extinguishment of debt -- -- 12,000
----------- ----------- -----------
Net income before income
taxes 441,084 95,679 22,476
Income tax benefit 340,200 -- --
----------- ----------- -----------
Net Income $ 781,284 $ 95,679 $ 22,476
=========== =========== ===========
Income/(loss) per common share:
Before extraordinary item $ 0.41 $ 0.04 $ (0.01)
Extraordinary item -- -- 0.01
----------- ----------- -----------
Income/(loss) per common share $ 0.41 $ 0.04 $ --
=========== =========== ===========
Weighted average number
of shares outstanding 1,894,737 1,603,806 1,603,806
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
14
TEL-INSTRUMENT ELECTRONICS CORP.
Statements Of OperationsChanges In Stockholders' Equity (Deficiency)
For the years ended March 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------Common Stock
---------------------------------- Additional
Number of Shares Paid-In Accumulated
Authorized Issued Amount Capital Deficit Total
---------- ------ ------ ------- ------- -----
Sales - commercial, net $ 1,274,606 $ 1,268,422 $ 1,091,600
Sales - government, net 1,043,482 597,070 217,339
Balances March 31, 1994 2,000,000 1,603,806 $160,383 $3,211,444 $(4,548,334) $(1,176,507)
Net income 22,476 22,476
Redeemable preferred stock
dividends accrued (30,000) (30,000)
---------- ---------- -------- ---------- ----------- -----------
-----------
Total Sales 2,318,088 1,865,492 1,308,939Balances 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)
---------- ---------- -------- ---------- ----------- -----------
-----------
CostBalances March 31, 1996 2,000,000 1,603,806 $160,383 $3,151,432 $(4,430,179) $(1,118,364)
Net income 781,284 781,284
Exchange of sales 1,022,942 888,213 619,165redeemable
preferred stock for common stock
and stock purchase warrants 178,720 17,872 588,771 606,643
Issuance of common stock shares and
stock purchase warrants 178,720 17,872 116,168 134,040
Issuance of common stock in connection
with the exercise of stock
purchase warrants 68,035 6,803 44,223 51,026
Issuance of common stock in connection
with the exercise of stock options 1,667 167 458 625
---------- ---------- -------- ---------- ----------- -----------
-----------
Gross margin 1,295,146 977,279 689,774
----------- ----------- -----------
Operating expenses:
Selling, general and administrative 739,912 575,124 506,595
Engineering, research and development 390,399 315,331 236,206
----------- ----------- -----------
Total Operating Expense 1,130,311 890,455 742,801
----------- ----------- -----------
Income/(loss) from operations 164,835 86,824 (53,027)
----------- ----------- -----------
Other income/(expense):
Interest (57,570) (60,748) (57,588)
Interest - related parties (12,100) (15,600) (17,000)
Other, net 514 8,472
----------- ----------- -----------
Income (loss) before extraordinary item 95,679 10,476 (119,143)
Extraordinary item - extinguishment of debt 12,000
----------- ----------- -----------
Net income/(loss)Balances March 31, 1997 4,000,000 2,030,948 $203,097 $3,901,052 $(3,648,895) $ 95,679 $ 22,476 $ (119,143)
=========== =========== ===========
Income/loss per common share:
Before extraordinary item $ .04 $ (.01) $ (.09)
Extraordinary item -- .01 --
----------- ----------- -----------
Income/(loss) per common share $ .04 $ $ (.09)
=========== =========== ===========
Weighted average number of shares outstanding 1,603,806 1,603,806 1,603,806
===========455,254
========== ========== ======== ========== =========== ===========
The accompanying notes are an integral part of the financial statements.
15
TEL-INSTRUMENT ELECTRONICS CORP.
