UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~December~~June 3130, ~~2023~~2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-31990

TEL-INSTRUMENT ELECTRONICS CORP.

(Exact name of registrant as specified in its charter)

New Jersey

22-1441806

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

One Branca Road

East Rutherford, NJ 07073

(Address of principal executive offices)

(201) 933-1600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large, accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~February~~August 1213, 2024, there were 3,255,887 shares outstanding of the registrant’s common stock.

TEL-INSTRUMENT ELECTRONICS CORP.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
		Page
Item 1.	Unaudited Condensed Consolidated Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	2117
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	2520
Item 4.	Controls and Procedures.	2520
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	2622
Item 1A.	Risk Factors.	2622
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	2622
Item 3.	Defaults Upon Senior Securities.	2622
Item 4.	Mine Safety Disclosures.	2622
Item 5.	Other Information.	2622
Item 6.	Exhibits.	2723
Signatures		2824

PART I – FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements.

TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31, 2023			March 31, 2023
	June 30, 2024			March 31, 2024
	(unaudited)
ASSETS
Current assets:
Cash	$	~~220~~149,~~791~~550		$	3132,~~839,398~~013
Accounts receivable, net		1,~~176~~763,~~203~~680			~~900~~1,~~881~~110,548
Inventories, net		45,~~319~~208,~~840~~229			35,~~586~~411,~~065~~644
Restricted cash to support appeal bond		-			2,011,083
Prepaid expenses and other current assets		213,024			214,161
Prepaid expenses and other current assets		243,907			817,625
Total current assets		7,334,483			6,868,366
Total current assets		5,960,741			11,155,052
Equipment and leasehold improvements, net		64,165			73,195
Equipment and leasehold improvements, net		83,495			85,167
Operating lease right-of-use assets		1,272,700			1,324,463
Operating lease right-of-use assets		1,375,726			1,526,551
Deferred tax asset, net		2,439,427			2,450,657
Deferred tax asset, net		2,630,274			2,627,935
Other long-term assets		35,109			35,109
Total assets	$	1011,~~085~~145,~~345~~884		$	1510,~~429~~751,~~814~~790
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Line of credit	$	690,000		$	690,000
Accounts payable	$	1,242,906		$	1,276,935
Operating lease liabilities – current portion		208,076			202,087
Accrued expenses ‐vacation pay, payroll and payroll withholdings		265,948			248,713
Accounts payable		804,363			322,582
Deferred revenues - current portion		57,778			72,803
Deferred revenues - current portion		82,797			123,117
Operating lease liabilities – current portion		204,064			210,111
Accrued expenses ‐vacation pay, payroll and payroll withholdings		230,992			240,034
Accrued expenses - other		179,748			120,027
Accrued legal damages		-			6,360,698
Line of credit		1,000,000			690,000
Accrued expenses - other		220,808			157,896
Promissory notes – related parties		80,500			-
Total current liabilities		23,~~237~~030,~~036~~944			82,~~096~~618,~~414~~589
Operating lease liabilities – long-term		1,~~167~~068,~~650~~636			1,~~324~~114,~~464~~352
Other long term liabilities		4843,~~140~~524			5345,~~416~~501
Deferred revenues – long-term		~~128~~104,~~778~~963			~~173~~119,~~883~~721
Total liabilities		34,~~581~~248,~~604~~067			93,~~648~~898,~~177~~163
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 authorized, issued, and outstanding, respectively par value $0.10 per share		4,055,998			3,875,998
Preferred stock, 500,000 shares 8% Cumulative Series A Convertible Preferred authorized, issued and outstanding, respectively par value $0.10 per share		4,175,998			4,115,998
Preferred stock, 320,000 shares 8% Cumulative Series B Convertible Preferred authorized; 233,334 and 166,667 issued, and outstanding, par value $0.1 per share		1,676,701			1,207,367
Preferred stock, 320,000 shares 8% Cumulative Series B Convertible Preferred authorized, 233,334 and 233,334 issued and outstanding, par value $0.10 per share		1,732,701			1,704,701
Preferred stock, 166,667 shares 8% Cumulative Series C Convertible Preferred authorized; 53,500 and 0 issued, and outstanding, par value $0.10 per share		328,795			-
Preferred stock, 166,667 shares 8% Cumulative Series C Convertible Preferred authorized; 53,500 and 53,500 issued, and outstanding, par value $0.10 per share		341,635			335,215
Common stock, 7,000,000 shares authorized, par value $0.10 per share, 3,255,887 and 3,255,887 shares issued and outstanding, respectively		325,586			325,586
Additional paid-in capital		6,~~471~~286,~~562~~607			6,~~721~~379,~~535~~085
Accumulated deficit		(65,~~354~~964,~~901~~710	)		(6,~~348~~006,~~849~~958	)
Total stockholders’ equity		6,~~503~~897,~~741~~817			56,~~781~~853,~~637~~627
Total liabilities and stockholders’ equity	$	1011,~~085~~145,~~345~~884		$	1510,~~429~~751,~~814~~790

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						~~Nine Months Ended~~
	December 31, 2023			December 31, 2022			December 31, 2023			December 31, 2022
	June 30, 2024			June 30, 2023
Net sales	$	2,~~403~~842,~~099~~176		$	2,~~328~~866,~~254~~929		$	~~6,835,123~~		$	~~6,594,768~~
Cost of sales		12,~~434~~096,~~981~~274			1,~~434~~572,~~547~~380			~~4,212,971~~			~~4,312,405~~
Gross margin		~~968~~745,~~118~~902			~~893~~1,~~707~~294,549			~~2,622,152~~			~~2,282,363~~
Operating expenses:
Selling, general and administrative		~~414~~542,~~458~~340			~~588~~584,~~937~~858			~~1,520,386~~			~~1,625,123~~
Engineering, research, and development		~~306~~131,~~546~~638			~~370~~289,~~795~~441			~~913,701~~			~~1,502,534~~
Total operating expenses		~~721~~673,~~004~~978			~~959~~874,~~732~~299			~~2,434,087~~			~~3,127,657~~
Income (loss) from operations		247,114			(66,025	)		188,065			(845,294	)
Income from operations		71,924			420,250
Other income (expense):
Other (expense) income:
Interest income		3511			539,~~665~~289			~~50,642~~			~~8,782~~
Income other					628,400			1,000			628,406
Interest expense – other		(18,457	)		(13,455	)
Interest expense – judgement		-			(7170,~~017~~245	)		~~(198,535~~	)		~~(193,953~~	)
Interest expense		(22,976	)		-			(49,561	)		-
Total other net expense		(18,446	)		(44,411	)
Total other net (expense) income		(22,941	)		563,048			(196,454	)		443,235
Income before income taxes		53,478			375,839
Income (loss) before income taxes		224,173			497,023			(8,389	)		(402,059	)
Income tax expense		11,230			80,547
Income tax expense (benefit)		90,364			104,396			(2,337	)		(84,449	)
Net income		42,248			295,292
Net income (loss) income		133,809			392,627			(6,052	)		(317,610	)
Preferred dividends		(94,420	)		(80,000	)
Preferred dividends		(94,420	)		(80,000	)		(257,128	)		(240,000	)
Net income (loss) attributable to common shareholders	$	(52,172	)	$	215,292
Net income (loss) attributable to common shareholders	$	39,389		$	312,627		$	(263,180	)	$	(557,610	)
Basic net (loss) income per common share	$	(0.02	)	$	0.07
Basic net income (loss) per common share	$	0.01		$	0.10		$	(0.08	)	$	(0.17	)
Diluted net (loss) income per common share	$	(0.02	)	$	0.06
Diluted net income (loss) per common share	$	0.02		$	0.08		$	(0.08	)	$	(0.17	)
Weighted average shares outstanding:
Weighted average shares outstanding:
Basic		3,255,887			3,255,887
Basic		3,255,887			3,255,887			3,255,887			3,255,887
Diluted		3,255,887			5,215,665
Diluted		5,610,634			5,155,665			3,255,887			3,255,887

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three Months Ended ~~December~~June 3130, ~~2023~~2024, and ~~2022~~2023

(Unaudited)

	Series A Convertible Preferred Stock				Series B Convertible Preferred Stock				Series C Convertible Preferred Stock				Common Stock
	# of Shares Issued		Amount		# of Shares Issued		Amount		# of Shares Issued		Amount		# of Shares Issued		Amount		Additional Paid-In Capital			Accumulated Deficit			Total
Balances at October 1, 2023		500,000	$	3,995,998		233,334	$	1,648,701		53,500	$	322,375		3,255,887	$	325,586	$	6,564,040		$	(6,488,710	)	$	6,367,990
Balances at April 1, 2024		500,000	$	4,115,998		233,334	$	1,704,701		53,500	$	335,215		3,255,887	$	325,586	$	6,379,085		$	(6,006,958	)	$	6,853,627
8% Dividends on Preferred Stock		-		60,000		-		28,000		-		6,420		-		-		(94,420	)		-			-
Stock-based compensation		-		-		-		-		-		-		-		-		1,942			-			1,942
Net income		-		-		-		-		-		-		-		-		-			~~133~~42,~~809~~248			~~133~~42,~~809~~248
Balances at December 31, 2023		500,000	$	4,055,998		233,334	$	1,676,701		53,500	$	328,795		3,255,887	$	325,586	$	6,471,562		$	(6,354,901	)	$	6,503,741
Balances at June 30, 2024		500,000	$	4,175,998		233,334	$	1,732,701		53,500	$	341,635		3,255,887	$	325,586	$	6,286,607		$	(5,964,710	)	$	6,897,817

	Series A Convertible Preferred Stock				Series B Convertible Preferred Stock				Common Stock
	# of Shares Issued		Amount		# of Shares Issued		Amount		# of Shares Issued		Amount		Additional Paid-In Capital			Accumulated Deficit			Total
Balances at October 1, 2022		500,000	$	3,755,998		166,667	$	1,167,367		3,255,887	$	325,586	$	6,870,822		$	(6,670,541	)	$	5,449,232
Balances at April 1, 2023		500,000	$	3,875,998		166,667	$	1,207,367		3,255,887	$	325,586	$	6,721,535		$	(6,348,849	)	$	5,781,637
8% Dividends on Preferred Stock		-		60,000		-		20,000		-		-		(80,000	)		-			-
Stock-based compensation		-		-		-		-		-		-		63,~~234~~269			-			63,~~234~~269
Net income		-		-		-		-		-		-		-			~~392~~295,~~627~~292			~~392~~295,~~627~~292
Balances at December 31, 2022		500,000	$	3,815,998		166,667	$	1,187,367		3,255,887	$	325,586	$	6,797,056		$	(6,277,914	)	$	5,848,093
Balances at June 30, 2023		500,000	$	3,935,998		166,667	$	1,227,367		3,255,887	$	325,586	$	6,644,804		$	(6,053,557	)	$	6,080,198

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES~~CASH ~~IN STOCKHOLDERS’ EQUITY~~ FLOWS

For the Nine Months Ended December 31, 2023, and 2022

(Unaudited)

