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

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 O’Hara, Tel-Instrument’s 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 lion’s 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 [phone] approximately five minutes prior to the scheduled start time. International callers please dial [phone].

A replay of the teleconference will be available until July 30, 2020 and may be accessed by dialing [phone]. International callers may dial [phone]. 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 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, 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

 

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