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Tel-Instrument Electronics Reports Net Income of $600K for FY 2021

EAST RUTHERFORD, N.J.–()–Tel-Instrument Electronics Corp. (“Tel-Instrument,” “TIC,” or the “Company”) (OTCQB: TIKK), a leading designer and manufacturer of avionics test and measurement solutions, today reported net income of $600,057 or $0.09 per basic share and $0.12 per diluted share on revenues of $11.6 million for the 2021 fiscal year ending March 31, 2021.

Mr. Jeffrey O’Hara, Tel-Instrument’s President and CEO, commented, “Fiscal year 2021 was challenging for TIC as the COVID-19 pandemic materially impacted commercial sales and delays to parts deliveries from our supply chain substantially reduced production deliveries. This led to a 27% decline in sales to $11,582,520 for the year ended March 31, 2021, and a $3.6 million increase in the year-end sales backlog. Gross Margin decreased by $2.6 million as compared to 2020 as a result of lower revenues and a six-percentage point decline in our gross margin percentage. This was caused by adverse manufacturing variances resulting from the reduced volume levels and plant inefficiencies due to delayed parts deliveries. Total operating expenses for the year declined by approximately $150,000. This expense reduction was achieved despite one-time professional fees of $300,000 related to discontinued M&A discussions and a government contract protest. Operating income declined sharply to $73,000 versus $2,552,492 million in the year ago period. Net income was $600,057 for fiscal year 2021 as compared to $4,736,490 in fiscal year 2020. This equated to $0.09 per share basic income per common share and $0.12 per share on a fully diluted basis. In evaluating the year-over -year results, the sharp decline in revenue and profitability was mostly attributable to supply chain issues and the large one-time professional fees incurred in fiscal year 2021.

The Company’s cash balance on March 31, 2021, was $5.5 million, including the $2 million of restricted cash to support the appeal bond. Net working capital improved by $1.3 million from the year-ago period to $3.2 million. The Company repaid its external bank line and began paying quarterly preferred dividends in the fourth quarter of the last fiscal year. The Company currently has $722,577 of external debt as a result of the second PPP loan draw. The Company plans to file for full loan forgiveness in the second quarter of the current fiscal year.

Looking ahead, TIC expects much improved fiscal year 2022 results and we are well positioned for future long-term growth. The opportunities include software and hardware upgrades for our Mode 5 test sets; the MADL high frequency test set under development for Lockheed Martin; and the upcoming release of our SDR/OMNI test set for military and commercial customers. The commercial avionics sector is starting to show signs of a modest rebound and our core military business remains strong with the year-end sales backlog growing to $7.6 million. The supply chain disruptions appear to be easing in conjunction with the success of the U.S. vaccination effort and TIC is expecting substantially improved results and profitability starting in the first quarter of fiscal year 2022. The Company continues to capture the lion’s share of the Mode 5 domestic and international test set business. The Company is also working on Mode 5 Level 2B, the next generation of Mode 5 . This could lead to funded software upgrades in the future for our domestic and international Mode 5 customers. The U.S. Navy is also considering a mid-life update of our CRAFT product line which could entail funded engineering starting next fiscal year and would ensure the ongoing production of this key test set which is used by the F-35 program.

The Company is also actively working on expanding out of its current core avionics test set market. TIC is working with Lockheed Martin (LMCO) on a new MADL test set. TIC was awarded this contract after winning a $956,000 competitive solicitation. MADL is a secure communications radio for the F-35. This operates in a much higher frequency range than our other test sets. The contract has been put on hold for at least the next four months due to LMCO funding issues, but we are hopeful that the contract will resume this fall. TIC has completed the majority of the development work on this new test set. If the funding issue is resolved, this could generate substantial recurring revenues for the Company.

TIC has completed the upgrade of the new 4.5-pound SDR/OMNI hand-held test set to include a much faster processor with improved video graphics processing capability. With the COVID pandemic’s negative impact on commercial aviation, the Company has focused its engineering efforts on developing a secure communications and navigation test set for the U.S. military. The U.S. military will need to upgrade thousands of existing communication and navigation test sets over the next several years to address the new frequency and waveform requirements for military radios and we believe the SDR/OMNI is well-positioned to capture a meaningful share of this business. The communications software is now largely completed, and we are in the product verification and testing stage. The goal is to start selling a military communications tester this year and then release the commercial avionics test set which will include the new communications and navigations test functions.

