UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009
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
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(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 by check mark whether the registrant is a large accelerated filer, an
accelerated filer, non-accelerated filer, or a smaller reporting company. See
definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of
the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Securities Act). Yes No X
----- -----
Indicate the number of shares outstanding of the issuer's common stock, as of
the latest practical date:
2,478,761 shares of Common stock, $.10 par value as of August 6, 2009.
TEL-INSTRUMENT ELECTRONICS CORPORATION
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TABLE OF CONTENTS
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PAGE
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Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
June 30, 2009 and March 31, 2009 1
Condensed Consolidated Statements of Operations -
Three Months Ended June 30, 2009 and 2008 2
Condensed Consolidated Statements of Cash Flows -
Three Months Ended June 30, 2009 and 2008 3
Notes to Condensed Consolidated Financial Statements 4-11
Item 2. Management's Discussion and Analysis of the Results of
Operations and Financial Condition 12-18
Item 4. Controls and Procedures 18
Part II - Other Information
Item 1. Legal Proceedings 19
Item 2. Unregistered sales of Equity Securities and Use of Proceeds 19
Item 6. Exhibits 19
Signatures 20
Certifications
i
Item 1 - Financial Statements
TEL-INSTRUMENT ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2009 March 31, 2009
------------- --------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 466,346 $ 601,887
Accounts receivable, net 1,326,966 1,516,698
Unbilled government receivables 1,415,203 1,265,470
Inventories, net 2,009,150 2,206,546
Prepaid expenses and other 98,489 90,509
Deferred income tax asset 733,851 461,631
----------- -----------
Total current assets 6,050,005 6,142,741
Equipment and leasehold improvements, net 403,143 437,974
Deferred income tax asset - non-current 852,413 852,413
Other assets 73,306 72,261
Total assets $ 7,378,867 $ 7,505,389
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit 600,000 450,000
Accounts payable 870,179 456,343
Deferred revenues 19,417 21,891
Accrued payroll, vacation pay and payroll taxes 295,874 326,202
Accrued expenses 1,338,937 1,604,190
----------- -----------
Total current liabilities 3,124,407 2,858,626
Deferred revenues 41,966 43,243
----------- -----------
Total liabilities 3,166,373 2,901,869
----------- -----------
Commitments
Stockholders' equity:
Common stock, par value $.10 per share, 2,478,761
issued and outstanding as of June 30,
2008 and March 31, 2008, respectively 247,876 247,876
Additional paid-in capital 4,818,977 4,801,272
Accumulated deficit (854,359) (445,628)
----------- -----------
Total stockholders' equity 4,212,494 4,603,520
----------- -----------
Total liabilities and stockholders' equity $ 7,378,867 $ 7,505,389
=========== ===========
See accompanying notes to condensed consolidated financial Statements
1
TEL-INSTRUMENT ELECTRONICS CORPORATIO
-------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Unaudited)
Three Months Ended
------------------
June 30, 2009 June 30, 2008
------------- -------------
Net sales $ 2,325,755 $ 3,551,975
Cost of sales 1,257,666 2,063,046
----------- -----------
Gross margin 1,068,089 1,488,929
Operating expenses:
Selling, general and administrative 807,248 708,358
Engineering, research and development 932,872 735,151
----------- -----------
Total operating expenses 1,740,120 1,443,509
----------- -----------
Income (loss) from continuing operations (672,031) 45,420
Interest income (expense):
Interest income 370 390
Interest expense (7,473) (11,519)
----------- -----------
Income (loss) from continuing operations
before income taxes (679,134) 34,291
Income tax provision (benefit) (271,313) 13,700
Net income (loss) from continuing
operations, net of income taxes (407,821) 20,591
Income (loss) from discontinued operations,
net of income taxes (910) 22,420
----------- -----------
Net income (loss) $ (408,731) $ 43,011
=========== ===========
Income (loss) from continuing operations,
net of income taxes:
Basic income (loss) per common share $ (0.16) $ 0.01
=========== ===========
Diluted income (loss) per common share $ (0.16) $ 0.01
=========== ===========
Income (loss) from discontinued operations,
net of income taxes:
Basic income (loss) per common share $ 0.00 $ 0.01
=========== ===========
Diluted income (loss) per common share $ 0.00 $ 0.01
=========== ===========
Net Income (loss):
Basic income (loss) per common share $ (0.16) $ 0.02
=========== ===========
Diluted income (loss) per common share $ (0.16) $ 0.02
=========== ===========
Weighted average shares outstanding:
Basic 2,478,761 2,433,381
Diluted 2,478,761 2,512,692
See accompanying notes to condensed consolidated financial statements
2
TEL-INSTRUMENT ELECTRONICS CORPORATION
--------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months ended
------------------
June 30, 2009 June 30, 2008
------------- -------------
Cash flows from operating activities:
Net income (loss) $(408,731) $ 43,011
Adjustments to reconcile net loss to net
cash used in operating activities:
Deferred income taxes (272,220) 28,615
Depreciation 46,144 44,480
Non-cash stock-based compensation 17,705 12,220
Changes in assets and liabilities:
Increase in accounts receivable 189,732 (99,995)
Increase in unbilled government receivables (149,733) (250,857)
Decrease in inventories 197,396 155,377
Decrease (increase) in prepaid expenses & other (7,980) 21,352
Increase in other assets (1,045) (559)
(Decrease) increase in accounts payable 413,836 (134,447)
Decrease in accrued payroll, vacation pay
and payroll taxes (30,328) (18,124)
Increase (decrease) in deferred revenues (3,751) 28,166
(Decrease) increase in accrued expenses (265,253) 389,218
--------- ---------
Net cash provided by (used in) operating activities (274,228) 218,457
--------- ---------
Cash flows from investing activities:
Purchases of equipment (11,313) (39,276)
--------- ---------
Net cash used in investing activities (11,313) (39,276)
--------- ---------
Cash flows from financing activities:
Proceeds from the exercise of stock options -- 25,330
Proceeds from borrowings from line of credit 150,000 200,000
--------- ---------
Net cash provided by financing activities 150,000 225,330
Net increase (decrease) in cash and cash equivalents (135,541) 404,511
Cash and cash equivalents at beginning of period 601,887 469,906
--------- ---------
Cash and cash equivalents at end of period $ 466,346 $ 874,417
========= =========
Taxes paid $ -- $ --
========= =========
Interest paid 4,391 4,357
========= =========
See accompanying notes to condensed consolidated financial statements
3
--
TEL-INSTRUMENT ELECTRONICS CORP.
