Giga-tronics Reports Results for the First Quarter FY 2018
August 04 2017 - 4:02PM
Giga-tronics Incorporated (Nasdaq:GIGA) (the “Company”) reported
today net sales for the first fiscal quarter ended June 24, 2017 of
$2.0 million, a 41% decrease as compared to $3.4 million for the
first quarter of fiscal 2017. The decrease in first quarter fiscal
2018 sales was primarily attributable to a $1.8 million decrease
from the Company’s Giga-tronics division, from $2.1 million in
fiscal 2017 to $297,000 in fiscal 2018, due to recent legacy
product line divestitures as well as a decrease in ASG product
shipments. In the first quarter of fiscal 2018, the Company
recorded $200,000 of sales associated with the ASG product compared
to $674,000 recorded in the first quarter of fiscal 2017. These
decreases were partially offset by a $377,000 increase in net sales
from the Company's Microsource business unit (Microsource) from
$1.3 million in fiscal 2017 to $1.7 million in fiscal 2018, which
was primarily due to an increase in YIG RADAR filter shipments and
completion of certain related nonrecurring engineering (NRE)
services.
Net loss for the first quarter of fiscal 2018
was $1.3 million, or $0.13 per fully diluted common share, compared
to $102,000, or $0.01 for the first quarter of fiscal 2017.
The increase in net loss is primarily due to the lower net sales
described above. The net loss recorded in the first quarter of
fiscal 2017 included a gain of $802,000 associated with the
Company’s sale of the Switch product line.
Due to variability in the quarter-to-quarter
bookings for the ASG product along with timing of expected large
YIG filter contracts, the Company entered into a new $1.5 million
term loan agreement with Partners for Growth LLP (PFG) which was
entirely funded during April 2017. The loan has a two-year term,
with interest only payments for the term of the loan. However, as
of the end of the first quarter of fiscal 2018, the Company was not
in compliance with certain financial covenants on the loan. On
August 2, 2017, the Company and PFG entered into a short-term
forbearance arrangement (through the end of August) with respect to
such noncompliance. No assurance can be given that the Company will
be able to comply with the terms of the forbearance agreement, or
that PFG will agree to a further extension of forbearance at the
end of the initial forbearance period. The Company will most likely
be required to raise additional capital to rectify the
noncompliance. No assurance can be given that the Company
will be able to raise sufficient capital on a timely basis.
The Company experienced delays with ASG orders
in the first quarter ended June 24, 2017, however, the Company
announced today that it had received one of its expected follow on
orders from the United States Navy for its Real-Time Threat
Emulation System (Real-Time TEmS). The current order, worth $1.7
million, is a combination of its new Advanced Signal Generator
Hardware Platform, along with software developed and licensed to
the Company from a major aerospace and Defense Company. The order
also includes integrating the Real-Time TEmS product with
additional third party hardware and software for the customer,
along with an upgrade to a unit which was shipped in the fourth
quarter of fiscal 2017. The Company also announced today that it
has received an additional $471,000 order extending ongoing
production of its high performance YIG filters for a major
aerospace company. The Company expects to fulfill the combined
orders, worth approximately $2.2 million in the current fiscal
year.
Suresh Nair, the Company’s Co-CEO stated, “As
announced previously, we expected revenue for the quarter to be
significantly below normal levels. While the Company
successfully increased shipments of RADAR filters, it was not able
to completely offset the shortfall from the lack of backlog for our
Advanced Signal Generators.”
John Regazzi, Co-CEO of Giga-tronics, said “This
repeat order for our Real-Time Threat Emulation System confirms its
importance to the US Navy for their current and future EW
programs. We are committed to supporting the U.S. Navy as they
further deploy our solution for testing EW systems and we are
pleased to be selected as a supplier of advanced emulation
equipment for their verification labs.”
Giga-tronics will host a conference call today
at 4:30 p.m. ET to discuss the first quarter results. To
participate in the call, dial (888) 517-2513 or (847) 619-6533, and
enter PIN Code 7310299#. 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 August 4, 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: uncertainty
as to the company’s ability to continue as a going concern; 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
25, 2017 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."
