Tel-Instrument Electronics Corp. Reports $639K Of Net Income for Third Quarter of FY 2019

Tel-Instrument Electronics Corp. (Tel, Tel-Instrument or the Company) (NYSE American: TIK), a leading designer and manufacturer of avionics test and measurement solutions, today announced its financial results for the third quarter of fiscal year 2019.

Highlights for Third Quarter of Fiscal Year 2019

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  Revenues increased 51% to just under $4 million from $2.6 million as compared to the same 2018 fiscal quarter.

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Total orders for the quarter increased to $9.7 million and backlog at December 31, 2018 increased to almost $7 million.

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Gross profit as a percentage of sales increased to 49.5% versus 35.7% as compared to the same 2018 fiscal quarter.

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  Operating profit improved to $757k as compared to an operating loss of $293k for the same 2018 fiscal quarter.

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  Net income improved to $639k as compared to a net loss of $333k for the third quarter in the same 2018 fiscal year.

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  Net income attributable to common shareholders included a one-time deemed dividend charge of $420k incurred as a result of the Series B Preferred Convertible Stock issuance. This non-cash charge had no impact on stockholders equity.
 

Jeff OHara, Tels President and CEO said, We are pleased to report a return to solid profitability in our latest quarter. The Company continues to build momentum while broadening our worldwide presence. Our team continues to work hard in pursuing new opportunities, developing new products and improving our manufacturing processes, while maintaining tight cost controls. The favorable product mix and tight cost controls resulted in Tel approaching its 50% gross margin target in the latest quarter. The near-term goal for the Company is to continue to increase revenues and profitability and to further rebuild our balance sheet that was negatively impacted by the Aeroflex litigation and damages award. The recent $1 million issuance of Series B Preferred Stock was crucial, as it has allowed us to quickly ramp up production and take full advantage of opportunities now in play for the Company. We continue to work hard on our domestic and international Mode 5 marketing efforts and we are pleased to report that our new T-47/M5 test set is making major in-roads in several key international markets. The $9.7 million of new orders for the third quarter will allow us to continue our growth path for the fourth quarter and into the 2020 fiscal year. We were particularly excited to finally secure the initial $520k purchase order from the German military this week after extensive delays resulting from a competitors unsuccessful protest. Based on customer input, we anticipate total bookings in CY 2019 from the German contract will total approximately $3.5 million. We also have several other large domestic and international contracts in play that we hope to announce in the next few months. Based on current backlog and expected contracts, we anticipate continued improvement in revenues and profitability for the balance of this fiscal year and for the next fiscal year.

The Company continues to be excited about its new handheld avionics flight-line test set, the SDR-OMNI. The worlds first All-in-One Avionics Test Set utilizes true software-designed radio technology that enables it to test all common avionics functions in one 4.5 pound test set. The SDR/OMNI has very wide frequency to accommodate new commercial and military waveforms in an industry leading 4-pound package. This is half the weight of competitive test sets. It utilizes the latest touch screen technology and has the capability to replace all TIC commercial test sets and military flight-line test sets with one handheld product. We expect to begin shipments of the initial product later this summer. The Companys goal is to use this hardware platform to move into the much larger digital radio communication test set market.

With respect to the Aeroflex litigation, we expect to file our appeal brief this month and it will likely take several years to reach a final decision. We believe that we have strong arguments for this award to be reduced or dismissed based on errors made during the trial and/or standing issues. Importantly, the legal expense associated with this litigation will be largely behind us after the current fiscal quarter. While we believe we have strong legal arguments, winning on appeal is always an uphill battle and we are working hard to generate sufficient cash-flow to satisfy the damages award in the event we are not successful.

