- Revenues decreased 25.6% to $5.08 million from $6.82 million in the second quarter of fiscal year 2016.
- Gross margin percentage improved to 36.0% versus 32.9% for the comparable quarter in the previous year.
- Legal expenses increased to $188k versus $108k in the year ago quarter.
- Operating income decreased to $367k as compared to $916k in the second quarter of fiscal year 2016.
- Non-GAAP Adjusted EBITDA was $411k as compared to $964k in the second quarter last year.
- Pre-tax income in the second quarter of $382k versus $370k in the 2016 comparable period.
- Net Income was $272k, or $0.08 per basic share versus $199k or $0.06 in the second quarter of 2016.
- $1.8 million reduction in liabilities since March 31, 2016 including the satisfaction of the $720k BCA Mezzanine Fund LLP ("BCA") warrant liability.
Gross margin as a percentage of sales increased to 36% for the three months ended September 30, 2016 as compared to 32.9% for the same quarter last year as a result of increased prices for the CRAFT units and the change in sale mix. Gross margin dollars decreased $417,878 (18.6%) to $1,825,588 for the three months ended September 30, 2016 as compared to $2,243,466 for the same period in the prior year primarily as a result of the lower sales.Selling, general and administrative expenses decreased $8,738 (1.0%) to $875,138 for the three months ended September 30, 2016, as compared to $883,876 for the three months ended September 30, 2015. This decrease was primarily attributed to lower salaries and accrued profit sharing expenses, mostly offset by litigation and expert witness expenses associated with the Aeroflex Wichita, Inc. ("Aeroflex"). Total litigation and expert witness expenses for the quarter were $188,126 as compared to $107,781 for the same quarter last year. Engineering, research and development expenses increased $140,115 (31.6%) to $583,771 for the three months ended September 30, 2016, as compared to $443,656 for the three months ended September 30, 2015. This reflects increased investment in the new hand-held avionics and radio test set currently under development. Mr. Jeffrey O'Hara, President and CEO of Tel, stated, "We continue to report solid revenues and profitability despite the substantial completion of the U.S. Army TS-4530A KITS and CRAFT and ITATS units associated with the U.S. Navy programs. Our balance sheet continues to improve and we were able to pay off the $720k warranty liability to BCA while maintaining a solid cash balance. Legal expenses and costs associated with expert testimony continue to be a significant drag on profitability but we expect this litigation to be concluded by the end of this fiscal year. With respect to our Motion to Dismiss filed in late August, we have not yet received a decision from the court.
We have intensified our marketing efforts and increased our investment in research and development. We continue to emphasize the importance of capturing the majority share of the large IFF international market which could generate substantial revenues starting in the 2017/2018 calendar year timeframe. We have been working with our international distributors to ensure that we are well-positioned in this market and are meeting with key customers. To put this in perspective, international orders for the first six months of this fiscal year have only amounted to approximately $250,000 out of our total bookings of $6.9 million. We believe that this booking pace should ramp up next year as there are some large international opportunities now in play. With our wide range of DOD certified Mode 5 test sets, we think we are well positioned to secure the lion's share of this business.The commercial avionics industry is undergoing a great deal of regulatory change including the requirement that all aircraft be equipped with ADS-B transponder as well as the introduction of new UAT navigation for the general aviation market. As a result, we are starting to see an increase in bookings for our commercial products such as the TR-220 and TR-36. Moreover, we believe that our new hand-held products, that we are planning to introduce by the end of this fiscal year, will generate increased market share at attractive gross margin levels. The Company is also targeting the extremely large commercial and military radio test set market which is many times the size of our traditional avionics test market. We are also working closely with our military customers on new potential market opportunities. We continue to be excited and optimistic about our near and long-term prospects," Mr. O'Hara concluded. The Company encourages investors to read its full results of operations as contained in our Quarterly Report on Form 10-Q filed on November 9, 2016 at www.sec.gov. Conference Call The Company will host a conference call and webcast today, Wednesday, November 9, 2016 at 9:00 a.m. Eastern Time to discuss the Company's fiscal second quarter 2017 results. To access the live webcast, log onto Tel-Instrument's website at:
|TEL-INSTRUMENT ELECTRONICS CORP. CONDENSED CONSOLIDATED BALANCE SHEETS|
|September 30, 2016||March 31, 2016|
|Cash and cash equivalents||$||830,534||$||972,633|
|Accounts receivable, net||1,861,256||1,454,361|
|Prepaid expenses and other current assets||85,282||128,071|
|Deferred income tax asset||578,507||578,507|
|Total current assets||7,031,367||7,812,604|
|Equipment and leasehold improvements, net||152,431||193,518|
|Deferred income tax asset - non-current||1,787,622||2,065,126|
|Other long-term assets||34,158||36,871|
|LIABILITIES & STOCKHOLDERS' EQUITY|
|Current portion of long-term debt||429,660||418,255|
|Capital lease obligations - current portion||5,981||10,232|
|Accounts payable and accrued liabilities||1,723,448||2,401,500|
|Federal and state taxes payable||-||53,623|
|Deferred revenues - current portion||370,454||48,766|
|Accrued payroll, vacation pay and payroll taxes||579,578||836,589|
|Total current liabilities||3,109,121||3,768,965|
|Subordinated notes payable - related parties||-||25,000|
|Capital lease obligations - long-term||16,966||20,524|
|Deferred revenues - long-term||256,088||172,703|
|Warrant liability - long-term||165,000||1,136,203|
|Other long-term liabilities||-||7,800|
|Common stock, 4,000,000 shares authorized, par value $0.10 per share, 3,255,887 shares issued and outstanding, respectively||325,586||325,586|
|Additional paid-in capital||8,091,013||8,074,655|
|Total stockholders' equity||5,371,086||4,672,364|
|Total liabilities and stockholders' equity||$||9,005,578||$||10,108,119|
|TEL-INSTRUMENT ELECTRONICS CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)|
|Three Months Ended||Six Months Ended|
|September 30, 2016||September 30, 2015||September 30, 2016||September 30, 2015|
|Cost of sales||3,250,441||4,574,924||6,716,157||8,605,548|
|Selling, general and administrative||875,138||883,876||1,786,882||1,749,564|
|Engineering, research and development||583,771||443,656||1,168,648||935,788|
|Total operating expenses||1,458,909||1,327,532||2,955,530||2,685,352|
|Income from operations||366,679||915,934||746,711||1,373,409|
|Other income (expense):|
|Amortization of debt discount||-||-||-||-|
|Amortization of deferred financing costs||(1,357||)||(1,358||)||(2,713||)||(2,715||)|
|Change in fair value of common stock warrants||34,000||(518,588||)||251,203||(450,828||)|
|Total other expense||15,136||(545,781||)||213,157||(509,012||)|
|Income before income taxes||381,815||370,153||959,868||864,397|
|Income tax expense||109,760||170,687||277,504||385,865|
|Basic income per common share||$||0.08||$||0.06||$||0.21||$||0.15|
|Diluted income per common share||$||0.07||$||0.06||$||0.20||$||0.15|
|Weighted average shares outstanding:|
|TEL-INSTRUMENT ELECTRONICS CORP. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION (Unaudited)|
|Three Months||Three Months|
|September 30,||September 30,|
|Income tax provision||109,760||170,687|
|Depreciation and amortization||36,380||39,959|
|Amortization of deferred financing costs||1,357||1,358|
|Change on fair value of common stock warrants||(34,000)||518,588|
|Non-cash stock-based compensation||8,179||8,577|
|Non-GAAP Adjusted EBITDA||$||411,238||$||964,470|