Tel-Instrument Electronics Reports Net Income of $4.7 Million for FY 2020

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Tel-Instrument Electronics Corp. (Tel, or the Company) (OTCQB: TIKK), a leading designer and manufacturer of avionics test and measurement solutions, today reported net income of $4.7 million or $1.36 per basic share on revenues of $15.8 million for the 2020 fiscal year ending March 31, 2020.

Highlights include:

Year

  • Revenues increased 30% from the year-ago level despite March production interruptions due to COVID-19
  • Gross margins for the year remained solid at 47% due to manufacturing efficiencies, tight cost controls, and product mix
  • Annual operating costs increased 2% to $4.86 million with profit sharing accruals responsible for the increase
  • Income from operations increased to $2.6 million as compared to $655k in the prior year
  • Net income of $4.7 million, or $1.36 per basic and $0.95 per diluted share, assisted in part by a tax benefit of $2.6 million related to the reinstatement of the deferred tax asset
  • Positive cash flow from operations of $2.9 million and year-end cash balance of $5.1 million
  • Shareholders Equity improved to $4.7 million as compared to a negative $83k at the start of the fiscal year
  • Elimination of going concern opinion in the audited financial statements

Mr. Jeffrey OHara, Tel-Instruments President and CEO commented We are pleased to report strong operating results for the 2020 fiscal year despite some supply chain issues in March due to COVID-19. The increase in revenues has been driven largely by growing international sales which accounted for over 50% of our revenues. The Company continues to do an excellent job managing operating expenses which were essentially flat for the year with the exception of profit-sharing accruals. The Company has now recorded strong profitability for six consecutive fiscal quarters, and we expect that this trend will continue for the 2021 fiscal year and beyond.

The COVID-19 pandemic is expected to result in a sharp contraction in our commercial avionic test set business for the near to medium term, but it is expected that the international Mode 5 test set business and orders for the F-35 program will remain strong for the next several years. We also continue to work with the U.S. Military and the major prime contractors on new programs, and we are in discussions with the U.S. military on an upgrade program that could generate revenues starting as early as this fiscal year.

Our near-term goal has been to capture the lions share of the Mode 5 test set market and continue strengthening 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 cash balances at March 31, 2020 increasing to $5.1 million. The Company also received a $723,577 government loan from the Payroll Protection Program in May 2020. This allowed us to continue development work on the SDR/OMNI test set despite the uncertain outlook for commercial aviation market. The Company believes that it will meet the requirements for forgiveness of this loan. The improvement in our cash position and strong future prospects have resulted in the elimination of the going concern opinion and the reinstatement of our deferred tax asset which improved our net worth position to $4.7 million.

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. This change will likely move the initial product introduction for the commercial avionics market into 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 revenues 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 $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.

Conference Call Information

The Company will host an earnings conference call today, Tuesday June 30 at 9:00 a.m. EDST to discuss its fiscal year 2020 results. To access the live webcast, log on to the Tel-Instrument Electronics website at www.telinstrument.com and click on Investor Relations. To participate in the call by phone, dial (877) 407-8035 approximately five minutes prior to the scheduled start time. International callers please dial (201) 689-8035.

A replay of the teleconference will be available until July 30, 2020 and may be accessed by dialing (877) 481-4010. International callers may dial (919) 882-2331. Callers should use conference ID: 35514.

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 Companys 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 Companys 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 Companys 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, 2020

 

 

March 31, 2019

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

3,126,195

 

 

$

585,856

 

Accounts receivable, net of allowance for doubtful accounts

of $7,500 and $7,500, respectively

 

 

1,411,644

 

 

 

2,196,099

 

Inventories, net

 

 

3,092,679

 

 

 

2,932,632

 

Restricted cash to support appeal bond

 

 

2,008,544

 

 

 

2,004,871

 

Prepaid expenses and other current assets

 

 

382,428

 

 

 

275,230

 

Total current assets

 

 

10,021,490

 

 

 

7,994,688

 

 

 

 

 

 

 

 

 

 

Equipment and leasehold improvements, net

 

 

263,750

 

 

 

236,370

 

Operating lease right-of-use assets

 

 

306,740

 

 

 

 

Deferred tax asset, net

 

 

2,712,780

 

 

 

63,500

 

Other assets

 

 

35,109

 

 

 

35,109

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

13,339,869

 

 

$

8,329,667

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Line of credit

 

$

680,000

 

 

$

800,000

 

Finance lease obligations “ current portion

 

 

49

 

 

 

6,885

 

Operating lease liabilities “ current portion

 

 

214,793

 

 

 

 

