EAST RUTHERFORD, N.J.–(BUSINESS WIRE)–Tel-Instrument Electronics Corp. (“Tel”, “TIC” or the “Company”) (OTCQB: TIKK), a leading designer and manufacturer of avionics test and measurement solutions, today reported net income of $110,980 on revenues of $2,939,437 for the first quarter of fiscal year 2021 ending June 30, 2020. The Company also announced the receipt of a $956K contract from Lockheed Martin to develop a new high frequency test set for the F-35 Joint Strike Fighter.

Highlights include:

  • Revenues decreased 11% from the year-ago quarter due to COVID-19 production and supply-chain interruptions
  • Gross margin for the quarter remained solid at 51%
  • Engineering expenses increased 20% representing the Company’s commitment to new product development
  • Income from operations was $208,711 as compared to $433,523 for the same quarter last year.
  • Backlog increased to $4.4 million at June 30, 2020 as compared to $4.0 million at March 31, 2020
  • Working capital increased to $2.4 million at June 30, 2020 from $1.8 million at March 31, 2020
  • Receipt of $722,577 loan from the Payroll Protection Program

Mr. Jeffrey O’Hara, Tel-Instrument’s President and CEO commented “Despite the impact of COVID-19 on our supply chain and labor force, the Company remained profitable in the first quarter of the 2021 fiscal year. This was a difficult quarter as we were forced to shut down our manufacturing facility in May for over a week as a result of COVID-19 infections among our manufacturing staff. We have also had numerous at-risk members of our manufacturing staff opt out of work due to the severity of the pandemic in the Tri-State area. The pandemic has also resulted in significant reductions in our commercial test set bookings and has delayed some orders from our domestic and international military customers.

Nonetheless, our core Mode 5 business remains strong. In June 2020 we received a follow-on order from Germany in the amount of approximately $1.6 million for the T-4530i. The Company secured AIMS certification for this test set this month, and we will begin shipments in the second quarter of FY 2021. The T-4530i includes upgraded hardware and software and we hope to market this as a potential upgrade for the TS-4530A units currently fielded. The Company also received a $1.6 million Mode 5 test set order from South Korea in July 2020, which we are scheduled to ship in the fourth quarter of the current fiscal year.

TIC was also notified this week that it has been awarded a $956K contract from Lockheed Martin to support the F-35 Joint Strike Fighter. This is a competitively bid development contract to design a “go-no-go” test set for the F-35 advanced communication systems. The system will involve much higher frequency levels than what TIC has worked with in the past and is a testament to our engineering team who came up with a winning design concept. The contract includes eight engineering qualification test sets with an option for 50 additional production test sets upon the completion of the development program. Lockheed Martin is a key customer and we are thrilled to be working with them on this critical program. It is expected that this development and testing program will be completed within 12 months.

Our near-term goal has been to continue our efforts in becoming the dominant supplier of Mode 5 test equipment throughout the world, and continuing to strengthen our balance sheet, while also setting aside sufficient cash to fully discharge the Aeroflex damage award in the event that we are unsuccessful with our pending legal appeal. We are well on our way to achieving this milestone with our cash balance at June 30, 2020 increasing to $5.2 million. The Company also received a $722,577 government loan from the Payroll Protection Program in May 2020. The Company believes that it will meet the requirements for forgiveness for a major portion of this loan. The loan has allowed us to continue development work on the SDR/OMNI test set despite the uncertain outlook for commercial aviation market.

As we’ve previously mentioned, to meet the standards for the next generation of military applications, we are upgrading the design of our 4.5-pound SDR/OMNI hand-held test set to include a much faster processor with improved video graphics processing capability. The upgraded digital PCB is now out for fabrication and we anticipate receipt of the new hardware this month. This change will likely move the initial product introduction for the commercial avionics market to late this calendar year, but we expect it will better position the Company for high dollar military contracts which will be critical to our long-term growth in revenue and profitability. The goal of this new test set is to recapture market share in the commercial avionics segment and expand into the much larger secure communications radio test market.

With respect to the Aeroflex litigation, the Company has appealed the previously announced $4.9 million judgment and has set aside $2 million in restricted cash to support an appeal bond. The appeal submissions are now complete. We continue to believe that the trial judge erred in his legal ruling with respect to standing and other issues during the trial, and that we have strong grounds for the award to be vacated or reduced,” Mr. O’Hara concluded.

