Press release

Tel-Instrument Electronics Corp. Reports Improved Financial Results for Fiscal Year 2019

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Tel-Instrument Electronics Corp. (“Tel”, “Tel-Instrument” or the “Company”) (OTC: TIKK), a leading designer and manufacturer of avionics test and measurement solutions, today reported net income of $203,038 on revenues of $12,116,050 million for the fiscal year ended March 31, 2019.

Mr. Jeffrey O’Hara, President and CEO of Tel, stated, “Fiscal year 2019 was a turn-around year for the Company as we returned to profitable operations after a strong second half of the fiscal year. Highlights include:

  • Annual revenues increased 21% to $12.1 million with $8.1 million recorded in the second half of the fiscal year.
  • Gross margins improved to 45% versus 31% in the year ago period due to manufacturing efficiencies and cost controls.
  • Operating income increased to $655k for the fiscal year with second half operating income reaching $1.4 million.
  • Net income of $203k as compared to a $4.4 million net loss last year which included Aeroflex legal damages.
  • Net loss attributable to common shareholders of $530k ($0.16 per share) due mainly to the one-time non-cash accounting charge of $420k for the issuance of the $1 million of Series B Preferred Stock.
  • Increased backlog at 2019 fiscal year-end to over $6 million versus $2 million in the year-ago period.
  • Improved liquidity with $2.8 million of cash and receivables at year-end while also reducing account payables 54% to $1.1 million and bank debt 20% to $800k.
  • Negotiated extension of our existing banking agreement through March 31, 2020 which includes $10k of monthly payments.

With the improved backlog and strong business prospects from the international Mode 5 market, the Company expects that it will report improved revenues and profitability for the 2020 fiscal year. The Company is currently working on several large international contracts and expects to receive a large follow-on award from Germany this summer. We expect the international Mode 5 business and orders for the F-35 program to remain strong for a number of years. Our goal for the current fiscal year is to continue strengthening our balance sheet and capture over 90% of the international Mode 5 market.

The Company believes its key long-term growth potential is in our new line of SDR/OMNI modular hand-held test set which provides unmatched capabilities in a market leading form factor that is 50% lighter than competitive products. Our engineering team has completed the hardware development for this new test set and our team is currently working on completing the necessary software enhancements. The plan is to introduce the first avionics related commercial product this year and add further avionic test capabilities via software download “APPS” every three to six months. This goal is to replace two Aeroflex market leading commercial test sets with one multi-purpose test set. Once the commercial avionics software is completed, we plan to focus on the much larger secure communications radio testing market which is the key to TIC’s long-term growth.

With respect to the Aeroflex litigation, the Company has appealed the decision and has set aside $2 million to support a cash bond. We believe that we have solid grounds for the award to be vacated or reduced. Aeroflex is expected to respond to our appeal brief by July 24, 2019. The appeal process is expected to take another two years to complete and the majority of the costs to appeal this adverse decision have already been spent.

The Company is currently in the process of applying to the OTCQX which is the highest tier OTC trading platform. This will entail annual savings in excess of $30k compared to the prior NYSE platform. The Company will also resume its investor relations initiatives starting with the release of first quarter financials.”

The Company encourages investors to read its full results of operations as contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on July 1, 2019 at www.sec.gov.

About Tel-Instrument Electronics Corp.

Tel-Instrument is a leading designer and manufacturer of avionics test and measurement solutions for the global commercial air transport, general aviation, and government/military aerospace and defense markets. Tel-Instrument provides instruments to test, measure, calibrate, and repair a wide range of airborne navigation and communication equipment. For further information please visit our website at www.telinstrument.com.

This press release includes statements that are not historical in nature and may be characterized as “forward-looking statements,” including those related to future financial and operating results, benefits, and synergies of the combined companies, 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 which 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 U.S. Securities and Exchange Commission. The Company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 (the “Act”) protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.

TEL-INSTRUMENT ELECTRONICS CORP.

Consolidated Balance Sheets

ASSETS

 

March 31,

2019

 

March 31,

2018

Current assets:

 

 

 

 

 

 

Cash

 

$

 

585,856

 

 

$

 

307,812

 

Accounts receivable, net of allowance for doubtful accounts of $7,500 and $7,500, respectively

 

 

2,196,099

 

 

 

1,095,049

 

Inventories, net

 

 

2,932,632

 

 

 

4,269,934

 

Restricted cash to support appeal bond

 

 

2,004,871

 

 

 

2,000,866

 

Prepaid expenses and other current assets

 

 

275,230

 

 

 

147,746

 

Total current assets

 

 

7,994,688

 

 

 

7,821,407

 

 

 

 

 

 

 

 

Equipment and leasehold improvements, net

 

 

236,370

 

 

 

180,763

 

Deferred tax asset, net

 

 

63,500

 

 

 

63,500

 

Other assets

 

 

35,109

 

 

 

35,109

 

 

 

 

 

 

 

 

Total assets

 

$

 

8,329,667

 

 

$

 

8,100,779

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of long-term debt

 

$

 