--------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
Note 1 Basis of Presentation
------ ---------------------
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of Tel-Instrument Electronics Corp. as of June 30, 2009, the
results of operations for the three months ended June 30, 2009 and June 30,
2008, and statements of cash flows for the three months ended June 30, 2009 and
June 30, 2008. 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, 2009 balance sheet included herein was
derived from the audited financial statements included in the Company's annual
report on Form 10-K as of that date. 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, 2009.
Note 2 Revenue Recognition - Percentage-of-Completion - ITATS
------ ------------------------------------------------------
("Intermediate Level TACAN Test Set") (AN/ARM-206)
--------------------------------------------------
Due to the unique nature of the ITATS program, wherein a significant portion of
this contract will not be delivered for over a year, revenues under this
contract are recognized on a percentage-of-completion basis, which recognizes
sales and profit as they are earned, rather than at the time of shipment.
Revenues and profits are estimated using the cost-to-cost method of accounting
where revenues are recognized and profits recorded based upon the ratio of costs
incurred to estimate of total costs at completion. The ratio of costs incurred
to date to the estimate of total costs at completion is applied to the contract
value to determine the revenues and profits. When adjustments in estimated
contract revenues or estimated costs at completion are required, any changes
from prior estimates are recognized by recording adjustments in the current
period for the inception-to-date effect of the changes on current and prior
periods. The Company also receives progress billings on this program, which is a
funding mechanism by the government to assist contractors on long-term contracts
prior to delivery. (See Critical Accounting Policies - Revenue Recognition)
Note 3 Accounts Receivable, net
------ ------------------------
The following table sets forth the components of accounts receivable:
June 30, March 31,
-------- ---------
2009 2009
Government $ 1,189,526 $ 1,199,989
Commercial 177,744 357,013
Less: Allowance for doubtful accounts (40,304) (40,304)
----------- -----------
$ 1,326,966 $ 1,516,698
=========== ===========
4
TEL-INSTRUMENT ELECTRONICS CORP.
--------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------
(Unaudited)
Note 4 Inventories, net
------ ----------------
Inventories consist of:
June 30, March 31,
2009 2009
Purchased parts $ 1,324,352 $ 1,534,184
Work-in-process 970,436 918,038
Finished goods 79,281 104,243
Less: Inventory reserve (364,919) (349,919)
----------- -----------
$ 2,009,150 $ 2,206,546
=========== ===========
Note 5 Earnings Per Share
------ ------------------
SFAS No. 128, "Earnings Per Share" requires presentation of basic earnings per
share ("basic EPS") and diluted earnings per share ("diluted EPS").
The Company's basic income (loss) per common 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 common share 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. Diluted loss per share for the period ended June 30,
2009 does not include common stock equivalents, as these shares would be
anti-dilutive.
Three Months Three Months
------------ ------------
Ended Ended
----- -----
June 30, 2009 June 30, 2008
------------- -------------
Basic net income (loss) per share computation:
Net income (loss) attributable to common stockholders $ (408,731) $ 43,011
Weighted-average common shares outstanding 2,478,761 2,433,381
Basic net income (loss) per share attributable to common stockholders $ (0.16) $ 0.02
Diluted net income (loss) per share computation
Net income (loss) attributable to common stockholders $ (408,731) $ 43,011
Weighted-average common shares outstanding 2,478,761 2,433,381
Incremental shares attributable to the assumed exercise of
outstanding stock options -- 79,311
Total adjusted weighted-average shares 2,478,761 2,512,692
Diluted net income (loss) per share attributable to common stockholders $ (0.16) $ 0.02
5
TEL-INSTRUMENT ELECTRONICS CORP.
--------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------
(Unaudited)
Note 6 Stock Options
------ -------------
Effective April 1, 2006, the Company adopted Statement of Financial Accounting
Standards No. 123R, "Share-Based Payment" ("SFAS 123R"), utilizing the modified
prospective method. SFAS 123R requires the measurement of stock-based
compensation based on the fair value of the award on the date of grant. Under
the modified prospective method, the provisions of SFAS 123R apply to all awards
granted after the date of adoption. The Company recognizes compensation cost on
awards on a straight-line basis over the vesting period, typically four years.