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.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30,

2020

 

 

March 31,

2020

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

3,185,796

 

 

$

3,126,195

 

Accounts receivable, net

 

 

1,809,297

 

 

 

1,411,644

 

Inventories, net

 

 

3,483,883

 

 

 

3,092,679

 

Restricted cash to support appeal bond

 

 

2,009,543

 

 

 

2,008,544

 

Prepaid expenses and other current assets

 

 

288,555

 

 

 

382,428

 

Total current assets

 

 

10,777,074

 

 

 

10,021,490

 

 

 

 

 

 

 

 

 

 

Equipment and leasehold improvements, net

 

 

249,596

 

 

 

263,750

 

Operating lease right-of-use assets

 

 

254,290

 

 

 

306,740

 

Deferred tax asset, net

 

 

2,650,890

 

 

 

2,712,780

 

Other long-term assets

 

 

35,109

 

 

 

35,109

 

Total assets

 

$

13,966,959

 

 

$

13,339,869

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Line of credit

 

$

680,000

 

 

$

680,000

 

SBA PPP loan – current portion

 

 

321,145

 

 

 

 

Operating lease liabilities – current portion

 

 

217,643

 

 

 

214,793

 

Accounts payable and accrued liabilities

 

 

944,151

 

 

 

1,035,023

 

Deferred revenues – current portion

 

 

90,257

 

 

 

145,168

 

Accrued legal damages

 

 

5,732,693

 

 

 

5,657,549

 

Finance lease obligations – current portion

 

 

 

 

 

49

 

Accrued payroll, vacation pay and payroll taxes

 

 

440,043

 

 

 

512,732

 

Total current liabilities

 

 

8,425,932

 

 

 

8,245,314

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities – long-term

 

 

36,647

 

 

 

91,947

 

Deferred revenues – long-term

 

 

311,216

 

 

 

327,132

 

SBA PPP loan – long term

 

 

401,432

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

9,175,227

 

 

 

8,664,393

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

 

 

3,575,998

 

 

 

3,515,998

 

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

issued and outstanding, par value $0.10 per share

 

 

1,107,367

 

 

 

1,087,367

 

Common stock, 7,000,000 shares authorized, par value $0.10 per share,

3,255,887 shares issued and outstanding, respectively

 

 

325,586

 

 

 

325,586

 

Additional paid-in capital

 

 

7,541,900

 

 

 

7,616,624

 

Accumulated deficit

 

 

(7,759,119

)

 

 

(7,870,099

)

Total stockholders’ equity

 

 

4,791,732

 

 

 

4,675,476

 

Total liabilities and stockholders’ equity

 

$

13,966,959

 

 

$

13,339,869

 

TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

June 30, 2020

 

June 30, 2019

 

 

 

 

 

Net sales

 

$

2,939,437

 

 

$

3,306,462

 

Cost of sales

 

 

1,434,826

 

 

 

1,724,858

 

 

 

 

 

 

Gross margin

 

 

1,504,611

 

 

 

1,581,604

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Selling, general and administrative

 

 

661,251

 

 

 

612,471

 

Litigation costs

 

 

2,696

 

 

 

10,507

 

Engineering, research and development

 

 

631,953

 

 

 

525,103

 

Total operating expenses

 

 

1,295,900

 

 

 

1,148,081

 

 

 

 

 

 

Income from operations

 

 

208,711

 

 

 

433,523

 

 

 

 

 

 

Other income (expense):

 

 

 

 

Change in fair value of common stock warrants

 

 

 

 

 

(78,500

)

Other income

 

 

13,854

 

 

 

 

Interest income

 

 

2,846

 

 

 

1,000

 

Interest expense – judgment

 

 

(75,144

)

 

 

(80,510

)

Interest expense

 

 

(9,780

)

 

 

(17,737

)

Total other expense

 

 

(68,224

)

 

 

(175,747

)

 

 

 

 

 

Income before income taxes

 

 

140,487

 

 

 

257,776

 

 

 

 

 

 

Income tax expense

 

 

29,507

 

 

 

 

 

 

 

 

 

Net income

 

 

110,980

 

 

 

257,776

 

 

 

 

 

 

Preferred stock dividends

 

 

(80,000

)

 

 

(80,000

)

 

 

 

 

 

Net income attributable to common shareholders

 

$

30,980

 

 

$

177,776

 

 

 

 

 

 

Net income per share:

 

 

 

 

Basic income per common share

 

$

0.01

 

 

$

0.05

 

Diluted income per common share

 

$

0.01

 

 

$

0.04

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

Basic

 

 

3,255,887

 

 

 

3,255,887

 

Diluted

 

 

3,255,887

 

 

 

4,915,665

 

 

Contacts

Joseph P. Macaluso

Tel-Instrument Electronics Corp.

(201) 933-1600

John Nesbett/Jennifer Belodeau

IMS Investor Relations

203.972.9200

jnesbett@institutionalms.com

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