Statements Of Cash Flows
Increase (Decrease) In Cash
For the years ended March 31,
-----------------------------
1997 1996 1995
---- ---- ----
Cash flows from operating activities:
Net income $ 781,284 $ 95,679 $ 22,476
Adjustments to reconcile net income
to cash provided by operating
activities:
Deferred income tax benefit (340,200) -- --
Depreciation and amortization 18,222 17,994 17,067
Provision for losses on accounts
receivable -- 15,000 16,000
Provision for inventory obsolescence 8,298 -- 70,336
Gain on early extinguishment of debt -- -- (12,000)
Gain on sale of equipment -- -- (7,014)
Changes In Stockholders' Deficiency
Common Stock
----------------------------------------- Additional
Number of Shares Paid-In Accumulated Total
Authorized Issued Amount Capital Deficit
---------- --------- ---------- ---------- ----------- -----------
Balances, March 31, 1993 2,000,000 1,603,806 $ 160,383 $3,241,444 $(4,429,191) $(1,027,364)
Net loss (119,143) (119,143)
Redeemable preferred stock
dividends accrued (30,000) (30,000)
--------- --------- ---------- ---------- ----------- -----------
Balances, March 31, 1994 2,000,000 1,603,806 $ 160,383 $3,211,444 $(4,548,334) $(1,176,507)
Net income 22,476 22,476
Redeemable preferred stock
dividends accrued (30,000) (30,000)
--------- --------- ---------- ---------- ----------- -----------
Balance, 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)in assets and liabilities:
Decrease/(increase) in accounts
receivable 56,757 (135,015) 3,650
(Increase)/decrease in
inventories (13,597) 135,399 (155,592)
(Increase)/decrease in other
assets (25,040) 17,916 10,853
(Decrease)/increase in accounts
payable (4,445) (152,313) 78,632
(Decrease)/increase in accrued
expenses (16,722) 25,477 58,842
--------- --------- ---------
Net cash provided by operating
activities 464,557 20,137 103,250
--------- --------- ---------
Cash flows from investing activities:
Additions to office and manufacturing
equipment (21,889) (19,601) (36,119)
Proceeds from sale of equipment 12,000
--------- --------- ---------
Net cash used in investing
activities (21,889) (19,601) (24,119)
--------- --------- ---------
Cash flows from financing activities:
Repayment of notes payable -- (16,667) (33,333)
Proceeds from issuance of
shares and warrants 87,500
Proceeds from exercise of warrants
and options 25,843 (12) --
Repayment of convertible
subordinated note (50,000) -- (23,000)
--------- --------- ---------
Net cash provided by (used in)
financing activities 63,343 (16,679) (56,333)
--------- --------- ---------
Net increase in cash 506,011 (16,143) 22,798
Cash - beginning of year 22,625 38,768 15,970
--------- --------- ---------
Cash - end of year $ 528,636 $ 22,625 $ 38,768
========= ========= =========
Non-cash investing and
financing activities:
Redeemable preferred stock
dividends accrued $ -- $ 30,000 $ 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 $ 219,481 $ 20,153 $ 8,667
========= ========= ========= ========== ========== =========== ===========
The accompanying notes are an integral part of the financial statements.
16
TEL-INSTRUMENT ELECTRONICS CORP.
