Giga-tronics Reports Third Quarter FY 2017 Results
February 06 2017 - 4:02PM
Giga-tronics Incorporated (Nasdaq:GIGA) reported today net sales
for the third quarter of fiscal 2017 of $3.2 million, a 29%
decrease as compared to $4.5 million for the third quarter of
fiscal 2016. The decrease in third quarter net sales over the prior
year period was primarily due to lower legacy product sales mainly
due to recent product line divestitures as well as lower sales
associated with the Company’s new Advanced Signal Generator (ASG)
product. In the third quarter of fiscal 2017 the Company recorded
$764,000 of sales associated with the ASG product compared to the
$1.3 million recorded in the third quarter of fiscal 2016. The
decrease in legacy product sales were offset by an increase of the
YIG filter shipments which started shipping in the second quarter
of fiscal 2017.
Net sales for the nine month period ended
December 24, 2016 were $11.0 million, a decrease of 7%, compared to
$11.9 million for the nine month period ended December 26, 2015.
The decrease was primarily due to lower legacy product sales
described above which was substantially offset by a $1.1 million
increase in YIG filter shipments and a $659,000 increase associated
with the ASG product.
Net loss for the third quarter of fiscal 2017
was $575,000, or $0.06 per fully diluted common share. This
compares to a net loss for the third quarter of fiscal 2016 of
$602,000, or $0.09 per fully diluted common share. Net loss for the
nine month period ended December 24, 2016 was $1.1 million, or
$0.11 per fully diluted common share. This compares to a net loss
of $2.5 million, or $0.40 per fully diluted common share for the
nine month period ended December 26, 2015. The reduction in net
loss for the third quarter of fiscal 2017 compared to the prior
year period was primarily due to lower operating expenses,
including a reduction in non-cash stock-based compensation and
lower personnel related costs as a result of the switch and legacy
product line divestitures. The lower net loss during the first nine
months of fiscal 2017 compared to the prior year period was
primarily due to an $802,000 gain associated with the sale of the
switch product line during the first quarter of fiscal 2017; lower
legacy product margins due to inventory transfers (as a result of
the switch and legacy product line divestitures); and lower
operating expenses, including lower personnel related costs due to
the divestiture of the switch and legacy product lines, a reduction
in non-cash stock-based compensation, and a reduction in consulting
and other outside services.
Non-GAAP net loss for the third quarter of
fiscal 2017 was $567,000, or $0.06 per fully diluted common share,
compared to a non-GAAP net loss for the third quarter of fiscal
2016 of $286,000, or $0.04 per fully diluted common share. Non-GAAP
net loss for the nine month period ended December 24, 2016 was
$970,000, or $0.10 per fully diluted common share, compared to a
non-GAAP net loss for the nine month period ended December 26, 2015
of $1.6 million, or $0.25 per fully diluted common share. Non-GAAP
net loss excludes non-cash expenses associated with the derivative
revaluation and discount accretion of debt and warrant agreements
as well as stock-based compensation (1).
William J. Thompson, the Company’s Acting CEO,
stated, “This quarter we shipped our first ASG Threat Emulation
System (TEmS). This product is the culmination of a partnership
that combines our unique hardware capabilities with simulation
software from a major Prime Contractor. We are encouraged by our
continued penetration in the benchtop Electronic Warfare market,
and we continue to make adjustments in the organization to optimize
the opportunities for our ASG product line as well as reduce costs
to bring the company to profitability.”
Giga-tronics will host a conference call today
at 4:30 p.m. ET to discuss the third quarter results. To
participate in the call, dial (800) 774-6070 or (630) 691-2753, and
enter PIN Code 7913548#. The call will also be broadcast over
the internet at www.gigatronics.com under "Investor
Relations." The conference call discussion reflects
management's views as of February 6, 2017.
This press release contains forward-looking
statements concerning operating results, future orders, and sales
of new products, shippable backlog within a year, long term growth
and margin, expected shipments, product line sales, and customer
acceptance of new products. Actual results may differ
significantly due to risks and uncertainties, such as: delays in
customer orders for the new ASG and our ability to manufacture it;
receipt or timing of future orders, cancellations or deferrals of
existing or future orders; our need for additional financing;
results of pending or threatened litigation; the volatility in the
market price of our common stock; and general market
conditions. For further discussion, see Giga-tronics' most
recent annual report on Form 10-K for the fiscal year ended March
26, 2016 Part I, under the heading "Risk Factors" and Part II,
under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(1) Non-GAAP net loss and non-GAAP loss per
common share, differ from net loss and loss per common share
determined in accordance with GAAP (Generally Accepted Accounting
Principles in the United States). Non-GAAP net loss and non-GAAP
loss per common share exclude the effects of the revaluation of the
derivative liability as well as the accretion of the discounts on
debt notes entered into in March and June of 2014. These numbers
also exclude the impact of Stock Based Compensation for all periods
presented. These non-GAAP financial measures are not prepared in
accordance with GAAP and should not be considered as a substitute
for, or superior to, measures of financial performance prepared in
accordance with GAAP. A schedule reconciling non-GAAP financial
measures is included in the financial information appearing at the
end of this press release. Giga-tronics utilizes both GAAP and
non-GAAP financial measures to assess what it believes to be its
core operating performance to evaluate and manage its internal
business and to assist in making financial operating decisions.
