Giga-tronics Incorporated (Nasdaq:GIGA) (the “Company”) reported
today net sales for the fourth fiscal quarter ended March 25, 2017
of $5.2 million, a 93% increase as compared to $2.7 million for the
fourth quarter of fiscal 2016. The increase in fourth quarter net
sales over the prior year period was primarily due to the
fulfillment of a $3.3 million order from the United States Navy for
the Company’s Real-Time Threat Emulation System, part of the
Company’s new Advanced Signal Generator (ASG) product line.
Net sales for the fiscal year ended March 25,
2017 were $16.3 million, an increase of 12%, compared to $14.6
million for the fiscal year ended March 26, 2016. The Company's
Microsource business unit (Microsource) saw an increase of
approximately $2.3 million in net sales, from $5.9 million in
fiscal 2016 to $8.2 million in fiscal 2017. The increase in net
sales for Microsource over the prior fiscal year was primarily due
to an increase in YIG RADAR filter shipments and completion of
certain related nonrecurring engineering (NRE) services. The
increase in Microsource net sales was partially offset by a
$700,000 decrease from the Giga-tronics division, from $8.7 million
in fiscal 2016 to $8.0 million in fiscal 2017. The decrease in net
sales for the Giga-tronics division over the prior fiscal year was
primarily due to lower legacy product sales mainly due to recent
product line divestitures. The decrease in legacy product sales
were partially offset by an increase in ASG product shipments. In
fiscal 2017, the Company recorded $5.2 million of sales associated
with the ASG product compared to $1.8 million recorded in fiscal
2016.
Net loss for the fourth quarter of fiscal 2017
was $473,000, or $0.05 per fully diluted common share. This
compares to a net loss for the fourth quarter of fiscal 2016 of
$1.6 million, or $0.18 per fully diluted common share. Net loss for
the fiscal year ended March 25, 2017 was $1.5 million, or $0.16 per
fully diluted common share. This compares to a net loss of $4.1
million, or $0.59 per fully diluted common share for the fiscal
year ended March 26, 2016. The reduction in net loss for the fourth
quarter of fiscal 2017 compared to the fourth quarter of fiscal
2016 was primarily due to the higher net sales reported for the
quarter. The lower net loss during the fiscal year ended March 25,
2017 compared to the prior fiscal year was primarily due to 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 $802,000 gain associated
with the sale of the switch product line during the first quarter
of fiscal 2017.
Non-GAAP net loss for the fourth quarter of
fiscal 2017 was $400,000, or $0.04 per fully diluted common share,
compared to a non-GAAP net loss for the fourth quarter of fiscal
2016 of $1.4 million, or $0.16 per fully diluted common share.
Non-GAAP net loss for the fiscal year ended March 25, 2017 was $1.4
million, or $0.14 per fully diluted common share, compared to a
non-GAAP net loss for the fiscal year ended March 26, 2016 of $3.0
million, or $0.43 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, “We had excellent year-over-year revenue growth for our ASG
product, driven by the first shipments of our new product line to
the US Navy. We are expecting to approximately double our ASG
product line revenue in FY18, and we are hopeful that the Navy will
be a substantial source of that revenue growth. However,
despite our optimism for our ASG products, we acknowledge that
recent bookings have been disappointing, with no ASG-related
bookings to date in calendar 2017. The ASG product line had an
average selling price (ASP) of approximately $1M in FY17, which is
significantly higher than historical ASPs from our legacy products.
We believe that this increased ASP can to lead to significant
differences in ASG bookings from one quarter to the next along with
longer sales cycles.”
The Company exited the fourth quarter with $11.4
million in total backlog. However, variable
quarter-to-quarter bookings for the ASG product along with timing
of expected large YIG filter contracts will result in lower net
sales for the current quarter compared to the fourth quarter of
fiscal 2017. The Company anticipates its net sales for the first
quarter of fiscal 2018 which ends June 24, 2017 to be in the range
of $1.3 million to $1.7 million, depending on timing of
shipments.