As a result of adopting SFAS 123(R), operations was charged $17,705 and $12,220
for three months ended June 30, 2009 and 2008, respectively. 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 2.09% to 2.74%, volatility at 42.09% to
43.06%, and an expected life of 5 years for the three months ended June 30,
2009; expected dividend yield of 0.0%, risk-free interest rate of 2.56% to
3.16%, volatility at 38.63% to 39.14%, and an expected life of 5 years for the
three months ended June 30, 2008. The Company estimates forfeiture rate based on
historical data. Based on an analysis of historical information, the Company has
applied a forfeiture rate of 15%.
Note 7 Segment Information
------ -------------------
As a result of the classification of its marine systems division as discontinued
operations, in accordance with FAS No. 131, "Disclosures about Segments of an
Enterprise and related information", the Company determined it has two
reportable segments for continuing operations - avionics government and avionics
commercial. There are no inter-segment revenues.
The Company is organized primarily on the basis of its avionics products. The
avionics government segment consists primarily of the design, manufacture, and
sale of test equipment to the U.S. and foreign governments and militaries either
directly or through distributors. The avionics commercial segment consists of
design, manufacture, and sale of test equipment to domestic and foreign
airlines, directly or through commercial distributors, and to general aviation
repair and maintenance shops. The Company develops and designs test equipment
for the avionics industry and as such, the Company's products and designs cross
segments.
Management evaluates the performance of its segments and allocates resources to
them based on gross margin. The Company's general and administrative costs and
sales and marketing expenses are not segment specific. As a result, all
operating expenses are not managed on a segment basis. Net interest includes
expenses on debt and income earned on cash balances. Segment assets include
accounts receivable and work-in-process inventory. Asset information, other than
accounts receivable and work-in-process inventory, is not reported, since the
Company does not produce such information internally. All long-lived assets are
located in the U.S.
6
TEL-INSTRUMENT ELECTRONICS CORP.
--------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------
(Unaudited)
Note 7 Segment Information (continued)
------ -------------------------------
The table below presents information about reportable segments within the avionics business for the periods
ending June 30, 2009 and 2008:
Three Months Ended Avionics Avionics Avionics Corporate
------------------ -------- -------- -------- ---------
June 30, 2009 Gov't Comm'l. Total Items Total
------------- ----- ------- ----- ----- -----
Net sales $ 1,891,240 $ 434,515 $ 2,325,755 $ 2,325,755
Cost of Sales 974,225 283,441 1,257,666 1,257,666
----------- ----------- ----------- -----------
Gross Margin 917,015 151,074 1,068,089 1,068,089
----------- ----------- ----------- -----------
Engineering, research, and development 932,872 932,872
Selling, general, and admin. 308,854 498,394 807,248
Interest (income) expense,net 7,103 - 7,103
----------- ----------- -----------
Total expenses 1,248,829 498,394 1,747,223
----------- ----------- -----------
Loss from continuing operations
before income taxes $ (180,740) $ (498,394) $ (679,134)
=========== =========== ===========
Segment assets $ 4,317,644 $ 433,675 $ 4,751,319 $ 2,627,548 $ 7,378,867
=========== =========== =========== =========== ===========
Three Months Ended Avionics Avionics Avionics Corporate
------------------ -------- -------- -------- ---------
June 30, 2008 Gov't Comm'l. Total Items Total
------------- ----- ------- ----- ----- -----
Net sales $ 2,960,596 $ 591,379 $ 3,551,975 $ 3,551,975
Cost of Sales 1,741,197 321,849 2,063,046 2,063,046
----------- ----------- ----------- -----------
Gross Margin 1,219,399 269,530 1,488,929 1,488,929
----------- ----------- ----------- -----------
Engineering, research, and development 735,151 735,151
Selling, general, and admin. 385,565 322,793 708,358
Interest (income) expense ,net 11,129 - 11,129
----------- ----------- -----------
Total expenses 1,131,845 322,793 1,454,638
----------- ----------- -----------
Income (loss) from continuing operations
before income taxes $ 357,084 $ (322,793) $ 34,291
=========== =========== ===========
Note 8 Income Taxes
------ ------------
The Company adopted the provisions of Financial Accounting Standards Board
("FASB") Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty in Income
Taxes- an Interpretation of FASB Statement No. 109, on April 1, 2007. The
Company has analyzed filing positions in all of the federal and state
jurisdictions where it is required to file income tax returns, as well as all
open tax years in these jurisdictions. The Company does not have any
unrecognized tax benefits.
The tax effect of temporary differences, primarily net operating loss
carryforwards, asset reserves and accrued liabilities, gave rise to the
Company's deferred tax asset in the accompanying June 30, 2009 and March 31,
2009 consolidated balance sheets. Deferred income taxes are recognized for the
tax consequence of such temporary differences at the enacted tax rate expected
to be in effect when the differences reverse.
7
TEL-INSTRUMENT ELECTRONICS CORP.
--------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------
(Unaudited)
Note 9 Fair Value Measurements
------ -----------------------
On September 2006, the FASB issued SFAS 157, which defines fair value,
establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. The provisions of SFAS 157 were effective April 1,
2008. The FASB has also issued Staff Position (FSP) SFAS 157-2 (FSP No. 157-2),
which delayed the effective date of SFAS 157 for nonfinancial assets and
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually), until fiscal
years beginning after November 15, 2008.
