Market Overview

Tel-Instrument Electronics Corp. Reports Financial Results for First Quarter 2018


Tel-Instrument Electronics Corp. ("Tel", "Tel-Instrument" or the
"Company") (NYSE American: TIK), a leading designer and manufacturer of
avionics test and measurement solutions, today reported its financial
results for the first quarter of fiscal year 2018.

Financial Results for First Quarter of Fiscal Year 2018

  • Revenues decreased to $3.5 million from $5.3 million in the first
    quarter of 2017.
  • Gross profit decreased to $1.2 million from $1.9 million in the first
    quarter of 2017.
  • Operating expenses decreased 8% to $706k as compared to $768k in the
    first quarter last year.
  • Litigation expenses increased to $383k, as compared to $144k in the
    first quarter of the prior fiscal year.
  • Engineering, research and development expenses increased 5% to $615k
    or 17% of revenues.
  • Operating loss was $463k compared to operating income of $380k in the
    first quarter of 2017.
  • Net loss was $286k versus net income of $410k in the first quarter of
    fiscal year 2017.

Subsequent Events

  • In July 2017, the court heard the Company's motion for reduction or
    elimination of the jury award as well as conducting a hearing as to
    possible punitive damages. The Company is currently awaiting the
    court's decision.

Quarter Ended June 30, 2017 as Compared to June 30, 2016

For the quarter ended June 30, 2017, total net sales decreased
$1,800,292 (33.7%) to $3,542,077, as compared to $5,342,369 for the
quarter ended June 30, 2016. Avionics government sales decreased
$1,899,294 (39.0%) to $2,972,326 for the quarter ended June 30, 2017, as
compared to $4,871,620 for the quarter ended June 30, 2016. The decrease
in sales is mostly attributed to the decrease in shipment of the U.S.
Army TS-4530A Kits and Sets, CRAFT and ITATS units associated with the
U.S. Navy programs, which contracts have now been completed. This
decrease is partially offset by the shipment of the T-47N and our
Precision DME ("Distance Measuring Equipment") test sets. Commercial
sales increased $90,002 (21.0%) to $569,751 for the quarter ended June
30, 2017 as compared to $470,749 for the quarter ended June 30, 2016.
This increase is attributed to the increased sales of the TR-220 and our
recently introduced TR-36.

For the quarter ended June 30, 2017, total gross margin decreased
$635,363 (33.9%) to $1,241,290, as compared to $1,876,653 for the
quarter ended June 30, 2016, primarily as a result of the lower volume
as well as labor and overhead variances as a result of the lower volume
partially offset by higher selling prices. The gross margin percentage
for the quarter ended June 30, 2017 was 35.0%, as compared to 35.1% for
the quarter ended June 30, 2016.

Selling, general and administrative expenses decreased $61,944 (8.1%) to
$706,286 for the quarter ended June 30, 2017, as compared to $768,230
for the quarter ended June 30, 2016. This decrease was primarily
attributed to lower salaries and related expenses, lower accrued profit
sharing expense and consulting expenses offset partially by higher
outside commission expenses.

Litigation expenses increased to $382,512 for the quarter ended June 30,
2017 as compared to $143,514 for the quarter ended June 30, 2016 as a
result of the trial expenses associated with the Aeroflex Wichita, Inc.
("Aeroflex") litigation.

Engineering, research and development expenses increased $30,396 (5.2%)
to $615,273 for the quarter ended June 30, 2017 as compared to $584,877
for the quarter ended June 30, 2016. The Company continues to invest in
new products by taking advantage of our CRAFT and TS-4530A technology to
develop smaller hand-held products, which will broaden our product line
for both commercial and military applications. The Company is also
developing its T-47M5 Mode 5 test set, which we believe will compete
effectively in the international market.

The Company recorded a loss from operations of $462,781 for the quarter
ended June 30, 2017, as compared to income from operations of $380,032
for the quarter ended June 30, 2016. Excluding the litigation costs, the
operating loss would have been $80,269 for the first quarter of 2018 as
compared operating income of $380,032 for the same quarter in fiscal
year 2017.

Commenting on the results, Mr. Jeffrey O'Hara, President and CEO of Tel,
stated, "The first quarter's results were impacted by lower than
expected gross margins and legal costs that approached $400k as a result
of the six week trial. Excluding these legal costs, the Company would
have reported a modest operating loss for the quarter. We continue to
aggressively pursue the international Mode 5 market and have several
pending opportunities that could turn into orders within the next 45
days. We are also in the process of rolling out a new marketing
incentive plan for our international Mode 5 customers which should drive
additional sales. New product development for our new T-47M5 IFF test
set is in the final stages, and we are already accepting and have
received orders for the T-47M5 from three different international
customers. This new test set is expected to begin shipments early in the
third quarter and should generate increased sales revenues for the
Company. We are also receiving excellent reports on our new TR-36
Nav/Comm test set from both domestic and international customers with
one major U.S. carrier ordering units in the second quarter. We are also
seeing increased market activity on our TR-220 air traffic control
("ATC") test set and we expect the commercial portion of our business to
continue to grow as a result of the 2020 FAA ADS-B mandate. The new
hand-held product is substantially completed from a mechanical
standpoint and the initial ADS-B only test set is expected to enter
production this fiscal year.