The Company encourages investors to read our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on February 8, 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 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. CONDENSED CONSOLIDATED BALANCE SHEETS

 
 

December 31, 2018

 

March 31, 2018

(unaudited)
ASSETS
 
Current assets:
Cash and cash equivalents $ 161,031 $ 307,812
Accounts receivable, net 2,271,510 1,095,049
Inventories, net 3,094,276 4,269,934
Restricted cash to support appeal bond 2,003,883 2,000,866
Prepaid expenses and other current assets   240,390   147,746
Total current assets 7,771,090 7,821,407
 
Equipment and leasehold improvements, net 128,148 180,763
Deferred tax asset, net 63,500 63,500
Other long-term assets   35,109   35,109
Total assets   7,997,847   8,100,779
 
LIABILITIES & STOCKHOLDERS DEFICIT
 
Current liabilities:
Current portion of long-term debt 2,124
Line of credit 820,000 1,000,000
Capital lease obligations “ current portion 7,368 6,875
Accounts payable and accrued liabilities 1,796,782 2,580,383
Deferred revenues “ current portion 92,204 60,051
Accrued legal damages 5,216,647 5,059,990
Warrant liability 23,000
Accrued payroll, vacation pay and payroll taxes   315,575   447,863
Total current liabilities 8,271,576 9,157,286
 
Capital lease obligations “ long-term 1,295 6,885
Deferred revenues “ long-term   274,170   337,676
Total liabilities   8,547,041   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

3,215,998 3,035,998

Preferred stock, 166,667 shares 8% Cumulative Series B Convertible Preferred issued and outstanding, par value $0.10 per share

1,007,036

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
Paid-in capital in excess of par value, common stock 8,009,843 8,046,975
Accumulated deficit   (13,107,657 )   (12,809,627 )
Total stockholders deficit   (549,194 )   (1,401,068 )
Total liabilities and stockholders deficit $ 7,997,847 $ 8,100,779
 
 

TEL-INSTRUMENT ELECTRONICS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 
  Three Months Ended   Nine Months Ended

December 31, 2018

 

December 31, 2017

December 31, 2018

 

December 31, 2017

 
Net sales $ 3,975,736 $ 2,625,793 8,012,891 $ 7,955,035
Cost of sales   2,006,132   1,689,113   4,562,761   5,377,195
 
Gross margin 1,969,604 936,680 3,450,130 2,577,840
 
Operating expenses:
Selling, general and administrative 530,180 548,391 1,652,116 1,881,072
Litigation expenses 59,680 134,765 134,799 560,610
Legal damages 2,100,000
Engineering, research and development   622,082   546,691   1,642,785   1,691,631
Total operating expenses   1,211,942   1,229,847   3,429,700   6,233,313
 
Income (loss) from operations 757,662 (293,167 ) 20,430 (3,655,473 )
 
Other income (expense):
Interest income 1,010 3,017
Proceeds from life insurance 92,678
Amortization of deferred financing costs (649 ) (3,363 )
Change in fair value of common stock warrants (23,000 ) 5,000 (23,000 ) 95,000
Interest expense – judgment (72,003 ) (30,523 ) (215,226 ) (30,523 )
Interest expense   (24,216 )   (14,097 )   (83,251 )   (38,435 )
Total other (expense) income   (118,209 )   (40,269 )   (318,460 )   115,357
 
Income (loss) before income taxes 639,453 (333,436 ) (298,030 ) (3,540,116 )
 
Income tax expense        
 
Net income (loss) 639,453 (333,436 ) (298,030 ) (3,540,116 )
 
Deemed dividend related to beneficial conversion feature

of Series B Convertible Preferred Stock

(420,000 ) (420,000 )
Preferred stock dividends   (112,807 )   (30,667 )   (232,807 )   (30,667 )
 
Net income (loss) attributable to common shareholders $ 106,646 $ (364,103 ) $ (950,837 ) $ (3,570,783 )
 
Basic income (loss) per common share $ 0.03 $ (0.11 ) $ (0.29 ) $ (1.10 )
Diluted income (loss) per common share $ 0.03 $ (0.11 ) $ (0.29 ) $ (1.10 )
 
Weighted average shares outstanding:
Basic 3,255,887 3,255,887 3,255,887 3,255,887
Diluted 3,409,657 3,255,887 3,255,887 3,255,887
 

Joseph P. Macaluso
Tel-Instrument Electronics Corp.
(201)
933-1600