As defined in SFAS 157, fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date (exit price). The Company utilizes
market data or assumptions that market participants would use in pricing the
asset or liability, including assumptions about risk and the risks inherent in
the inputs to the valuation technique. These inputs can be readily observable,
market corroborated, or generally unobservable. The Company classifies fair
value balances based on the observability of those inputs. SFAS 157 establishes
a fair value hierarchy that prioritizes the inputs used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurement) and the lowest
priority to unobservable inputs (level 3 measurement).
The three levels of the fair value hierarchy defined by SFAS 157 are as follows:
Level 1 - Quoted prices are available in active markets for identical assets or
liabilities as of the reporting date. Active markets are those in which
transactions for the asset or liability occur in sufficient frequency and volume
to provide pricing information on an ongoing basis. Level 1 primarily consists
of financial instruments such as exchange-traded derivatives, marketable
securities and listed equities.
Level 2 - Pricing inputs are other than quoted prices in active markets included
in level 1, which are either directly or indirectly observable as of the
reported date. Level 2 includes those financial instruments that are valued
using models or other valuation methodologies. These models are primarily
industry-standard models that consider various assumptions, including quoted
forward prices for commodities, time value, volatility factors, and current
market and contractual prices for the underlying instruments, as well as other
relevant economic measures. Substantially all of these assumptions are
observable in the marketplace throughout the full term of the instrument, can be
derived from observable data or are supported by observable levels at which
transactions are executed in the marketplace. Instruments in this category
generally include non-exchange-traded derivatives such as commodity swaps,
interest rate swaps, options and collars.
Level 3 - Pricing inputs include significant inputs that are generally less
observable from objective sources. These inputs may be used with internally
developed methodologies that result in management's best estimate of fair value.
Cash, accounts receivable, accounts payable, and accrued expenses reflected in
the consolidated balance sheets are a reasonable estimate of their fair value
due to the shot-term nature of these instruments. The carrying value of the
Company's short-term borrowings is a reasonable estimate of its fair value as
borrowings under the Company's credit facility have variable rates that reflect
currently available terms and conditions for similar debt. As of June 30, 2009
and March 31, 2009, the Company did not have any financial assets and
liabilities measured at fair value on a recurring basis that would be subject to
the disclosure provisions of SFAS 157.
8
TEL-INSTRUMENT ELECTRONICS CORP.
--------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------
(Unaudited)
Note 10 Discontinued Operations
------- -----------------------
In fiscal year 2008, the Board of Directors approved discontinuing the Company's
marine systems division. As a result, the consolidated financial statements
present the marine systems division as a discontinued operation.
The Company wrote-off fixed assets of approximately $77,000 and inventories of
approximately $151,000 in 2008.
The Company's decision to discontinue its marine operations was based primarily
on the historical losses sustained and management's intent to focus on its
avionics business
The following tables reflects sales, costs and expenses, and loss from
discontinued operations, net of taxes for the three months ended June 30, 2009
and 2008, respectively.
--------------------------------------------------------------- ---------------------- -----------------
Three Months Three Months
------------ ------------
Ended Ended
----- -----
June 30, 2009 June 30, 2008
------------- -------------
--------------------------------------------------------------- ---------------------- -----------------
Discontinued Operations:
------------------------
--------------------------------------------------------------- ---------------------- -----------------
Sales $ 16,444 $ 81,506
--------------------------------------------------------------- ---------------------- -----------------
Costs and expenses 17,960 44,170
-------- --------
--------------------------------------------------------------- ---------------------- -----------------
Income (loss) from operations of discontinued operations (1,516) 37,336
--------------------------------------------------------------- ---------------------- -----------------
Income tax provision (benefit) (606) 14,916
-------- --------
--------------------------------------------------------------- ---------------------- -----------------
Net income (loss) from discontinued operations $ (910) $ 22,420
======== ========
--------------------------------------------------------------- ---------------------- -----------------
Note 11 Reclassifications
------- -----------------
Certain prior year and period amounts have been reclassified to conform to the
current period presentation.
Note 12 Litigation
------- ----------
On March 24, 2009, Aeroflex Wichita, Inc. ("Aeroflex") filed a petition against
the Company and two of its employees in the District Court, Sedgwick County,
Kansas, Case No. 09 CV 1141 (the "Aeroflex Action"), alleging that the Company
and its two employees misappropriated Aeroflex's proprietary technology in
connection with the Company winning a substantial contract from the U.S. Army
(the "Award"), to develop new Mode-5 radar test sets and kits to upgrade the
existing TS-4530 radar test sets to Mode 5. Aeroflex's petition alleges that in
connection with the award, the Company and its named employees misappropriated
Aeroflex's trade secrets; tortiously interfered with its business relationship;
conspired to harm Aeroflex and tortiously interfered with its contract and seeks
injunctive relief and damages. The gravamen of all the claims in the Aeroflex
Action is that the Company misappropriated and used Aeroflex proprietary
technology in winning the Award.
9
TEL-INSTRUMENT ELECTRONICS CORP.
--------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------
(Unaudited)
Note 12 Litigation (continued)
------- ----------------------
In February 2009, subsequent to the Award to the Company, Aeroflex filed a
protest of the Award with the Government Accounting Office ("GAO"). In its
protest, Aeroflex alleged, inter alia, that the Company used Aeroflex's
proprietary technology in order to win the Award, the same material allegations
as were later alleged in the Aeroflex Action. On or about March 17, 2009, the
Army Contracts Attorney and the Army Contracting Officer each filed a statement
with the GAO, expressly rejecting Aeroflex's allegations that the Company used
or infringed Aeroflex proprietary technology in winning the Award, and
concluding that the Company had used only its own proprietary technology. On
April 6, 2009, Aeroflex withdrew its protest.
