UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------------------------------------------
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
--- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 19981999
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 33-18978
TEL-INSTRUMENT ELECTRONICS CORP.
(Exact name of the Registrant as specified in Charter)
New Jersey 22-1441806
(State of Incorporation) (I.R.S. Employer ID Number)
728 Garden Street, Carlstadt, New Jersey 07072
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone No. including Area Code: 201-933-1600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_X No ____
Indicate the number of shares outstanding of the issuer's common stock, as of
the latest practical date:
2,096,9852,109,957 shares of Common stock, $.10 par value as of October 28, 1998.August 9, 1999.
TEL-INSTRUMENT ELECTRONICS CORPORATION
TABLE OF CONTENTS
PAGE
----
Item 1. Financial Statements (Unaudited):
Condensed Comparative Balance Sheets
SeptemberJune 30, 19981999 and March 31, 19981999 1
Condensed Comparative Statements of Operations -
Three and Six Months Ended SeptemberJune 30, 19981999 and 19971998 2
Condensed Comparative Statements of Cash Flows -
SixThree Months Ended SeptemberJune 30, 19981999 and 19971998 3
Notes to Condensed Financial Statements 4-54-6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-9
Part II. Other Information 107-9
SIGNATURES 10
Item 1 - Financial Statements
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE BALANCE SHEETS
(Unaudited)
September 30, 1998 and March 31, 1998
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE BALANCE SHEETS
June 30, 1999 and March 31, 1999
(Unaudited) (Audited)
ASSETS SeptemberJune 30, March 31,
1998 1998
------------- ------------1999 1999
----------- -----------
Current assets:
Cash $ 79,68153,831 $ 585,28170,617
Accounts receivable, net of allowance for doubtful 399,904 374,506871,865 638,721
accounts of $15,923$15,598 at September 30,1998June 30, 1999 and
$16,164$15,585 at March 31, 1998
Unbilled revenues (see note 2) 195,272 --1999
Inventories 462,998 383,030929,854 713,700
Prepaid expenses and other current assets 38,333 24,01743,130 39,173
Deferred income tax benefit - current 78,300 78,300
----------- -----------
Total current assets 1,254,488 1,445,134
----------- -----------1,976,980 1,540,511
Property, plant and equipment, net
112,671 79,321170,943 130,901
Other assets 120,723 96,067129,256 128,892
Deferred income tax benefit 372,415 320,619392,064 418,204
----------- -----------
Total assets 1,860,297 1,941,1412,669,243 2,218,508
=========== ===========
LIABILITIESLIABILITES & STOCKHOLDERS EQUITY
Current liabilities:
Note payable - related party - current portion 50,000 50,000100,000 100,000
Note payable - bank 250,000 --
Convertible subordinatesubordinated notes - related party 15,000 15,000
Capitalized lease obligations - current portion 9,941 9,667
Advance payments 55,601 134,767
Accrued payroll, vacation pay, deferred wages
payroll taxes and interest on deferred wages 210,592 211,400263,981 218,289
Accounts payable and accrued expenses 301,651 304,673711,799 555,206
----------- -----------
Total current liabilities 577,243 581,073
----------- -----------1,406,322 1,032,929
Notes payable - related party - non-current portion 300,000 300,000250,000 250,000
Capitalized lease obligations - excluding current port 54,538 16,486
----------- -----------
Total liabilities 877,243 881,0731,710,860 1,299,415
Stockholders' equityequity:
Common stock 209,701 209,476210,998 210,998
Additional paid-in capital 3,922,288 3,921,6703,925,854 3,925,854
Accumulated deficit
(3,148,935) (3,071,078)(3,178,469) (3,217,759)
----------- -----------
Total stockholders' equity 983,054 1,060,068958,383 919,093
----------- -----------
Total liabilities and stockholders' equity $ 1,860,2972,669,243 $ 1,941,1412,218,508
=========== ===========
See accompanying notes to condensed financial statements
1
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
Sales
Government, net $ 418,472 567,191 $ 801,212 1,124,705
Commercial, net 607,204 276,850 889,657 590,159
----------- ----------- ----------- -----------
Total Sales 1,025,676 844,041 1,690,869 1,714,864
