UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q/A
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2003
|_| 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| No |_|
Indicate the number of shares outstanding of the issuer's common stock, as of
the latest practical date:
2,144,151 shares of Common stock, $.10 par value as of November 7, 2003.
TEL-INSTRUMENT ELECTRONICS CORPORATION
TABLE OF CONTENTS
PAGE
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Item 1. Financial Statements (Unaudited):
Condensed Comparative Balance Sheets
September 30, 2003 and March 31, 2003 1
Condensed Comparative Statements of Operations -
Three and Six Months Ended September 30, 2003 and 2003 2
Condensed Comparative Statements of Cash Flows -
Six Months Ended September 30, 2003 and 2002 3
Notes to Condensed Financial Statements 4-6
Item 2. Management's Discussion and Analysis of the Results of
Operations and Financial Conditions 7-11
Item 4. Controls and Procedures 12
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
Certifications 13-16
Item 1 - Financial Statements
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE BALANCE SHEETS
(Unaudited)
ASSETS September 30, 2003 March 31, 2003
------------------ --------------
Current assets:
Cash and cash equivalents $1,644,478 $1,680,124
Accounts receivable, net of allowance
for doubtful accounts of $36,598 at
September 30, 2003 and March 31, 2003 1,881,996 1,966,815
Inventories, net 2,352,201 2,262,147
Prepaid expenses and other current assets 77,061 42,587
Deferred income taxes 679,614 535,448
---------- ----------
Total current assets 6,635,350 6,487,121
Property, plant and equipment, net 708,719 726,594
Other assets 289,918 97,462
---------- ----------
Total assets 7,633,987 7,311,177
========== ==========
LIABILITIES & STOCKHOLDERS EQUITY
Current liabilities:
Note payable - related party - current
portion 200,000 200,000
Convertible subordinated notes -
related party 7,500 7,500
Capitalized lease obligations - current
portion 28,231 28,637
Accounts payable 521,608 503,216
Deferred revenues 48,763 51,203
Accrued payroll, vacation pay,
deferred wages payroll taxes and
interest on deferred wages 485,961 436,630
Income taxes payable -- 103,924
Accrued expenses 954,438 1,001,124
---------- ----------
Total current liabilities 2,246,501 2,332,234
Notes payable - related party - long-term 50,000 50,000
Capitalized lease obligations - long-term 6,989 21,069
---------- ----------
Total liabilities 2,303,490 2,403,303
Commitments and contingencies -- --
Stockholders' equity:
Common stock 214,418 213,583
Additional paid-in capital 3,960,890 3,944,812
Retained earnings 1,155,189 749,479
---------- ----------
Total stockholders' equity 5,330,497 4,907,874
---------- ----------
Total liabilities and stockholders' equity $7,633,987 $7,311,177
========== ==========
See accompanying notes to condensed financial statements
-1-
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
Sept. 30, 2003 Sept. 30, 2002 Sept. 30, 2003 Sept. 30, 2002
-------------- -------------- -------------- --------------
Sales
Government, net $1,762,767 $2,608,868 $3,632,256 $5,013,576
Commercial, net 853,949 374,034 2,042,366 819,059
---------- ---------- ---------- ----------
Total Sales 2,616,716 2,982,902 5,674,622 5,832,635
Cost of sales 1,192,809 1,386,582 2,479,331 2,771,865
---------- ---------- ---------- ----------
Gross Margin 1,423,907 1,596,320 3,195,291 3,060,770
Operating expenses
Selling, general & administrative 714,591 790,593 1,449,590 1,363,661
Engineering, research, & development 500,138 417,319 1,068,048 869,046
Total operating expenses 1,214,729 1,207,912 2,517,638 2,232,707
---------- ---------- ---------- ----------
Income from operations 209,178 388,408 677,653 828,063
Other income (expense):
Interest income 5,188 9,313 15,910 15,789
Interest expense (8,957) (15,880) (17,942) (33,288)
---------- ---------- ---------- ----------
Income before taxes 205,409 381,841 675,621 810,564
Provision for income taxes 81,642 152,544 269,911 323,820
---------- ---------- ---------- ----------