GIGA-TRONICS INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) |
(In thousands, except share data) |
|
June 24, 2017 |
|
March 25, 2017 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash-equivalents |
|
$ |
1,137 |
|
|
$ |
1,421 |
|
Trade
accounts receivable, net of allowance of $45, respectively |
|
|
748 |
|
|
|
954 |
|
Inventories, net |
|
|
4,989 |
|
|
|
4,811 |
|
Prepaid
expenses and other current assets |
|
|
377 |
|
|
|
452 |
|
Total current
assets |
|
|
7,251 |
|
|
|
7,638 |
|
Property and equipment,
net |
|
|
1,052 |
|
|
|
528 |
|
Other long term
assets |
|
|
175 |
|
|
|
175 |
|
Capitalized software
development costs |
|
|
582 |
|
|
|
733 |
|
Total assets |
|
$ |
9,060 |
|
|
$ |
9,074 |
|
Liabilities and
shareholders' equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Line of
credit |
|
$ |
582 |
|
|
$ |
582 |
|
Current
portion of long term debt, net of discount and issuance costs |
|
|
1,315 |
|
|
|
— |
|
Accounts
payable |
|
|
666 |
|
|
|
1,107 |
|
Accrued
payroll and benefits |
|
|
427 |
|
|
|
583 |
|
Deferred
revenue |
|
|
3,447 |
|
|
|
3,614 |
|
Capital
lease obligations |
|
|
51 |
|
|
|
50 |
|
Deferred
liability related to asset sale |
|
|
375 |
|
|
|
375 |
|
Equity
forward |
|
|
46 |
|
|
|
— |
|
Other
current liabilities |
|
|
710 |
|
|
|
707 |
|
Total current
liabilities |
|
|
7,619 |
|
|
|
7,018 |
|
Warrant liability, at
estimated fair value |
|
|
222 |
|
|
|
222 |
|
Long term deferred
rent |
|
|
451 |
|
|
|
— |
|
Long term obligations -
capital lease |
|
|
100 |
|
|
|
114 |
|
Total liabilities |
|
|
8,392 |
|
|
|
7,354 |
|
|
|
|
|
|
Shareholders'
equity: |
|
|
|
|
Convertible preferred
stock of no par value; |
|
|
|
|
Authorized - 1,000,000 shares |
|
|
|
|
Series A
- designated 250,000 shares; no shares at June 24, 2017 and March
25, 2017 issued and outstanding |
|
|
— |
|
|
|
— |
|
Series B,
C, D - designated 19,500 shares; 18,533.31 shares at June 24, 2017
and March 25, 2017 issued and outstanding; (liquidation preference
of $3,540 at June 24, 2017 and March 25, 2017) |
|
|
2,911 |
|
|
|
2,911 |
|
Common stock of no par
value; |
|
|
|
|
Authorized
- 40,000,000 shares; 10,139,653 shares at June 24, 2017 and
9,594,203 at March 25, 2017 issued and outstanding |
|
24,596 |
|
|
|
24,390 |
|
Accumulated
deficit |
|
|
(26,839 |
) |
|
|
(25,581 |
) |
Total shareholders'
equity |
|
|
668 |
|
|
|
1,720 |
|
Total liabilities and
shareholders' equity |
|
$ |
9,060 |
|
|
$ |
9,074 |
|
GIGA-TRONICS INCORPORATEDCONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) |
|
|
Three Month Periods Ended |
|
June 24, |
June 25, |
(In
thousands, except per share data) |
|
|
2017 |
|
|
|
2016 |
|
Net
sales |
|
$ |
1,991 |
|
|
$ |
3,442 |
|
Cost of sales |
|
|
1,525 |
|
|
|
2,517 |
|
Gross
margin |
|
|
466 |
|
|
|
925 |
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
Engineering |
|
|
452 |
|
|
|
530 |
|
Selling,
general and administrative |
|
|
1,171 |
|
|
|
1,305 |
|
Total operating
expenses |
|
|
1,623 |
|
|
|
1,835 |
|
|
|
|
|
|
Operating
loss |
|
|
(1,157 |
) |
|
|
(910 |
) |
|
|
|
|
|
Gain on sale of product
line |
|
|
— |
|
|
|
802 |
|
Gain/(loss) on
adjustment of derivative liability to fair value |
|
|
— |
|
|
|
46 |
|
Interest expense: |
|
|
|
|
Interest
expense, net |
|
|
(79 |
) |
|
|
(29 |
) |
Interest
expense from accretion of loan discount |
|
|
(22 |
) |
|
|
(11 |
) |
Total interest expense,
net |
|
|
(101 |
) |
|
|
(40 |
) |
Loss before
income taxes |
|
|
(1,258 |
) |
|
|
(102 |
) |
Provision for income
taxes |
|
|
— |
|
|
|
— |
|
Net
loss |
|
$ |
(1,258 |
) |
|
$ |
(102 |
) |
|
|
|
|
|
Loss per common
share – basic |
|
$ |
(0.13 |
) |
|
$ |
(0.01 |
) |
Loss per common
share – diluted |
|
$ |
(0.13 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
Weighted average common shares used in per share
calculation:
|
|
|
|
Basic |
|
|
9,715 |
|
|
|
9,550 |
|
Diluted |
|
|
9,715 |
|
|
|
9,550 |
|
Contact: Temi Oduozor
Corporate Controller
toduozor@gigatronics.com
(925) 328-4650
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