	Series A Convertible Preferred Stock						Series B Convertible Preferred Stock				Series C Convertible Preferred Stock				Common Stock
	Three Months Ended
	# of Shares Issued			Amount			# of Shares Issued		Amount		# of Shares Issued		Amount		# of Shares Issued		Amount		Additional Paid-In Capital			Accumulated Deficit			Total
	June 30, 2024			June 30, 2023
Balances at April 1, 2023		500,000		$	3,875,998			166,667	$	1,207,367		-		-		3,255,887	$	325,586	$	6,721,535		$	(6,348,849	)	$	5,781,637
Cash flows from operating activities:
8% Dividends on Preferred Stock		-			180,000			-		69,334		-		7,795		-		-		(257,129	)		-			-
Net income	$	42,248		$	295,292
Issuance of Series B and C Convertible Preferred Stock		-			-			66,667		400,000		53,500		321,000		-		-		-			-			721,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities
Stock-based compensation		-			-			-		-		-		-		-		-		7,156			-			7,156
Deferred income taxes		11,230			80,547
Net loss		-			-			-		-		-		-		-		-		-			(6,052	)		(6,052	)
Depreciation and amortization		9,030			12,274
Balances at December 31, 2023		500,000		$	4,055,998			233,334	$	1,676,701		53,500	$	328,795		3,255,887	$	325,586	$	6,471,562		$	(6,354,901	)	$	6,503,741
Amortization of right of use assets		51,763			49,786
Provision for inventory obsolescence		4,127			1,004
Non-cash stock-based compensation		1,942			3,269
Changes in assets and liabilities:
Increase in accounts receivable		(653,132	)		(336,663	)
Decrease (increase) in inventories		199,288			(21,600	)
Decrease in prepaid expenses and other current assets		1,137			573,177
Decrease in accounts payable		(34,029	)		(9,360	)
Increase in accrued payroll, vacation pay and payroll taxes		17,235			64,416
Decrease in deferred revenues		(29,783	)		(32,501	)
Decrease in operating lease liabilities		(51,763	)		(49,786	)
Decrease in other long term liabilities		(1,977	)		(1,978	)
Increase in accrued expenses - other		59,721			8,150
Increase in accrued legal damages		-			70,245
Net cash (used) provided by operating activities		(372,963	)		706,272
Cash flows from investing activities:
Purchases of equipment		-			(13,983	)
Net cash used in investing activities		-			(13,983	)
Cash flows from financing activities:
Draw from line of credit		310,000			-
Proceeds from promissory notes-related parties		80,500			-
Net cash provided by financing activities		390,500			-
Net increase in cash and restricted cash		17,537			692,289
Cash and restricted cash at beginning of period		132,013			5,850,481
Cash and restricted cash at end of period	$	149,550		$	6,542,770
End of period
Cash	$	149,550		$	4,531,637
Restricted cash		-			2,011,133
	$	149,550		$	6,542,770
Beginning of period
Cash	$	132,013		$	3,839,398
Restricted cash		-			2,011,083
	$	132,013		$	5,850,481
Supplemental cash flow information:
Taxes paid	$	-			-
Interest paid	$	17,869		$	13,455

	Series A Convertible Preferred Stock					Series B Convertible Preferred Stock					Common Stock
	# of Shares Issued		Amount			# of Shares Issued		Amount			# of Shares Issued		Amount		Additional Paid-In Capital			Accumulated Deficit			Total
Balances at April 1, 2022		500,000	$	3,695,998			166,667	$	1,147,367			3,255,887	$	325,586	$	7,018,353		$	(5,960,304	)	$	6,227,000
8% Dividends on Preferred Stock		-		180,000			-		60,000			-		-		(240,000	)		-			-
Dividend Payments		-		(60,000	)		-		(20,000	)		-		-		-			-			(80,000	)
Stock-based compensation		-		-			-		-			-		-		18,703			-			18,703
Net loss		-		-			-		-			-		-		-			(317,610	)		(317,610	)
Balances at December 31, 2022		500,000	$	3,815,998			166,667	$	1,187,367			3,255,887	$	325,586	$	6,797,056		$	(6,277,914	)	$	5,848,093

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TEL-INSTRUMENT ELECTRONICS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	December 31, 2023			December 31, 2022
Cash flows from operating activities:
Net loss	$	(6,052	)	$	(317,610	)
Adjustments to reconcile net loss used in operating activities
Deferred income taxes		(2,339	)		(84,449	)
Depreciation and amortization		35,522			39,553
Amortization of right of use assets		150,825			145,544
Recovery of for inventory obsolescence		(5,133	)		(8,068	)
Non-cash stock-based compensation		7,156			18,703
Changes in assets and liabilities:
Increase in accounts receivable		(275,322	)		(221,313	)
Increase in inventories		(728,642	)		(482,594	)
Decrease (increase) in prepaid expenses & other assets		573,718			(723,572	)
Increase in accounts payable and other accrued liabilities		544,693			252,887
Decrease in accrued payroll, vacation pay and payroll taxes		(9,042	)		(193,077	)
Decrease in deferred revenues		(85,425	)		(45,420	)
Decrease in operating lease liabilities		(150,825	)		(145,544	)
Decrease in other long term liabilities		(5,276	)		-
(Decrease) increase in accrued legal damages		(6,360,698	)		193,953
Net cash used in operating activities		(6,316,840	)		(1,571,007	)
Cash flows from investing activities:
Purchases of equipment		(33,850	)		(6,136	)
Net cash used in investing activities		(33,850	)		(6,136	)
Cash flows from financing activities:
Proceeds from issuance of Preferred Stock		721,000			-
Payment of dividends		-			(80,000	)
Net cash provided (used in) financing activities		721,000			(80,000	)
Net decrease in cash and restricted cash		(5,629,690	)		(1,657,143	)
Cash and restricted cash at beginning of period		5,850,481			6,960,740
Cash and restricted cash at end of period	$	220,791		$	5,303,597
End of period
Cash	$	220,791		$	3,292,547
Restricted cash		-			2,011,050
	$	220,791		$	5,303,597
Beginning of period
Cash	$	3,839,398		$	4,949,690
Restricted cash		2,011,083			2,011,050
	$	5,850,481		$	6,960,740
Supplemental cash flow information:
Taxes paid	$	-			-
Interest paid	$	40,523		$	-
Disposal of Equipment and leasehold improvements	$	27,272		$	-

See accompanying notes to unaudited condensed consolidated financial statements.

Table of Contents

TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Business, Organization and Liquidity

Business and Organization

Tel-Instrument Electronics Corp. (“Tel,” “TIC” or the “Company”) has been in business since 1947. The Company is a leading designer and manufacturer of avionics test and measurement instruments for the global, commercial air transport, general aviation, and government/military defense markets. Tel provides instruments to test, measure, calibrate, and repair a wide range of airborne navigation and communication equipment. The Company sells its equipment in both domestic and international markets. Tel continues to develop new products in anticipation of customers’ needs and to maintain its strong market position. Its development of multi-function testers has made it easier for customers to perform ramp tests with less operator training, fewer test sets, and lower product support costs. The Company has become a major manufacturer and supplier of Identification Friend or Foe (“IFF”) flight line test equipment over the last two decades.

The Company is publicly traded and was quoted on the Over -the -Counter ~~Marketplace~~Market Place (“OTCQB”) under the symbol “TIKK.”

Liquidity

On ~~December~~June 3130, ~~2023~~2024, the Company had positive ~~net~~ working capital of $34,~~723~~303,~~705,~~539 as compared to working capital of $34,~~058~~249,~~638~~777 aton March 31, ~~2023~~2024. This included $149,550 of cash on hand and $1.8 million of accounts receivable.

The ~~Bank~~Company ofhad ~~America~~a ~~line~~$7 ofmillion ~~credit~~sales ~~has~~backlog ~~been~~on ~~extended from December 31, 2023 maturity to~~ June 30, 2024 ~~maturity~~. ~~As of December 31, 2023, the $690,000 line of credit was fully used.~~

On ~~December~~April 311, 2023, Bank of America further extended the ~~Company~~maturity ~~had~~date of our line of credit from June 30, 2024 to July 31, 2024. Bank of America has extended the line of credit while in process of formally renewing the line of credit for an additional period. Additionally, the line of credit available was increased from $~~220~~690,~~791~~000 to $1,000,000. The line of ~~cash~~credit was fully drawn upon for $1,000,000 on ~~hand~~June 30, 2024. The Company repaid $75,000 of this line of credit in July 2024.

~~The~~During June 2024, the Company’s ~~had~~CEO aprovided short term advances totaling $6105,500. ~~million~~During ~~sales~~July ~~backlog~~2024, onan ~~December~~additional 31$40,000 ~~2023~~was provided in short term advances of which $25,000 was repaid during July 2024, with a balance owed as of August 13, 2024 of $120,500.

The Company ~~had~~believes ~~recorded~~it ~~total~~has ~~damages~~sufficient ofcash ~~$6,559,233~~on ~~including~~hand ~~interest~~and ofexpected ~~$1,659,233~~cash asflow afrom ~~result~~operations offor the ~~jury~~next ~~verdict~~twelve ~~associated~~months ~~with~~due to the ~~Aeroflex~~increase ~~litigation~~in asbusiness ~~well~~and as the ~~Court’s~~opportunities ~~decision~~we onhave ~~punitive~~included ~~damages~~in our projections. ARevenues ~~decision~~and onprofits ~~the~~are ~~case~~expected ~~was~~to ~~rendered~~improve ~~and~~in ~~released~~fiscal onyear ~~July~~2025 ~~21,~~due ~~2023,~~to the ~~Kansas~~success ~~Appeals Court rejected each~~ of ~~TIC’s~~our ~~appeal~~SDR-OMNI ~~arguments.~~product ~~TIC~~and ~~paid~~ the ~~full~~commencement ~~judgement amount~~ of ~~$6,559,233~~CRAFT onECP ~~September 15, 2023~~production.

~~The~~Based ~~Employee~~on ~~Retention~~the ~~Credit~~foregoing, ~~(ERC)~~we isbelieve ~~a refundable tax credit for businesses~~ that ~~continued~~our toexpected ~~pay~~cash ~~employees~~flows ~~while~~from ~~shut~~operations, ~~down~~and ~~due~~fulfillment toof ~~the~~our ~~COVID-19~~$7 ~~pandemic~~million oropen ~~had~~orders ~~significant~~will ~~declines~~be insufficient ~~gross receipts from March 13, 2020~~ to ~~December~~operate ~~31,~~in ~~2021. Eligible employers can claim~~ the ~~ERC~~normal oncourse anof ~~original~~business ~~or adjusted employment tax return~~ for anext ~~period~~12 ~~within~~months ~~those~~from ~~dates. The Company filed adjusted employment tax returns for quarters one and two of calendar year 2021, and $628,401 of income was recognized during~~ the ~~nine~~issuance ~~month~~date ~~period ended December 2022. The refund~~ of ~~$628,401~~these ~~was~~unaudited ~~received~~condensed onconsolidated ~~June~~financial ~~1, 2023~~statements.

Moving forward, we believe that our expected cash flows from operations and fulfillment of our $6 million open orders will be sufficient to operate in the normal course of business for at least the next 12 months from the issuance date of these unaudited condensed consolidated financial statements.

Currently, the Company has no material future capital expenditure requirements.

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – Summary of Significant Accounting Policies

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of Tel-Instrument Electronics Corp. as of ~~December~~June 3130, ~~2023~~2024, the results of operations, change in stockholders’ equity and statements of cash flow for the ~~nine~~three months ended ~~December~~June 3130, ~~2023~~2024 and ~~December~~June 3130, ~~2022~~2023. These results are not necessarily indicative of the results to be expected for the full year. The unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include disclosures normally made in an Annual Report on Form 10-K. The March 31, ~~2023~~2024 balance sheet included herein was derived from the audited financial statements included in the Company’s Annual Report on Form 10-K as of that date. Accordingly, the unaudited condensed consolidated financial statements included herein should be reviewed in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2023~~2024, as filed with the United States Securities and Exchange Commission (the “SEC”) on June 1528, ~~2023~~2024 (the “Annual Report”).

Inventory Reserve Policy

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. Inventories are reviewed for obsolescence and a reserve is recorded for inventory allowances if the estimated net realizable value is less than the recorded value. The Company reviews the carrying cost of inventories by product to determine the adequacy of reserves for obsolescence. In accounting for inventories, the Company must make estimates regarding the estimated realizable value of inventory. If actual conditions are less favorable than those we have projected, we may need to increase our reserves for excess and obsolete inventories. Any increases in our reserves will adversely impact our results of operations. Such reserves are not reduced until the product is sold. If we are able to sell such inventory any related reserves would be reversed in the period of sale. In accordance with industry practice, service parts inventory is included in current assets, although service parts are carried for established requirements during the serviceable lives of the products and, therefore, not all parts are expected to be sold within one year.

