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 a net loss of $333k on revenues of $2.6 million for the
third quarter of fiscal year 2018. This loss included $135k of
litigation expenses related to the Aeroflex litigation.
Quarter Ended December 31, 2017 as Compared to December 31,
2016
For the three months ended December 31, 2017, total net sales
decreased $1,610,726 (38.0%) to $2,625,793, as compared to
$4,236,519 for the three months ended December 31, 2016. Avionics
government sales decreased $1,945,640 (51.6%) to $1,825,744 for the
three months ended December 31, 2017, as compared to $3,771,384 for
the three months ended December 31, 2016. The decrease in sales is
mostly attributed to the decrease in shipment of the U.S. Army
TS-4530A Kits and Sets, and the CRAFT units associated with the
U.S. Navy programs, which contracts have now been completed,
partially offset by the increase in sales associated with the
initial shipments of the T-47/M5. Commercial sales increased
$334.914 (72.0%) to $800,049 for the three months ended December
31, 2017 as compared to $465,135 for the three months ended
December 31, 2016. This increase is attributed to increased
shipments of the TR-220 to a major U.S. airline as well as
increased revenues from our repair and calibration business.
For the three months ended December 31, 2017, total gross margin
decreased $697,571 (42.7%) to $936,680 as compared to
$1,634,251 for the three months ended December 31, 2016, primarily
as a result of the lower volume as well as labor and overhead
variances as a result of the lower volume. The gross margin
percentage for the three months ended December 31, 2017 was 35.7%,
as compared to 38.6% for the three months ended December 31,
2016.
Selling, general and administrative expenses decreased $34,489
(5.9%) to $548,391, for the three months ended December 31, 2017,
as compared to $582,880 for the three months ended December 31,
2016. These decreases were primarily attributed to lower salaries
and related expenses offset partially by higher commission fees,
shareholder communication expenses and consulting fees.
Litigation expenses decreased $147,725 to $134,765 for the three
months ended December 31, 2017 as compared to $282,490 for the
three months ended December 31, 2016. The litigation expenses in
the quarter ended December 31, 2017 related to the additional
motions filed with the court to correct the damages award and
securing the appeal bond.
Engineering, research and development expenses decreased $68,316
(11.1%) to $546,691 for the three months ended December 31, 2017 as
compared to $615,007 for the three months ended December 31, 2016.
The Company continues to invest in new products by taking advantage
of our CRAFT and TS-4530A technology to develop smaller hand-held
products, which will broaden our product line for both commercial
and military applications. The Company has completed its
development of the T-47/M5 Mode 5 test set, which began initial
shipments in the quarter ended December 31, 2017, and which we
believe will compete effectively in the international market.
The Company recorded a loss from operations of $323,690 for the
quarter ended December 31, 2017, as compared to income from
operations of $153,874 for the quarter ended December 31, 2016.
Mr. Jeffrey O’Hara, President and CEO of Tel, stated, “After a
sharp drop in second quarter revenues, revenues increased 47% in
the third quarter to $2.6 million which is still below our
estimated quarterly break-even revenue level of approximately $3
million. The positive news is that we are starting to see increased
quote and sales activity in both our domestic and international
markets with bookings for the third quarter increasing to $3.2
million. We have several large potential military orders in the
pipe-line including a possible multi-million dollar follow-on test
set order from the U.S. DOD, which if secured, should lead to
improved revenues and profitability starting in the 2019 fiscal
year starting April 1, 2018. We continue to actively target the
international Mode 5 market and our recent “Drive-to-Mode 5”
marketing incentive plan for our international Mode 5 customers has
resulted in several medium size orders for our new T-47/M5 product
which we announced in December. We are committed to aggressively
pursuing this business and continue to meet with key international
customers. My meetings with customers in the Far East last month
were very positive and we expect to capture the lion’s share of the
Mode 5 test set business in these key markets. We are also seeing
steady sales on our TS-4530A test set, and expect a volume CRAFT
order from Lockheed Martin for the F-35 program later this spring.
We have also released a new Remote Client software application for
all of our Mode 5 products that will generate increased revenues
and help improve our gross margins. Finally, the Company continues
to see strong market activity on our TR-220 air traffic control
(“ATC”) test set, and we expect the commercial portion of our
business to continue to remain solid as a result of the 2020 FAA
ADS-B mandate.”
“The Company believes its key long-term growth potential is in
our new line of modular hand-held test sets which provides
unmatched capabilities in a market leading form factor. We expect
that these hand-held test sets will provide us with the opportunity
to regain a leading market position in commercial avionics testing
and expand into the much larger secure communications radio test
market. We plan to introduce the first avionics related commercial
product called the SDR-Omni next month at an industry show with
initial deliveries expected to take place in the late summer of
2018. The plan is to add additional avionic test capabilities to
this product via software download every three to six months with
the goal of becoming the market leader in world-wide commercial
avionics. We are also in preliminary discussions with potential
partners to collaborate on the secure communications radio market
which is the key to TIC’s long-term growth. We expect to face stiff
competition from Aeroflex which has been the dominant supplier in
these markets. This is an extremely attractive market segment as
evidenced by VIAVI Solutions (a U.S. company) recently announcing
plans to purchase the Aeroflex AvComm and Wireless Test and
Measurement businesses from Cobham at a price of $455 million,
or more than two times trailing revenues.”