Cost of sales 425,504 351,674 764,810 687,894
----------- ----------- ----------- -----------
Gross Margin 600,172 492,367 926,059 1,026,970
Operating expenses
Selling, general & administrative 258,704 184,245 473,228 403,175
Engineering, research, & development 327,532 205,981 569,544 363,926
----------- ----------- ----------- -----------
Total operating expenses 586,236 390,226 1,042,772 767,101
Income/ (Loss) from operations 13,936 102,141 (116,713) 259,869
Other income (expense):
Interest income 2,484 5,651 8,554 11,733
Interest expense (9,611) (19,849) (21,494) (37,592)
----------- ----------- ----------- -----------
Income/ (Loss) before taxes 6,809 87,943 (129,653) 234,010
Provision/(Benefit) for income taxes 2,720 35,125 (51,796) 93,464
----------- ----------- ----------- -----------
(Loss)/net income $ 4,089 52,818 $ (77,857) 140,546
=========== =========== =========== ===========
Basic and diluted income (loss)
per common share $ 0.00 0.03 $ (0.04) 0.07
Dividends per share None None None None
Weighted average shares outstanding
Basic 2,095,298 2,034,123 2,095,056 2,032,762
Diluted 2,118,317 2,101,731 2,118,075 2,100,370
Three Months Ended
June 30,
1999 1998
----------- -----------
Sales - government, net $ 553,428 $ 382,740
Sales - commercial, net 558,401 282,453
----------- -----------
Total sales 1,111,829 665,193
Cost of sales 465,424 339,306
----------- -----------
Gross margin 646,405 325,887
Operating expenses:
Selling, general and administrative 290,559 214,524
Engineering, research and development 278,443 242,012
----------- -----------
Total operating expenses 569,002 456,536
----------- -----------
Income (loss) from operations 77,403 (130,649)
Other income (expenses):
Interest income 1,615 6,070
Interest expenses (13,588) (11,883)
----------- -----------
Income (loss) before taxes 65,430 (136,462)
Provision (benefit) for income taxes 26,140 (54,516)
----------- -----------
Net income (loss) 39,290 (81,946)
=========== ===========
Basic and diluted income (loss) per common share $ 0.02 $ (0.04)
=========== ===========
Dividends per share None None
Weighted average shares outstanding
Basic 2,109,957 2,094,735
Diluted 2,119,452 2,094,735
See accompanying notes to condensed financial statements
2
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS
(Unaudited)
SixThree Months Ended
SeptemberJune 30,
1999 1998
1997
---------- --------- ------
(Decrease) increase in cash:
Cash flows from operating activities
Net income (loss) income $ (77,857) $ 140,54639,290 (81,946)
Adjustments to reconcile net (loss) income to cash used
in operating activities:
Deferred income taxes (51,796) 93,46426,140 (54,516)
Depreciation 20,339 12,53513,274 10,909
Changes in operating assets orand liabilities:
Increase in accounts receivable and unbilled revenues (220,670) (251,434)(233,144) (98,663)
Increase in inventories (79,968) (93,993)(216,154) (95,822)
Increase in prepaid expenses and other current assets (14,316) (14,132)(3,957) (11,327)
Increase in other assets (24,656) (15,000)
(Decrease) increase(364) (19,668)
Increase (decrease) in accrued payroll, deferred wages
and and vacation pay (808) 14,279
Decrease45,692 (16,189)
Increase in accounts payable, advance payments
and accrued expenses (3,022) (26,725)77,427 37,265
--------- ---------
Net cash used in operations (452,754) (140,460)(251,796) (329,957)
--------- ---------
Cash flows from investing activities:
Cash purchases of property, plant and equipment (53,689) (41,790)(12,911) (13,276)
--------- ---------
Net cash used in investing activities (53,689) (41,790)(12,911) (13,276)
--------- ---------
Cash flows from financing activities:
Proceeds from exercisenotes payable - bank 250,000 --
Repayment of stock options 843 1,588
Proceeds from issuance of common stock --capitalized lease obligations (2,079) --
--------- ---------
Net cash provided by financing activities 843 1,588
--------- ---------247,921 --
Net decrease in cash (505,600) (180,662)(16,786) (343,233)
Cash at beginning of period 70,617 585,281 528,636
--------- ---------
Cash at end of period $ 79,68153,831 $ 347,974
========= =========
Interest paid $ 19,786 $ 25,864242,048
========= =========
See accompanying notes to condensed financial statementsstatements.