Net income $ 123,767 $ 229,297 $ 405,710 $ 486,744
========== ========== ========== ==========
Basic income per common share $ 0.06 $ 0.11 $ 0.19 $ 0.23
======= ======= ======= =======
Diluted income per common share $ 0.06 $ 0.11 $ 0.18 $ 0.23
======= ======= ======= =======
Dividends per share None None None None
Weighted average shares outstanding
Basic 2,143,776 2,135,776 2,140,930 2,135,422
Diluted 2,202,281 2,162,386 2,199,435 2,162,032
See accompanying notes to condensed financial statements
-2-
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED COMPARATIVE STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
Sept. 30, 2003 Sept. 30, 2002
-------------- --------------
Cash flows from operating activities:
Net income $ 405,710 $ 486,744
Adjustments to reconcile net income
to net cash provided by operating
activities:
Deferred income taxes (144,166) 175,870
Depreciation and amortization 129,270 107,009
Changes in operating assets or liabilities:
Decrease (increase) in accounts
receivable, net 84,819 (451,660)
(Increase) decrease in inventories, net (90,054) 730,577
(Increase) decrease in prepaid exp
& other current assets (34,474) 7,152
(Increase) decrease in other assets (192,456) 5,237
Increase in accounts payable 18,392 104,684
(Decrease) increase in deferred revenues (2,440) 53,334
Increase in accrued payroll,
vacation pay, deferred wages,
and payroll taxes 49,331 119,822
Decrease in income taxes payable (103,924) --
(Decrease) increase in accrued expenses (46,686) 189,801
---------- ----------
Net cash provided by operating activities 73,322 1,528,570
---------- ----------
Cash flows from investing activities:
Cash purchases of property, plant
and equipment (111,395) (52,956)
---------- ----------
Net cash used in investing activities (111,395) (52,956)
---------- ----------
Cash flows from financing activities:
Proceeds from exercise of stock options 16,913 3,090
Repayment of capitalized lease obligations (14,486) (67,580)
---------- ----------
Net cash used in financing activities 2,427 (64,490)
---------- ----------
Net (decrease) increase in cash and
cash equivalents (35,646) 1,411,124
Cash and cash equivalents at beginning
of period 1,680,124 1,198,191
---------- ----------
Cash and cash equivalents at end of period $1,644,478 $2,609,315
========== ==========
Supplemental information
Interest paid $ 23,269 $ 16,515
========== ==========
Income taxes paid $ 518,000 $ 138,737
========== ==========
See accompanying notes to condensed financial statements
-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 September 30, 2003, the results of operations for the
three and six months ended September 30, 2003 and September 30, 2002, and
statements of cash flows for the six months ended September 30, 2003 and
September 30, 2002. 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, 2003 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, 2003.
Note 2 Accounts Receivable, net
Accounts receivable, net consist of:
September 30, 2003 March 31, 2003
------------------ --------------
Commercial $ 829,987 $ 555,076
Government 1,088,607 1,448,337
Allowance for bad debts (36,598) (36,598)
---------- ----------
Total $1,881,966 $1,966,815
========== ==========
Note 3 Inventories, net
Inventories, net consist of:
September 30, 2003 March 31, 2003
------------------ --------------
Purchased parts $ 781,964 $1,074,442
Work-in-process 1,624,507 1,289,578
Finished goods 83,543 10,940
Less: Reserve for obsolescence (137,813) (112,813)
---------- ----------
Total $2,352,201 $2,262,147
========== ==========
-4-
TEL-INSTRUMENT ELECTRONICS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 4 Earnings Per Share
The Company's basic income per share is based on net income for the relevant
period, divided by the weighted average number of common shares outstanding
during the period. Diluted income per share is based on net income, divided by
the weighted average number of common shares outstanding during the period,
including common share equivalents, such as outstanding stock options.