Revenue Recognition

Under Financial Accounting Standards Board (“FASB”) Topic 606, Revenue from Contacts with Customers (“ASC 606”), the Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods and services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company accounts for revenue recognition in accordance with ASC 606.The core principle of Topic 606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The ASC 606 defines a five-step process to achieve the core principle and, in doing so, it is possible more judgement and estimates may be required within the revenue recognition process than are currently in use.

The Company generates revenue from designing, manufacturing, and selling avionic tests and measurement solutions for the global commercial air transport, general aviation, and government/military aerospace and defense markets. The Company also offers calibration and repair services for a wide range of airborne navigation and communication equipment.

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – Summary of Significant Accounting Policies (continued)

Nature of goods and services

The following is a description of the products and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each.

Test Units/Sets

The Company develops and manufactures unit sets to test navigation and communication equipment, such as ramp testers and bench testers for equipment installed in aircraft and ground radios. The Company recognizes revenue when the customer obtains control of the Company’s product based on the contractual shipping terms of the contract, which is usually at the time of shipment. Revenue on products is presented gross because the Company is primarily responsible for fulfilling the promise to provide the product, is responsible to ensure that the product is produced in accordance with the related supply agreement and bears the risk of loss while the inventory is in-transit. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to the customer. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone selling prices of the promised products or services underlying each performance obligation. The Company determines stand-alone selling prices based on the price at which the performance obligation is sold separately. If the stand-alone selling price is not observable through past transactions, the Company estimates the standalone selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

When determining the transaction price of a contract, an adjustment is made if payment from the customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. None of the Company’s contracts contained a significant financing component as of ~~December~~June 3130, ~~2023~~2024.

Replacement Parts

The Company offers replacement parts for test equipment, ramp testers, and bench testers. Similar to the sale of test units, the control of the product transfers at a point of time and therefore, revenue is recognized at the point in time when the obligation to the customer has been fulfilled.

Extended Warranties

The extended warranties sold by the Company provide a level of assurance beyond the coverage for defects that existed at the time of a sale or against certain types of covered damage with coverage terms ranging from 2 to 7 years. Amounts received for warranties are recorded as deferred revenue and recognized as revenue ratably over the respective term of the agreements. As of ~~December~~June 3130, ~~2023~~2024, $~~199~~162,~~553~~741 is expected to be recognized from remaining performance obligations for extended warranties as compared to $~~296~~179,~~400~~422 at March 31, ~~2023~~2024. For the three ~~and nine~~ months ended ~~December~~June 3130, ~~2023~~2024, the Company recognized revenue offrom ~~$30,261~~extended ~~and~~warranties of $9616,~~847~~681 ~~respectively~~ from amounts that were included in Deferred Revenue as compared to $2434,~~393~~006 ~~and~~of ~~$71,796,~~extended ~~respectively~~warranties from amounts that were included in Deferred Revenue for the three months ~~and nine months~~ ended ~~December~~June 3130, ~~2022~~2023.

The following table provides a summary of the changes in deferred revenues for the ~~nine~~three months ended ~~December~~June 3130, ~~2023~~2024:

Deferred revenues at April 1, 2023	$	296,400
Deferred revenues at April 1, 2024	$	179,422
Revenue recognized for the nine months ended December 31, 2023		(96,847	)
Revenue recognized for the three months ended June 30, 2024		(16,681	)
Deferred revenues at December 31, 2023	$	199,553
Deferred revenues at June 30, 2024	$	162,741

~~Other Deferred Revenues~~9

The Company sometimes receives payments in advance of shipment. These amounts are classified as other deferred revenues. As of December 31, 2023, and March 31, 2023, the Company has other deferred revenues of $12,022 and $600, respectively.

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – Summary of Significant Accounting Policies (continued)

Repair and Calibration Services

The Company offers repair and calibration services for units that are returned for annual calibrations and/or for repairs after the warranty period has expired. The Company repairs and calibrates a wide range of airborne navigation and communication equipment. Revenue is recognized at the time the repaired or calibrated unit is shipped back to the customer, as it is at this time that the work is completed.

Other

The majority of the Company’s revenues are from contracts with the U.S. government, airlines, aircraft manufacturers, ~~such as Boeing and Lockheed Martin,~~ domestic distributors, international distributors for sales to military and commercial customers, and other commercial customers. The contracts with the U.S. government typically are subject to the Federal Acquisition Regulation (“FAR”) which provides guidance on the types of costs that are allowable in establishing prices for goods and services provided under U.S. government contracts. Payment terms and conditions vary by contract, although terms generally include a requirement of payment within a range from 30 to 60 days, or in certain cases, up-front deposits. In circumstances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the Company's contracts generally do not include a significant financing component. Payments received prior to the delivery of units or services performed are recorded as deferred revenues. The Company applied the practical expedient to account for shipping and handling activities as fulfillment cost rather than as a separate performance obligation. Shipping and handling costs charged to customers are classified as sales, and the shipping and handling costs incurred are included in cost of sales. All sales are denominated in U.S. dollars. The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers. The Company chose to apply the available practical expedient as commission eligible sales orders are fulfilled within less than one year and commissions are generally paid by the Company within 30 days of the related sales order fulfillment.

Payment terms and conditions vary by contract, although terms include a requirement of payment within a range from 30 to 60 days, or in certain cases, up-front deposits. In circumstances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the Company's contracts do not include a significant financing component. Payments received prior to the delivery of units or services performed are recorded as deferred revenues. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from sales. The Company applied the practical expedient to account for shipping and handling activities as fulfillment cost rather than as a separate performance obligation. Shipping and handling costs charged to customers are classified as sales, and the shipping and handling costs incurred are included in cost of sales. All sales are denominated in U.S. dollars. The Company excludes from revenues all taxes assessed by a governmental authority that are imposed on the sale of its products and collected from customers.

The Company chose to apply the available practical expedient as commission eligible sales orders are fulfilled within less than one year and commissions are generally paid by the Company within 30 days of the related sales order fulfillment. Accordingly, management has determined that no change in accounting for costs to obtain a contract will be required for the Company to conform to ASC 606.

Disaggregation of revenue

In the following tables, revenue is disaggregated by revenue category.

	For the Three Months Ended December 31, 2023
	For the Three Months Ended June 30, 2024
	Commercial		Government
Sales Distribution
Test Units & Engineering	$	55186,~~594~~702	$	2,~~025~~374,~~707~~860
	$	55186,~~594~~702	$	2,~~025~~374,~~707~~860

The remainder of our revenues for the three months ended ~~December~~June 3130, ~~2023~~2024, are derived from repairs and calibration of $~~260~~221,~~238~~581, replacement parts of $2341,~~921~~846, extended warranties of $3016,~~262~~681 and other net revenues of $~~7,377~~506. We do not disaggregate these revenue streams as they are not deemed an important element related to how management operates the business between segments.

	For the Three Months Ended December 31, 2022
	For the Three Months Ended June 30, 2023
	Commercial		Government
Sales Distribution
Test Units and Engineering	$	197,681	$	1,838,697
Test Units & Engineering	$	408,959	$	1,977,812
	$	~~197~~408,~~681~~959	$	1,~~838~~977,~~697~~812

11The remainder of our revenues for the three months ended June 30, 2023, are derived from repairs and calibration of $342,051, replacement parts of $97,297, extended warranties of $34,006 and other revenues of $6,804. We do not disaggregate these revenue streams as they are not deemed an important element related to how management operates the business between segments.

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – Summary of Significant Accounting Policies (continued)

The remainder of our revenues for the three months ended December 31, 2022, are derived from repairs and calibration of $193,848, replacement parts of $50,078, extended warranties of $29,393 and other revenues of $18,557. We do not disaggregate these revenue streams as they are not deemed an important element related to how management operates the business between segments.

	For the Nine Months Ended December 31, 2023
	Commercial		Government
Sales Distribution
Test Units and Engineering	$	541,679	$	5,111,945
	$	541,679	$	5,111,945

The remainder of our revenues for the nine months ended December 31, 2023, are derived from repairs and calibration of $898,670, replacement parts of $163,111, extended warranties of $98,847 and other revenues of $20,871. We do not disaggregate these revenue streams as they are not deemed an important element related to how management operates the business between segments.

	For the Nine Months Ended December 31, 2022
	Commercial		Government
Sales Distribution
Test Units and Engineering	$	399,613	$	4,807,723
	$	399,613	$	4,807,723

The remainder of our revenues for the nine months ended December 31, 2022, are derived from repairs and calibration of $1,124,213, replacement parts of $135,154, extended warranties of $86,797 and other revenues of $41,268. We do not disaggregate these revenue streams as they are not deemed an important element related to how management operates the business between segments.

In the following table, revenue is disaggregated by geography.

	For the Three Months Ended December 31, 2023		For the Three Months Ended December 31, 2022
	For the Three Months Ended June 30, 2024		For the Three Months Ended June 30, 2023
Geography
United States	$	2,~~227~~569,~~999~~844	$	12,~~267~~263,~~013~~829
International		~~175~~272,~~100~~332		1603,~~061,241~~100
Total	$	2,~~403~~842,~~099~~176	$	2,~~328~~866,~~254~~929

	For the Nine Months Ended December 31, 2023		For the Nine Months Ended December 31, 2022
Geography
United States	$	5,894,617	$	5,252,138
International		940,506		1,342,630
Total	$	6,835,123	$	6,594,768

For the three months ended June 30, 2024, two customers accounted for sales of 46% and 12%, respectively.

For the three months ended ~~December~~June 3130, 2023, ~~three~~two customers accounted for sales of ~~$715,635 or 30~~36%, ~~$437,499 or 18%~~ and ~~$243,718 or 10~~12%~~. For the nine months ended December 31~~, ~~2023 one customer accounted for sales of $2,162,360, or 32%~~respectively.

~~For~~The ~~the~~Company, ~~three~~in ~~months~~addition ~~ended~~to ~~December~~inside ~~31,~~sales ~~2022~~efforts, ~~three~~utilizes independent sales agents to sell its products to customers. ~~accounted~~A ~~for~~related party independent sales ofagent earned $~~472~~10,~~752~~026 orin ~~20%,~~commissions ~~$320,284~~for orthe ~~14%~~three months ended June 30, ~~and~~2024. The sales agent earned $~~239~~9,~~100~~000 orfor ~~10%.~~sales ~~For~~and ~~the~~marketing ~~nine~~assistance ~~months~~for the three ended ~~December~~June 3130, ~~2022,~~2024. ~~three~~The ~~customers~~same ~~accounted~~related ~~for~~party independent sales ofagent earned $1,~~123,685~~600 orin ~~17%~~commissions for the three months ended June 30, 2023. The sales agent earned $~~769~~9,~~370~~000 orfor ~~12%~~sales and ~~$627,951~~marketing orassistance ~~10%~~for the three months ended June 30, 2023.

12Long-Lived Assets

The Company assesses the recoverability of the carrying value of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future, undiscounted cash flows expected to be generated by an asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. No impairment losses have been recognized for the three months ended June 30, 2024 and 2023.

New Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures”. This guidance expands public entities ‘segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. We are currently evaluating this guidance to determine the impact it may have on our consolidated financial statements related disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disaggregated information about our effective tax rate reconciliation as well as information on income taxes paid. The guidance will first be effective in our annual disclosures for the year ending December 31, 2026, and should be applied on a prospective basis with the option to apply retrospectively. Early adoption is permitted. The Company is in the process of assessing the impact of ASU 2023-09 on our disclosures.

No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – Summary of Significant Accounting Policies (continued)

The Company, in addition to inside sales efforts, utilizes independent sales agents to sell its products to customers. A related party independent sales agent earned $12,031 and $68,267 in commissions for the three and nine months ended December 31, 2023, respectively. The sales agent earned $9,000 and $27,000 for sales and marketing assistance for the three and nine months ended December 31, 2023.