In response to the absence of ASG orders thus
far in 2017, which is expected to be short-term, Dr. Thompson
stated, “As we continue to pursue opportunities to grow our new
product revenue, we have made substantial strides in cutting costs
to bring our expenses more in-line with the revenues that we
believe are achievable in the near-term.
“Some of our recent expense cuts represent
long-term changes, notably our first quarter FY18 move to a new
facility in Dublin, California which is roughly half the size of
the prior outdated San Ramon facility. During the first quarter, we
also transitioned to an outsourced payroll, benefits, and HR
provider which is expected to further reduce our costs. We
also recently implemented a temporary four day work week for the
summer months to further conserve our cash as we await specific
anticipated large orders for the ASG product line and additional
contracts for YIG filter products destined for fourth generation
U.S.-designed fighter aircraft.” The
Company also announced certain changes within its executive
leadership team, effective today. For personal reasons, Joey
Thompson is stepping down from the Acting CEO role and will instead
be named Executive Chairman. This change will remove Dr.
Thompson from day-to-day responsibilities within the Company. In
his new role, he is expected to continue to support the management
team with the institutional knowledge gained since last August.
The Company further announced today that John
Regazzi and Suresh Nair will be named Co-Chief Executive
Officers. Mr. Regazzi will primarily focus on product
development and strategic marketing issues. Mr. Nair, who was the
Company’s Vice President of Operations until accepting this new
role, will primarily focus on operational issues and driving the
metrics necessary to achieve profitability. Dr. Thompson said,
“When I accepted the role of Acting CEO, it was expected to be a
temporary position to allow John to focus on technical issues
associated with the ASG product platform. John and Suresh make a
great team. While it is uncommon to have Co-CEOs, the Board of
Directors felt that their complementary skills provide an excellent
solution to leading the Company forward.”
Suresh Nair was quoted as saying, “These are
challenging but exciting times for us. We have built a solid team
over the past year and now have good visibility on the runway ahead
of us. We have executed significant process changes over the past
year which have translated into positive improvements to our
metrics for FY17. We believe this should be reflected in an
improved bottom line for FY18. I appreciate Dr. Thompson’s and the
Board of Directors confidence in me, and I look forward to working
with John in leading Giga-tronics on its new journey.”
John Regazzi agreed, saying, “I very much
appreciate Dr. Thompson’s leadership of the Company this past year,
which has allowed me to focus on completing the open technical
issues associated with the ASG product and to be involved with the
Company’s strategic marketing efforts. Mr. Regazzi concluded, “I
look forward to working with Suresh in leading Giga-tronics back to
profitability”
Finally, in light of the longer than anticipated
procurement cycle for the ASG product, the Company’s Board of
Directors is in the process of reviewing strategic alternatives in
an attempt to enhance shareholder value, including a possible sale,
merger, spin-off or other separation of a selected business or
other form of business combination or strategic transaction. James
Kochman, Managing Director of Alliant Partners, LLC, is serving as
the Company’s financial advisor in connection with this review.
The Company’s Board of Directors has not yet set
a timetable for the strategic review process. Further, the Board of
Directors has not made a decision to pursue any particular
transaction. There can be no assurance that the process will result
in the consummation of any transaction or, if a transaction is
undertaken, as to its terms, structure or timing. The Company does
not intend to disclose or comment on further developments regarding
the review of strategic alternatives unless and until the Board of
Directors approves a specific action or otherwise concludes its
review.