Accounts payable

 

 

739,810

 

 

 

1,058,304

 

Deferred revenues “ current portion

 

 

145,168

 

 

 

97,122

 

Accrued expenses – vacation pay, payroll and payroll withholdings

 

 

512,732

 

 

 

394,296

 

Accrued legal damages

 

 

5,657,549

 

 

 

5,312,085

 

Accrued expenses – related parties

 

 

 

 

 

3,017

 

Accrued expenses “ other

 

 

295,213

 

 

 

432,472

 

Warrant liability

 

 

 

 

 

43,500

 

Total current liabilities

 

 

8,245,314

 

 

 

8,147,681

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities “ long-term

 

 

91,947

 

 

 

 

Deferred revenues “ long-term

 

 

327,132

 

 

 

264,669

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

8,664,393

 

 

 

8,412,350

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders equity (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

 

 

3,515,998

 

 

 

3,275,998

 

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

issued and outstanding, par value $0.10 per share

 

 

1,087,367

 

 

 

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

 

 

7,616,624

 

 

 

7,914,955

 

Accumulated deficit

 

 

(7,870,099

)

 

 

(12,606,589

)

 

 

 

 

 

 

 

 

 

Total stockholders equity (deficit)

 

 

4,675,476

 

 

 

(82,683

)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders equity (deficit)

 

$

13,339,869

 

 

$

8,329,667

 

TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

 

 

Year Ended

 

 

 

March 31,

2020

 

 

March 31,

2019

 

 

March 31,

2020

 

 

March 31,

2019

 

 

 

(Unaudited)

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

Net sales

 

$

3,823,178

 

 

$

4,103,159

 

 

 

15,774,943

 

 

$

12,116,050

 

Cost of sales

 

 

2,080,996

 

 

 

2,136,069

 

 

 

8,365,042

 

 

 

6,698,830

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

1,742,182

 

 

 

1,967,090

 

 

 

7,409,901

 

 

 

5,417,220

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

630,520

 

 

 

568,405

 

 

 

2,477,548

 

 

 

2,215,521

 

Litigation costs

 

 

21,160

 

 

 

94,921

 

 

 

140,050

 

 

 

234,720

 

Engineering, research and development

 

 

608,452

 

 

 

669,258

 

 

 

2,239,811

 

 

 

2,312,043

 

Total operating expenses

 

 

1,260,132

 

 

 

1,332,584

 

 

 

4,857,409

 

 

 

4,762,284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

482,050

 

 

 

634,506

 

 

 

2,552,492

 

 

 

654,936

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of common stock warrants

 

 

 

 

 

(20,500

)

 

 

(73,000

)

 

 

(43,500

)

Interest income

 

 

1,736

 

 

 

988

 

 

 

5,819

 

 

 

4,005

 

Interest expense

 

 

(11,440

)

 

 

(18,489

)

 

 

(55,557

)

 

 

(100,750

)

Interest expense – judgement

 

 

(86,723

)

 

 

(95,437

)

 

 

(342,544

)

 

 

(310,663

)

Interest expense “ related parties

 

 

 

 

 

 

 

 

 

 

 

(990

)

Total other income (expense)

 

 

(96,427

)

 

 

(133,438

)

 

 

(465,282

)

 

 

(451,898

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

385,623

 

 

 

501,068

 

 

 

2,087,210

 

 

 

203,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefit for income taxes)

 

 

(2,649,280

)

 

 

 

 

 

(2,649,280

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income loss

 

 

3,034,903

 

 

 

501,068

 

 

 

4,736,490

 

 

 

203,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deemed dividend related to beneficial conversion feature

of Series B Convertible Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

(420,000

)

Preferred dividends

 

 

(80,000

)

 

 

(80,000

)

 

 

(320,000

)

 

 

(312,807

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

 

$

2,954,903

 

 

$

421,068

 

 

$

4,416,490

 

 

$

(529,769)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income (loss) per common share

 

$

0.91

 

 

$

0.13

 

 

$

(0.09

)

 

$

(0.16

)

Diluted income (loss) per common share

 

$

0.61

 

 

$

0.13

 

 

$

(0.09

)

 

$

(0.16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,255,887

 

 

 

3,255,887

 

 

 

3,255,887

 

 

 

3,255,887

 

Diluted

 

 

5,005,665

 

 

 

3,827,060

 

 

 

4,960,665

 

 

 

3,255,887

 

 

Joseph P. Macaluso

Tel-Instrument Electronics Corp.

(201) 933-1600

John Nesbett/Jennifer Belodeau

IMS Investor Relations

203.972.9200

[email protected]