The same related party independent sales agent earned $43,778 and $71,458 in commissions for the three and nine months ended December 31, 2022, respectively. The sales agent earned $9,000 and $27,000 for sales and marketing assistance for the three and nine months ended December 31, 2022.

Long-Lived Assets

New Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements. The amendment in this update replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses on instruments within its scope, including trade receivables. This update is intended to provide financial statement users with more decision-useful information about the expected credit losses. The effective date of the new standard is for fiscal years beginning after December 15, 2022 and was adopted by the Company on April 1, 2023. The adoption of this standard did not have a significant impact on our financial position and results of operations.

No other recently issued accounting pronouncements had or are expected to have a material impact on the Company’s unaudited condensed consolidated financial statements.

Note 3 – Accounts Receivable, net

The following table sets forth the components of accounts receivable:

	December 31, 2023			March 31, 2023
	June 30, 2024			March 31, 2024
Government	$	~~973~~1,~~149~~636,977		$	~~651~~933,~~370~~249
Commercial		~~212~~135,~~486~~273			~~255~~185,~~912~~869
Less: Allowance for credit loss		(9,432	)		(6,401	)
Less: Allowance for credit losses		(8,570	)		(8,570	)
	$	1,~~176~~763,~~203~~680		$	~~900~~1,~~881~~110,548

Note 4 – Inventories, net

Inventories consist of:

	December 31, 2023			March 31, 2023
	June 30, 2024			March 31, 2024
Purchased parts	$	2,~~699~~896,~~756~~263		$	2,~~602~~835,~~447~~120
Work-in-process		2,~~073~~624,~~756~~754			12,~~388~~912,~~679~~737
Finished Goods		176,~~308~~181			5548,~~052~~630
Less: Inventory reserve		(~~454~~388,~~980~~969	)		(~~460~~384,~~113~~843	)
	$	45,~~319~~208,~~840~~229		$	35,~~586~~411,~~065~~644

13Note 5 – Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of:

	June 30, 2024		March 31, 2024

Prepaid expenses	$	185,094	$	186,231
Deferred charges		27,719		27,719
Other receivables		211		211
	$	213,024	$	214,161

Note 6 – Equipment and Leasehold Improvements

Equipment and leasehold improvements consist of the following:

	June 30, 2024			March 31, 2024
Leasehold improvements	$	127,655		$	127,655
Machinery and equipment		1,931,831			1,931,831
Automobiles		23,712			23,712
Sales equipment		590,365			590,365
Assets under finance leases		637,189			637,189
Less: Accumulated depreciation & amortization		(3,246,587	)		(3,237,557	)
	$	64,165		$	73,195

Depreciation and amortization expense related to the assets above for June 30, 2024 was $9,030 and March 31, 2024 was $45,823.

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5 – Restricted Cash to Support Appeal Bond

In January 2018, the Company transferred $2,000,000 to a restricted cash account to secure a letter of credit which was used for collateral for the appeal bond (See Note 14). In September 2023, the restricted cash account funds of $2,011,083 which included interest earned, were used to make payment towards the final judgment. At December 31, 2023, the restricted cash balance was $0.

Note 6 – Prepaid expenses and other current assets

Prepaid expenses and other current assets consist of:

	December 31, 2023		March 31, 2023
Prepaid expenses	$	215,977	$	148,929
Deferred charges		27,720		24,720
Other receivables		210		643,976
	$	243,907	$	817,625

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Tax Credit (“ERTC”): a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERTC. We qualified for the ERTC in the first two quarters of 2021. During year ended March 31, 2023, we recorded an aggregate benefit of $628,401 in our consolidated financial statements and the receivable for the ERTC benefit as of March 31, 2023 is in other current assets, which was received on June 1, 2023.

Note 7 – Line of Credit

The Company has a line of credit with Bank of America with open availability up to $~~690~~1,000,000 as of June 30, 2024, with monthly payments of interest only. The borrowing base calculation is tied to accounts receivable collateralized by substantially all of the assets of the Company. Interest on any outstanding balance is payable monthly at an annual interest rate equal to the sum of the greater of the BSBY (Bloomberg Short-Term Bank Yield Index rate) daily float plus 3.75 percentage points.

~~Bank~~As of ~~America~~June ~~renewed the Company’s line of credit with a maturity date of July~~ 30, ~~2023~~2024, and ~~had~~March ~~extended the maturity date to December~~ 31, ~~2023. In January~~ 2024, the ~~line~~outstanding ofbalances ~~credit~~were ~~was~~$1,000,000 ~~further~~and ~~extended to June 30~~$690,000, ~~2024~~respectively. The ~~annual~~ interest rate ~~was~~on ~~amended~~June ~~as part of the renewal agreement. Effective October 12~~30, ~~2023~~2024, ~~interest~~was ~~on any outstanding balance is payable monthly at an annual interest rate equal to the sum of the greater of the BSBY daily float or 1~~9.2555% ~~plus 4~~.~~62 percentage points.~~

AsOn April 1, 2024 Bank of ~~December~~America ~~31,~~extended ~~2023,~~the ~~and~~Company ~~March~~line of credit with a maturity date of July 31, ~~2023~~2024, in addition the ~~outstanding~~line ~~balances~~of ~~were~~credit cash limit amount was increased from $690,000, ~~respectively~~to $1,000,000. The renewal of the line of credit is in process by Bank of America. Under the amendment, interest on any outstanding balance is payable monthly at an annual interest rate equal to the Bank’s Prime Rate plus 1.05 percentage points and no less than 3.25%. The “Prime Rate” is the rate of interest publicly announced from time to time by the Bank as its Prime Rate. The Prime Rate is set by the Bank based on ~~December~~various 31factors, ~~2023~~including the Bank’s costs and desired return, ~~was~~general 10economic conditions, and other factors, and is used as a reference point for pricing loans.~~04%.~~

Note 8 – Right of Use Assets and Operating Lease Liability

The Company leases its facility in East Rutherford, NJ with monthly payments of $21,237 until August 2025. Thereafter, monthly payments are $23,083 for the balance of the 8 year lease agreement expiring August 2029.

The Company's leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company estimated its incremental borrowing rate based on its credit quality, line of credit agreement and by comparing interest rates available in the market for similar borrowings. The Company used a discount rate of 3.90% for both ~~December~~June 3130, ~~2023~~2024 and March 31,~~2023~~2024. The weighted average remaining lease term is 5.6717 years.

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 8 – Right of Use Assets and Operating Lease Liability (continued)

Right to use assets is summarized below:

	December 31, 2023			March 31, 2023
	June 30, 2024			March 31, 2024
Right to use asset	$	1,830,857		$	1,830,857
Less: Accumulated amortization		(~~455~~558,~~131~~157	)		(~~304~~506,~~306~~394	)
Right to use assets, net	$	1,~~375~~272,~~726~~700		$	1,~~526~~324,~~551~~463

The following table reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under non-cancelable operating leases with terms of more than one year to the total lease liabilities recognized on the unaudited condensed consolidated balance sheet as of ~~December~~June 3130, ~~2023~~2024:

Remaining payments in fiscal 2024	$	63,710
Remaining payments in fiscal 2025	$	191,130
2025		254,840
2026		267,767
2027		277,000
2028		277,000
Thereafter		392,417
2029		277,000
Total undiscounted future minimum lease payments		1,532,734
Thereafter		115,416
Less: Difference between undiscounted lease payments and discounted lease liabilities		(157,008	)
Total undiscounted future minimum lease payments		1,405,313
Present value of net minimum lease payments		1,375,726
Less: Difference between undiscounted lease payments and discounted lease liabilities		(132,613	)
Less current portion		(208,076	)
Present value of net minimum lease payments		1,272,700
Operating lease liabilities – long-term	$	1,167,650
Less current portion		(204,064	)
Operating lease liabilities – long-term	$	1,068,636

Total rent expense for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2023,~~2024 was $~~102~~91,~~900 and $308~~777,~~634,~~ ~~respectively,~~ as compared to $96102,~~233~~811 ~~and $304,736~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2022, respectively~~2023.

~~Note 9 – Stockholder’s Equity~~13

Series B 8% Convertible Preferred Stock

In September 2023, the Company entered into a definitive subscription agreement pursuant to which an accredited investor purchased 66,667 shares of the Company’s Series B Preferred Stock (the “Series B Preferred”) for $400,000. These funds were used for working capital purposes to support the orders received and expected in the near term.

The shares of Series B Preferred to have a stated value of $6.00 per share (the “Series B Stated Value”) and are convertible into Common Stock at a price of $2.00 per share. The holder of shares of the Series B Preferred shall be entitled to receive dividends out of any assets legally available, to the extent permitted by New Jersey law, at an annual rate equal to 8% of the Series B Stated Value of such shares of Series B Preferred, calculated on the basis of a 360 day year, consisting of twelve 30-day months, and shall accrue from the date of issuance of such shares of Series B Preferred, payable quarterly in cash. Any unpaid dividends shall accrue at the same rate. To the extent not paid on the last day of March, June, December and December of each calendar year, all dividends on any share of Series B Preferred shall accumulate whether or not declared by the Board and shall remain accumulated dividends until paid. During the 9 months ended December 31, 2023, the Company recognized $69,333 for dividends, which have not been paid.

Series C 8% Convertible Preferred Stock

In September 2023, the Company entered into a definitive subscription agreement pursuant to which two accredited investors purchased 53,500 shares of the Company’s Series C Preferred Stock (the “Series C Preferred”) in total for $321,000. These funds were used for working capital purposes to support the orders received and expected in the near term (one accredited investor is a member of the Board of Directors who invested $171,000 and the other accredited investor is a related party who invested $150,000).

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9 – ~~Stockholder’s~~Stock ~~Equity~~Options ~~(continued)~~Plans

The shares of Series C Preferred to have a stated value of $6.00 per share (the “Series C Stated Value”) and are convertible into Common Stock at a price of $2.00 per share. The holder of shares of the Series C Preferred shall be entitled to receive dividends out of any assets legally available, to the extent permitted by New Jersey law, at an annual rate equal to 8% of the Series C Stated Value of such shares of Series C Preferred, calculated on the basis of a 360 day year, consisting of twelve 30-day months, and shall accrue from the date of issuance of such shares of Series c Preferred, payable quarterly in cash. Any unpaid dividends shall accrue at the same rate. To the extent not paid on the last day of March, June, December and December of each calendar year, all dividends on any share of Series C Preferred shall accumulate whether or not declared by the Board and shall remain accumulated dividends until paid. During the 9 months ended December 31, 2023, the Company recognized $7,795 for dividends, which have not been paid.

Note 10 – Stock Options Plans

The Board of Directors (the “Board”) adopted on January 18, 2017, and ratified by the shareholders at the Annual Meeting on January 18, 2017, the Company’s 2016 Stock Option Plan (the “Plan”). The Plan provides for the granting of incentive stock options, by a committee to be appointed by the Board (both the Board and the Committee are referred to herein as the “Committee”) to directors, officers, and employees (excluding directors and officers who are not employees) to purchase shares of the Common Stock of the Company, par value $0.10 per share (the “Stock”), in accordance with the terms and provisions. The 2016 Plan reserves for issuance, options to purchase up to 250,000 shares of its common stock. Options granted under the plan are exercisable up to a period of five years from the date of grant at an exercise price which is not less than the fair market value of the common stock at the date of grant, except to a shareholder owning 10% or more of the outstanding common stock of the Company, as to which the exercise price must be not less than 110% of the fair market value of the common stock at the date of grant. Options are exercisable on a cumulative basis, 20% at or after each of the first, second, and third anniversary of the grant and 40% after the fourth year anniversary.

