Market Overview

Tel-Instrument Electronics Corp. Reports Financial Results for Fiscal Year 2018

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Tel-Instrument Electronics Corp. ("Tel", "Tel-Instrument" or the
"Company") (NYSE:TIK), a leading designer and manufacturer of
avionics test and measurement solutions, today reported a net loss of
$4.4 million on revenues of $10 million for the fiscal year ended March
31, 2018. This loss included legal damages and litigation costs relating
to the Aeroflex litigation matter totaling approximately $2.8 million.

Mr. Jeffrey O'Hara, President and CEO of Tel, stated, "Fiscal year 2018
was an extremely difficult year due to the unexpected decision by the
Kansas Court as well as delays in the award of several expected
contracts. In response, the Company has significantly reduced its
manufacturing and administrative costs over the last four months. At the
same time, we have increased our direct marketing visits with key
international Mode 5 customers, which have confirmed that our test sets
are highly regarded. We expect to win the majority of the international
Mode 5 flight-line business, which has been estimated at up to 2,000
test sets. The Company is currently working on several large
international contracts, including a multi-million dollar 200-unit
competitive German solicitation that could be awarded this summer. The
Company is starting to see international orders for its new T-47/M5 Mode
5 test set with additional volume orders expected once AIMS
certification is secured for this new test set later this year. In
addition, we have several large potential domestic opportunities 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. We also expect a large order from Lockheed
Martin for the F-35 program this summer. These expected orders are
believed to generate improved gross margins going forward as prices will
be higher, and improved manufacturing efficiency and lower manufacturing
overhead costs. The Company projects that revenues and profitability
will start to improve starting in the second half of this fiscal year
with much stronger growth expected starting next calendar year as we get
closer to the January 1, 2020 deadline for Mode 5 implementation. We
expect the international Mode 5 business to remain strong for a number
of years."

"The Company believes its key long-term growth potential is in our new
line of SDR/OMNI modular hand-held test sets which provides unmatched
capabilities in a market leading form factor. Our development team has
been working hard to complete development and testing of the first
product, while providing the foundation for future enhancements. The
plan is to introduce the first avionics related commercial product in
the fourth quarter of this calendar year and add further avionic test
capabilities to this product via software download every three to six
months. This will allow us to replace two Aeroflex market leading
commercial test sets with multi-purpose test set. The goal is to
dominate commercial avionics similar to what we have done in Mode 5
flight-line testing. The Company is currently working on a marketing and
advertising program, and will begin product demonstrations to key
customers later this summer. Once the commercial avionics software is
completed, we plan to expand into the secure communications radio market
which is the key to TIC's long-term growth. We continue to seek a
partner for this new market. We expect to face stiff competition from
Aeroflex which has been the dominant supplier in these markets."

"With respect to the Aeroflex litigation, the Company has posted a
$2,000,000 appeal bond. The Company believes it has solid grounds to
appeal this verdict. The appeal process would be expected to take up to
three years to complete and the costs should be a fraction of what we
have spent litigating this case to date."

"To support the near-term growth in business and improve our balance
sheet, the Company is actively working to secure additional equity
funding, and is in discussions with several potential investors. The
Company believes its core position in Mode 5 testing to be extremely
strong and we believe the new SDR/OMNI product will allow the Company to
regain its position in the commercial market-place and allow us to
effectively compete in upcoming military secure communication test set
solicitations."

Year Ended March 31, 2018 as Compared to March 31, 2017

For the year ended March 31, 2018 sales decreased $8,720,686 (46.5%)
to $10,024,588 as compared to $18,745,456 for the year ended March 31,
2017. Avionics government sales decreased $9,136,189 (55.3%)
to $7,395,724 for the year ended March 31, 2018 as compared to
$16,531,913 for the year ended March 31, 2017. 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 and ITATS units associated with the U.S.
Navy programs, which contracts have now been completed. Commercial sales
increased $415,321 (18.8%) to $2,628,864 for the year ended March 31,
2018 as compared to $2,213,543 for the year ended March 31, 2017. This
increase is attributed to the increased sales of the TR-220 and the
increase in sales from our repair business.

Gross margin decreased $3,554,306 (53.2%) to $3,129,809 for the year
ended March 31, 2018 as compared to $6,684,115 for the year ended March
31, 2017, primarily as a result of the lower volume as well as labor and
overhead variances as a result of the lower volume. This decrease is
mostly attributed to the lower volume offset partially by increased
prices on CRAFT and the change in sales mix. The gross margin percentage
for the year ended March 31, 2018 was 31.2%, as compared to 35.7% for
the year ended March 31, 2017.