3
TEL-INSTRUMENT ELECTRONICS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 Basis of Presentation
In the opinion of management, the accompanying unaudited condensed financial
statements contain all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position of Tel-Instrument
Electronics Corp. as of SeptemberJune 30, 1998,1999, the results of operations for the three
and six months ended SeptemberJune 30, 19981999 and SeptemberJune 30, 1997,1998, and statements of cash flows for
the sixthree months ended SeptemberJune 30, 19981999 and SeptemberJune 30, 1997.1998. These results are not
necessarily indicative of the results to be expected for the full year.
The financial statements have been prepared in accordance with the requirements
of Form 10-Q and consequently do not include disclosures normally made in an
Annual Report on Form 10-K. The March 31, 19981999 results included herein have been
derived from the audited financial statements included in the Company's annual
report on Form 10-K. Accordingly, the financial statements included herein
should be reviewed in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998.1999.
Note 2 Accounts Receivable
The following table sets forth the components of accounts receivable:
June 30, March 31,
1999 1999
-------- ---------
Commercial $ 246,517 $ 179,742
Government 473,603 359,716
Unbilled Revenuerevenues 167,343 114,848
Allowance for bad debts (15,598) (15,585)
--------- ---------
Total $ 871,865 $ 638,721
Sales are recognized primarily upon shipment of products, except in the case of
long-term contracts wherein sales are recognized on the percentage-of-completion
method.
Sales underassociated with the documentation and test portion of the U.S. Navy
contract have been recorded on the percentage-of-completion method. Under this
approach, sales and gross margin are recognized based onupon the ratio of costs
incurred to date to total estimated contract costs. Unbilled revenues of $195,272 represent
recoverable costs and accrued profit not billed resulting from the application
of percentage-of-completion accounting. Actual billing of these amounts will be
based upon contractualactual billing terms. In August 1999, the Company received the first
production order for 230 test sets with a value of approximately $3,000,000.
4
TEL-INSTRUMENT ELECTRONICS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
Note 3 Inventories
Inventories consist of:
SeptemberJune 30, March 31,
1998 1998
--------------------------------1999 1999
----------------------------
Purchased parts $ 282,409529,930 $ 253,616402,804
Work-in-process 216,209 165,034429,544 340,516
Less: Reserve for obsolescence (35,620) (35,620)
--------------------------------(29,620) (29,620)
----------------------------
$ 462,998929,854 $ 383,030
================================713,700
============================
Note 4 Income Taxes
The Company, in accordance with SFASFASB 109, has recognized a deferred income tax
benefit based upon the expected utilization of net operating loss carryforwards
as the Company believes that it is more likely than not that it will realize a
portion of its operating losses before they expire. For the sixthree months ended
SeptemberJune 30, 1998,1999, the Company recorded a deferred income tax benefitprovision of $51,796,$26,140, which represents
the effective federal and state tax rate on the Company's net lossincome before
taxes of $129,653. This$65,430. The Company has no tax benefit reduced the loss
for the period.liability. The $51,796 increased$26,140 decreased the
Company's deferred income tax assetbenefit by the same amount in the accompanying
balance sheet. The Company expects to utilize this deferred income tax benefit
in the future for tax reporting purposes.