A summary of the status of the Company’s stock option plans for the fiscal year ended March 31, ~~2023~~2024, and year to date ~~December~~June 30, ~~2023~~2024, and changes during the year are presented below (in number of options):

	Number of Options			Average Exercise Price		Average Remaining Contractual Term	~~Average Remaining Contractual Term~~	Aggregate Intrinsic Value		~~Aggregate Intrinsic Value~~
Outstanding options at April 1, 2023		99,000		$	3.13		1.78 years			$	-
Outstanding options at April 1, 2024		99,000		$	3.13	0.78 years		$	-
Options granted		-		$	-		-				-
Options exercised		-		$	-		-				-
Options canceled/forfeited		-(66,000	)	$	-3.19		-				-
Outstanding options at December 31, 2023		99,000		$	3.13		1.03 years			$	-
Outstanding options at June 30, 2024		33,000		$	3.02	1.89 years		$	-
Vested Options:
Vested options at June 30, 2024		16,200		$	3.03	1.8 years		$	-
December 31, 2023:		79,200		$	3.16		0.7 years			$	-

Remaining options available for grant were ~~151~~217,000 as of ~~December~~June 3130, ~~2023~~2024. It is anticipated that additional stock options will be awarded to key employees in the second quarter of the current fiscal year.

At ~~December~~June 3130, ~~2023~~2024, the unamortized compensation expense for stock options was $106,~~508~~622. Unamortized compensation expense is expected to be recognized over a weighted-average period of approximately 2.367 years.

For the three months ended ~~December~~June 3130, ~~2023~~2024, the Company recorded stock compensation costs of $1,942, as compared to $63,~~234~~269 for the three months ended ~~December~~June 3130, ~~2022. The Company recorded stock compensation costs of $7,156 for the nine months ended December 31,~~ 2023 ~~as compared to $18,703 for the nine months ended December 31, 2022~~.

16Note 10 – Income Taxes

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 11 – Income Taxes

FASB ASC 740-10, “Accounting for Uncertainty in Income Taxes” (“ASC 740-10”) prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company does not have any unrecognized tax benefits.

The tax effect of temporary differences, primarily net operating loss carryforwards, asset reserves and accrued liabilities, gave rise to the Company’s deferred tax asset. Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse. The Company had approximately $2.64 million in deferred tax assets at ~~December~~June 3130, ~~2023~~2024 and approximately $2.65 million in deferred tax assets at March 31, ~~2023~~2024. The Company recognizes the impact of an uncertain income tax position taken on its income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority.

~~Note~~The ~~12–~~net ~~Net~~ income ~~(loss)~~was ~~per~~$42,248 ~~Share~~for the three months ended June 30, 2024.

Net income (loss) per share has been computed according to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 260”), “Earnings per Share,” which requires a dual presentation of basic and diluted income per share (“EPS”). Basic EPS represents net income (loss) divided by the weighted average number of common shares outstanding during a reporting period. Diluted EPS to common stockholders reflects the potential dilution that could occur if securities, including preferred stock and options, were converted into common stock. The dilutive effect of outstanding options is reflected in earnings per share by use of the treasury stock method. The dilutive effect of preferred stock is reflected in earnings per share by use of the if-converted method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise and the amounts of average unrecognized compensation. For the nine months ended December 31, 2023 and 2022, since the Company has a net loss, the effect of common stock equivalents is anti-dilutive, and as such, common stock equivalents have been excluded from this calculation.14

	Three Months Ended			Three Months Ended
	December 31, 2023			December 31, 2022
Basic net income per share computation:
Net income	$	133,809		$	392,627
Less: Preferred dividends		(94,420	)		(80,000	)
Net income attributable to common shareholders		39,389			312,627
Weighted-average common shares outstanding		3,255,887			3,255,887
Basic net income per share	$	0.01		$	0.10
Diluted net income per share computation
Net income attributable to common shareholders	$	39,389		$	312,627
Add: Preferred dividends		94,420			80,000
Diluted net income attributable to common shareholders	$	133,809		$	392,627
Weighted-average common shares outstanding		3,255,887			3,255,887
Incremental shares attributable to the assumed conversion of preferred stock		2,354,747			1,899,778
Total adjusted weighted-average shares		5,610,634			5,155,665
Diluted net income per share	$	0.02		$	0.08

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1211 – Net ~~loss~~Income (Loss) per Share ~~(continued)~~

	Nine Months Ended			Nine Months Ended
	December 31, 2023			December 31, 2022
Basic net loss per share computation:
Net loss	$	(6,052	)	$	(317,610	)
Less: Preferred dividends		(257,128	)		(240,000	)
Net loss attributable to common shareholders		(263,180	)		(557,610	)
Weighted-average common shares outstanding		3,255,887			3,255,887
Basic net loss per share	$	(0.08	)	$	(0.17	)
Diluted net loss per share computation
Net loss attributable to common shareholders	$	(263,180	)	$	(557,610	)
Add: Preferred dividends		-			-
Net loss attributable to common shareholders	$	(263,180	)	$	(557,610	)
Weighted-average common shares outstanding		3,255,887			3,255,887
Incremental shares attributable to the assumed conversion of preferred stock		-			-
Total adjusted weighted-average shares		3,255,887			3,255,887
Diluted net loss per share	$	(0.08	)	$	(0.17	)

Net income (loss) per share has been computed according to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 260”), “Earnings per Share,” which requires a dual presentation of basic and diluted income per share (“EPS”). Basic EPS represents net income (loss) divided by the weighted average number of common shares outstanding during a reporting period. Diluted EPS to common stockholders reflects the potential dilution that could occur if securities, including preferred stock and options, were converted into common stock. The dilutive effect of outstanding options is reflected in earnings per share by use of the treasury stock method. The dilutive effect of preferred stock is reflected in earnings per share by use of the if-converted method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise and the amounts of average unrecognized compensation. For the three months ended June 30, 2024, since the Company has a net loss attributable to common shareholders, the effect of common stock equivalents is anti-dilutive, and as such, common stock equivalents have been excluded from this calculation.

	Three Months Ended			Three Months Ended
	June 30, 2024			June 30, 2023
Basic net income (loss) per share computation:
Net income	$	42,248		$	295,292
Less: Preferred dividends		(94,420	)		(80,000	)
Net income (loss) attributable to common shareholders		(52,172	)		215,292
Weighted-average common shares outstanding		3,255,887			3,255,887
Basic net income (loss) per share	$	(0.02	)	$	0.07
Diluted net income (loss) per share computation
Net income (loss) attributable to common shareholders	$	(52,172	)	$	215,292
Add: Preferred dividends		-			80,000
Diluted net income (loss) attributable to common shareholders	$	(52,172	)	$	295,292
Weighted-average common shares outstanding		3,255,887			3,255,887
Incremental shares attributable to the assumed conversion of preferred stock		-			1,959,778
Total adjusted weighted-average shares		3,255,887			5,215,665
Diluted net income (loss) per share	$	(0.02	)	$	0.06

The following table summarizes securities that, if exercised, would have an anti-dilutive effect on earnings per share for the three months ended:

	December 31, 2023		December 31, 2022
	June 30, 2024		June 30, 2023
Convertible preferred stock		-2,663,109		-
Stock options		9933,000		~~111~~99,~~500~~000
		99,000		111,500
		2,696,109		99,000

~~The~~Note ~~following~~12 – ~~table~~Segment ~~summarizes securities that, if exercised, would have an anti-dilutive effect on earnings per share for the nine months ended:~~Information

	December 31, 2023		December 31, 2022
Convertible preferred stock		2,354,747		1,899,778
Stock options		99,000		111,500
		2,453,747		2,011,278

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 13 – Segment Information

In accordance with FASB ASC 280, “Disclosures about Segments of an Enterprise and related information”, the Company determined it has two reportable segments - avionics government and avionics commercial. There are no inter-segment revenues.

The Company is organized primarily on the basis of its avionics products. The avionics government segment consists primarily of the design, manufacture, and sale of test equipment to the U.S. and foreign governments and militaries either directly or through distributors. The avionics commercial segment consists of design, manufacture, and sale of test equipment to domestic and foreign airlines, directly or through commercial distributors, and to general aviation repair and maintenance shops. The Company develops and designs test equipment for the avionics industry and as such, the Company’s products and designs cross segments.

Management evaluates the performance of its segments and allocates resources to them based on gross margin. The Company’s general and administrative costs and sales and marketing expenses, and engineering costs are not segment specific. As a result, all operating expenses are not managed on a segment basis. Net interest includes expenses on debt and income earned on cash balances, both maintained at the corporate level.

~~The tables below present information about reportable segments within the avionics business for the three and nine months ended December 31, 2023, and 2022:~~15

Three Months Ended December 31, 2023	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	2,025,707	$	377,392	$	2,403,099	$	-		$	2,403,099
Cost of sales		1,099,256		335,725		1,434,981		-			1,434,981
Gross margin		926,451		41,667		968,118		-			968,118
Total expenses						469,649		274,296			743,945
Net income (loss) before income taxes					$	498,469	$	(274,296	)	$	224,173

Three Months Ended December 31, 2022	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	1,838,697	$	489,557	$	2,328,254	$	-		$	2,328,254
Cost of sales		1,041,984		392,563		1,434,547		-			1,434,547
Gross margin		796,713		96,994		893,707		-			893,707
Total expenses						571,421		(174,737	)		396,684
Net income before income taxes					$	322,286	$	174,737		$	497,023

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TEL-INSTRUMENT ELECTRONICS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 13 12 – Segment Information (continued)

Nine Months Ended December 31, 2023	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	5,111,945	$	1,723,178	$	6,835,123	$	-		$	6,835,123
Cost of sales		2,858,652		1,354,319		4,212,971		-			4,212,971
Gross margin		2,253,293		368,859		2,622,152		-			2,622,152
Total expenses						1,461,598		1,168,943			2,630,541
Income (loss) before income taxes					$	1,160,554	$	(1,168,943	)	$	(8,389	)

The tables below present information about reportable segments within the avionics business for the three months ended June 30, 2024, and 2023:

Nine Months Ended December 31, 2022	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Three Months Ended June 30, 2024	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	42,~~807~~374,~~723~~860	$	1467,~~787,045~~316	$	62,~~594~~842,~~768~~176	$	-		$	62,~~594~~842,~~768~~176
Cost of sales		21,~~971~~847,~~200~~674		1248,~~341,205~~600		42,~~312~~096,~~405~~274		-			42,~~312~~096,~~405~~274
Gross margin		1527,~~836,523~~186		~~445~~218,~~840~~716		2745,~~282,363~~902		-			2745,~~282,363~~902
Total expenses						2315,~~042,165~~933		~~642~~376,~~257~~491			2692,~~684,422~~424
Loss before income taxes					$	240,198	$	(642,257	)	$	(402,059	)
Income (loss) before income taxes					$	429,969	$	(376,491	)	$	53,478

Note 14 – Litigation

Three Months Ended June 30, 2023	Avionics Government		Avionics Commercial		Avionics Total		Corporate Items			Total
Net sales	$	1,977,812	$	889,117	$	2,866,929	$	-		$	2,866,929
Cost of sales		986,038		586,342		1,572,380		-			1,572,380
Gross margin		991,774		302,775		1,294,549		-			1,294,549

Total expenses						479,347		439,363			918,710
Income (loss) before income taxes					$	815,202	$	(439,363	)	$	375,839

Currently, we are not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of executive officers of our Company, threatened against or affecting our Company, or our common stock in which an adverse decision could have a material effect.16

The Aeroflex litigation did not result in a favorable outcome for the Company, despite our belief that we committed no wrongdoing. We have paid the $6.6 million judgment in full and there are no outstanding obligations related to the Aeroflex litigation. The jury found no misappropriation of Aeroflex trade secrets but found that the Company tortiously interfered with a prospective business opportunity and awarded damages. The jury also found that TIC tortiously interfered with Aeroflex’s non-disclosure agreements with two former Aeroflex employees, and that the former Aeroflex employees breached their non-disclosure agreements with Aeroflex. Upon appeal, a decision on the case was rendered and released on July 21, 2023, the Kansas Appeals Court rejected each of TIC’s appeal arguments. TIC paid the full judgement amount of $6,559,233 on September 15, 2023, including interest of $1,659,233.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Quarterly Report on Form 10-Q and other reports filed by the Company from time to time with the SEC (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words “may,” “will,” “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management are intended to identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and we caution you that these statements are not guarantees of future performance or events and are subject to risks, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

The key factors that are not within the Company’s control and that may have a direct bearing on operating results include, but are not limited to, managements’ ability to raise capital in the future, the retention of key employees and changes in the regulation of our industry, as well as the risk factors identified in the Company’s filings.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our unaudited condensed consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report.

