Tel-Instrument Electronics Reports Second Quarter 2021 Results and Receipt of $1.1 Million Mode 5 Test Set Order

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 $222,748 on revenues of $3,336,396 for the second quarter of fiscal year 2021 ending September 30, 2020. The Company also announced the receipt of a $1.1 million follow-on order for Mode 5 test sets from a major U.S. defense supplier related to the F-35 Joint Strike Fighter program.

Highlights include:

  • Revenues decreased 15% from the year-ago quarter, primarily as a result of a decrease in our commercial business.
  • Gross margins for the quarter were 41% as compared to 48% for the same quarter last year mainly due to the competitive pricing on two major international contracts win. We expect margins to improve once these shipments are completed.
  • SGA expenses declined 26% mostly due to lower commission, accrued profit sharing and marketing consulting expenses.
  • Engineering expenses decreased 5% as a result of time spent on a funded engineering program.
  • Income from operations was $341,945 as compared to $631,178 for the same quarter last year.
  • Basic earnings per share of $0.04 as compared to $0.14 for the same quarter last year.
  • Backlog increased to $5.1 million at September 30, 2020 as compared to $4.0 million at March 31, 2020
  • Working capital increased $814,000 to $2.6 million at September 30, 2020 from $1.8 million at March 31, 2020
  • Stockholders’ equity increased to over $5 million.

Mr. Jeffrey O’Hara, Tel-Instrument’s President and CEO commented “We continue to be profitable with our second quarter income before taxes approximately double that of our first quarter, despite the impact of COVID-19 on our supply chain and labor force. The pandemic has resulted in a significant reduction in our commercial test set bookings and has delayed some orders from our domestic and international military customers. With the resurgence of the COVID-19 virus across the country, managing our supply chain and manufacturing operations will remain a challenge for the remainder of this fiscal year.

We continue to seek new opportunities, and our core Mode 5 business remains strong, representing 75% of total sales for the quarter. We recently received a $1.1 million Mode 5 follow-on test set order from a major U.S. Prime this week which will be shipped in the fourth quarter, and we have submitted quotes to the U.S. military for other Mode 5 and legacy test sets that we expect to secure in the next few months. Our $956K contract from Lockheed Martin to support the F-35 Joint Strike Fighter is proceeding on schedule with the Preliminary Design Review scheduled for next week. 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 12 month development program.

Our balance sheet and financial position continues to strengthen and we are well positioned to discharge the Aeroflex damage award in the event that we are unsuccessful with our pending legal appeal. The Company also received a $722,577 government loan from the Payroll Protection Program in May 2020. The Company applied for 100% forgiveness of this loan in November 2020, and we believe we meet the requirements for this to be granted. The loan has allowed us to continue development work on the SDR/OMNI test set despite the uncertain outlook for commercial aviation market.

Given the sharp decline in the commercial market, the Company is increasing its engineering focus on military communication applications. We have upgraded 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 allow us the technological capability to compete in much larger markets where we have previously not had any presence. Our goal is to introduce a military communications test set in the first half of 2021 while still working to introduce a commercial avionics test set in the same timeframe.

In summary, the Company has never been in a stronger position with orders for Mode 5 and legacy test sets continuing and the Company aggressively expanding into related high-growth areas such as specialty engineering for Lockheed Martin and the military communications test set market. On a final note, we wish the best for Joe Macaluso, our Chief Accounting Officer, who announced his departure from the Company earlier this week. Joe has done a fantastic job at TIC and will be missed. Mr. O’Hara will assume Joe’s responsibilities until a replacement is named.”

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

 

 

 

September 30,

2020

 

 

March 31,

2020

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

3,453,098

 

 

$

3,126,195

 

Accounts receivable, net

 

 

1,952,406

 

 

 

1,411,644

 

Inventories, net

 

 

3,048,897

 

 

 

3,092,679

 

Restricted cash to support appeal bond

 

 

2,010,454

 

 

 

2,008,544

 

Prepaid expenses and other current assets

 

 

404,474

 

 

 

382,428

 

Total current assets

 

 

10,869,329

 

 

 

10,021,490

 

 

 

 

 

 

 

 

 

 

Equipment and leasehold improvements, net

 

 

222,221

 

 

 

263,750

 

Operating lease right-of-use assets

 

 

201,017

 

 

 

306,740

 

Deferred tax asset, net

 

 

2,591,685

 

 

 

2,712,780

 

