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
reported its financial results for the first quarter of fiscal year
2019.
Mr. Jeffrey O’Hara, President and CEO of Tel, indicated that
“Fiscal year 2018 was extremely challenging for the Company with
the combination of sharply lower revenues and the award of $4.9
million in damages from the Aeroflex litigation. This trend
continued in the first quarter of FY 2019 as revenues of $1.8
million were almost 50% below year-ago levels. The Company has
responded by significantly reducing its cost structure with annual
manufacturing and administrative payroll costs reduced by over $1
million. This is expected to reduce our annual break-even revenues
to approximately $11 million. The positive news is that we believe
that we are now approaching the turn-around point where we expect
to report increasing quarterly revenues and a return to profitable
operations. This is based on several major pending contracts in the
pipeline and indications of future large orders from key domestic
and international Mode 5 customers. All allied countries have a
drop-dead date of January 1, 2020 for Mode 5 capability and our
international business is now poised to drive our business growth
for the next several years.
As reported last week, we have recently been informed by Germany
that it plans to award a contract to the Company for 275 TS-4530A
test sets, with approximately 200 of these test sets expected to be
delivered in the next 12 months. This is expected to result in a
multimillion-dollar contract for the Company. Although this award
is currently being protested by an unsuccessful bidder, we are
optimistic that we will receive this contract in the near term. We
are also negotiating a large order from Lockheed Martin for
additional AN/USM-708 test sets. Finally, the Company also expects,
based on customer input, to receive a multi-million order from the
U.S. Department of Defense (the “DOD”) for additional Mode 5 test
sets this year. These pending orders would materially improve our
sales backlog and allow for substantial improvements in quarterly
revenues and profitability.
The Company has demonstrated our market-leading Mode 5 products
to most key international Mode 5 customers and we expect to receive
volume orders from these countries starting in the next two
quarters. The Company estimates the total international Mode 5
market to be in the 2,000-test set range, which represents a large
and profitable market opportunity. The Company believes it is
well-positioned to capitalize on these opportunities as our CRAFT
and TS-4530A flight-line test sets have been endorsed by the U.S.
military and we have already delivered test sets into 18
international markets. We believe the new T-47/M5 Mode 5 IFF test
set will be a cost-effective upgrade option for our large installed
base of Mode 4 test sets, and several large international customers
have already indicated that volume orders for this new test set
will be issued as soon the test set receives certification from
AIMS certification, which is currently scheduled to take place next
month.
The commercial avionics industry is undergoing a great deal of
change and we believe our new lightweight, hand-held SDR/OMNI
product that is scheduled to enter production later this fiscal
year will revolutionize the commercial avionics test set business
and should generate increased market share at very attractive gross
margin levels. The initial SDR-OMNI software release will provide
test capability for Transponders (Modes A, C, and S), ADS-B, and
978 MHz UAT capability. This software radio technology will provide
a platform for future products which we expect to provide us with
the opportunity to expand out of our relatively narrow avionics
test market niche and enter the much larger secure communications
radio test market. We are actively working to secure partners to
enter this growth market, and we believe that our new hardware
platform provides unmatched capabilities in a market leading form
factor.
The Company is currently appealing the Aeroflex $4.9 million
judgment and we believe that substantive mistakes were made in the
trial and that we have strong legal arguments. The Company has
posted a $2,000,000 appeal bond which will remain in place during
the appeal process which is expected to take several years to
complete. If we do not prevail with the appeal, we will have
several years to generate sufficient cash or secure additional
financing to support the repayment of the remaining $2.9 million
not covered by the $2 million appeal bond.”
Quarter Ended June 30, 2018 as Compared to June 30, 2017
Sales
For the three months ended June 30, 2018, total net sales
decreased $1,727,863 (48.8%) to $1,814,214 as compared to
$3,542,077 for the three months ended June 30, 2017. Avionics
government sales decreased $1,879,744 (63.2%) to $1,092,852 for the
three months ended June 30, 2018, as compared to $2,972,326 for the
three months ended June 30, 2017. The decrease in sales is mostly
attributed to the decrease in shipment of the U.S. Army TS-4530A
which contract is now completed, CRAFT units and certain other
legacy products, partially offset by the increase in sales
associated with the shipments of the T-47/M5. Commercial sales
increased $151,881 (26.7%) to $721,632 for the three months ended
June 30, 2018 as compared to $569,751 for the three months ended
June 30, 2017. This increase is attributed to the increased sales
from our repair business as well as increased shipments of the
TR-220.
Gross Margin
For the three months ended June 30, 2018, total gross margin
decreased $759,977 (61.2%) to $481,313 as compared to
$1,241,290 for the three months ended June 30, 2017, respectively,
primarily as a result of the lower volume. The gross margin
percentage for the three months ended June 30, 2018 was 26.5% as
compared to 35.0% for the three months ended June 30, 2017. The
lower gross margin percentage is attributable to the lower volume
for the quarter. This gross margin percentage is projected to
improve substantially in future periods as fixed manufacturing
personnel costs would be spread over higher volume levels.