Giga-tronics will host a conference call today
at 4:30 p.m. ET to discuss the fourth quarter results. To
participate in the call, dial (888) 517-2458 or (847) 413-3538, and
enter PIN Code 5478108#. 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 June 20, 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; uncertainty as to the
company’s ability to continue as a going concern, 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) |
|
March 25, 2017 |
|
March 26, 2016 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and
cash-equivalents |
|
$ |
1,421 |
|
|
$ |
1,331 |
|
Trade
accounts receivable, net of allowance |
|
|
|
|
of $45,
respectively |
|
|
954 |
|
|
|
2,129 |
|
Inventories, net |
|
|
4,811 |
|
|
|
5,694 |
|
Prepaid
expenses and other current assets |
|
|
452 |
|
|
|
318 |
|
Total current
assets |
|
|
7,638 |
|
|
|
9,472 |
|
Property and equipment,
net |
|
|
528 |
|
|
|
837 |
|
Other long term
assets |
|
|
175 |
|
|
|
8 |
|
Capitalized software
development costs |
|
|
733 |
|
|
|
876 |
|
Total assets |
|
$ |
9,074 |
|
|
$ |
11,193 |
|
Liabilities and
shareholders' equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Line of
credit |
|
$ |
582 |
|
|
$ |
800 |
|
Current
portion of long term debt, net of discount and issuance costs |
|
|
— |
|
|
|
370 |
|
Accounts
payable |
|
|
1,107 |
|
|
|
1,924 |
|
Accrued
payroll and benefits |
|
|
583 |
|
|
|
647 |
|
Deferred
revenue |
|
|
3,614 |
|
|
|
2,804 |
|
Deferred
rent |
|
|
— |
|
|
|
110 |
|
Capital
lease obligations |
|
|
50 |
|
|
|
44 |
|
Deferred
liability related to asset sale |
|
|
375 |
|
|
|
375 |
|
Other
current liabilities |
|
|
707 |
|
|
|
621 |
|
Total current
liabilities |
|
|
7,018 |
|
|
|
7,695 |
|
Warrant liability, at
estimated fair value |
|
|
222 |
|
|
|
353 |
|
Long term obligations -
capital lease |
|
|
114 |
|
|
|
165 |
|
Total liabilities |
|
|
7,354 |
|
|
|
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 March 25,
2017 |
|
|
and March
26, 2016 issued and outstanding |
|
|
— |
|
|
|
— |
|
Series B, C, D - designated 19,500 shares; 18,533.31 shares at
March 25, 2017 and March 26, 2016 issued and outstanding;
(liquidation preference of $3,540 at March 25, 2017 and March 26,
2016) |
|
2,911 |
|
|
|
2,911 |
|
Common stock of no par
value; |
|
|
|
|
Authorized
- 40,000,000 shares; 9,594,203 shares at March 25, 2017 |
|
|
|
and
9,549,703 at March 26, 2016 issued and outstanding |
|
24,390 |
|
|
|
24,104 |
|
Accumulated
deficit |
|
|
(25,581 |
) |
|
|
(24,035 |
) |
Total shareholders'
equity |
|
|
1,720 |
|
|
|
2,980 |
|
Total liabilities and
shareholders' equity |
|
$ |
9,074 |
|
|
$ |
11,193 |
|
|
|
|
|
|
|
|
|
|
|
GIGA-TRONICS INCORPORATED |
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED) |
|
|
|
Three Month Periods Ended |
|
Twelve Month Periods Ended |
|
|
|
March 25, |
|
|
March 26, |
|
|
March 25, |
|
|
March 26, |
|
|
(In
thousands except per share data) |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Net
sales |
|
$ |
5,230 |
|
|
$ |
2,675 |
|
|
$ |
16,267 |
|
|
$ |
14,596 |
|
|
Cost of
sales |
|
|
3,928 |
|
|
|
2,274 |
|
|
|
11,716 |
|
|
|
9,975 |
|
|
Gross margin |
|
|
1,302 |
|
|
|
401 |
|
|
|
4,551 |
|
|
|