For purposes of this Quarterly Report, “Tel-Instrument,” “we,” “our,” “us,” or similar references refers to Tel-Instrument Electronics, Inc, unless the context requires otherwise.

Overview

~~The~~Operations ~~Company~~continued ~~reported~~to ~~net~~be ~~sales~~affected ofby ~~$2,403,099~~major ~~and~~delays ~~$6,835,123~~in ~~for~~component ~~the~~shipments ~~three~~from ~~and~~our ~~nine~~vendors ~~months~~further ~~ended~~delaying ~~December~~TIC’s ~~31,~~ability ~~2023.~~to ~~This~~fulfill ~~compared~~our customer orders which have hampered our ability to ~~net~~ship ~~sales~~units ofunder ~~$2,328,254~~normal ~~and~~lead ~~$6,594,768~~times. ~~for~~The ~~the~~supply ~~same~~chain ~~three~~situation ~~and~~is ~~nine-month~~gradually ~~period~~improving, inand ~~the~~TIC ~~prior~~has ~~fiscal~~received ~~year.~~sufficient ~~The~~parts ~~increase~~to inresume ~~sales~~normal production operations for the ~~quarter~~current ~~ended~~fiscal ~~December~~year ~~31,~~with ~~2023~~the ~~was~~one ~~attributable~~major toexception ~~earlier~~being ~~placement~~parts offor ~~vendor~~the ~~orders~~CRAFT bytest ~~supply~~sets. ~~chain~~The ~~procurement,~~Company ~~enabling~~was ~~the~~impacted ~~company~~by tolate ~~ship~~deliveries ~~more~~of ~~units.~~several ~~Long~~components ~~supplier~~which ~~lead~~negatively ~~lines~~impacted ~~for~~production ~~certain~~revenues ~~high~~in ~~demand~~the ~~chips~~first ~~have~~quarter. ~~been~~Although ~~unprecedented,~~the ~~preventing~~Company ~~the~~has ~~timely~~been ~~production~~negatively ofimpacted ~~finished~~by ~~units~~this ~~being~~situation, ~~shipped~~there towas ~~customers.~~an ~~The~~increase ~~supply~~in ~~chain~~our ~~situation~~receipt isof ~~gradually~~new ~~improving,~~orders ~~and~~with ~~TIC~~an ~~has~~open ~~received~~order ~~sufficient~~backlog ~~parts~~of toapproximately ~~resume~~$7 ~~normal~~million ~~production~~on ~~operations~~June 30, 2024.

~~Gross~~The ~~margin~~Company ~~for~~reported ~~the~~net ~~current~~sales ~~quarter~~of ~~was~~ $~~968,118 (40%) and $~~2,~~622~~842,~~152~~176 ~~(38%)~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2023, respectively~~2024. AsThis compared to ~~$893,707~~net ~~(38%)~~sales ~~and~~of $2,~~282~~866,~~363~~929 ~~(35%)~~ for the same periods in the prior year, respectively. The improvement was primarily attributable to fixed production costs being spread over increased volumes as production is ramped up with manufacturing components being delivered by our suppliers to coincide with open order deadlines and high margin engineering software sales revenue. This is a result of placing supplier orders further out to manage the long delivery dates for the three ~~months~~month ~~ended~~period ~~December 31, 2023. The increase~~ in the ~~nine~~prior ~~months~~fiscal ~~ended December 31, 2023 as compared to December 31, 2022 is primarily due to revenue from the Navy Craft ECP project~~year.

~~Net~~Gross ~~income~~margin for the current quarter was $~~133~~745,~~809~~902 ~~for~~(26.2%) which is approximately 19 percentage points lower than the three months ended ~~December~~June 3130, 2023 ~~and~~of a$1,294,549 ~~net~~(45.2%). ~~loss~~This ofis ~~$6,052~~primarily ~~for~~attributable to the ~~nine~~Navy ~~months~~Craft ~~ended~~ECP ~~December~~margin ~~31,~~true ~~2023.~~up Asas ~~compared~~the toprogram ais ~~net~~nearing ~~income~~completion ofand engineering labor hours have exceeded our projections. Approximately $~~392~~730,~~627~~000 ~~for~~of ~~the~~Navy ~~three~~funding ~~months~~remains ~~ended~~on ~~December~~this ~~31,~~contract ~~2022~~which ~~and~~should abe ~~net~~completed ~~loss~~in calendar year 2024. Once the development work is completed, production revenues of approximately $~~317,610~~5 ~~for~~million ~~the~~per ~~nine~~year ~~months~~are ~~ended~~expected ~~December~~over ~~31,~~a ~~2022~~four-year period.

~~Backlog~~Net ~~orders~~income onwas ~~December 31~~$42,248 ~~2023,~~for ~~were~~the $6three ~~million~~months ended June 30, 2024, as compared to net income of $~~6.5~~295,292 ~~million~~in asthe ofprior ~~March~~year 31three months ended June 30, 2023.

2117

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Overview (continued)

The Company continues to pursue opportunities in the domestic and international market for our Mode 5 ~~and other new~~ test sets. ~~The international Mode 5 market has been slow over the last year due in part to ongoing delays in securing a large follow-on order from the German government.~~ We continue to receive substantial orders from the U.S. Government and ~~the~~Northrup ~~F-35~~Grumman ~~program~~ for our AN/USM-708 ~~and 719~~ (“CRAFT”) Mode 5 test sets. ~~Our~~We ~~expectation~~have iscompleted ~~that~~the ~~orders~~funded ~~and~~software ~~back-log~~upgrade ~~will~~to ~~improve this fiscal year as~~ the ~~SDR~~TS-~~OMNI~~4530A ~~test~~product ~~set gains traction~~ in the ~~marketplace.~~amount Weof ~~also received a~~ $~~875,000~~0.9 ~~contract~~million ~~from~~and ~~the~~are ~~U.S. Army~~ in ~~July 2023 to update~~ the ~~TS-4530A~~process ~~software~~of ~~and~~securing ~~add~~AIMS ~~new capabilities~~certification. ~~The~~It ~~engineering~~is ~~software~~also ~~work~~possible ~~has~~that ~~been~~the ~~completed~~USAF ~~and~~will weelect ~~expect~~ to ~~invoice~~upgrade ~~this~~its ~~amount by year~~TS-~~end,~~4530A ~~although~~units ~~this~~as ~~is contingent upon securing prompt approval from a government certification body~~well.

TIC ishas ~~also~~spent ~~exploring~~several ~~new~~years ~~avenues~~and tomillions ~~broaden~~of ~~its~~dollars in developing our ground-breaking SDR/OMNI and SDR-OMNI/MIL product ~~portfolio~~which ~~including~~will ~~designing~~address aboth ~~high~~the ~~frequency~~commercial ~~“MADL”~~market for transponder and navigation test ~~set~~sets ~~for~~as well as competing in the ~~Lockheed~~military ~~Martin~~secure ~~F-35~~comm ~~program~~test set market. ~~This~~The ~~contract~~SDR/OMNI ~~takes~~product ~~advantage~~line ofsupports ~~our~~a ~~expertise~~wide frequency range to accommodate new commercial and military waveforms in RFan ~~technology~~industry leading 4.5-pound package. This is aapproximately ~~completely~~half the weight of competitive test sets. It is also the only new ~~market~~multi-purpose ~~for~~test ~~TIC~~set aswhich itmeets ~~involves~~the ~~high~~Class ~~frequency~~1 ~~communication~~military ~~signals~~environmental specifications. ~~TIC~~It ~~has~~utilizes ~~successfully~~the ~~completed~~latest ~~the~~touch ~~engineering~~screen ~~portion~~technology ofand has the ~~program~~capability to replace all TIC commercial test sets and ~~recently~~military ~~received~~flight-line atest ~~partially~~sets ~~funded~~with one handheld product. The Company started initial production ~~purchase~~deliveries in December 2022. The Company recently received an order ~~with~~from aAirbus ~~value~~for ofSDR-OMNI ~~$1.5~~test ~~million~~sets to replace the obsolete test sets used in their world-wide manufacturing. WeThis ~~expect~~is toa ~~finalize~~significant ~~this~~win ~~contract~~as Airbus evaluated competitive products and ~~secure~~selected ~~full~~the ~~funding~~SDR-OMNI ~~this~~due ~~summer~~to its faster speed and ease of use. WeIn ~~expect~~August to2024, ~~complete~~the ~~this~~Company received a follow-on order ~~during~~from FYAirbus ~~2025~~with additional orders expected. ~~TIC~~We ~~will~~have ~~continue~~added toa ~~explore~~direct ~~funded~~sales ~~engineering~~representative ~~programs~~for ofthe ~~this~~SDR-OMNI ~~nature~~and asare ~~this~~instituting isa ~~high~~customer ~~margin~~demo ~~business~~program ~~that~~which ~~helps~~should ~~diversify~~allow ~~and~~us ~~expand~~to significantly extend our ~~product~~sales ~~portfolio~~reach for smaller customers. Significantly, every commercial customer that evaluates our test sets versus the competition has selected the SDR-OMNI.

~~The~~TIC ~~main~~recently ~~focus~~released ~~area for~~ the ~~Company~~SDR-OMNI/MIL istest ~~moving~~set ~~into~~which ~~the~~adds ~~military~~SIF ~~avionic~~ and ~~secure~~TACAN ~~communications~~test ~~testing~~capability. The ~~key for long~~SDR-~~term~~OMNI/MIL ~~sustained~~has ~~growth~~received ~~will~~positive bereviews tofrom ~~supplement~~the ~~our~~U.S. ~~strong~~DOD ~~position~~and ininternational military ~~Mode~~customers. 5We ~~transponder~~have ~~testing~~received ~~with~~purchase ~~dominant~~orders ~~product~~from ~~offerings~~Italy, inSouth ~~the~~Korea ~~much larger commercial~~ and ~~military~~from ~~communications and navigation test set market~~U.S. ~~TIC~~customers ~~has spent several years~~ and ~~millions~~have ofshipped ~~dollars in developing~~ our ~~ground-breaking~~first SDR-OMNI/MIL ~~product which is meant to address both the commercial market for transponder and navigation~~ test ~~sets as well as competing in the military secure comm test~~ set ~~market. The SDR/OMNI supports a wide frequency range to accommodate new commercial and military waveforms~~ in anJuly ~~industry leading 4~~2024.~~5-pound~~ ~~package.~~ This is ~~approximately~~designed half the weight of competitive test sets. It is also the only new multi-purpose test set which meets the Class 1 military environmental specifications. It utilizes the latest touch screen technology and has the capability to replace ~~all~~thousands ~~TIC~~of ~~commercial~~obsolete ~~test sets and~~ military ~~flight-line~~ test sets ~~with~~currently ~~one~~in ~~handheld product~~use. ~~The~~This ~~Company~~is ~~started~~expected ~~initial~~to ~~production~~be ~~deliveries~~a ~~during~~significant ~~December~~driver ~~2022 and has sold over $720,000~~ of ~~SDR/OMNI~~both ~~test~~revenues ~~sets~~and asfuture ~~of December 31, 2023~~profitability. There are several companies competing in this market space, but we believe that our SDR/OMNI design will be extremely competitive.