4
TEL-INSTRUMENT ELECTRONICS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
Note 5 Reclassifications
Certain reclassifications have been made to the fiscal year 1998 financial
statements to be consistent with the fiscal year 1999 presentation.
Note 6 Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128 "Earnings Per Share" (SFAS 128). SFAS 128
supersedes 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 relating to both interim and annual periods ending
after December 15, 1997.
BasicThe Company's basic income (loss) per share is based on net income (loss) for
the relevant period, divided by the weighted average number of common shares
outstanding during the period. Diluted income (loss) per share for September 30, 1998 is based on net
income (loss), divided by the weighted average number of common shares
outstanding during the period, including common share equivalents, such as
outstanding stock options and warrants during the period.options. Common share equivalents such as
outstanding stock options, are not included in the
calculation for the sixthree months ended SeptemberJune 30, 1998 since the effect would be
antidilutive.
5
TEL-INSTRUMENT ELECTRONICS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
Note 7 Credit Facility
On July 22, 1998,6 Government and Commercial Sales
In 1999, the Company entered into a credit agreement with Summit Bank
for $350,000, which extends for one yearadopted SFAS 131. The prior years information has been
restated to present the Company's government and is thereafter renewable on an
annual basis.commercial activities.
The Company has not borrowed against this line.is organized primarily on the basis of its avionics products. The
government segment consists primarily of the sale of test equipment to U.S. and
foreign governments and militaries either direct or through distributors. The
commercial segment consists of sales of test equipment to domestic and foreign
airlines and to commercial distributors. The Company pays
no commitment feeprimarily develops and
designs test equipment for the rateavionics industry and, as such, the Company's
products and designs may be sold in the government and commercial markets.
The table below presents information about sales and gross margin. Cost of interest borrowings is the Lender's Prevailing
Base Rate plus 1%.
5sales
includes certain allocation factors for indirect costs.
Three Months Ended Three Months Ended
June 30, 1999 June 30, 1998
Government Commercial Government Commercial
---------- ---------- ---------- ----------
Sales $553,428 558,401 $382,740 282,453
Cost of sales 233,966 231,458 196,001 143,305
-------- ------- -------- -------
Gross margin $319,462 326,943 $187,739 139,148
6
Item 2 MANAGEMENT2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL POSITIONCONDITION
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 the
demand
for the Company's products or in the cost and availability ofif its raw materials;
the actions of its 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.
Overview
TheIn August 1999 the Company invested heavily in product development and expenditures increased
$205,618 (57%) forreceived the first six months of the current fiscal year as compared
to the same period in the prior fiscal year. The total expenditure of $569,544
represents 34% of total sales. The principal effort resultedproduction order from the U.S.
Navy exercising its option to incorporatefor 230 test sets for a collision avoidance (TCAS) test
capability into the T-47M test set design. Eight T-47M prototypes have been
fabricated and these units have begun several monthstotal value of environmental and
functional testing. Several tests have been successfully completed. Field
evaluation by the U.S. Navyover $3,000,000. This order is anticipated to begin early in the fourth quarter
of the current fiscal year. Assuming field evaluations are satisfactory and the
U.S. Navy exercises production options later in the fourth quarter, deliveries
could begin in the
first quarter ofunder the next fiscal year. This contract can be a
source of significant revenues, withwhich includes options for up to 1,300 units, which the
U.S. Navy can exercise, on behalf of all U.S. military services, through
calendar year 2001. However, there can be no assurance that field evaluations will be favorable and that the U.S. Navy will
exercise all of its purchase options under this contract. In addition,The Company expects to
begin shipping these units at the end of the fourth quarter of the current
fiscal year. Sales for the first quarter were $1,111,829 and the Company
continues the
developmentgenerated income before taxes of the T-36M, under a U.S. Army contract, and new products for other
markets.