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 were complete prior to the COVID-19 pandemic but no progress has been made since last year, due to closures and other delays related to the pandemic. We continue to believe that an error was made in the 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. In the event the Company is not successful in its appeal, the Company has adequate cash resources and credit availability to discharge any potential obligation.”

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, 2021

 

 

March 31,2020

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

3,485,275

 

 

$

3,126,195

 

Accounts receivable, net of allowance for doubtful accounts

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

 

 

1,933,321

 

 

 

1,411,644

 

Inventories, net

 

 

3,437,989

 

 

 

3,092,679

 

Restricted cash to support appeal bond

 

 

2,011,050

 

 

 

2,008,544

 

Prepaid expenses and other current assets

 

 

263,067

 

 

 

447,195

 

Total current assets

 

 

11,130,702

 

 

 

10,086,257

 

 

 

 

 

 

 

 

 

 

Equipment and leasehold improvements, net

 

 

200,769

 

 

 

263,750

 

Operating lease right-of-use assets

 

 

1,922,805

 

 

 

306,740

 

Deferred tax asset, net

 

 

2,675,040

 

 

 

2,648,013

 

Other assets

 

 

35,110

 

 

 

35,109

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

15,964,426

 

 

$

13,339,869

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERSEQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Line of credit

 

$

 

 

$

680,000

 

Finance lease obligations – current portion

 

 

 

 

 

49

 

Operating lease liabilities – current portion

 

 

201,883

 

 

 

214,793

 

Accounts payable

 

 

906,149

 

 

 

739,810

 

Deferred revenues – current portion

 

 

150,709

 

 

 

145,168

 

Accrued expenses – vacation pay, payroll and payroll withholdings

 

 

457,232

 

 

 

512,732

 

Accrued legal damages

 

 

5,889,023

 

 

 

5,657,549

 

Accrued expenses – other

 

 

365,975

 

 

 

295,213

 

Total current liabilities

 

 

7,970,971

 

 

 

8,245,314

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities – long-term

 

 

1,720,921

 

 

 

91,947

 

Long Term Debt-PPP

 

 

722,577

 

 

 

 

Deferred revenues – long-term

 

 

332,428

 

 

 

327,132

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

10,746,897

 

 

 

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

 

 

3,695,998

 

 

 

3,515,998

 

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

issued and outstanding, par value $0.10 per share

 

 

1,147,367

 

 

 

1,087,367

 

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

 

 

7,318,620

 

 

 

7,616,624

 

Accumulated deficit

 

 

(7,270,042

)

 

 

(7,870,099

)

 

 

 

 

 

 

 

 

 

Total stockholders equity

 

 

5,217,529

 

 

 

4,675,476

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders equity

 

$

15,964,426

 

 

$

13,339,869

 

TEL-INSTRUMENT ELECTRONICS CORP.

Consolidated Statements of Operations

 

 

For the years ended March 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

11,582,520

 

 

$

15,774,943

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

6,800,021

 

 

 

8,365,042

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

4,782,499

 

 

 

7,409,901

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

2,165,190

 

 

 

2,477,548

 

Litigation expenses

 

 

248,004

 

 

 

140,050

 

Engineering, research and development

 

 

2,295,901

 

 

 

2,239,811

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

4,709,095

 

 

 

4,857,409

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

73,404

 

 

 

2,552,492

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

7,483

 

 

 

5,819

 

Change in fair value of common stock warrants

 

 

 

 

 

(73,000

)

Forgiveness of PPP Loan

 

 

722,577

 

 

 

 

Interest expense

 

 

(29,779

)

 

 

(55,557

)

Interest expense – judgment

 

 

(231,474

)

 

 

(342,544

)

Other Income

 

 

30,819

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other (expense) income

 

 

499,626

 

 

 

(465,282

)

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

573,030

 

 

 

2,087,210

 

 

 

 

 

 

 

 

 

 

Benefit for income taxes

 

 

(27,027

)

 

 

(2,649,280

)

 

 

 

 

 

 

 

 

 

Net income

 

 

600,057

 

 

 

4,736,490

 

 

 

 

 

 

 

 

 

 

Preferred dividends

 

 

(320,000

)

 

 

(320,000

)

 

 

 

 

 

 

 

 

 

Net income attributable to common shareholders

 

$

280,057

 

 

$

4,416,490

 

 

 

 

 

 

 

 

 

 

Basic income per common share

 

$

0.09

 

 

$

1.36

 

Diluted income per common share

 

$

0.12

 

 

$

0.95

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

3,255,887

 

 

 

3,255,887

 

Diluted

 

 

5,073,165

 

 

 

4,960,665

 

 

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