Note 5 Stock Options
The Company accounts 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. The Company has adopted the
disclosure only provisions of Statement of Financial Accounting Standards No.
123 and 148, "Accounting for Stock-Based Compensation" ("SFAS 123 and 148").
Under SFAS 123 and 148 the Company provides pro forma net income and pro forma
earnings per share disclosures for employee stock option grants made since
fiscal 1996 as if the fair-value-based method as defined in SFAS No. 123 has
been applied. The Company currently does not plan to adopt the fair value based
method prescribed by SFAS 123.
The Company estimates the fair value of each option using the Black Scholes
option-pricing model with the following weighted-average assumptions: expected
dividend yield of 0.0%, risk-free interest rate of 3.5, volatility at 50% and an
expected life of 5 years. 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 pro forma amounts are indicated below:
Six Months Ended Six Months Ended
September 30, 2003 September 30, 2002
------------------ ------------------
Net income - as reported $ 405,710 $ 486,744
Less fair value of stock options (38,507) (37,929)
--------- ---------
Net income - pro forma 367,203 448,815
--------- ---------
Basic earnings per share - as reported 0.19 0.23
Basic earnings per share - pro forma 0.17 0.21
Diluted earnings per share - as reported 0.18 0.23
Diluted earnings per share - pro forma 0.17 0.21
-5-
TEL-INSTRUMENT ELECTRONICS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS (continued)
Note 6 Government and Commercial Sales
Information has been presented for the Company's two reportable activities,
government and commercial.
The Company is organized primarily on the basis of its avionics products. The
government market consists primarily of the sale of avionic test equipment to
U.S. and foreign governments and militaries either direct or through
distributors. The commercial market consists of sales of test equipment to
domestic and foreign airlines and to commercial distributors. The commercial
market also includes sales related to repairs and calibration which have a lower
gross margin. The Company primarily develops and designs test equipment for the
avionics 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. Costs of
sales include certain allocation factors for indirect costs.
Three Months Ended Three Months Ended
September 30, 2003 September 30, 2002
Government Commercial Government Commercial
---------- ---------- ---------- ----------
Sales $1,762,767 $ 853,949 $2,608,868 $374,034
Cost of Sales 748,719 444,090 1,176,531 210,051
---------- ---------- ---------- --------
Gross Margin $1,014,046 $ 409,859 $1,432,337 $163,983
========== ========== ========== ========
Six Months Ended Six Months Ended
September 30, 2003 September 30, 2002
Government Commercial Government Commercial
---------- ---------- ---------- ----------
Sales $3,632,256 $2,042,366 $5,013,576 $819,059
Cost of Sales 1,475,645 1,003,686 2,310,416 461,449
---------- ---------- ---------- --------
Gross Margin $2,156,611 $1,039,000 $2,703,160 $357,610
========== ========== ========== ========
-6-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
A number of the statements made by the Company in this report may be regarded as
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.
Forward-looking statements include, among others, statements concerning the
Company's outlook, pricing trends and forces within the industry, the completion
dates of capital projects, expected sales growth, cost reduction strategies and
their results, long-term goals of the Company and other statements of
expectations, beliefs, future plans and strategies, anticipated events or trends
and similar expressions concerning matters that are not historical facts.
All predictions as to future results contain a measure of uncertainty and
accordingly, actual results could differ materially. Among the factors that
could cause a difference are: changes in the general economy; changes in demand
for the Company's products or in the cost and availability of 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 previous
filings with the Securities and Exchange Commission.
Critical Accounting Policies
In preparing our financial statements and accounting for the underlying
transactions and balances, we apply our accounting policies as disclosed in Note
2 of our Notes to Financial Statements included in our Form 10-K. The Company's
accounting policies that require a higher degree of judgment and complexity used
in the preparation of financial statements include:
Revenue recognition - revenues are recognized at the time of shipment to, or
acceptance by customer provided title and risk of loss is transferred to the
customer. Provisions, when appropriate, are made where the right to return
exists. Revenues under service contracts are recognized when the services are
performed.