Other long-term assets

 

 

35,109

 

 

 

35,109

 

Total assets

 

$

13,919,361

 

 

$

13,339,869

 

 

 

 

 

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Line of credit

 

$

680,000

 

 

$

680,000

 

SBA PPP loan – current portion

 

 

416,940

 

 

 

 

Operating lease liabilities – current portion

 

 

201,017

 

 

 

214,793

 

Accounts payable and accrued liabilities

 

 

577,531

 

 

 

1,035,023

 

Deferred revenues – current portion

 

 

134,593

 

 

 

145,168

 

Accrued legal damages

 

 

5,785,183

 

 

 

5,657,549

 

Finance lease obligations – current portion

 

 

 

 

 

49

 

Accrued payroll, vacation pay and payroll taxes

 

 

483,723

 

 

 

512,732

 

Total current liabilities

 

 

8,278,987

 

 

 

8,245,314

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities – long-term

 

 

 

 

 

91,947

 

Deferred revenues – long-term

 

 

314,981

 

 

 

327,132

 

SBA PPP loan – long term

 

 

305,637

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

8,899,605

 

 

 

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

 

 

3,635,998

 

 

 

3,515,998

 

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

issued and outstanding, par value $0.10 per share

 

 

1,127,367

 

 

 

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

 

 

7,467,176

 

 

 

7,616,624

 

Accumulated deficit

 

 

(7,536,371

)

 

 

(7,870,099

)

Total stockholders’ equity

 

 

5,019,756

 

 

 

4,675,476

 

Total liabilities and stockholders’ equity

 

$

13,919,361

 

 

$

13,339,869

 

 

TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

September 30,

2020

 

 

September 30,

2019

 

 

September 30,

2020

 

 

September 30,

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

3,336,396

 

 

$

3,912,168

 

 

$

6,275,833

 

 

$

7,218,630

 

Cost of sales

 

 

1,969,573

 

 

 

2,038,535

 

 

 

3,404,399

 

 

 

3,763,393

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

1,366,823

 

 

 

1,873,633

 

 

 

2,871,434

 

 

 

3,455,237

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

464,809

 

 

 

625,163

 

 

 

1,126,060

 

 

 

1,237,634

 

Litigation expenses

 

 

5,514

 

 

 

91,553

 

 

 

8,210

 

 

 

102,060

 

Engineering, research and development

 

 

554,555

 

 

 

525,739

 

 

 

1,186,508

 

 

 

1,050,842

 

Total operating expenses

 

 

1,024,878

 

 

 

1,242,455

 

 

 

2,320,778

 

 

 

2,390,536

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

341,945

 

 

 

631,178

 

 

 

550,656

 

 

 

1,064,701

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,879

 

 

 

1,018

 

 

 

4,725

 

 

 

2,018

 

Other income

 

 

 

 

 

 

 

 

13,854

 

 

 

 

Change in fair value of common stock warrants

 

 

 

 

 

5,500

 

 

 

 

 

 

(73,000

)

Interest expense – judgement

 

 

(52,490

)

 

 

(90,596

)

 

 

(127,634

)

 

 

(171,106

)

Interest expense

 

 

(9,380

)

 

 

(10,866

)

 

 

(19,160

)

 

 

(28,603

)

Total other expense, net

 

 

(59,991

)

 

 

(94,944

)

 

 

(128,215

)

 

 

(270,691

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

281,954

 

 

 

536,234

 

 

 

422,441

 

 

 

794,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

59,206

 

 

 

 

 

 

88,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

222,748

 

 

 

536,234

 

 

 

333,728

 

 

 

794,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred dividends

 

 

80,000

 

 

 

80,000

 

 

 

160,000

 

 

 

160,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to common shareholders

 

$

142,748

 

 

$

456,234

 

 

$

173,728

 

 

$

634,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per common share

 

$

0.04

 

 

$

0.14

 

 

$

0.05

 

 

$

0.19

 

Diluted income per common share

 

$

0.04

 

 

$

0.11

 

 

$

0.05

 

 

$

0.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,255,887

 

 

 

3,255,887

 

 

 

3,255,887

 

 

 

3,255,887

 

Diluted

 

 

5,068,949

 

 

 

4,945,665

 

 

 

3,255,887

 

 

 

4,945,665

 

 

Contacts

Jeffrey O’Hara

Tel-Instrument Electronics Corp.

(201) 933-1600

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