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 also signed an exclusive agreement with Milspec Services Pty. Ltd. in
August 1998 to represent the Company in Australia and New Zealand, and an
agreement with M.P.G. Instruments s.r.l. in September 1998 to represent the
Company in Europe to obtain a contract for a new military product which would be
based on the Company's technology.$65,430. The Company continues to believe that the
foreign commercial market is larger than the domestic market, because many
foreign airlines are upgrading to meet U.S. requirements,invest
heavily in engineering, research, and that foreign
government sales will grow, particularlydevelopment as the result of our growing reputation
in IFF testing.
6
Item 2 MANAGEMENT DISCUSSION OF RESULTS OF OPERATIONS AND
ANALYSIS OF FINANCIAL POSITION (Continued)
Overview (Continued)
As previously reported, during fiscal year 1998 the Company fulfilled its
obligation and delivered the final units of the T-30CM ILS test set to the U.S.
Air Force. As a result of completing this contract, it was anticipated that the
Company would have lower sales during the first half of fiscal year 1999. The Company continues to
believe that this decline is temporary and new contracts
can be obtained to increase sales and earnings. In this regard, management is
encouraged bydevelop other products for targeted markets.
The Company's backlog, including the dollar value of its backlog, by the second quarter revenues
which included a large and unexpected increase in commercial sales, by the
progress onorder from the U.S. Navy contract, and by the efforts of its new offshore
distributors.exceeds
$6,000,000.
Sales
For the three months ended SeptemberJune 30, 19981999, net sales increased $181,635 (21.5%$446,636 (67.1%)
to $1,025,676,
as compared to the same period ending Septemberthree months ended June 30, 1997.1998. Commercial sales increased
$330,354 (119.3%$275,948 (97.7%) and government sales increased $170,688 (44.6%). The increase
in commercial sales reflects the favorable economic conditions within the
airline industry. However, there is no assurance that this trend will continue.
The increase in government sales is attributed to $607,204the T-47 family of IFF test
sets, including the T-47CC which incorporates a directional antenna. The
increase is sales in both the commercial and government segments is also
attributed to the efforts of our international distributors.
7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Results of Operations (continued)
Gross Margin
Gross Margin increased $320,518 (98.4%) for the three months ended SeptemberJune 30, 1998
as compared to the same period ending September 30,
1997. Thisthree months in the prior fiscal year. The increase in
commercial sales is attributed to decisions by several
large fleet owners to upgrade their test equipment and may not be continued. The
Company had a commercial backlog of $297,090 at September 30, 1998.
Government sales decreased $148,719 (26.2%), as compared to the same period
ending September 30, 1997. This decrease is primarily attributed to the
completion of the U.S. Air Force T-30CM contract for which there were no sales
in the current fiscal year. This decrease was partially offset by revenues of
$195,242 for fabrication of the initial prototypes and certain documentation and
testing related to the U.S. Navy T-47M IFF test set contract. The Company had a
government backlog of $2,043,307 at September 30, 1998.
For the six months ended September 30, 1998 sales declined $23,995 (1.4%), as
compared to the same period ending September 30, 1997. The decline in government
sales related to the completion of the contract with the U.S. Air Force was
mostly offset by the increase in commercial sales during the second quarter and
the sales related to the contract with the U.S. Navy. There can be no assurance
that the increase in commercial sales will continue.
Gross Margin
For the three months ended September 30, 1998 gross margin, increased $107,805
(21.9%), as compared tofor the same period ending September 30, 1997. This increasemost part, is primarily attributed to the higher sales in the second quarter.volume. The gross
margin percentage was 58.5% for the three months ended SeptemberJune 30, 19981999 was 58.1% as compared
to 58.3%49.0% for the three months ended SeptemberJune 30, 1997.