Property and equipment - property and equipment are stated at cost, less
accumulated depreciation. Depreciation is provided using the straight-line
method over the estimated useful lives of the respective assets over periods
ranging from three to eight years. Useful lives are estimated at the time the
asset is acquired and are based upon historical experience with similar assets
as well as taking into account anticipated technological or other changes.
Leasehold improvements are amortized over the term of the lease or the useful
life of the asset, whichever is shorter.
Inventory reserves - inventory reserves are estimated for excess, slow-moving
and obsolete inventory as well as inventory whose carrying value is in excess of
net realizable value. These estimates are based on current assessments about
future demands, market conditions and related management initiatives. If market
conditions and actual demands are less favorable than those projected by
management, additional inventory write-downs may be required.
Warranty reserves - warranty reserves are estimated based upon historical rates
and specific items that are identifiable and can be estimated at time of sale.
While warranty costs have historically been within our expectations and the
provisions established, future warranty costs could be in excess of our warranty
reserves. A significant increase in these costs could adversely affect our
operating results for the period and the periods these additional costs
materialize. Warranty cost accruals are adjusted from time to time when actual
warranty claim experience differs from estimates.
-7-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Critical Accounting Policies (continued)
Accounts receivable - the Company performs ongoing credit evaluations of its
customers and adjusts credit limits based on customer payment and current credit
worthiness, as determined by review of their current credit information. The
Company continuously monitors credits and payments from its customers and
maintains provision for estimated credit losses based on its historical
experience and any specific customer issues that have been identified. While
such credit losses have historically been within our expectation and the
provision established, the Company cannot guarantee that it will continue to
receive positive results.
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 more likely than not 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.
Results of Operations
Overview
Sales for the three and six months ended September 30, 2003 declined $366,186
(12.3%) and $158,013 (2.7%), as compared to the same periods in the last fiscal
year. The decrease in sales is primarily attributed to the reduced shipments of
the AN/APM-480 to the U.S. Navy. Deliveries of the AN/APM-480 continue, but
accounted for only 32.7% and 30.0% of total sales, respectively, for the three
and six months ended September 30, 2003, as compared to 64.9% and 59.3%,
respectively, for the same periods in the prior fiscal year. The Company, in
agreement with the U.S. Navy, has temporarily decreased the number of units it
is currently shipping in anticipation of these units being returned for
up-grades and enhancements. The total number of units under contract has not
changed. The Company anticipates an improvement in sales during the second half
of the current fiscal year.
The introduction of the TR-220 Multi-Function test set, a sales promotion of the
T-49C Transponder/TCAS test set, and additional sales of Precision DME test sets
partially offset these lower shipments. Investment in new product development
continues as these expenses increased 19.8% and 22.9%, respectively, for the
three and six months ended September 30, 2003, as compared to the previous year.
Research and development activities include the next generation of IFF test
sets, developing a foundation technology for future products, and incorporating
other product enhancements. The Company has also begun work on a bench test set,
which will be a new market and a diversification opportunity for the Company.
The Company has signed a non-binding letter of intent to acquire privately held
Innerspace Technology, Inc. (ITI) of Waldwick, NJ. ITI has been in business for
over 30 years designing, manufacturing and distributing a variety of shipboard
and underwater instruments to support hydrographers, oceanographers,
researchers, engineers, geophysicists, and surveyors worldwide. ITI has total
annual sales of approximately $1 million dollars, and the letter of intent
provides for a purchase price of $547,000, options to purchase 25,000 TEL
shares, and employment arrangements for the two principals, subject to the
-8-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Results of Operations (continued)
Overview (continued)
Company's satisfactory completion of its due diligence investigation, completion
of a definitive acquisition agreement, and approval of the Company's Board of
Directors. The Company hopes to significantly increase the sales of ITI's
products by expanding distribution and enhancing marketing and product
development. Mr. Harold K. Fletcher, CEO of Tel-Instrument, said, "This is an
important first step in the Company's diversification program. We are excited
about this opportunity to penetrate a market outside of our traditional market.