The Aeroflex civil claim is currently in the jurisdiction phase. Based, among
other things, on Tel's knowledge of the technology involved and the Army's
detailed and emphatic refutation of Aeroflex's allegations, Tel believes that
Aeroflex's claims are without merit. However, Tel has incurred and anticipates
that it will incur substantial legal fees in connection with the litigation, and
these costs will have an adverse effect on its results of operations for the
fiscal year ending March 31, 2010. During the quarter ended June 30, 2009, the
Company incurred approximately $111,000 of legal fees associated with the GAO
protest and the civil litigation.
Note 13 New Accounting Pronouncements
------- -----------------------------
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No 141(R), "Business
Combinations." This statement provides new accounting guidance and disclosure
requirements for business combinations. SFAS No 141(R) is effective for business
combinations which occur in the first fiscal year beginning on or after December
15, 2008. The adoption of SFAS 141(R) will not have a significant impact on the
Company's consolidated financial statements or financial position, but the
nature and magnitude of the specific effects will depend upon the nature, terms
and size of any acquisitions the Company consummates after the effective date.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No. 133"
("SFAS 161"), which modifies and expands the disclosure requirements for
derivative instruments and hedging activities. SFAS 161 requires that objectives
for using derivative instruments be disclosed in terms of underlying risk and
accounting designation and requires quantitative disclosures about fair value
amounts and gains and losses on derivative instruments. It also requires
disclosures about credit-related contingent features in derivative agreements.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. SFAS 161 encourages, but does
not require, comparative disclosures for earlier periods at initial adoption.
The Company adopted this standard effective January 1, 2009. The implementation
of this standard did not have a material impact on the disclosures related to
the Company's consolidated financial statements.
In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures
about Fair Value of Financial Instruments. This FSP amends FASB Statement No.
107, Disclosures about Fair Value of Financial Instruments, to require
disclosures about fair value of financial instruments for interim reporting
periods of publicly traded companies as well as in annual financial statements.
This FSP also amends APB Opinion
10
TEL-INSTRUMENT ELECTRONICS CORP.
--------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------
(Unaudited)
Note 13 New Accounting Pronouncements (continued)
------- -----------------------------------------
No. 28, Interim Financial Reporting, to require those disclosures in summarized
financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1
were effective for interim and annual reporting periods ending after June 15,
2009. The Company made the disclosures required by this statement.
In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly. This FSP provides
additional guidance for estimating fair value in accordance with FASB Statement
No. 157, Fair Value Measurements, when the volume and level of activity for the
asset or liability have significantly decreased. This FSP also includes guidance
on identifying circumstances that indicate a transaction is not orderly. This
FSP emphasizes that even if there has been a significant decrease in the volume
and level of activity for the asset or liability and regardless of the valuation
technique(s) used, the objective of a fair value measurement remains the same.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction (that is, not a forced
liquidation or distressed sale) between market participants at the measurement
date under current market conditions. FSP FAS 157-4 was effective for interim
and annual reporting periods ending after June 15, 2009, and is applied
prospectively. The Company's adoption of FSP FAS 157-4 did not have a material
impact on the Company's condensed consolidated financial statements.
In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codification and Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162 ("SFAS 168"). SFAS 168 establishes the
FASB Standards Accounting Codification ("Codification") as the source of
authoritative GAAP recognized by the FASB to be applied to nongovernmental
entities. The only other source of authoritative GAAP is the rules and
interpretive releases of the SEC which only apply to SEC registrants. The
Codification will supersede all the existing non-SEC accounting and reporting
standards upon its effective date. Since the issuance of the Codification is not
intended to change or alter existing GAAP, adoption of this statement will not
have an impact on the Company's financial position or results of operations, but
will change the way in which GAAP is referenced in the Company's financial
statements. SFAS 168 is effective for interim and annual reporting periods
ending after September 15, 2009.
In May 2009, the FASB issued SFAS No. 165, Subsequent Events ("SFAS 165"), which
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before the financial statements are
issued or are available to be issued. The Company adopted SFAS 165 effective
April 1, 2009 and has evaluated subsequent events after the balance sheet date
of June 30, 2009 through the date the financial statements were issued, August
14, 2009.
11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
------- -------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
---------------------------------------------
Forward Looking Statements
--------------------------
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, including statements regarding litigation, 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 filings
with the Securities and Exchange Commission.
Critical Accounting Policies
----------------------------
In preparing the financial statements and accounting for the underlying
transactions and balances, the Company applies its 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 on repairs and calibrations are recognized at the time the repaired or
calibrated unit is shipped, as it is at the time that the work is completed.
Due to the unique nature of the ITATS program wherein a significant portion of
this contract will not be delivered for over a year, revenues under this
contract are recognized on a percentage-of-completion basis, which recognizes
sales and profit as they are earned, rather than at the time of shipment.
Revenues and profits are estimated using the cost-to-cost method of accounting
where revenues are recognized and profits recorded based upon the ratio of costs
incurred to date to our estimate of total costs at completion. The ratio of
costs incurred to our estimate of total costs at completion is applied to the
contract value to determine the revenues and profits. When adjustments in
estimated contract revenues or estimated costs at completion are required, any
changes from prior estimates are recognized by recording adjustments in the
current period for the inception-to-date effect of the changes on current and
prior periods. The Company also receives progress billings on this program,
which is a funding mechanism by the government to assist contractors on
long-term contracts prior to delivery.