For the six months ended September 30, 1998 gross margin decreased $100,911
(9.8%), as compared to the same period ended September 30, 1997. This decrease
is primarily attributed to the lower gross margin associated with the U.S. Navy
T-47M contract. The gross margin percentage was 54.8% for the six months ended
September 30, 1998 as compared to 59.9% for the six months ended September 30,
1997.
7
Item 2 MANAGEMENT DISCUSSION OF RESULTS OF OPERATIONS AND
ANALYSIS OF FINANCIAL POSITION (Continued)1998.
Operating Expenses
Selling, general and administrative expenses increased $74,459 (40.4%$76,035 (35.4%) for the
three months ended SeptemberJune 30, 19981999 as compared to the same period last year.three months ended June 30,
1998. This increase is associated withattributed to higher sales and marketing expenses, the
addition to staff of a Director of Finance, and an increase in selling expenses, mostly
attributed to higher commissions based upon the increase in commercial sales and
to higher administrative salaries. In fiscal year 1998 the Company's President
devoted a percentage of his time to research and development to ensure that such
activities were properly conducted. In fiscal year 1999, the Company hired a
Director of Engineering, thus minimizing the President's time in overseeing the
research and development function and allowing him to concentrate on Company
growth.
Selling, general and administrative expenses increased $70,053 (17.4%) for the
six months ended September 30, 1998 as compared to the same period last year.
This increase is primarily attributed to the increase for the three months ended
September 30, 1998, as discussed above.
Engineering, research and development expenses increased $121,551 (59.0%$36,431 (15.1%)
and $205,618
(56.5%) forprimarily associated with the three and six months ended September 30, 1998, respectively, as
compared to the same periods last year. This increase reflects the Company's
ongoing commitment to developing new products and finalizingfinalization of the design of the T-47M IFF test
sets for the U.S. Navy T-47M test sets,and the development of additional products, such as described in the
Overview. As this work is
completed, the rate of engineering expenditures should be reduced.T-47CC and T-47N.
Income Taxes
In accordance with SFAS 109, a provision for income taxes was recognized in the
amount of $93,464$26,140 for the sixthree months ended SeptemberJune 30, 1997.1999. For the sixthree months
ended SeptemberJune 30, 1998, the Company recorded ana deferred income tax benefit of
$51,796,$54,516, which represents the effective federal and state tax rate on the
Company's net loss before taxes of $129,653.$136,642. The Company currently does not have
any tax liability. (See Note 4 to Notes to Condensed Comparative Financial
Statements).
Liquidity and Capital Resources
At SeptemberJune 30, 19981999 the Company had positive working capital of $677,245$570,658 as
compared to $864,061$507,582 at March 31, 1998.1999. For the sixthree months ended SeptemberJune 30,
1998,1999, cash used in operations was $452,754$251,796 as compared to $140,460$329,957 for the sixthree
months ended SeptemberJune 30, 1997.1998. This increasereduction in cash used in operations is
primarily associated withattributed to the improvement in the Company's loss from operations andoperating income. The
increases in accounts receivable unbilled revenues, and inventories. The total decrease in
cash of $505,600 was also impactedinventories were partially offset by purchases of equipmentthe
Company's operating income, borrowings from the bank in the amount of $53,689.$250,000
,and increases in accounts payable and other accrued liabilities.
The Company continueshas a line of credit from Summit Bank for $350,000, which was
originally scheduled to invest heavilyexpire in research and development.July 1999, however, the Company received a
60-day extension to the agreement. The Company expects these investments will finalize the designs for the T-47M, T-47N, T-36M,
and T-48IC, and begin to ship these units for which there are current ordersis currently in the backlog. Whileprocess of
negotiating the extension of this would increase sales, cash flow, and profits, there is
no assurance that these increases will occur.credit line with the bank. As of June 30,
1999, the Company had borrowed $250,000 against this line for working capital
needs.
Based upon the current backlog and available working capital, the Company
believes that it has sufficient working capital to fund its plans for the next
twelve months. At present, the Company does not expect to incur significant
long-term needs for capital outside of its normal operating activities.