Giga-tronics believes that the inclusion of non-GAAP financial
measures, together with GAAP measures, provides investors with an
alternative presentation useful to investors' understanding of
Giga-tronics' core operating results and trends. Additionally,
Giga-tronics believes that the inclusion of non-GAAP measures,
together with GAAP measures, provides investors with an additional
dimension of comparability to similar companies. However, investors
should be aware that non-GAAP financial measures utilized by other
companies are not likely to be comparable in most cases to the
non-GAAP financial measures used by Giga-tronics.
|
GIGA-TRONICS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) |
(In thousands, except share data) |
|
December 24, 2016 |
|
March 26, 2016 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash-equivalents |
|
$ |
1,640 |
|
|
$ |
1,331 |
|
Trade
accounts receivable, net of allowance |
|
|
|
|
of $45,
respectively |
|
|
2,534 |
|
|
|
2,129 |
|
Inventories, net |
|
|
6,088 |
|
|
|
5,694 |
|
Prepaid
expenses and other current assets |
|
|
150 |
|
|
|
318 |
|
Total current
assets |
|
|
10,412 |
|
|
|
9,472 |
|
Property and equipment,
net |
|
|
602 |
|
|
|
837 |
|
Other long term
assets |
|
|
8 |
|
|
|
8 |
|
Capitalized software
development costs |
|
|
1,176 |
|
|
|
876 |
|
Total assets |
|
$ |
12,198 |
|
|
$ |
11,193 |
|
Liabilities and
shareholders' equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Line of
credit |
|
$ |
704 |
|
|
$ |
800 |
|
Current
portion of long term debt, net of discount and issuance costs |
|
|
10 |
|
|
|
370 |
|
Accounts
payable |
|
|
1,287 |
|
|
|
1,924 |
|
Accrued
payroll and benefits |
|
|
423 |
|
|
|
647 |
|
Deferred
revenue |
|
|
6,463 |
|
|
|
2,804 |
|
Deferred
rent |
|
|
— |
|
|
|
110 |
|
Capital
lease obligations |
|
|
49 |
|
|
|
44 |
|
Deferred
liability related to asset sale |
|
|
375 |
|
|
|
375 |
|
Other
current liabilities |
|
|
417 |
|
|
|
621 |
|
Total current
liabilities |
|
|
9,728 |
|
|
|
7,695 |
|
Warrant liability, at
estimated fair value |
|
|
217 |
|
|
|
353 |
|
Long term obligations -
capital lease |
|
|
128 |
|
|
|
165 |
|
Total liabilities |
|
|
10,073 |
|
|
|
8,213 |
|
|
|
|
|
|
Shareholders'
equity: |
|
|
|
|
Convertible preferred
stock of no par value; |
|
|
|
|
Authorized - 1,000,000 shares |
|
|
|
|
Series A - designated 250,000 shares; no shares at December 24,
2016 |
|
|
and March
26, 2016 issued and outstanding |
|
|
— |
|
|
|
— |
|
Series B, C, D - designated 19,500 shares; 18,533.31 shares
at |
|
|
|
|
|
|
|
December 24, 2016 and March 26, 2016 issued and
outstanding; |
|
|
|
|
|
|
|
(liquidation preference of $3,540 at December 24, 2016 and
March 26, |
|
|
|
|
|
|
|
2016) |
|
2,911 |
|
|
|
2,911 |
|
Common stock of no par
value; |
|
|
|
|
Authorized
- 40,000,000 shares; 9,549,703 shares at December 24, 2016 |
|
|
|
and March
26, 2016 issued and outstanding |
|
24,322 |
|
|
|
24,104 |
|
Accumulated
deficit |
|
|
(25,108 |
) |
|
|
(24,035 |
) |
Total shareholders'
equity |
|
|
2,125 |
|
|
|
2,980 |
|
Total liabilities and
shareholders' equity |
|
$ |
12,198 |
|
|
$ |
11,193 |
|
|
|
|
|
|
|
|
|
|
|
GIGA-TRONICS INCORPORATED |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED) |
|
|
|
|
Three Month Periods Ended |
|
Nine Month Periods Ended |
|
|
|
|
December 24, |
|
|
December 26, |
|
|
December 24, |
|
|
December 26, |
|
|
(In thousands except per share data) |