Statements Of Cash Flows
Increase (Decrease) In Cash
For the years ended March 31,
-----------------------------------
1996 1995 1994
--------- --------- ---------
Cash flows from operating activities:
Net income/(loss) $ 95,679 $ 22,476 $(119,143)
Adjustments to reconcile net income/(loss) to cash
provided by (used in) operating activities:
Depreciation and amortization 17,994 17,067 18,260
Provision for losses on accounts receivable 15,000 16,000 23,590
Provision for inventory obsolescence -- 70,336 25,500
Gain on early extinguishment of debt -- (12,000) --
Gain on sale of equipment -- (7,014) --
Changes in current assets and liabilities:
(Increase)/decrease in accounts receivable (135,015) 3,650 (61,196)
(Increase)/decrease in inventories 135,399 (155,592) (140,284)
(Increase)/decrease in other assets 17,916 10,853 (33,047)
Increase/(decrease) in accounts payable (152,313) 78,632 118,348
Increase in accrued expenses 25,477 58,842 141,185
--------- --------- ---------
Net cash provided by/(used in) operating
activities 20,137 103,250 (26,787)
--------- --------- ---------
Cash flows from investing activities:
Additions to office and manufacturing equipment (19,601) (36,119) (10,986)
Proceeds from sale of equipment 12,000
--------- --------- ---------
Net cash used in investing activities (19,601) (24,119) (10,986)
--------- --------- ---------
Cash flows from financing activities:
Repayment of notes payable (16,667) (33,333) --
Repurchase of shares (12) -- --
Repayment of convertible subordinated note -- (23,000) --
--------- --------- ---------
Net cash used in financing activities (16,679) (56,333) --
--------- --------- ---------
Net increase/(decrease) in cash (16,143) 22,798 (37,773)
Cash - beginning of year 38,768 15,970 53,743
--------- --------- ---------
Cash - end of year $ 22,625 $ 38,768 $ 15,970
========= ========= =========
Non-cash investing and financing activities:
Redeemable preferred stock dividends accrued $ 30,000 $ 30,000 $ 30,000
Supplemental information:
Interest paid $ 20,153 $ 8,667 $ 5,575
17
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 manufacturesmarkets avionic
test equipment for the civilgeneral and commercial aviation industrymarkets and
avionic testing and electronic equipment for the
government/military under government
contracts.aviation markets. The Company's instruments are used to
test navigation and communications equipment installed in aircraft. The
Company grants creditsells its equipment to its civil aviation customers,
substantially all of whom are eitherboth the domestic and foreign commercial
airlines or repair and maintenance service shops located at the private and
commercial airports in the United States.
As shown in the accompanying financial statements, as of March 31, 1996,
the Company had a working capital deficiency of $500,199 and a net
stockholders' deficiency of $1,118,364. Tel's ability to continue as a
going concern is dependent upon its ability to generate sufficient cash
flow from operations and obtain sufficient debt financing or capital
contributions to meet its obligations. In addition, the Company's ability
to meet its obligations on both a short-term and long-term basis requires
the Company to continue to increase revenue, operating profits and
operating cash flow and to fulfill manufacturing contracts. These
circumstances raise substantial doubt about the ability of the Company to
continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Management's plans include new product developments which are outgrowths of
existing products for which a backlog currently exists, the introduction of
new products to meet new commercial needs, and improved penetration of the
government market. Although no significant amounts were required in fiscal
year 1996, if necessary, the Company will again defer the payment of
certain salary related amounts and amounts due to related parties in an
effort to conserve cash. Management believes that short-term liquidity can
be provided from cash generated by operations. In addition, management
intends to continue searching for external financing.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.
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
costs which approximates market value.
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, 1997, 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.
1817
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. Upon retirement or disposition of a fixed asset, the cost and
related accumulated depreciation are removed from the accounts and the
resulting gain or loss is included in the Statements of Operations.
Revenue Recognition:
Commercial sales and sales related to Government contracts are recorded
when products are shipped.
Research and Development Costs:
Research and development costs are expensed as incurred.
Income/(Loss) Per Common Share:
The computation of income/(loss) per common share is based on the weighted
average number of shares outstanding. The Company'soutstanding, including dilutive common stock
equivalents were anti-dilutive for the year ended March 31, 1996.equivalents. Preferred stock dividends are considered when determining per
share amounts. In fiscal 1995 the preferred stock dividend of $30,000 iswas
deducted from the income before extraordinary item of $10,476, which
resultsresulted in the loss per share before extraordinary item of $.01. The
convertible subordinated notes are not considered common stock equivalents
for the purpose of 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 laws 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.
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
18
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
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.
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, and the inventory and accounts receivable
reserves.valuation.
Reclassification
Certain amounts have been reclassified to conform to the current year
presentation.