TIC ~~recently~~is ~~introduced~~also aexploring ~~military~~new ~~version~~avenues ofto ~~this~~broaden ~~test~~its ~~set~~product ~~called~~portfolio ~~the~~including ~~SDR-OMNI/MIL.~~designing ~~It adds SIF IFF and TACAN functions. This is~~ a ~~critically~~high ~~important~~frequency test set asfor itthe ~~could~~Lockheed ~~replace~~Martin ~~over~~F-35 ~~5,000~~program. ~~obsolete~~This ~~avionic~~contract ~~and~~takes ~~communication~~advantage ~~test~~of ~~sets~~our ~~currently~~expertise in ~~use~~RF ~~by the U~~technology.S. ~~military.~~This Weis ~~have~~a ~~taken~~completely ~~orders for this~~ new ~~military~~market ~~test~~for ~~set~~TIC ~~from~~as ~~two~~it ~~international~~involves ~~customers~~high ~~and~~frequency ~~expect~~communication ~~initial~~signals. ~~orders~~TIC ~~from~~is ~~the~~currently ~~U.S.~~negotiating ~~military~~a ~~this~~sizeable ~~quarter.~~production ~~Production~~contract ~~deliveries~~with ~~are~~Northrup ~~expected~~Grumman tofor ~~begin in~~ the ~~first~~new ~~quarter~~MADL oftest ~~FY 2025~~set.

TIC is also working closely with manufacturers of the new micro-Mode 5 transponders that will be used to add Mode 5 technology to drones. This is expected to be a significant long-term revenue driver given the recent drone fatalities faced by the U.S. in the Mid-East. We have also demonstrated Mode 5L2B using the micro-Mode 5 transponders in several of our test sets.

As previously disclosed, the Aeroflex litigation (see Note 14 to the Unaudited Condensed Consolidated Financial Statements) did not result in a favorable outcome for the Company, despite our belief that we committed no wrongdoing. We have paid the $6.6 million judgment in full and there are no outstanding obligations related to the Aeroflex litigation. The jury found no misappropriation of Aeroflex trade secrets but found that the Company tortiously interfered with a prospective business opportunity and awarded damages. The jury also found that TIC tortiously interfered with Aeroflex’s non-disclosure agreements with two former Aeroflex employees, and that the former Aeroflex employees breached their non-disclosure agreements with Aeroflex. Upon appeal, a decision on the case was rendered and released on July 21, 2023. The Kansas Appeals Court rejected each of TIC’s appeal arguments and the judgment required the Company to pay Aeroflex $6.6 million. The loss of the appeal is very disappointing to the Company, however there will be no impact on our net worth, as these damages had already been fully accrued. TIC paid the full judgement amount and has been fully satisfied as of September 15, 2023.

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Results of Operations

Sales

~~The~~Net ~~Company reported net~~ sales ofwere $2,~~403~~842,~~099~~176 ~~and $6,835,123~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2023.~~2024, ~~This~~as compared to ~~net sales of~~ $2,~~328~~866,~~254~~929 ~~and $6,594,768~~ for the same three ~~and nine-~~month period in the prior fiscal year.

The increase in sales for the three months ended December 31, 2023 of 2,403,099 as compared to the same prior period of $2,328,254 resulted in a 3% increase. The increase in sales for the nine months ended December 31, 2023 of $ 6,835,123 as compared to the same prior period of $6,594,768 remained basically flat or a 4% increase.

The increase in sales for the quarter ended December 31, 2023 as compared to the prior quarter ended September 30, 2023 of $1,565,094 or a 54 percent increase was attributable to earlier placement of vendor orders by supply chain procurement, enabling the company to ship more units. Long supplier lead lines for certain high demand chips have been unprecedented, preventing the timely production of finished units being shipped to customers. The supply chain situation is gradually improving, and TIC has received sufficient parts to resume normal production operations. In addition, the company revenue included a 50 percent progress billing for the Army software upgrade project.

Gross Margin

Gross margin for the current quarter was $~~968~~745,~~118~~902 (4026.2%) ~~and~~which ~~$2,622,152~~is ~~(38%)~~approximately ~~for~~19 ~~the~~percentage ~~three~~points ~~and~~lower ~~nine~~than the three months ended ~~December~~June 3130, 2023, ~~respectively.~~of ~~This compared to~~ $~~893~~1,~~707 (38%) and $2~~294,~~282,363~~549 (3545.2%) ~~for the same periods in the prior year, respectively~~. ~~The~~This ~~improvement~~is ~~was~~ primarily attributable to ~~fixed~~the ~~production~~Navy ~~costs~~Craft ~~being~~ECP ~~spread~~margin ~~over~~true ~~increased~~up ~~volumes~~ as ~~production~~the program is ~~ramped~~nearing upcompletion ~~with~~and ~~manufacturing~~engineering ~~components~~labor ~~being~~hours ~~delivered~~have byexceeded our ~~suppliers to coincide with open order deadlines and high margin engineering software revenue~~projections. ~~This~~Approximately is$730,000 ~~a result~~ of ~~placing~~Navy ~~supplier~~funding ~~orders~~remains ~~further~~on ~~out~~this tocontract ~~manage~~which ~~the~~should ~~long~~be ~~delivery~~completed ~~dates~~in ~~for~~calendar ~~the~~year ~~three months ended December 31, 2023~~2024. ~~The~~Once ~~increase in~~ the ~~nine~~development ~~months~~work ~~ended~~is ~~December 31~~completed, ~~2023~~production asrevenues ~~compared~~of toapproximately ~~December~~$5 ~~31,~~million ~~2022~~per isyear ~~primarily~~are ~~due~~expected toover ~~revenue from the Navy Craft and Army engineering software projects which have~~ a ~~high~~four-year ~~margin~~period.

Operating Expenses

Selling, general and administrative expenses decreased $~~174~~42,~~479~~518 (307%) to $~~414~~542,~~458~~340 ~~and $104,737 (6%) to $1,520,386~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2023~~2024, as compared to $~~588~~584,~~937~~858 ~~and $1,625,123, respectively~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2022~~2023. The three ~~and~~month ~~nine~~decrease ~~months~~is ~~decreases~~primarily ~~of $174,479 and $104,737, respectively are~~ a result of ~~professional fee savings and no~~ profit sharing accruals ~~offset~~in bythe ~~marketing~~prior ~~documentation~~year ~~for~~three ~~our~~month ~~new~~period ~~SDR-OMNI~~that ~~test~~was ~~set,~~later ~~the~~reversed ~~resumption~~and of travel and trade show participation timing.

Engineering, research, and development expenses decreased $64157,~~249~~803 (1755%) to $~~306~~131,~~546~~638 ~~and $588,833 (39%) to $913,701~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2023,~~2024 as compared to $~~370~~289,~~795~~441 ~~and $1,502,534~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2022, respectively~~2023. Total engineering expense decreased primarily as a result of the Navy ECP ~~contract~~Contract non-recurring engineering expenditures (“NRE”) which ~~are reimbursed and~~ reduced engineering costs in the current quarter by $~~208~~244,~~368~~769 ~~offset~~with byoffsets ~~increases~~for inoutside ~~engineering~~consultants ~~talent~~and salary increases.

Income ~~(loss)~~ from Operations

As a result of the above, the Company recorded ~~a net~~ income from operations of $~~247~~71,~~114~~924 ~~and $188,065~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2023~~2024, as compared to aan ~~loss~~income from operations of $66420,~~025~~250 ~~and $845,294~~ for the three ~~and nine~~ months ended ~~December~~June 3130, ~~2022~~2023.

~~Other Expense, Net~~ 18

For the three and nine months ended December 31, 2023, total other net expense was $22,941 and $196,454. During the 9 months ended December 31, 2023, $198,535 of accrued judgement interest was included for the first two quarters of the current fiscal year. This is compared to other net income of $563,048 and $443,235 for the three and nine months ended December 31, 2022, this is primarily a result of $628,400 of Employee Retention Tax Credits (“ERC”) the Company was eligible for and filed the required amended tax returns. The credit refunds were received from the Internal Revenue Service on June 1, 2023.

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~~Net~~Other ~~Income~~Expense, ~~(loss)~~Net ~~before Income Taxes~~

~~The~~Other ~~Company~~net ~~recorded~~expense afor ~~net~~the ~~income~~three ~~before~~months ~~taxes~~ended ofJune 30, 2024 was $~~224~~18,~~173~~446 ~~and~~consisting aprimarily ~~net~~of ~~loss~~line of $8credit interest,~~389~~ ~~for~~as compared to the three ~~and nine~~ months ended ~~December~~June 3130, 2023, astotal ~~compared~~other to net ~~income~~expense ~~before~~was ~~taxes of~~ $~~497~~44,~~023~~411, ~~and~~which awas ~~net~~primarily ~~loss~~a result of $~~402~~70,~~059~~245 ~~for~~accrued interest related to the ~~three~~legal ~~and~~judgement ~~nine~~that ~~months~~was ~~ended~~settled ~~December~~in ~~31,~~the ~~2022~~prior fiscal year.

Income ~~Tax~~before ~~Benefit~~Income Taxes

~~For~~The ~~the three and nine months ended December 31, 2023, the~~ Company recorded income ~~tax~~before ~~expense~~taxes of $9053,~~364~~478 and ~~an income tax benefit of~~ $2375,~~337,~~839 asfor ~~compared~~the tothree ~~income~~months ~~tax~~ended ~~expense~~June ~~and benefit of $104~~30,~~396~~ ~~and~~2024 ~~$84,449 for the three~~ and ~~nine~~June ~~months ended December 31~~30, ~~2022~~2023, respectively.

~~Net~~Income ~~Loss~~Tax Expense

~~The~~For ~~Company~~the ~~recorded~~three ~~net~~months ~~income~~ended ofJune ~~$133~~30,~~809~~ 2024 and ~~net loss of $6,052 for~~ the three ~~and nine~~ months ended ~~December~~June 3130, 2023, asthe ~~compared~~Company torecorded ~~net~~ income oftax ~~$392,627~~expense ~~and a net loss~~ of $~~317~~11,~~610~~230 ~~for the three~~ and ~~nine months ended December 31~~$80,547, ~~2022~~respectively.

Net Income

The Company recorded net income of $42,248 and $295,292 for the three months ended June 30, 2024 and June 30, 2023, respectively.

Liquidity and Capital Resources

At ~~December~~June 3130, ~~2023~~2024, the Company had net working capital of $34,~~723~~303,~~705,~~539 as compared to working capital of $34,~~058~~249,~~638~~777 at March 31, ~~2023~~2024. ~~The~~This ~~Company~~included ~~had approximately~~ $~~220~~149,~~791~~550 of cash on hand ~~at December 31, 2023~~ and ~~approximately~~ $~~5,850,000 at March 31, 2023. The Company also had $~~1,~~176~~763,~~203~~680 million of accounts ~~receivables compared to $900,881 at March 31, 2023~~receivable.

The Company’s principal sources, and uses of funds were as follows:

Cash (used in) provided by operating activities. For the ~~nine~~three months ended ~~December~~June 3130, ~~2023~~2024, $6372,~~316,840~~963 in cash from operations was used, as compared to the ~~nine~~three months ended ~~December~~June 3130, ~~2022~~2023, the Company ~~used~~provided $1706,~~571,007~~272. This decrease in cash provided by (used ~~from~~in) for operations is ~~attributable~~mostly attributed to ~~both~~an ~~operating~~increase ~~losses~~in ~~and~~trade ~~the~~receivables ~~settlement~~offset ofby ~~the~~a ~~Aeroflex~~decrease ~~judgement~~in ~~of $6,559,233~~inventories.

Cash used in investing activities. For the ~~nine~~three months ended ~~December~~June 3130, ~~2023~~2024, the Company used $~~33,850~~0 for purchases of equipment as compared to the ~~nine~~three months ended ~~December~~June 3130, ~~2022~~2023, the Company used $1113,~~732~~983.