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Net
sales |
|
$ |
3,202 |
|
|
$ |
4,483 |
|
|
$ |
11,037 |
|
|
$ |
11,921 |
|
|
Cost of
sales |
|
|
2,108 |
|
|
|
2,868 |
|
|
|
7,788 |
|
|
|
7,701 |
|
|
Gross margin |
|
|
1,094 |
|
|
|
1,615 |
|
|
|
3,249 |
|
|
|
4,220 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
Engineering |
|
|
627 |
|
|
|
614 |
|
|
|
1,724 |
|
|
|
2,179 |
|
|
Selling, general and administrative |
|
|
1,077 |
|
|
|
1,417 |
|
|
|
3,429 |
|
|
|
4,221 |
|
|
Total
operating expenses |
|
|
1,704 |
|
|
|
2,031 |
|
|
|
5,153 |
|
|
|
6,400 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(610 |
) |
|
|
(416 |
) |
|
|
(1,904 |
) |
|
|
(2,180 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(loss)
on adjustment of derivative liability to fair value |
|
|
62 |
|
|
|
(98 |
) |
|
|
136 |
|
|
|
(51 |
) |
|
Gain on
sale of product line |
|
|
— |
|
|
|
— |
|
|
|
802 |
|
|
|
— |
|
|
Interest
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
(24 |
) |
|
|
(54 |
) |
|
|
(84 |
) |
|
|
(164 |
) |
Interest
expense from accretion of loan discount |
|
|
(3 |
) |
|
|
(34 |
) |
|
|
(21 |
) |
|
|
(140 |
) |
Total
interest expense |
|
|
(27 |
) |
|
|
(88 |
) |
|
|
(105 |
) |
|
|
(304 |
) |
|
Loss before income taxes |
|
|
(575 |
) |
|
|
(602 |
) |
|
|
(1,071 |
) |
|
|
(2,535 |
) |
|
Provision
for income taxes |
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
Net
Loss |
|
$ |
(575 |
) |
|
$ |
(602 |
) |
|
$ |
(1,073 |
) |
|
$ |
(2,537 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common share – basic |
|
$ |
(0.06 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.40 |
) |
|
Loss per common share – diluted |
|
$ |
(0.06 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.40 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in per share
calculation: |
|
|
|
|
|
|
|
|
Basic |
|
|
9,550 |
|
|
|
6,484 |
|
|
|
9,550 |
|
|
|
6,402 |
|
|
Diluted |
|
|
9,550 |
|
|
|
6,484 |
|
|
|
9,550 |
|
|
|
6,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET LOSS TO NON-GAAP NET
LOSS |
(Unaudited in thousands, except per share
data) |
|
|
|
Three Month Periods Ended |
|
|
|
Nine Month Periods Ended |
|
|
|
|
December 24, |
|
|
|
December 26, |
|
|
|
December 24, |
|
|
|
December 26, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
Net
loss |
|
$ |
(575 |
) |
|
$ |
(602 |
) |
|
$ |
(1,073 |
) |
|
$ |
(2,537 |
) |
Adjustments to
reconcile net loss to non-GAAP net loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
based compensation expense |
|
|
67 |
|
|
|
184 |
|
|
|
218 |
|
|
|
717 |
|
(Gain)/loss on adjustment of derivative liability to fair
value |
|
|
(62 |
) |
|
|
98 |
|
|
|
(136 |
) |
|
|
51 |
|
Accretion
of loan discount |
|
|
3 |
|
|
|
34 |
|
|
|
21 |
|
|
|
140 |
|
Non-GAAP net loss |
|
$ |
(567 |
) |
|
$ |
(286 |
) |
|
$ |
(970 |
) |
|
$ |
(1,629 |
) |
Non-GAAP loss per
common share-basic |
|
$ |
(0.06 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.25 |
) |
Non-GAAP loss per
common share- diluted |
|
$ |
(0.06 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.10 |
) |
|
$ |
(0.25 |
) |
Shares used in the
calculation of non-GAAP loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
9,550 |
|
|
|
6,484 |
|
|
|
9,550 |
|
|
|
6,402 |
|
Diluted |
|
|
9,550 |
|
|
|
6,484 |
|
|
|
9,550 |
|
|
|
6,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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