19
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
3. Accounts Receivable
The following tabulation showssets forth the component elementscomponents of accounts receivable:
March 31,
--------------------------------------------------------
1997 1996
1995
------------- --------------------- --------
Government $ 147,542 $ 124,323$163,490 $147,542
Commercial 139,247 211,952
115,156
------------- -------------
$ 359,494 $ 239,479
============= =============-------- --------
$302,737 $359,494
======== ========
4. Inventories
Inventories consist of:
March 31,
-------------------------------------------------------
1997 1996
1995
------------- -------------------- --------
Purchased Parts $ 160,327 $ 246,909parts $213,842 $160,327
Work-in-process 206,750 246,668 339,400
Less: Reserve for obsolescence (68,419) (60,121)
(104,036)
------------- ------------
$ 346,874 $ 482,273
============= ============-------- --------
$352,173 $346,874
======== ========
The work-in-process includes $147,090$71,943 and $145,855$147,090 for government contracts
at March 31, 19961997 and March 31, 1995,1996, respectively.
5. Office and Manufacturing Equipment
March 31,
-------------------------------------------------------
1997 1996
1995
------------- -------------------- --------
Leasehold Improvements $ 36,99939,657 $ 36,999
Machinery and equipment 487,672 471,083
464,503
Sales Equipment 55,000equipment 70,663 68,021
Less: Accumulated depreciation (552,500) (534,278)
(516,284)
------------- --------------------- ---------
$ 45,492 $ 41,825
$ 40,218
============= ============
6. Note Payable
The note payable at March 31, 1995 consisted of a bank note, bearing
interest at 9% and payable on demand. The loan was collateralized by the
cash surrender value of a life insurance policy for the Chairman/President
of the Company. The note was paid in full in 1996.========= =========
20
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
7.6. Accrued Expenses
Accrued payroll, vacation pay and deferred wages consists of the following:
March 31,
-------------------------------------------------------
1997 1996
1995
------------- -------------------- --------
Deferred salary and wages and interest $ 468,980 $ 462,647$169,955 $468,980
Accrued vacation pay 53,157 101,621 81,477
Accrued salary, and payroll taxes 24,851 19,752
16,746
------------- ------------
$ 590,353 $ 560,870
============= ============Accrued profit sharing 94,469 --
-------- --------
$342,432 $590,353
======== ========
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 employeesemployee's 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 managers also deferred salary
for portions of the fiscal years ending March 31, 1997 and March 31, 1996.
Other accrued expenses of $351,099$325,556 and $385,578$351,099 at March 31, 19961997 and 1995,1996,
respectively, consist primarily of professional service costs for legal,
accounting and consulting services and of product related costs, such as
warranty.
8. Redeemable Preferred Stock
Tel has issued and outstanding 125,025 shares of 8% cumulative redeemable
preferred stock. The redeemable preferred stock has a $3 par value.
Dividends are payable prior to the redemption date only to the extent of
10% of net income. Redemption provisions provide that Tel will pay the
holders of the preferred stock 10% of net income (less amounts paid for
dividends) and 10% of the net proceeds of any Tel equity financing. In any
event, subject to the conditions set forth in the following paragraph, Tel
was required to redeem this stock and any unpaid dividends by June 21,
1995. At March 31, 1996, cumulative unpaid dividends amount to $231,568.
The Company's management does not believe that a market exists to readily
determine the estimated fair value of the redeemable preferred stock.
In the opinion of the Company's external legal counsel, the state law
governing the redemption of the preferred stock prohibits a corporation
from redeeming or acquiring its shares for cash if, after giving effect
thereto, the Company's total assets would be less than its total
liabilities. At March 31, 1996, Tel's liabilities exceed its assets by
$1,118,364. The redeemable preferred stock has been classified as a
non-current liability because of the restriction upon its redemption. See
Note 14 for discussion of such redeemable preferred stock.
21
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
9.7. 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. The warrants are exercisable at a
price of $0.75 per share until March 31, 1997, $1.50 until March 31, 1998
and $2.25 until March 31, 1999. At March 31, 1997, 32,291 have been
exercised.
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 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 and
in accordance with SFAS No. 123, 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.
