Tel-Instrument Electronics Corp. Reports First Quarter Fiscal Year 2016 Financial Results

Revenues for the First Quarter 2016 increased 87% to $5.8 Million

Basic Earnings per Share Increases to $0.09 for the Quarter from a Loss of $0.12 Last Year

Non-GAAP EBITDA of $506,000 or $0.16 per Share

EAST RUTHERFORD, N.J.--(BUSINESS WIRE)--Tel-Instrument Electronics Corp. (“Tel”, “Tel-Instrument” or the “Company”) (NYSE MKT:TIK), a leading designer and manufacturer of avionics test and measurement solutions, today reported its financial results for the first quarter of fiscal year 2016 ended June 30, 2015.

Highlights

• Revenues increased to $5.8 million, an 87% increase versus the comparable period of fiscal year 2015.
• Pre-tax income increased to $494k, a $991k improvement versus the first quarter of fiscal year 2015.
• Operating expenses declined to 23% of revenues versus 44% in the first quarter of fiscal year 2015.
• GAAP basic earnings of $0.09 per share, versus a loss of $0.12 per share in the year ago period.
• Non-GAAP EBITDA of $506,000 or $0.16 per share. It should be emphasized that the tax accrual included in our GAAP accounting is a non-cash item due to the Company’s large net operating loss carry-forward (“NOL”).

Revenues for the first quarter were $5,845,919, an 87% increase from $3,129,076 in the comparable period of fiscal year 2015. Gross margin for the quarter increased to $1,815,295 as compared to $1,120,217 for the same period last year. This increase is mostly attributed to the increase in volume of revenues, especially for the TS-4530A KITS and ITATS. Gross margin percentage decreased compared to the same quarter last year due to a change in sales mix, primarily due to the increase in sales for the TS-4530 and ITATS programs which have lower margins as these programs were competitively bid. Research and development expenses increased slightly as the Company focuses on developing its next generation of avionics and communications test sets.

Non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the first quarter increased to $506,354 or $0.16 per share, compared to loss of $185,747 for the first quarter of fiscal year 2015. On a GAAP basis, net income for the quarter was $279,066, or $0.09 per basic share compared to a net loss of $384,005, or $0.12 per share, in the year ago period.

Commenting on the results, Mr. Jeffrey O’Hara, President and CEO of Tel, stated, “We are pleased to report a second consecutive quarter of improved operating results. Management believes that our operating results going forward will continue to benefit from increased volume and the shipment of more of the higher priced CRAFT units, and will also benefit from the full production release of the TS-4530A SETS which are expected to begin shipping in volume prior to calendar year end. The Company also continues to do a solid job in keeping a tight rein on operating costs despite substantially increased revenues. We continue to invest in new product development with the TR-36 Nav/Comm test set being the first product to be released from these efforts. We are also actively working on next generation test sets for both the commercial and military market that we believe will be extremely competitive. We believe that the Company has a solid position in its core Mode 5 flight-line market and we are actively working both domestic and overseas opportunities. The untapped Mode 5 market is significant and securing these higher margin sales could further enhance our operating profitability. We are excited about fiscal year 2016 and beyond.”

We encourage everyone to read our full results of operations contained in our Quarterly Report on Form 10-Q filed with the United States Securities and Exchange Commission on August 12, 2015, which can be found at sec.gov.

Conference Call

The Company will host a conference call and webcast on Wednesday, August 12, 2015 at 9:00 a.m. Eastern Time to discuss the Company’s fiscal first quarter results.

To access the live webcast, log onto the Tel-Instrument Electronics Corp.’s website at: https://www.telinstrument.com/learn-about-telinstrument/investor-relations.html.

To participate in the call by phone, dial [phone] approximately five minutes prior to the scheduled start time. International callers please dial [phone].

A replay of the teleconference will be available until September 12, 2015 and may be accessed by dialing [phone]. International callers may dial [phone]. Callers should use conference ID: 13617180.

About Tel-Instrument Electronics Corp.

Tel-Instrument is a leading designer and manufacturer of avionics test and measurement solutions for the global commercial air transport, general aviation, and government/military aerospace and defense markets. Tel-Instrument provides instruments to test, measure, calibrate, and repair a wide range of airborne navigation and communication equipment. For further information please visit our website at www.telinstrument.com.

This press release includes statements that are not historical in nature and may be characterized as “forward-looking statements,” including those related to future financial and operating results, benefits, and synergies of the combined companies, statements concerning the Company’s outlook, pricing trends, and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies, and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. All predictions as to future results contain a measure of uncertainty and, accordingly, actual results could differ materially. Among the factors which could cause a difference are: changes in the general economy; changes in demand for the Company’s products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances. A number of these factors are discussed in the Company’s previous filings with the U.S. Securities and Exchange Commission. The Company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this press release. The safe harbor for forward-looking statements contained in the Securities Litigation Reform Act of 1995 (the “Act”) protects companies from liability for their forward-looking statements if they comply with the requirements of the Act.