–

 

 

$

 

2,124

 

Line of credit

 

 

800,000

 

 

 

1,000,000

 

Capital lease obligations – current portion

 

 

6,885

 

 

 

6,875

 

Accounts payable

 

 

1,058,304

 

 

 

2,307,813

 

Deferred revenues – current portion

 

 

97,122

 

 

 

60,051

 

Accrued expenses – vacation pay, payroll and payroll withholdings

 

 

394,296

 

 

 

447,863

 

Accrued legal damages

 

 

5,312,085

 

 

 

5,059,990

 

Accrued expenses – related parties

 

 

3,017

 

 

 

31,151

 

Accrued expenses – other

 

 

432,472

 

 

 

241,419

 

Warrant liability

 

 

43,500

 

 

 

–

 

Total current liabilities

 

 

8,147,681

 

 

 

9,157,286

 

 

 

 

 

 

 

 

Capital lease obligations – long-term

 

 

–

 

 

 

6,885

 

Deferred revenues – long-term

 

 

264,669

 

 

 

337,676

 

 

 

 

 

 

 

 

Total liabilities

 

 

8,412,350

 

 

 

9,501,847

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ deficit

 

 

 

 

 

 

Preferred stock, 1,000,000 shares authorized, par value $0.10 per share

 

 

 

 

 

 

Preferred stock, 500,000 shares 8% Cumulative Series A Convertible Preferred

issued and outstanding, par value $0.10 per share

 

 

3,275,998

 

 

 

3,035,998

 

Preferred stock, 166,667 shares 8% Cumulative Series B Convertible Preferred

issued and outstanding, par value $0.10 per share

 

 

1,007,367

 

 

 

–

 

Common stock, 7,000,000 shares authorized, par value $.10 per share, 3,255,887 and 3,255,887 shares issued and outstanding, respectively

 

 

325,586

 

 

 

325,586

 

Additional paid-in capital

 

 

7,914,955

 

 

 

8,046,975

 

Accumulated deficit

 

 

(12,606,589

)

 

 

(12,809,627

)

 

 

 

 

 

 

 

Total stockholders’ deficit

 

 

(82,683

)

 

 

(1,401,068

)

 

 

 

 

 

 

 

Total liabilities and stockholders’ deficit

 

$

 

8,329,667

 

 

$

 

8,100,779

 

 

TEL-INSTRUMENT ELECTRONICS CORP.

Consolidated Statements of Operations

 

 

 

For the years ended March 31,

 

 

 

2019

 

 

 

2018

 

 

 

 

 

 

Net sales

 

$

12,116,050

 

 

$

10,024,588

 

 

 

 

 

 

Cost of sales

 

 

6,698,830

 

 

 

6,894,779

 

 

 

 

 

 

Gross margin

 

 

5,417,220

 

 

 

3,129,809

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Selling, general and administrative

 

 

2,215,521

 

 

 

2,491,816

 

Litigation expenses

 

 

234,720

 

 

 

610,125

 

Legal damages

 

 

–

 

 

 

2,159,000

 

Engineering, research and development

 

 

2,312,043

 

 

 

2,275,508

 

 

 

 

 

 

Total operating expenses

 

 

4,762,284

 

 

 

7,536,449

 

 

 

 

 

 

Income (loss) from operations

 

 

654,936

 

 

 

(4,406,640

)

 

 

 

 

 

Other income (expense):

 

 

 

 

Proceeds from life insurance

 

 

–

 

 

 

92,678

 

Interest income

 

 

4,005

 

 

 

866

 

Amortization of deferred financing costs

 

 

–

 

 

 

(3,363

)

Change in fair value of common stock warrants

 

 

(43,500

)

 

 

95,000

 

Interest expense

 

 

(100,750

)

 

 

(59,787

)

Interest expense – judgment

 

 

(310,663

)

 

 

(100,960

)

Interest expense – related parties

 

 

(990

)

 

 

(3,605

)

 

 

 

 

 

Total other (expense) income

 

 

(451,898

)

 

 

20,829

 

 

 

 

 

 

Income (loss) before income taxes

 

 

203,038

 

 

 

(4,385,811

)

 

 

 

 

 

Benefit for income taxes

 

 

–

 

 

 

(63,500

)

 

 

 

 

 

Net income (loss)

 

 

203,038

 

 

 

(4,322,311

)

 

 

 

 

 

Deemed dividend related to beneficial conversion feature of Series B Convertible Preferred Stock

 

 

(420,000

)

 

 

–

 

Preferred dividends

 

 

(312,807

)

 

 

(90,667

)

 

 

 

 

 

Net loss attributable to common shareholders

 

$

(529,769

)

 

$

(4,412,978

)

 

 

 

 

 

 

 

 

 

 

Basic loss per common share

 

$

(0.16

)

 

$

(1.36

)

Diluted loss per common share

 

$

(0.16

)

 

$

(1.36

)

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

Basic

 

 

3,255,887

 

 

 

3,255,887

 

Diluted

 

 

3,255,887

 

 

 

3,255,887