22
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
8. Income Taxes
The benefit for income taxes as of March 31, 1997 comprises of the
following:
Current:
Federal $ --
State and Local --
----------
Total Current Benefit $ --
==========
Deferred:
Federal $ (299,000)
State and Local (41,200)
----------
Total Deferred Benefit $ (340,200)
==========
The components of the Company's deferred taxes at March 31, 1997 and 1996
are as follows:follows
March 31, March 31,
1997 1996
1995
------------- --------------------- ---------
Net operating loss carryforwards $ 1,446,900 $ 1,466,300$1,222,000 $1,446,900
Asset reserves 53,000 50,400 62,000
Deferred wages and accrued interest 206,000 218,800 209,600
Provision for estimated expenses 70,000 78,500
89,200
------------- ---------------------- ----------
Deferred tax asset 1,551,000 1,794,600 1,827,100
Less, valuation allowance 1,210,800 1,794,600
1,827,100
------------- ---------------------- ----------
Amount recognized in financial
statements $ --(340,200) $ --
============= ====================== ==========
As of March 31, 1996,1997, the Company has Federal tax net operating loss
carryforwards of approximately $3,873,000$3,521,000 which begin to expire in 1998. As
of March 31, 1997 and 1996, the Company reduced the valuation allowance to
reflect the deferred tax assets utilized to offset income tax expense. In
addition, during 1997, the Company, in accordance with FASB 109, reduced
the valuation allowance to recognize in the financial statements a deferred
tax asset of $340,200 at March 31, 1997. The recognized deferred tax asset
is based upon the expected utilization of net operating loss carryfowards
as the Company believes it is more likely than not 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
23
TEL-INSTRUMENT ELECTRONICS CORP.
Notes to Financial Statements (Continued)
8. Income Taxes (Continued)
differ from those estimates. Future profitability in this competitive
industry depends on the 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 in the near term, which
could affect the Company's ability to utilize the deferred tax asset on the
balance sheet or its loss carryfowards.
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:
1997 1996
1995
------------- ---------------- ----
Income tax expense - statutory rate $ 32,500150,000 $ 7,642
Net change in valuation allow (32,500) (7,642)
------------- ------------32,500
Income tax expenseexpenses - state and
local, net of federal benefit 27,200
Reduction of federal valuation allowance (542,600) (32,500)
Other 25,200 --
--------- --------
Income tax benefit recognized
in financial statements $(340,200) $ --
$ --
============= ============
22========= ========
9. Related Party Transactions
At March 31, 1996 the $100,000 non-current note payable - related party was
payable to the Company's Chairman/President, bore interest at 10% and was
payable on demand no earlier than April 1, 1997. At March 31, 1996 accrued
interest thereon of $72,500 was included in accrued expenses - related
parties.
On March 31, 1997, the Company's Chairman/President renegotiated the term
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 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
24
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
10.9. Related Party Transactions The non-current note payable - related party at March 31, 1996 and 1995 of
$100,000 is payable(Continued)
prior to the Company's Chairman/President, bears interest at
10% and is payable on demand no earliermaturity date or 110% of the principal if redeemed more than
April 1, 1997. Accrued
interest thereon of $72,500 and $62,500 at March 31, 1996 and 1995,
respectively, is included in accrued expenses - related parties.one year, but less than two years prior to the maturity date.
Accrued payroll, vacation pay and deferred wages and related interest
includes, $374,343$114,555 and $326,420$374,343 at March 31, 19961997 and 1995,1996, respectively,
which is due to officers of the Company.
Accrued expenses-related parties consists of interest and expenses due to
an officer of the Company of approximately $16,000 and $82,000 at March 31,
1997 and 1996, respectively. In addition, accrued expenses-related parties
includes interest and professional fee of approximately $54,000 due to an
officer/stockholder of the Company at March 31, 1997 and 1996.
Tel has obtained legalprofessional services from an officer/stockholder with the
related professional fees amounting to approximately $35,600, $21,000 $12,000 and $12,000 which
are included in selling, general and administrative expenses for the years
ended March 31, 1997, 1996 1995 and 1994,1995, respectively.