TEL-INSTRUMENT ELECTRONICS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS
	June 30, 2015			March 31, 2015
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	178,023			185,932
Accounts receivable, net		1,856,985			1,625,171
Inventories, net		4,523,832			4,032,074
Prepaid expenses and other current assets		328,720			281,002
Deferred financing costs		5,429			5,429
Deferred income tax asset		1,064,395			1,064,395
Total current assets		7,957,384			7,194,003
Equipment and leasehold improvements, net		234,252			270,792
Deferred financing costs – long-term		7,435			8,792
Deferred income tax asset – non-current		2,162,405			2,377,583
Other long-term assets		32,317			32,317
Total assets		10,393,793			9,883,487
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt, net of debt discount		393,846			387,839
Capital lease obligations – current portion		17,345			16,758
Accounts payable and accrued liabilities		3,903,312			3,577,566
Deferred revenues – current portion		8,167			18,609
Accrued payroll, vacation pay and payroll taxes		676,288			594,114
Total current liabilities		4,998,958			4,594,886
Subordinated notes payable - related parties		250,000			250,000
Capital lease obligations – long-term		-			4,561
Long-term debt		607,927			708,604
Deferred revenues – long-term		133,650			133,650
Warrant liability		451,202			518,962
Other long-term liabilities		26,700			33,000
Total liabilities		6,468,437			6,243,663
Commitments
Stockholders' equity:
Common stock, 4,000,000 shares authorized, par value $0.10 per share,
3,256,887 and 3,256,887 shares issued and outstanding, respectively		325,686			325,686
Additional paid-in capital		8,052,634			8,046,168
Accumulated deficit		(4,452,964	)		(4,732,030	)
Total stockholders' equity		3,925,356			3,639,824
Total liabilities and stockholders' equity	$	10,393,793		$	9,883,487

TEL-INSTRUMENT ELECTRONICS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	Three Months Ended
	June 30, 2015			June 30, 2014
Net sales	$	5,845,919		$	3,129,076
Cost of sales		4,030,624			2,008,859
Gross margin		1,815,295			1,120,217
Operating expenses:
Selling, general and administrative		865,688			879,193
Engineering, research and development		492,132			483,896
Total operating expenses		1,357,820			1,363,089
Income (loss) from operations		457,475			(242,872	)
Other income (expense):
Amortization of debt discount		-			(30,874	)
Amortization of deferred financing costs		(1,357	)		(27,080	)
Change in fair value of common stock warrants		67,760			(133,881	)
Interest expense		(29,634	)		(62,480	)
Total other income (expense)		36,769			(254,315	)
Income (loss) before income taxes		494,244			(497,187	)
Income tax provision (benefit)		215,178			(113,182	)
Net income (loss)	$	279,066		$	(384,005	)
Net income (loss) per share:
Basic income (loss) per common share	$	0.09		$	(0.12	)
Diluted income (loss) per common share	$	0.02		$	(0.12	)
Weighted average shares outstanding:
Basic		3,256,887			3,251,387
Diluted		3,320,442			3,251,387

TEL-INSTRUMENT ELECTRONICS CORP. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION (Unaudited)
	Three Months			Three Months
	Ended			Ended
	June 30,			June 30,
	2015			2014
Net income (loss)	$	279,066		$	(384,005	)
Income tax provision (benefit)		215,178			(113,182	)
Depreciation and amortization		42,413			45,062
Amortization of debt discount		-			30,874
Amortization of deferred financing costs		1,357			27,080
Change on fair value of common stock warrants		(67,760	)		133,881
Interest, net		29,634			62,480
Non-cash stock-based compensation		6,466			12,063
Non-GAAP EBITDA	$	506,354		$	(185,747	)
Non-GAAP EBITDA per common share	$	0.16		$	(0.06	)
Basic weighted average shares outstanding		3,256,887			3,251,387

The term EBITDA consists of net income (loss) plus interest, taxes, depreciation and amortization, amortization of debt discount and deferred financing charges, change in fair value of warrants, non-cash interest, and non-cash stock-based compensation. EBITDA is not a measure of financial performance under generally accepted accounting principles, and should not be considered in isolation from, or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles, or as a measure of profitability or liquidity. Additionally, EBITDA may not be comparable to other similarly titled measures of other companies. The Company has included EBITDA as a supplemental disclosure because its management believes that EBITDA provides useful information regarding our ability to service debt, and to fund capital expenditures, and provides investors a helpful measure for analyzing its operating performance. The table above sets forth a reconciliation of EBITDA to net income (loss), which is the most directly comparable measure of financial performance, calculated under generally accepted accounting principles. Non-GAAP EBITDA per common share is calculated by dividing Non-GAAP EBITDA by basic weighted average shares outstanding.