Shipping and handling costs charged to customers are classified as revenue, and
the shipping and handling costs incurred are included in cost of goods sold.
Payments received prior to the delivery of units or services performed are
recorded as deferred revenues.
12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
------- -------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
---------------------------------------------------------
Critical Accounting Policies (continued)
----------------------------------------
Inventory reserves - inventory reserves or write-downs 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
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. For the
year ended March 31, 2009 approximately 67% of the Company's sales were to the
U.S. Government. 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.
Warranty reserves - warranty reserves are 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 expectations and the provisions
established, future warranty costs could be in excess of the Company's warranty
reserves. A significant increase in these costs could adversely affect the
Company's operating results for the period and the periods these additional
costs materialize. Warranty reserves are adjusted from time to time when actual
warranty claim experience differs from estimates.
Income taxes - deferred tax assets arise from a variety of sources, the most
significant being: a) tax losses that can be carried forward to be utilized
against profits in future years; b) expenses recognized in the books but
disallowed in the tax return until the associated cash flow occurs; and c)
valuation changes of assets which need to be tax effected for book purposes but
are taxable only when the valuation change is realized. 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 are expected to 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. In assessing the need for a valuation allowance, future taxable income
is estimated, considering the realization of tax loss carryforwards. Valuation
allowances related to deferred tax assets can also be affected by changes to tax
laws, changes to statutory tax rates and future taxable income levels. In the
event it is determined that the Company would not be able to realize all or a
portion of our deferred tax assets in the future, we would reduce such amounts
through a charge to income in the period in which that determination is made.
Conversely, if we were to determine that we would be able to realize our
deferred tax assets in the future in excess of the net carrying amounts, we
would decrease the recorded valuation allowance through an increase to income in
the period in which that determination is made. In its evaluation of a valuation
allowance the Company takes into account existing contracts and backlog, and the
probability that options under these contract awards will be exercised as well
as sales of existing products. The Company prepares profit projections based on
the revenue and expenses forecast to determine that such revenues will produce
sufficient taxable income to realize the deferred tax assets
13
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
------- -------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
---------------------------------------------------------
General
-------
Management's discussion and analysis of results of operations and financial
condition is intended to assist the reader in the understanding and assessment
of significant changes and trends related to the results of operations and
financial position of the Company together with its subsidiary. This discussion
and analysis should be read in conjunction with the consolidated financial
statements and accompanying financial notes in the Company's Annual Report on
Form 10-K for the year ended March 31, 2009.
The Company's avionics business is conducted in the Government, Commercial and
General aviation markets (see Note 7 of Notes to Financial Statements for
segment financial information). In January 2004, the Company completed its
acquisition of ITI, a company selling products to the marine industry, and ITI's
financial statements were consolidated with the Company's financial statements
until the Company considered it a discontinued operation as of March 31, 2009
see Note 10 to Financial Statements).
Overview
--------
As discussed in our Form 10-K for the year ended March 31, 2009, because of the
continuing decline in commercial sales, the difficult economic environment,
delays in several major anticipated government orders, the increased new product
engineering costs, and the increased legal and professional fees, the Company
expected that sales and profits in the first half of the current fiscal year
would decline materially, until substantial production and delivery of the new
products commence. However, the Company believes that the financial situation
for the Company will improve in the second half of the current fiscal year and
the Company expects to be profitable in the next fiscal year.
In the first quarter of fiscal year 2010, the Company's sales fell 35% as
compared to the same period last year, and the Company recorded a net loss from
continuing operations before taxes of $679,000 as compared to $34,291 in net
income from continuing operations before taxes in the prior year.
As discussed in our Form 10-K for the year ended March 31, 2009, the current
fiscal year will be a challenge as the commercial avionics market shows no signs
of improvement and military sales have been impacted by delays in the receipt of
several expected large orders, as well as some delay in completion of our
existing programs. Moreover, the Company continues to make substantial
engineering investments in the AN/USM-708 and the recently awarded TS-4530A
programs. TEL has also experienced delays on two of its major programs
(AN/USM-708/ and AN/ARM-206) that have collectively increased development cost
and time and delayed production shipments. At this time, it appears that sales
will remain at depressed levels for the first half of this fiscal year with a
substantial operating loss. Starting in the third quarter of this fiscal year,
revenues and profitability are expected to increase due to anticipated shipments
of the AN/APM-719 as well as the receipt of anticipated government orders which
have been delayed.
TEL currently has three major government contracts totaling over $80 million of
potential orders, which it won competitively. Upon completion of our engineering
development on these major programs, TEL has the ability to substantially
increase the size and profitability of our business starting next fiscal year
(which begins April 2010) as production deliveries of the AN/USM-708 and
AN/APM-206 are expected to commence in volume. Production deliveries of TS-4530A
are also expected to commence in volume later in calendar year 2010. This
program has a maximum contract value of $44 million with $15 million of delivery
orders already received.
14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
------- -------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
---------------------------------------------------------
Overview (continued)
--------------------
On July 28, 2009, Tel was notified by the AIMS Program Office that its
AN/USM-719 Mode 5 test set has been officially certified for Mode 5 system
integration purposes. This is a major accomplishment as this represents the
first Mode 5 flight-line test set certified by AIMS (the DoD Agency in charge of
IFF system certification). This represents the culmination of a multi-million
investment by the company in Mode 5 technology and will provide a significant
competitive advantage in the years to come as the U.S. and our NATO allies
migrate to this leading edge IFF technology. To our knowledge, Tel is the only
company with AIMS certified Mode 5 flight-line test sets.