Together, Tel and ITI will be a strong team." Semaphore Capital Advisors, LLC of
Stamford, CT, advised the Company on this transaction.
The Company continues to actively pursue other opportunities in both the
commercial and government markets, both domestically and internationally.
Sales
For the six months ended September 30, 2003, net sales decreased $158,013
(2.7%), as compared to the six months ended September 30, 2002. Government sales
decreased $1,381,320 (27.6%) for the six months ended September 30, 2003 as
compared to the six months ended September 30, 2002. The decrease in sales is
primarily attributed to the reduced shipments of the AN/APM-480 to the U.S.
Navy. Deliveries of the AN/APM-480 continue, but accounted for only 30.0% of
total sales for the six months ended September 30, 2003, as compared 59.3% for
the same period in the prior fiscal year. The Company, in agreement with the
U.S. Navy, has temporarily decreased the number of units it is currently
shipping in anticipation of these units being returned for up-grades and
enhancements. The total number of units under contract has not changed. This
decrease was partially offset by an increase in the shipment of Precision DME
test sets. Commercial sales increased $1,223,307 (149.4%) for the six months
ended September 30, 2003 as compared to the same period last year. The
introduction of the TR-220 Multi-Function test set and a sales promotion of the
T-49C Transponder/TCAS test set accounted for this increase. However, the
commercial market remains weak, primarily as a result of the weak financial
position of most commercial airlines.
For the three months ended September 30, 2003, net sales decreased $366,186
(12.3%), as compared to the three months ended September 30, 2002. Government
sales decreased $846,101 (32.4%) for the three months ended September 30, 2003
as compared to the three months ended September 30, 2002. The decrease in sales
is primarily attributed to the reduced shipments of the AN/APM-480 to the U.S.
Navy as discussed above. Sales of other government products also declined, but
were partially offset by an increase in the shipment of Precision DME test sets.
Commercial sales increased $479,915 (128.3%) for the three months ended
September 30, 2003 as compared to the same period last year. The introduction of
the TR-220 Multi-Function test set accounted for most of this increase.
-9-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Results of Operations (continued)
Gross Margin
Gross margin dollars increased $134,521 (4.4%) for the six months ended
September 30, 2003, as compared to the same period in the prior fiscal year. The
increase in gross margin, for the most part, is attributed to improved
production efficiencies, lower warranty costs and higher margins on certain
products, partially offset by lower volume. The gross margin percentage for the
six months ended September 30, 2003 was 56.3% as compared to 52.5% for the six
months ended September 30, 2002.
Gross margin dollars decreased $172,413 (10.8%) for the three months ended
September 30, 2003, as compared to the same period in the prior fiscal year.
This decrease in gross margin, for the most part, is attributed to the lower
sales volume. The gross margin percentage for the three months ended September
30, 2003 was 54.4% as compared to 53.5% for the three months ended September 30,
2002
Operating Expenses
Selling, general and administrative expenses increased $85,929 (6.3%) for the
six months ended September 30, 2003 as compared to the six months ended
September 30, 2002. An increase in legal fees associated with an appeal of an
award of a significant contract by the U.S. Army to another contractor, an
increase in administrative salaries and consulting fees, and an increase in
sales and marketing activities was partially offset by lower selling commissions
and relocation expenses.
Selling, general and administrative expenses decreased $76,002 (9.6%) for the
three months ended September 30, 2003 as compared to the three months ended
September 30, 2002. Lower relocation expenses for new employees and selling
commissions was partially offset by an increase in administrative salaries and
consulting fees.