8
Item 2 MANAGEMENT2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND ANALYSIS OF FINANCIAL POSITIONCONDITION (Continued)
Liquidity and Capital Resources (Continued)
On July 22, 1998, the Company received from Summit Bank a credit line of
$350,000. The Company has not borrowed against this line as of September 30,
1998.(continued)
There was no significant impact on the Company's operations as a result of
inflation for the sixthree months ended SeptemberJune 30, 1998.1999.
These financial statements should be read in conjunction with the Company's
Annual Report on Form 10-K to the Securities and Exchange Commission for the
fiscal year ended March 31, 1998.1999.
Year 2000 Issue
Many existing computer programs use only two digitstwo-digits to identify a year in the
date field. These programs were designed and developed without considering the
impact of the upcoming change in the yearYear 2000. Some older computer systems
stored dates with only a two-digit year with an assumed prefix of "19".
Consequently, this limits those systems to dates between 1900 and 1999. If not
corrected, many computer systems andand/or applications could fail or create
erroneous results by or at the year 2000.
The Company has reviewed the potential impact of the Year 2000 issue. This
assessment included a review of the impact of the issue in four areas: products,
manufacturing systems, business systems, and other areas. The Company does not
anticipate that the Year 2000 issue will impact operations or operating results.results
or require future material expenditures. The Company's products are not date
sensitive. In addition, the Company is in the process of contacting its
suppliers to determine as to whether they are Year 2000 compliant. The Company
relies on its customers, suppliers, utility service providers, financial
institutions, and other partners in order to continue normal business relations.
The Company is continuing to evaluate alternatives and develop contingency plans
for key business partners. Year 2000 disruptions in the operations of key
business partners could also impact the Company's ability to fulfill some of its
contractual obligations. At this time, it is impossible to assess the impact of
the Year 2000 issue on each of these organizations. There can be no guarantee
that the systems of other unrelated entities on which the Company relies will be
correctedcorrecetd on a timely basis and will not have a material adverse effect on the
Company.
New Accounting Pronouncements
StatementThe discussion of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities was issued in June 1998 and is effective for
all fiscal quarters beginning after June 15, 1999. This statement establishes
accounting and reporting standards for derivative instruments and hedging
activities. The Company does not expect its implementation will have a material
effect on the Company's financialefforts, and management's expectations, relating
to Year 2000 compliance are forward-looking statements. StatementThe Company's ability to
achieve Year 2000 compliance and the level of Financial Accounting Standards No. 134, Accounting for Certain
Mortgage Banking Activities was issuedincremental costs associated
therewith, could be adversely impacted by, among other things, the availability
and cost of programming and testing resources, vendors' ability to modify
proprietary software, and unanticipated problems identified in October 1998 and is effective for all
fiscal quarters beginning after December 15, 1998. This statement establishes
reporting standards for certain banking activities of mortgage banking
enterprises and other enterprises that conduct operations that are substantially
similar to the primary operations of a mortgage banking enterprise. The Company
does not expect its implementation will have a material effect on the Company's
financial statements as currently presented.ongoing
compliance review.
9
Part II. Other Information
Item 6. Exhibits and Reports on Form 10-Q.
The exhibits filed or incorporated by reference as part of the Quarterly
Report on Form 10-Q are listed in the attached Index to Exhibits.
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TEL-INSTRUMENT ELECTRONICS CORP.
Date: 11/10/98August 13, 1999 By: /s/ Harold K. Fletcher
--------------------------------
/s/----------------------
Harold K. Fletcher
Chairman and President
10
INDEX TO EXHIBITS
1 Loan agreement with Summit Bank dated July 22, 1998
27 Financial data schedule which is submitted electronically to the
Securities and Exchange Commission for information only and is not filed.
11Date: August 13, 1999 By: /s/ Joseph P. Macaluso
----------------------
Joseph P. Macaluso
Principal Accounting Officer