At June 30, 2009 the Company's backlog stood at approximately $14.7 million, as
compared to approximately $11.4 million at June 30, 2008. The backlog at June
30, 2009 includes only the amount of currently exercised delivery orders on open
IDIQ (indefinite delivery/indefinite quantity) contracts, and is expected to
materially increase when the volume production orders for the two large Navy
contracts are received. Historically, the Company obtains a substantial volume
of orders which are required to be filled in less than twelve months, and,
therefore, these anticipated orders are not reflected in the backlog. The
Company has received approximately $8.83 million in orders related to the
TS-4530A program, and this amount is included in the backlog at June 30, 2009.
In July 2009, the Company received an additional delivery order of approximately
$6 million related to the TS-4530 program.
On March 24, 2009, Aeroflex Wichita, Inc. ("Aeroflex") filed a civil claim
against the Company and two of its employees in the District Court, Sedgwick
County, Kansas, Case No. 09 CV 1141 (the "Aeroflex Action"), alleging that the
Company and its two employees misappropriated Aeroflex's proprietary technology
in connection with TEL winning the Army TS-4530A contract. Many of these same
claims were included in Aeroflex's previous, formal Protest of the Contract
award which it filed with the U.S. Government Accounting Office ("GAO"). On or
about March 17, 2009, the Army Contracts Attorney and the Army Contracting
Officer each filed a statement with the GAO, expressly rejecting Aeroflex's
allegations that the Company used or infringed Aeroflex proprietary technology
in winning the Award, and concluding that the Company had used only its own
proprietary technology. On April 6, 2009, Aeroflex withdrew its GAO Protest, but
continued the civil litigation. The Aeroflex civil claim is currently in the
jurisdiction phase.
While TEL is confident about the ultimate successful outcome of the litigation,
the Company anticipates that it will incur legal fees in connection with the
litigation, and these costs will have an adverse effect on its results of
operations for the fiscal year ending March 31, 2010. During the quarter ended
June 30, 2009, the Company incurred legal fees of approximately $110,000 in
connection with the GAO protest and this litigation.
Given the weak first quarter results, Tel increased it borrowing on its credit
facility by $150,000 in the quarter to $600,000 and had approximately $485,000
of available borrowing capacity as of June 30, 2009. This credit line is on a
year-to-year basis with a September 30, 2009 renewal date. Given first quarter
loss and the expected loss in the second quarter as well as the sharp expansion
in projected business starting this fall, the Company is planning to raise a
minimum of $500,000 of equity funding in the next few months through a
combination of Director stock option exercises and new share purchases. At this
time, the Company has received informal commitments from several Directors to
purchase between 90,000 and 100,000 shares of newly issued company stock at a
price to be determined by a Special Committee of Directors who would not
purchase shares. Other shareholders will be provided the opportunity to
participate on the same terms and conditions subject to a minimum share
purchase. Further information about the financing program will be provided when
the details are finalized.
15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
------- -------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
---------------------------------------------------------
Results of Operations (continued)
---------------------------------
Sales
-----
For the first quarter ended June 30, 2009, total sales decreased $1,226,220
(34.5%) to $2,325,755 as compared to $3,551,975 for the same quarter in the
prior year. Avionics Government sales decreased $1,069,356 (36.1%) to $1,891,240
for the period as compared to $2,960,596 for the same period last year. The
decrease in Avionics Government sales is primarily attributed to: a decrease in
sales associated with the ITATS, which are recognized on a percentage of
completion as the initial phase of the programs nears completion as well a
decrease in shipments of the T-30D, T-47N, and the T-47G, which were primarily
associated with orders that were awarded in the previous year. Government sales
have been impacted by delays in the receipt of several expected large orders.
These decreases were partially offset by higher sales of the AN/APM-719.
Commercial sales decreased $156,864 (26.5%) to $434,515 for the three months
ended June 30, 2009 as compared to $591,379 in the same period in the prior year
As a result of the continued weakness in the commercial market.
Gross Margin
------------
Gross margin decreased $420,840 (28.3%) to $1,068,089 for the three months ended
June 30, 2009 as compared to $1,488,929 for the same three months in the prior
fiscal year. The decrease in gross margin is attributed to the decrease in
volume. The gross margin percentage for the three months ended June 30, 2009 was
45.9% as compared to 41.9% for the three months ended June 30, 2008.
Operating Expenses
------------------
Selling, general and administrative expenses increased $98,890 (14%) to $807,248
for the three months ended June 30, 2009, as compared to $708,358 for the three
months ended June 30, 2008. This increase is attributed mainly to an increase in
legal fees associated with the litigation (see Note 12 to the Financial
Statements), and professional fees offset partially by lower outside
commissions.
Engineering, research and development expenses increased $197,721 (26.9%) to
$932,872 for three months ended June 30, 2009 as compared to $735,151 for the
three months ended June 30, 2008. Engineering, research and development expenses
are mostly attributed to efforts related to the CRAFT and TS-4530 programs.
Interest, net
-------------
Interest expense decreased as a result of lower interest rates.