Operating Expenses
Selling, general and administrative expenses decreased $139,761
(19.8%) to $566,525 for the three months ended June 30, 2018 as
compared to $706,286 for the three months ended June 30, 2017,
respectively. This decrease is primarily attributed to lower
salaries and related expenses as well as lower commission
expenses.
Litigation costs decreased $343,241 (89.7%) to $39,271 for the
three months ended June 30, 2018 as compared to $382,512 for the
three months ended June 30, 2017 as a result of less activity
associated with the Aeroflex litigation. The Company has filed its
appeal which is expected to take two to three years to reach a
final decision.
Engineering, research and development expenses decreased $97,950
(15.9%) to $517,323 for the three months ended June 30, 2018 as
compared to $615,273 for the three months ended June 30, 2017. The
Company continues to invest heavily in its new SDR/OMNI
product.
The Company continues to pursue additional equity financing
opportunities to support the expected near-term growth in our
business. While no firm commitments have been secured,
management is optimistic that additional equity funding will be
secured by the end of the current fiscal quarter.
The Company encourages investors to read its full results of
operations as contained in our Quarterly Report on Form 10-Q filed
on August 20, 2018 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 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
June 30,2018
March 31,2018
(unaudited) ASSETS Current assets: Cash and cash equivalents
$ 254,732 $ 307,812 Accounts receivable, net 672,884 1,095,049
Inventories, net 4,095,888 4,269,934 Restricted cash to support
appeal bond 2,001,864 2,000,866 Prepaid expenses and other current
assets 162,106 147,746 Total current assets 7,187,474
7,821,407 Equipment and leasehold improvements, net 164,037
180,763 Deferred tax asset, net 63,500 63,500 Other long-term
assets 35,109 35,109 Total assets 7,450,120
8,100,779 LIABILITIES & STOCKHOLDERS’ DEFICIT
Current liabilities: Current portion of long-term debt 534
2,124 Line of credit 950,000 1,000,000 Capital lease obligations –
current portion 7,036 6,875 Accounts payable and accrued
liabilities 2,576,612 2,580,383 Deferred revenues – current portion
279,087 60,051 Accrued legal damages 5,072,642 5,059,990 Accrued
payroll, vacation pay and payroll taxes 380,346
447,863 Total current liabilities 9,266,257 9,157,286
Capital lease obligations – long-term 5,064 6,885 Deferred revenues
– long-term 318,185 337,676 Total liabilities
9,589,506 9,501,847 Commitments and contingencies
Stockholders’ deficit: Preferred stock, 1,000,000 shares
authorized, par value $0.10 per share,
500,000 shares 8% Cumulative Series A
Convertible Preferred issued and outstanding
3,095,995 3,035,998 Common stock, 4,000,000 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 7,994,733 8,046,975 Accumulated deficit (13,555,700 )
(12,809,627 ) Total stockholders’ deficit (2,139,386
) (1,401,068 ) Total liabilities, mezzanine equity and
stockholders’ deficit $ 7,450,120 $ 8,100,779
TEL-INSTRUMENT
ELECTRONICS CORP.CONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
Three Months Ended June 30,
2018 June 30, 2017
Net sales $ 1,814,214 $ 3,542,077 Cost of sales 1,332,901
2,300,787 Gross margin 481,313 1,241,290
Operating expenses: Selling, general and administrative 566,525
706,286 Litigation costs 39,271 382,512 Engineering, research and
development 517,323 615,273 Total operating expenses
1,123,119 1,704,071 Loss from operations
(641,806 ) (462,781 ) Other income (expense): Proceeds from
life insurance - 92,678 Amortization of deferred financing costs -
(1,357 ) Change in fair value of common stock warrants - 95,000
Interest income 998 - Interest expense – judgment (71,220 ) -
Interest expense (34,045 ) (9,631 ) Total other
income (expense) (104,267 ) 176,690 Loss
before income taxes (746,073 ) (286,091 ) Income tax expense
- - Net loss (746,073 ) (286,091 )
Preferred stock dividends (60,000 ) - Net loss
attributable to common shareholders $ (806,073 ) $ (286,091 )
Net loss per share: Basic loss per common share $ (0.25 ) $
(0.09 ) Diluted loss per common share $ (0.25 ) $ (0.12 )
Weighted average shares outstanding: Basic 3,255,887 3,255,887
Diluted 3,255,887 3,266,540
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version on businesswire.com: https://www.businesswire.com/news/home/20180821005221/en/
Tel-Instrument Electronics Corp.Joseph P. Macaluso,
201-933-1600
Tel Instrument Electronics (QB) (USOTC:TIKK)
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