While the fiscal year 2018 revenues are predicted to decline
substantially from FY 2017 levels, and we are projecting further
decrease in the current quarter, we are forecasting a return to
operating profitability in the third and fourth quarters as revenues are
expected to rebound and gross margins should continue to improve due to
the completion of the major military programs. We are forecasting
increasing revenues and solid profitability in fiscal year 2019 when the
international and F-35 Mode 5 sales are expected in volume as well as
increasing sales from our new hand-held products. This new test set will
be half the size of competitive test sets and should do extremely well
in the marketplace. The 2018 and 2019 projections are of course
dependent on our ability to finance the appeal process or pay the final
damages award."

Concerning the current litigation, Mr. O'Hara commented, "Depending on
the outcome of hearings and the establishment of a final damages amount,
both sides have the ability to appeal the decision or the judge could
vacate the jury decision and schedule a new trial. If the judge enters a
final damages award, both sides have approximately 30 days to file an
appeal or request a new trial. The appeal process would entail posting a
bond which is expected to be in excess of $1 million. Tel believes it
has excellent grounds for appeal which would likely take several years
to complete. Tel is actively working to arrange financing to cover the
cost of the expected appeal and/or pay the final damages award depending
on the amount of the final award."

The Company encourages investors to read its full results of operations
as contained in our Quarterly Report on Form 10-Q filed on August 17,
2017 at

Conference Call

The Company will host a conference call and webcast on Thursday, August
17, 2017 at 9:00 a.m. Eastern Time to discuss the Company's fiscal first
quarter 2018 results.

To access the live webcast, log onto the Tel-Instrument Electronics'
website at

To participate in the call by phone, dial (877) 407-8035 approximately
five minutes prior to the scheduled start time. International callers
please dial (201) 689-8035.

A replay of the teleconference will be available until September 17,
2017 and may be accessed by dialing (877) 481-4010. International
callers may dial (919) 882-2331. Callers should use conference ID: 19960.

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

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.
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.





June 30,


March 31,

Current assets:
Cash and cash equivalents $ 234,804 $ 287,873
Accounts receivable, net 1,221,456 1,556,382
Inventories, net 4,165,330 4,208,179
Prepaid expenses and other current assets   77,997     188,578  
Total current assets 5,699,587 6,241,012
Equipment and leasehold improvements, net 161,411 161,427
Other long-term assets   33,509     33,509  
Total assets   5,894,507     6,435,948  
Current liabilities:
Current portion of long-term debt 186,252 291,991
Line of credit 400,000 200,000
Capital lease obligations – current portion 6,414 6,268
Accounts payable and accrued liabilities 1,875,577 2,072,955
Federal and state taxes payable 4,105 4,105
Deferred revenues – current portion 63,165 123,720
Accrued legal damages 2,800,000 2,800,000
Accrued payroll, vacation pay and payroll taxes   501,030     527,413  
Total current liabilities 5,836,543 6,026,452
Capital lease obligations – long-term 12,100 13,760
Long-term debt 534 2,124
Deferred revenues – long-term 377,603 352,973
Warrant liability   -     95,000  
Total liabilities   6,226,780     6,490,309  
Stockholders' (deficit) equity:
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 8,115,548 8,107,369
Accumulated deficit   (8,773,407 )   (8,487,316 )
Total stockholders' (deficit) equity   (332,273 )   (54,361 )
Total liabilities and stockholders' (deficit) equity $ 5,894,507   $ 6,435,948  




  Three Months Ended

June 30,


June 30,

Net sales $ 3,542,077 $ 5,342,369
Cost of sales   2,300,787     3,465,716  
Gross margin 1,241,290 1,876,653
Operating expenses:
Selling, general and administrative 706,286 768,230
Litigation costs 382,512 143,514
Engineering, research and development   615,273     584,877  
Total operating expenses   1,704,071     1,496,621  
(Loss) income from operations (462,781 ) 380,032
Other income (expense):
Proceeds from life insurance 92,678 -
Amortization of deferred financing costs (1,357 ) (1,356 )
Change in fair value of common stock warrants 95,000 217,203
Interest expense   (9,631 )   (17,826 )
Total other income (expense)   176,690     198,021  
(Loss) income before income taxes (286,091 ) 578,053
Income tax provision   -     167,744  
Net (loss) income $ (286,091 ) $ 410,309  
Net (loss) income per share:
Basic (loss) income per common share $ (0.09 ) $ 0.13  
Diluted (loss) income per common share $ (0.12 ) $ 0.10  
Weighted average shares outstanding:
Basic 3,255,887 3,255,887
Diluted 3,266,540 3,274,829

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