Cash provided by ~~(used in)~~ financing activities. For the ~~nine~~three months ended ~~December~~June 3130, ~~2023~~2024, the Company provided $~~721~~390,~~000~~500 from ~~financing~~funds ~~activities~~received asfrom ~~compared~~the toBank ~~using~~of America line of credit ($80310,000) ~~for~~and ~~the~~short ~~nine~~term ~~months~~related ~~ended~~party ~~December~~loans 31($80,500) ~~2022.~~as ~~This~~compared ~~increase is due~~ to ~~proceeds~~$0 ~~received~~funds ~~from~~provided ~~issuance~~for ofin ~~Series~~the Bthree ~~and~~months Cended ~~Convertible~~June ~~Preferred~~30, ~~Stock~~2023.

The Bank of America line of credit ~~has~~is ~~been~~in ~~extended~~the ~~from~~process ~~December~~of being renewed and the current line of credit matured July 31, ~~2023~~2024. ~~maturity~~Bank toof ~~June~~America ~~30,~~has ~~2023~~extended ~~maturity~~the line of credit during their renewal process. As of ~~December~~June 3130, ~~2023~~2024, the $~~690~~1,000,000 line of credit was fully used. The Company repaid $75,000 of this line of credit in July 2024.

~~The~~Moving ~~Company~~forward, ~~has~~we ~~recorded~~believe ~~total~~that ~~damages~~our ofexpected ~~$6,559,233~~cash ~~including~~flows ~~interest~~from ofincreased ~~$1,659,233,~~operations asand aincreased ~~result~~accounts ofreceivable ~~the~~payments ~~jury~~will ~~verdict~~be ~~associated~~sufficient ~~with~~to operate in the ~~Aeroflex~~normal ~~litigation~~course asof ~~well~~business asfor next 12 months from the ~~Court’s~~issuance ~~decision~~date onof ~~punitive~~these ~~damages~~unaudited condensed financial statements.

A decision on the Aeroflex case was rendered and released on July 21, 2023, the Kansas Appeals Court rejected each of TIC’s appeal arguments. The loss of the appeal is very disappointing to the Company, however there will be no impact on net worth, as these damages have already been fully accrued. TIC paid the full judgement amount and has been fully satisfied as of September 15, 2023.

Moving forward, we believe that our expected cash flows from increased operations and increased accounts receivable payments will be sufficient to operate in the normal course of business for at least the next 12 months from the issuance date of these unaudited condensed financial statements.

Currently, the Company has no material future capital expenditure requirements.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on ~~Form~~For 10-K for the fiscal year ended March 31, ~~2023~~2024, filed with the SEC on June 1528, ~~2023~~2024 (the “Annual Report”).

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Off-Balance Sheet Arrangements

As of ~~December~~June 3130, ~~2023~~2024, the Company had no off-balance sheet arrangements.

~~Critical Accounting Policies~~19

~~Our~~Table ~~critical accounting policies are described in Management’s Discussion and Analysis~~ of Financial Condition and Results of Operations included in our Annual Report. There have been no changes in our critical accounting policies. Our significant accounting policies are described in our notes to the 2023 consolidated financial statements included in our Annual Report.Contents

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this Item. We do not hold any derivative instruments and do not engage in any hedging activities.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

~~The~~Our ~~Company~~management, ~~including~~with ~~its~~the ~~principal~~participation ~~executive~~of ~~officer~~our ~~and~~Chief ~~principal~~Executive ~~financial~~Officer ~~officer,~~and ~~conducted~~Chief anFinancial ~~evaluation~~Officer, ofevaluated the effectiveness of ~~the~~our ~~design and operation of its~~ disclosure controls and procedures, aspursuant ~~defined~~to inRule ~~Rules~~ 13a-15(e) ~~and 15d-15(e)~~ under the ~~Securities~~ Exchange Act ~~of 1934 (the “Exchange Act”) as of the end of the period covered by this report (the “Evaluation Date”)~~. ~~Based~~In ~~upon~~designing ~~the evaluation, our principal executive officer~~ and ~~principal~~evaluating ~~financial officer concluded as of~~ the ~~Evaluation Date that our~~ disclosure controls and procedures ~~were effective as of the end of the period covered by this Quarterly Report. Based on that evaluation~~, ~~our~~ management, ~~including~~recognizes ~~the~~that ~~Chief~~any ~~Executive~~controls ~~Officer~~ and ~~Chief Financial Officer~~procedures, ~~concluded~~no ~~that~~matter ~~our~~how ~~disclosure~~well ~~controls~~designed and ~~procedures~~operated, ~~were~~can ~~effective~~provide inonly ~~providing~~ reasonable assurance ~~that~~of ~~information~~achieving ~~required to be disclosed in our reports filed or submitted under~~ the ~~Exchange~~desired ~~Act~~control ~~was~~objectives. ~~recorded,~~In ~~processed~~addition, ~~summarized, and reported within~~ the ~~time~~design ~~periods~~of ~~specified~~disclosure ~~in the SEC’s rules and forms. Disclosure~~ controls ~~are controls~~ and procedures ~~designed~~must toreflect ~~reasonably~~the ~~ensure~~fact that ~~information~~there ~~required~~are toresource ~~be disclosed in our reports filed under the Exchange Act~~constraints, ~~such~~and asthat ~~this~~management ~~report,~~ is ~~recorded,~~required ~~processed,~~to ~~summarized,~~apply ~~and~~its ~~reported~~judgment ~~within the time periods specified~~ in evaluating the ~~SEC’s~~benefits ~~rules~~of ~~and~~possible ~~forms. Disclosure~~ controls ~~include controls~~ and procedures ~~designed~~relative to ~~reasonably~~their ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosurecosts.

Based on management’s evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective in providing reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s report on internal control over financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, a company’s principal executive and principal financial officer and effected by the our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

	1.	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

	2.	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made in accordance with authorizations of management and directors of the company; and

	3.	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible enhancements to controls and procedures.

Management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2024, based on the criteria in a framework developed by the Company’s management pursuant to and in compliance with the criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission. This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, walkthroughs of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, management has concluded that our internal control over financial reporting was not effective as of June 30, 2024, because management identified that there was a lack of adherence to formal policies and procedures with inventory controls.

Management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively. The remediation actions include:

●	Management personnel, including our Chief Accounting Officer, are overseeing the financial reporting process and implementation of enhanced controls and governance;
●	Formation of an internal task team to enhance weaknesses over inventory movement, valuation, and internal controls.

Management is committed to maintaining a strong internal controls environment and implementing measures designed to help ensure that control deficiencies contributing to the material weakness are remediated as soon as possible. We have documented key procedures and controls using a risk-based approach and have, therefore, made progress toward remediation. We continue to implement our remediation plan, which includes continued engagement of an external financial consulting firm to enhance financial reporting and operations as well as design and implementation of controls. We will consider the material weakness remediated after the applicable controls operate for a sufficient period of time, and Management has concluded, through testing, that the controls are operating effectively.

(b) Changes in Internal Control over Financial Reporting

~~The~~There ~~Company,~~has ~~including~~been ~~its~~no ~~chief~~change ~~executive~~in ~~officer~~our ~~and chief financial officer, reviewed the Company’s~~ internal control over financial reporting, ~~pursuant~~identified toin ~~Rule~~connection ~~13(a)-15(e)~~with ~~under~~ the ~~Exchange~~evaluation ~~Act~~referred ~~and~~to ~~concluded~~above that ~~there~~occurred ~~was no change in the Company’s internal control over financial reporting~~ during ~~the~~our ~~Company’s~~last ~~most recently~~ completed fiscal quarter ~~during the period ended December 31, 2023 or subsequent to the date the Company completed its evaluation~~ that has materially negatively affected, or is reasonably likely to materially affect, ~~the~~our ~~Company’s~~ internal control over financial reporting. As discussed above, management has remediation plans that will be implemented during fiscal year 2025.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

~~Currently,~~There we are ~~not~~no ~~involved~~material inproceedings to which any ~~litigation~~director ~~that~~or weofficer, ~~believe~~or ~~could~~any ~~have~~associate of any such director or officer, is a ~~material~~party that is adverse ~~effect~~to onour Company or any of our ~~financial~~subsidiaries ~~condition~~or has a material interest adverse to our Company or ~~results~~any of ~~operations~~our subsidiaries. ~~There~~No isdirector noor ~~action,~~executive ~~suit,~~officer ~~proceeding,~~has ~~inquiry~~been a director or ~~investigation~~executive ~~before~~officer of any ~~court,~~business ~~public~~which ~~board,~~has ~~government~~filed ~~agency,~~a ~~self-regulatory~~bankruptcy ~~organization~~petition or ~~body~~had ~~pending~~a bankruptcy petition filed against it during the past ten years. No director or, toexecutive officer has been convicted of a criminal offense or is the ~~knowledge~~subject of a pending criminal proceeding during the past ten years. No director or executive ~~officers~~officer has been the subject of ~~our~~any ~~Company~~order, ~~threatened~~judgment ~~against~~or decree of any court permanently or ~~affecting~~temporarily ~~our~~enjoining, ~~Company~~barring, suspending or ~~our~~otherwise ~~common~~limiting ~~stock~~his involvement in ~~which~~any antype ~~adverse~~of ~~decision~~business, ~~could~~securities, or banking activities during the past ten years. No director or officer has been found by a court to have violated a ~~material~~federal ~~effect~~or state securities or commodities law during the past ten years.

As previously disclosed, the Aeroflex litigation (see Note 14 to the Unaudited Condensed Consolidated Financial Statements) did not result in a favorable outcome for the Company, despite our belief that we committed no wrongdoing. We have paid the $6.4 million judgment in full and there are no outstanding obligations related to the Aeroflex litigation. The jury found no misappropriation of Aeroflex trade secrets but found that the Company tortiously interfered with a prospective business opportunity and awarded damages. The jury also found that TIC tortiously interfered with Aeroflex’s non-disclosure agreements with two former Aeroflex employees, and that the former Aeroflex employees breached their non-disclosure agreements with Aeroflex. Upon appeal, a decision on the case was rendered and released on July 21, 2023. The Kansas Appeals Court rejected each of TIC’s appeal arguments and the judgment required the Company to pay Aeroflex $6.4 million. The loss of the appeal is very disappointing to the Company, however there will be no impact on net worth, as these damages had already been fully accrued.

Item 1A. Risk Factors.

Not applicable because we are a smaller reporting company. Notwithstanding, we believe there are no changes that constitute material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, ~~2023~~2024, filed with the SEC on June 1528, ~~2023~~2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

~~During~~There ~~the~~were ~~three~~no ~~months~~unregistered ~~ended~~sales ~~December~~of ~~31,~~the ~~2023,~~Company’s ~~other~~equity ~~than~~securities asduring ~~previously~~the ~~disclosed~~quarter inended aJune ~~Current Report on Form 8-K~~30, ~~we did not issue any securities that were not registered under the Securities Act~~2024.

Item 3. Defaults upon Senior Securities.

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company during the quarter ending ~~December~~June 3130, ~~2023~~2024.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

There is no other information required to be disclosed under this item which was not previously disclosed.

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Item 6. Exhibits.

Exhibit No.		Description

31.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*

31.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*

32.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

101.INS		Inline XBRL Instance Document*

101.SCH		Inline XBRL Taxonomy Extension Schema Document*

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document*

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document*

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document*

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document*

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*

* Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TEL-INSTRUMENT ELECTRONICS CORP.
Date: February 13, 2024	By:	/s/ Jeffrey C. O’Hara
Date: August 14, 2024	By:	/s/ Jeffrey C. O’Hara
	Name:	Jeffrey C. O’Hara
	Title:	Chief Executive Officer (Principal Executive Officer)
Date: February 13, 2024	By:	/s/ Pauline Romeo
Date: August 14, 2024	By:	/s/ Pauline Romeo
	Name:	Pauline Romeo
	Title:	Chief Accounting Officer (Principal Financial and Accounting Officer)

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