Engineering, research and development expenses increased $82,819 (19.8%) and
$199,002 (22.9%), respectively, for the three and six months ended September 30,
2003, as compared to same periods in the prior fiscal year. The higher level of
expenditures is associated with an increase in research and development
activities, including the next generation of IFF test sets, developing a
foundation technology for future products, and incorporating other product
enhancements. The Company has also begun work on a bench test set, which will be
a new market and diversification opportunity for the Company.
Income Taxes
Income taxes decreased $70,902, and $53,909, respectively, for the three and six
months ended September 30, 2003 as compared to the same periods last year as a
result of the lower profit. The provision for income taxes represents the
effective federal and state tax rate on the Company's income before taxes. The
Company has used its net operating loss carryforwards and the Company will pay
federal taxes this fiscal year.
-10-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
Liquidity and Capital Resources
At September 30, 2003 the Company had positive working capital of $4,388,849 as
compared to $4,154,887 at March 31, 2003. For the six months ended September 30,
2003, cash provided by operations was $73,322 as compared to $1,528,570 for the
six months ended September 30, 2002. This decrease in cash from operations is
primarily attributable to an increase in inventories, an increase in other
assets, a decrease in accrued expenses and payment of income taxes partially by
a decrease in accounts receivable. Cash declined $35,646 for the six months
ended September 30, 2003 due primarily to payment of income taxes, purchases of
capital equipment and an increase in other assets.
The Company has a line of credit of $1,750,000 from Fleet Bank.. The line of
credit bears an interest rate of 0.5% above the lender's prevailing base rate,
which is payable monthly, based upon the outstanding balance. At September 30,
2003, the Company had no outstanding balance. The line of credit is
collateralized by substantially all of the assets of the company. The credit
facility requires the Company to maintain certain financial covenants. As of
September 30, 2002, the Company was in compliance with all financial covenants.
The line of credit expired at September 30, 2003 and the Company has received a
commitment from the bank to renew this line for another year.
Based upon the current backlog, its existing credit line, and cash balance, the
Company believes that it has sufficient working capital to fund its operating
plans for at least the next twelve months. However, as the Company pursues
additional opportunities, the need for additional capital may arise. The Company
will evaluate its alternatives when these opportunities arise. The Company has
also retained Semaphore Capital Advisors as its investment bankers to help
pursue acquisitions and alliances and, if needed, to help raise capital. The
Company maintains its cash balance primarily in a money market account in the
event the cash is needed for an acquisition. Some of this cash will be used to
purchase Innerspace Technology, Inc. (see above).
There was no significant impact on the Company's operations as a result of
inflation for the six months ended September 30, 2003.
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, 2003.
-11-
Item 4. Controls and Procedures
The Company adopted disclosure controls and procedures, as called for by the
recently adopted legislation and rules of the Securities and Exchange
Commission. Under rules promulgated by the S.E.C., disclosure controls and
procedures are defined as "those controls or other procedures of the issuer that
are designed to ensure that information required to be disclosed by the issuer
in the reports filed or submitted by it under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms." The Chief Executive Officer and the Principal
Accounting Officer of the Company evaluated the Company's disclosure controls
and procedures at October 31, 2003, and concluded that they are effective.
Furthermore, there were no significant changes in the Company's internal
controls, or in other factors that could significantly affect these controls
after October 31, 2003, the date of the evaluation by the Chief Executive
Officer and the Principal Accounting Officer.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
31.1 Certification by CEO pursuant o 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification by CFO pursuant o 18 U.S.C. Section 1350, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Cerification by CEO pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sabanes-Oxley Act of
2002.
32.2 Cerification by CFO pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sabanes-Oxley Act of
2002.
Press Release Dated November 12, 2003.
b. Reports on Form 8-K.
None.
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: December 22, 2003 By: /s/ Harold K. Fletcher
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/s/ Harold K. Fletcher
Chairman and President
Date: December 22, 2003 By: /s/ Joseph P. Macaluso
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/s/ Joseph P. Macaluso
Principal Accounting Officer
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