Income (Loss) from Continuing Operations before Income Taxes
------------------------------------------------------------
As a result of the above, the Company recorded a loss from continuing operations
before income taxes of $679,134 for the quarter ended June 30, 2009 as compared
to income from continuing operations before income taxes of $34,291 for the
quarter ended June 30, 2008.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
---------------------------------------------------------
Results of Operations (continued)
---------------------------------
Income Taxes
------------
An income tax benefit of $271,313 was recorded for the three months ended June
30, 2009 as compared to an income tax provision in the amount of $13,700 for the
quarter ended June 30, 2008. The change is due to the loss before taxes for the
quarter ended June 30, 2009 as compared to income before taxes for the quarter
ended June 30, 2008. These amounts represent the effective federal and state tax
rate of approximately 40% on the Company's net income or loss before taxes.
Net Income (Loss) from Continuing Operations, Net of Taxes
----------------------------------------------------------
As a result of the above, the Company recorded a loss from continuing
operations, net of taxes of $407,821 for the quarter ended June 30, 2009 as
compared to net income from continuing operations, net of taxes of $20,591 for
the quarter ended June 30, 2008.
Income (Loss) from Discontinued Operations, Net of taxes
---------------------------------------------------------
For the three months ended June 30, 2009, the Company recorded a loss from
discontinued operations, net of taxes, of $910 as compared to income from
discontinued operations, net of taxes, of $22,420 for the three months ended
June 30, 2008, primarily as a result of the lower sales volume.
Net Income (Loss)
-----------------
As a result of the above, the Company recorded a net loss of $408,731 for the
quarter ended June 30, 2009 as compared to net income of $43,011 for the quarter
ended June 30, 2008.
Liquidity and Capital Resources
-------------------------------
At June 30, 2009, the Company had working capital of $2,925,598 as compared to
$3,284,115 at March 31, 2009. For the three months ended June 30, 2009, the
Company used $274,228 in cash for operations as compared to generating $218,457
in cash from operations the three months ended June 30, 2008. This decrease in
cash from operations is primarily attributed to the loss for the period and the
decrease in accrued expenses partially offset by an increase in accounts
payable.
Net cash used in investing activities was $11,313 for the three months ended
June 30, 2009 from $39,276 for the three months ended June 30, 2008 due to the
decrease in purchases of equipment.
Net cash provided by financing activities decreased to $150,000 for the three
months ended June 30, 2009 from $225,330 for the three months ended June 30,
2008 due to the lower borrowings from the line of credit and a decrease in
proceeds from the exercise of stock options.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
-------------------------------------------
RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued)
---------------------------------------------------------
Liquidity and Capital Resources (continued)
-------------------------------------------
At June 30, 2009 the Company's backlog stood at approximately $14.7 million, as
compared to approximately $11.4 million at June 30, 2008. The backlog at June
30, 2009 includes only the amount of currently exercised delivery orders on open
IDIQ (indefinite delivery/indefinite quantity) contracts, and is expected to
materially increase when the volume production orders for the two large Navy
contracts are received. Historically, the Company obtains a substantial volume
of orders which are required to be filled in less than twelve months, and,
therefore, these anticipated orders are not reflected in the backlog. The
Company has received approximately $8.83 million in orders related to the
TS-4530A program, and this amount is included in the backlog at June 30, 2009.
In addition, in July 2009 the Company received an additional $6 million delivery
order from the Army, bringing the total amount of orders received to
approximately $15 million.
Given the weak first quarter results, Tel increased it borrowing on its credit
facility by $150,000 in the quarter to $600,000 and had approximately $485,000
of available borrowing capacity as of June 30, 2009. This credit line is on a
year-to-year basis with a September 30, 2009 renewal date. Given first quarter
loss and the expected loss in the second quarter as well as the sharp expansion
in projected business starting this fall, the Company is planning to raise a
minimum of $500,000 of equity funding in the next few months through a
combination of Director stock option exercises and new share purchases. At this
time, the Company has received informal commitments from several Directors to
purchase between 90,000 and 100,000 shares of newly issued company stock at a
price to be determined by a Special Committee of Directors who would not
purchase shares. Other shareholders will be provided the opportunity to
participate on the same terms and conditions subject to a minimum share
purchase. Further information about the financing program will be provided when
the details are finalized.
There was no significant impact on the Company's operations as a result of
inflation for the three months ended June 30, 2009. 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, 2009.
Item 4 (T). Controls and Procedures
----------- -----------------------
As of the end of the period covered by this report, the Company conducted an
evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the principal executive officer and principal financial officer concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.
There was no change in the Company's internal control over financial reporting
during the Company's most recently completed fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
18
Part II. Other Information
-------- -----------------
Item 1. Legal Proceedings
------- -----------------
See discussion in Item 3 of the Company's Report on Form 10-K for
the fiscal year ended March 31, 2009, and the above under M,D&A
overview.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
------- -----------------------------------------------------------
There were no unregistered sales of equity securities and there
were no repurchases of equity securities during the Company's
first quarter ended June 30, 2009.
Item 6. Exhibits
------- --------
Exhibits
31.1 Certification by CEO pursuant to Rule 15d-14 under
the Securities Exchange Act.
31.2 Certification by CFO pursuant to Rule 15d-14 under
the Securities Exchange Act.
32.1 Certification by CEO and CFO pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
19
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: August 14, 2009 By: /s/ Harold K. Fletcher
-----------------------------------
Harold K. Fletcher
CEO
Date: August 14, 2009 By: /s/ Joseph P. Macaluso
-----------------------------------
Joseph P. Macaluso
Principal Accounting Officer
20