The Chairman/PresidentCompany'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 Company guaranteed payment of theremaining $15,000
until March 31, 1999. This note payable to the bank. In 1995 and 1994, as compensation for providing this
guarantee, the Company paid this individual $2,500 and $3,500 in cash,
respectively.
The convertible subordinated notes accrueaccrues interest semi-annually at a rate of
7%. The subordinate note is for past professional fees and mature on March 31, 1997.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.
Payment of the10. Convertible Subordinated Notes
The Company's $35,000 convertible subordinated note outstanding atmatured and was
discharged on March 31, 1996 has
been guaranteed by an officer/stockholder of the Company.
In1997.
During the year ended March 31, 1995, a convertible subordinated note with
a face value of $35,000 was redeemed for $23,000. The gain on this
transaction of $12,000 has been recognized as an extraordinary item -
extinguishment of debt. As part of the redemption transaction the
subordinated noteholders adjusted the interest due and accrued by $6,942.
This income has been reflected within the operating statement line item
interest-relatedinterest expense-related parties.
11. Leases
The Company rents its office space and manufacturing facility under a lease
agreement expiring in August, 1998. Minimum lease payments are $55,824 in
1996 and 1997 and $20,934 in
25
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
11. Leases (Continued)
1998. Under terms of the lease, the Company pays all real estate taxes and
utility costs for the premises.
Total rent expense, including real estate taxes, was approximately $80,000,
$84,000, $85,000 and $89,000$85,000 for the years ended March 31, 1996,1997,1996 and 1995,
and 1994,
respectively.
23
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
12. Significant Customer Concentrations
No distributor or end user customer accounted for more than 10% of
commercial sales for the year ended March 31, 1997. Sales to a major
commercial distributor accounted for 14%, 12% and 12% of total commercial
revenue for the years ended March 31, 1996 1995 and 1994,1995, respectively. Sales to
another commercial distributor accounted for 12% of total commercial
revenue for the year ended March 31, 1996. Foreign commercial sales were
27%14%, 17%27% and 12%17% of total commercial sales for the years ended March 31,
1997, 1996 1995 and 1994,1995, respectively.
Government sales to the USAF Canadian Defense Force (CDF)were 46% and 37% of total government sales,
respectively, for the years ended March 31, 1997 and 1996. Government sales
to the CDF and US Army for the fiscal year ended March 31, 1996 were 37%, 30%
and 18% of total government sales, respectively. Government sales to the
CDF and US Coast Guard for the fiscal year ended March 31, 1995 were 54%
and 23% of total government sales, respectively.
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable.
The Company feels that the credit risk is limited due to the number of
customers and their dispersion across different geographic areas.
13. Stock Option Plan
The Company has a stock option plan that provides for the granting of
options to employees and directors. Activity during 1997, 1996 1995 and 19941995 is
summarized below (in number of options):
1997 1996 1995
1994
-------- -------- --------------- ------- -------
Held at beginning of year 107,886 54,153 57,653
47,620
Granted 6,933 53,733 --
48,720Exercised 1,667 -- --
Canceled or expired 19,933 -- (3,500)
(38,687)
-------- -------- --------------- ------- -------
Held at end of year 93,219 107,886 54,153
57,653
======== ======== ========
The exercise price of options range from $.375 to $1.50 per share. The
shares become exercisable in 33% increments through 1999. No options were
exercised during 1996, 1995 or 1994. As of March 31, 1996, the number of
shares exercisable was approximately 38,100.
24======= ======= =======
26
TEL-INSTRUMENT ELECTRONICS CORP.
Notes To Financial Statements (Continued)
14. Subsequent Event (Unaudited)
In July,13. Stock Option Plan (Continued)
For the years ended March 31, 1997, 1996 a groupand 1995 the Company had 59,130,
38,100 and 21,600 of options outstanding and exercisable.