“With respect to the Aeroflex litigation, we plan to appeal the
decision if the Judge does not change the result or vacate the
damage award based on our latest motions. A hearing on this motion
is expected on February 27, 2018 and a final decision is expected
within the next two to three months. The Judge could deny our
motions, reduce the amount of damages or even order a new trial.
Once a final decision has been rendered, the Company has 30 days to
file an appeal. The Company has posted a $2,000,000 bond to prevent
Aeroflex from enforcement actions until a final decision has been
rendered by the Court. This $2 million bond amount would remain in
place during any appeal process. The Company believes it has
excellent grounds to appeal this verdict. The appeal process would
be expected to take several years to complete. We believe that we
will have approximately 2-3 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,
if we do not prevail with the appeal.”
The Company encourages investors to read its full results of
operations as contained in our Quarterly Report on Form 10-Q filed
on February 14, 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
December 31,2017
March 31,2017
(unaudited) ASSETS Current assets: Cash and cash equivalents
$ 263,983 $ 287,873 Accounts receivable, net 1,660,757 1,556,382
Inventories, net 4,309,324 4,208,179 Restricted cash to support
appeal bond 2,000,000 - Prepaid expenses and other current assets
107,450 188,578 Total current assets
8,341,514 6,241,012 Equipment and leasehold improvements,
net 197,602 161,427 Other long-term assets 35,109
33,509 Total assets 8,574,225
6,435,948 LIABILITIES & STOCKHOLDERS’ DEFICIT
Current liabilities: Current portion of long-term debt 3,696
291,991 Line of credit 1,000,000 200,000 Capital lease obligations
– current portion 6,718 6,268 Accounts payable and accrued
liabilities 2,431,763 2,072,955 Federal and state taxes payable -
4,105 Deferred revenues – current portion 54,671 123,720 Accrued
legal damages 4,930,523 2,800,000 Accrued payroll, vacation pay and
payroll taxes 396,207 527,413 Total
current liabilities 8,823,578 6,026,452 Capital lease
obligations – long-term 8,664 13,760 Long-term debt - 2,124
Deferred revenues – long-term 353,280 352,973 Warrant liability
- 95,000 Total liabilities
9,185,522 6,490,309 Commitments
Mezzanine Equity: 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
2,990,667 - Total mezzanine equity
2,990,667 - Stockholders’
deficit: 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 8,099,882 8,107,369 Accumulated deficit (12,027,432 )
(8,487,316 ) Total stockholders’ deficit (3,601,964 )
(54,361 ) Total liabilities, mezzanine equity and
stockholders’ deficit $ 8,574,225 $ 6,435,948
TEL-INSTRUMENT
ELECTRONICS CORP.CONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited)
Three Months Ended Nine Months Ended
December 31,2017
December 31,2016
December 31,2017
December 31,2016
Net sales $ 2,625,793 $ 4,236,519 7,955,035 $ 14,654,917
Cost of sales 1,689,113 2,602,268
5,377,195 9,318,425 Gross margin
936,680 1,634,251 2,577,840 5,336,492 Operating expenses:
Selling, general and administrative 548,391 582,880 1,881,072
2,042,922 Litigation expenses 134,765 282,490 560,610 609,330 Legal
damages 30,523 - 2,130,523 - Engineering, research and development
546,691 615,007 1,691,631
1,783,655 Total operating expenses 1,260,370
1,480,377 6,263,836
4,435,907 (Loss) income from operations (323,690 )
153,874 (3,685,996 ) 900,585 Other income (expense):
Proceeds from life insurance - - 92,678 - Amortization of deferred
financing costs (649 ) (1,359 ) (3,363 ) (4,072 ) Change in fair
value of common stock warrants 5,000 37,000 95,000 288,203 Interest
expense (14,097 ) (11,620 ) (38,435 )
(46,953 ) Total other income (expense) (9,746 )
24,021 145,880 237,178
(Loss) income before income taxes (333,436 ) 177,895 (3,540,116 )
1,137,763 Income tax expense - 36,382
- 313,886 Net (loss)
income (333,436 ) 141,513 (3,540,116 ) 823,877 Preferred
stock dividends (30,667 ) - (30,667 )
- Net (loss) income attributable to common
shareholders $ (364,103 ) $ 141,513 $ (3,570,783 ) $ 823,877
Basic (loss) income per common share $ (0.11 ) $ 0.04
$ (1.10 ) $ 0.25 Diluted (loss) income per common share $ (0.11 ) $
0.03 $ (1.10 ) $ 0.23 Weighted average shares outstanding:
Basic 3,255,887 3,255,887 3,255,887 3,255,887 Diluted 3,255,887
3,265,135 3,255,887 3,266,532
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version on businesswire.com: http://www.businesswire.com/news/home/20180214005299/en/
Tel-Instrument Electronics Corp.Joseph P. Macaluso,
201-933-1600
Tel Instrument Electronics (QB) (USOTC:TIKK)
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