4,621 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
Engineering |
|
|
530 |
|
|
|
627 |
|
|
|
2,254 |
|
|
|
2,806 |
|
|
Selling, general and administrative |
|
|
1,212 |
|
|
|
1,301 |
|
|
|
4,641 |
|
|
|
5,522 |
|
|
Total
operating expenses |
|
|
1,742 |
|
|
|
1,928 |
|
|
|
6,895 |
|
|
|
8,328 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(440 |
) |
|
|
(1,527 |
) |
|
|
(2,344 |
) |
|
|
(3,707 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(loss)
on adjustment of derivative liability to fair value |
|
|
(5 |
) |
|
|
39 |
|
|
|
131 |
|
|
|
(12 |
) |
|
Gain on
sale of product line |
|
|
— |
|
|
|
— |
|
|
|
802 |
|
|
|
— |
|
|
Interest
expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
|
(28 |
) |
|
|
|
(53 |
) |
|
|
|
(111 |
) |
|
|
|
(218 |
) |
|
Interest
expense from accretion of loan discount |
|
|
|
— |
|
|
|
|
(26 |
) |
|
|
|
(22 |
) |
|
|
|
(165 |
) |
|
Total interest
expense |
|
|
|
(33 |
) |
|
|
|
(79 |
) |
|
|
|
(133 |
) |
|
|
|
(383 |
) |
|
Loss before income taxes |
|
|
(473 |
) |
|
|
(1,567 |
) |
|
|
(1,544 |
) |
|
|
(4,102 |
) |
|
Provision
for income taxes |
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
Net
Loss |
|
$ |
(473 |
) |
|
$ |
(1,567 |
) |
|
$ |
(1,546 |
) |
|
$ |
(4,104 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss per common share – basic |
|
$ |
(0.05 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.59 |
) |
|
Loss per common share – diluted |
|
$ |
(0.05 |
) |
|
$ |
(0.18 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.59 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in per share
calculation: |
|
|
|
|
|
|
|
|
Basic |
|
|
9,550 |
|
|
|
8,558 |
|
|
|
9,550 |
|
|
|
6,941 |
|
|
Diluted |
|
|
9,550 |
|
|
|
8,558 |
|
|
|
9,550 |
|
|
|
6,941 |
|
|
|
RECONCILIATION OF NET LOSS TO NON-GAAP NET
LOSS |
(Unaudited in thousands, except per share
data) |
|
|
Three Month Periods Ended |
|
Twelve Month Periods Ended |
|
|
|
|
|
March 25, |
|
|
|
March 26, |
|
|
|
|
March 25, |
|
|
|
March 26, |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
2017 |
|
|
|
2016 |
|
Net
loss |
|
$ |
(473 |
) |
|
$ |
(1,567 |
) |
|
$ |
(1,546 |
) |
|
$ |
(4,104 |
) |
Adjustments to
reconcile net loss to non-GAAP net loss: |
|
|
|
|
|
|
|
|
Stock
based compensation expense |
|
|
68 |
|
|
|
208 |
|
|
|
286 |
|
|
|
925 |
|
(Gain)/loss on adjustment of derivative liability to fair
value |
|
|
5 |
|
|
|
(39 |
) |
|
|
(131 |
) |
|
|
12 |
|
Accretion
of loan discount |
|
|
— |
|
|
|
26 |
|
|
|
22 |
|
|
|
165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net loss |
|
$ |
(400 |
) |
|
$ |
(1,372 |
) |
|
$ |
(1,369 |
) |
|
$ |
(3,002 |
) |
Non-GAAP loss per
common share-basic |
|
$ |
(0.04 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.43 |
) |
Non-GAAP loss per
common share- diluted |
|
$ |
(0.04 |
) |
|
$ |
(0.16 |
) |
|
$ |
(0.14 |
) |
|
$ |
(0.43 |
) |
Shares used in the
calculation of non-GAAP loss per share: |
|
|
|
|
|
|
|
|
Basic |
|
|
9,550 |
|
|
|
8,558 |
|
|
|
9,550 |
|
|
|
6,941 |
|
Diluted |
|
|
9,550 |
|
|
|
8,558 |
|
|
|
9,550 |
|
|
|
6,941 |
|
Contact:
Temi Oduozor
Corporate Controller
toduozor@gigatronics.com
(925) 328-4650
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