As of March 31, 1997, the Company's employees and creditors (the
"Group") agreed to purchase the Company'sCompany had 93,219 options outstanding redeemable preferred
stock (the "Preferred Stock") from the preferred stockholder for $111,700
and to exchange the Preferred Stock for common stock. The Company's Board
of Directors approved the exchange of the Preferred Stock and accrued
dividends for 178,720 shares of newly issued common stock and stock
purchase warrants for an additional 35,744 shares of common stock. The
purchase warrantswhich
86,286 are exercisable at a price$0.375 per share with a weighted average
remaining contractual life of $.75 until March
31, 1997, $1.50 until March 31, 19982.4 years and $2.25 until March 31, 1999. At
March 31, 1996, the Preferred Stock and accrued dividends had6,933 are exercisable at $0.72
per share with a faceweighted average remaining contractual life of 4.2 years.
The per share weighted-average fair value of $606,643, as reflectedstock options granted during
1997 and 1996 were $0.64 and $0.33, respectively on the accompanying balance sheet.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. The effect of
this transaction will be to reduce liabilities by approximately $700,000Company
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 negative net worth by approximately $600,000.income
would not have been materially affected. The Board of Directors also authorized the Company to offer all
shareholders the right to purchase an additional 178,720 shares of common
stock at $.75pro forma amounts are
indicated below:
1997 1996
------- -------
Net income - as reported $781,284 $ 95,679
Net income - pro forma 775,526 92,524
Earnings per share - as reported $ 0.41 0.04
Earnings per share - pro forma 0.41 0.04
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 issue, to such participating shareholders,
up to 35,744 in stock purchase warrants with the same terms as those
described above.
25April 1, 1995 was
not considered.
27
TEL-INSTRUMENT ELECTRONICS CORP.
Schedule II - Valuation and Qualifying Accounts
Balance at Charged to Charged to Deductions Balance at
Beginning Costs and to Other at End of Year
Description of Period Expenses Accounts Deductions of Year
- -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year ended March 31, 1994:
Allowance for doubtful
accounts $ 11,500 $ 23,590 $ 35,090
========= ========== =========
Allowance for obsolete
inventory $ 69,400 $ 25,500 $ 15,000(1) $ 79,900
========= ========== ========= =========
Year ended March 31, 1995:
Allowance for doubtful
accounts $ 35,090 $ 16,000$16,000 $ 51,090
========= ========== ================= ======= ========
Allowance for obsolete
inventory $ 79,900 $ 70,336$70,336 $ 46,200(1) $ 104,036
========= ========== ========= =========$104,036
======== ======= ======== ========
Year ended March 31, 1996:
Allowance for doubtful
accounts $ 51,090 $ 15,000$15,000 $ 66,090
========= ========== ================= ======= ========
Allowance for obsolete
inventory $ 104,036$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
======== ======== ========
(1) Amounts represent disposals of obsolete inventory
26inventory.
(2) Amount represents write off of accounts receivable.
28
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, 1996.1997.
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
(71)(72) President and Chief
Executive Officer
since 1982.
George J. Leon Director; Investment 1986
(52)(53) Manager and beneficiary of
the George Leon Family Trust
(investments) since 1986.
Robert H. Walker Director; Executive Vice 1984
(60)(61) President, Robotic Vision
Systems, Inc. (design and
manufacture of robotic
vision systems),
1983-present.
There are no family relationships between any of the Directors and
Officers of the Registrant.
Significant Employee
--------------------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.
2729
Item 11. Executive Compensation
The following table and accompanying notes set forth information
concerning compensation for the fiscal years ended March 31, 1997 1996
1995 and 1994.1995.
Stock Other
Name and Principal Position Year SalarySalary(1) Options CompensationCompensation(2)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
Harold K. Fletcher 1996 $86,2501997 $100,000 $ ---
Chairman of Board 1995 85,000 2,5001996 86,250 --
President and Chief 19941995 85,000 3,5002,500
Executive Officer
(1) Salaries includes wages deferred in 1994 of $36,680,1997 and 1996 of $1,250.$5,193 and $1,250,
respectively.
(2) Other compensation represents compensation for debt guarantees.