Selling, general and administrative expenses decreased $89,269 (3.5%) to
$2,491,816, for the year ended March 31, 2018 as compared to $2,581,085
for the year ended March 31, 2017. This decrease was primarily
attributed to lower salaries and related expenses due to a reduction in
headcount offset partially by higher commission fees, and professional
and consulting fees.

Litigation expenses decreased $634,514 to $610,125 for the year ended
March 31, 2018 as compared to $1,244,639 for the year ended March 31,
2017 as a result of less activity associated with the Aeroflex
litigation. The Company recorded $2.159 million in additional legal
damages for the year ended March 31, 2018 as compared to the $2.8
million recorded for the year ended March 31, 2017 as a result of the
court's decision regarding punitive damages as a result of the Aeroflex
litigation.

Engineering, research and development expenses decreased $154,814 (6.4%)
to $2,275,508 for the year ended March 31, 2018 as compared to
$2,430,322 for the year ended March 31, 2017. The Company continues to
invest in new products. 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 also continues to heavily
invest in the development of the Company's SDR/OMNI hand-held product
line, the enhanced remote client, and the incorporation of other product
enhancements in existing designs.

The Company encourages investors to read its full results of operations
as contained in our Annual Report on Form 10-K filed on July 16, 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.

Consolidated Balance Sheets

 
ASSETS March 31, 2018 March 31, 2017
Current assets:
Cash $ 307,812 $ 287,873
Accounts receivable, net of allowance for doubtful accounts

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

1,095,049 1,556,382
Inventories, net 4,269,934 4,208,179
Restricted cash to support appeal bond 2,000,866 -
Prepaid expenses and other current assets   147,746   188,578
Total current assets 7,821,407 6,241,012
 
Equipment and leasehold improvements, net 180,763 161,427
Deferred tax asset, net 63,500 -
Other assets   35,109   33,509
 
Total assets $ 8,100,779 $ 6,435,948
 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
Current liabilities:
Current portion of long-term debt $ 2,124 $ 291,991
Line of credit 1,000,000 200,000
Capital lease obligations – current portion 6,875 6,268
Accounts payable 2,307,813 1,428,320
Deferred revenues – current portion 60,051 123,720
Federal and state taxes payable - 4,105
Accrued expenses - vacation pay, payroll and payroll withholdings 447,863 527,413
Accrued legal damages 5,059,990 2,800,000
Accrued expenses - related parties 31,151 45,586
Accrued expenses – other   241,419   599,049
Total current liabilities 9,157,286 6,026,452
 
Capital lease obligations – long-term 6,885 13,760
Long-term debt, net of debt discount - 2,124
Warrant liability - 95,000
Deferred revenues – long-term   337,676   352,973
 
Total liabilities   9,501,847   6,490,309
 
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

3,035,998 -
Common stock, 4,000,000 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 8,046,975 8,107,369
Accumulated deficit   (12,809,627 )   (8,487,316 )
 
Total stockholders' deficit   (1,401,068 )   (54,361 )
 
Total liabilities and stockholders' deficit $ 8,100,779 $ 6,435,948
 
     

TEL-INSTRUMENT ELECTRONICS CORP.

Consolidated Statements of Operations

 
For the years ended March 31,
2018     2017
 
Net sales $ 10,024,588 $ 18,745,456
 
Cost of sales   6,894,779   12,061,341
 
Gross margin   3,129,809   6,684,115
 
Operating expenses:
Selling, general and administrative 2,491,816 2,581,085
Litigation expenses 610,125 1,244,639
Legal damages 2,159,000 2,800,000
Engineering, research and development   2,275,508   2,430,322
 
Total operating expenses   7,536,449   9,056,046
 
Loss from operations (4,406,640 ) (2,371,931 )
 
Other income (expense):
Proceeds from life insurance 92,678 -
Interest income 866 -
Amortization of deferred financing costs (3,363 ) (5,429 )
Change in fair value of common stock warrants 95,000 321,203
Interest expense (59,787 ) (40,431 )
Interest expense - judgment (100,960 ) -
Interest expense - related parties   (3,605 )   (18,736 )
 
Total other income   20,829   256,607
 
Loss before income taxes (4,385,811 ) (2,115,324 )
 
(Benefit) provision for income taxes   (63,500 )   2,644,115
 
Net loss (4,322,311 ) (4,759,439 )
 
Preferred dividends   (90,667 )   -
 
Net loss attributable to common shareholders $ (4,412,978 ) $ (4,759,439 )
 
 
Basic loss per common share $ (1.36 ) $ (1.46 )
Diluted loss per common share $ (1.36 ) $ (1.49 )
 
Weighted average number of shares outstanding
Basic   3,255,887   3,255,887
Diluted   3,255,887   3,266,842
 

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