2830
TEL-INSTRUMENT ELECTRONICS CORP.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following tables set forth, as of March 31, 1996,1997, 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)Class(1)
- ---------------- ------------------ -----------------------
Harold K. Fletcher, Director 389,557496,102 (2) 23.9%24.1%
728 Garden Street
Carlstadt, New Jersey 07072
George J. Leon, Director 306,066302,199 (3) 19.0%14.9%
116 Glenview
Toronto, Ontario
Canada M4R1P8
Robert H. Walker, Director 12,18320,450 (4) 0.8%1.0%
425 Robro Drive East
Hauppague, New York 11788
Donald S. Bab, Secretary
330 Madison Avenue
New York, NY 10017 65,634 (5) 3.2%
All Officers and Directors 787,627 46.0%924,863 (6) 44.5%
as a Group (5(6 persons)
(1) The class includes 1,603,8062,030,948 shares outstanding. InThe 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 shares owned by an option holder, the class
includes shares subject to his option.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.FletcherMr. Fletcher is a
partner and 25,787 shares of common stock issuable to Mr. Fletcher upon
conversion of options. Mr.FletcherMr. 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 options owned by Mr.Leon2,693 shares subject to purchase 1,800 shares at $1.50 per share, 750 shares at $.375 per
share and 4,000 shares at $.375 per share.currently exercisable
stock option. Mr. Leon disclaims beneficial ownership of the shares owned
by the trust.
(4) Includes options4,117 shares subject to purchase 1,800 shares at an exercise price of
$1.50 per share, 2,250 shares at $.375 per share and 3,800 shares
at $.375 per share.
29currently exercisable stock options.
31
TEL-INSTRUMENT ELECTRONICS CORP.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(Continued)
(5) Includes 3,333 shares subject to currently exercisable stock optioins.
(6) Includes 45,931 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 109 to the
financial statements included on page 22pages 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 12-1312
Balance Sheets - March 31, 1997 and 1996 and 1995 1413
Statements of Operations - Years Ended
March 31, 1997, 1996 and 1995 and 1994 1514
Statements of Changes in Stockholders'
DeficiencyEquity/(Deficiency) - Years Ended
March 31, 1997, 1996 and 1995 and 1994 1615
Statements of Cash Flows - Years Ended
March 31, 1997, 1996 and 1995 and 1994 1716
Notes to Financial Statements 18-2517-27
(2) Financial Statement Schedule:
II - Valuation and Qualifying Accounts 2628
(3) Restated Certificate of Incorporation dated
November 8, 1996
b.) No reports on Form 8-K were filed during the fourth quarter of
1996.
301997.
32
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) Department of the Air Force Contract No. G-1331,
dated August 30, 1994.
(10.3) Canadian Defense Forces Contract No. G-1457,
dated December 22, 1993.
(10.4) 7%, $35,000 Convertible Subordinated Note dated
March 31,199231, 1992 by and between Registrant and
George Bresler.
(10.5) 7%, $30,000 Convertible Subordinated Note dated
March 31, 1992 between Registrant and Donald S.
Bab.
* (10.6) Guarantee of bank loan,$50,000 $50,000 Key Bank of
Western New York, N.A., Promissory Note dated
July 29, 1988, and Letter Agreement dated July
27, 1988 by and between Issuer, Kevin S.
Neumaier and Kirsten S. Neumaier.
**(11. (27.) Statement recomputation of per share earnings.
**(12.) Statement recomputation of ratio of earnings to fixed
charges.
**(22.) Registrant has no subsidiaries.Financial Data Schedule
* Incorporated by reference to Registration 33-18978 dated November
7, 1988.
** Not ApplicableFinancial 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.
3133
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 28, 19961997 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 28, 19961997
---------------------------
/s/ Harold K. Fletcher
/s/ George J. Leon Director June 28, 19961997
---------------------------
/s/ George J. Leon
/s/ Robert H. Walker Director June 28, 19961997
---------------------------
/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, 1996,1997, 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.
3234