Giga-tronics Reports Second Quarter FY 2018 Results

DUBLIN, Calif., Nov. 14, 2017 (GLOBE NEWSWIRE) — Giga-tronics Incorporated (OTCQB:GIGA) (the “Company”) reported today net sales for the second quarter of fiscal 2018 of $2.2 million, a 49% decrease as compared to $4.4 million for the second quarter of fiscal 2017. Net sales for the six-month period ended September 30, 2017 were $4.2 million, a decrease of 46%, compared to $7.8 million for the six-month period ended September 24, 2016. The decreases in net sales for both periods were primarily due to lower sales associated with the legacy products (sold to Astronics in June 2016); a decrease associated with the Company’s new ASG product; a decrease primarily associated with the winding down of non-recurring engineering services as well as lower product revenues following the completion of the $4.5 million order for YIG RADAR filters in the first quarter of fiscal 2018.

Net loss for the second quarter of fiscal 2018 was $1.1 million, or $0.11 per fully diluted common share. This compares to a net loss for the second quarter of fiscal 2017 of $396,000, or $0.04 per fully diluted common share. Net loss for the six month period ended September 30, 2017 was $2.3 million, or $0.24 per fully diluted common share. This compares to a net loss of $498,000, or $0.05 per fully diluted common share for the six month period ended September 24, 2016. The increase in net loss for the second quarter of fiscal 2018 compared to the same prior year period was primarily due to the lower net sales in fiscal 2018. The increase in net loss for the six month period ended September 30, 2017 was primarily due to the lower net sales in fiscal 2018 as well as the $802,000 gain associated with the sale of the Switch product line in the first quarter of fiscal 2017.

The Company is also providing guidance for the third quarter of fiscal 2018, which will end on December 30, 2017. Net sales for the third quarter is expected to be in the range of $2.9 million to $3.1 million, compared to $2.0 million and $2.2 million reported in the first and second quarters of fiscal 2018, respectively, and the $3.2 million reported in the third quarter of fiscal 2017. The foregoing guidance is based on management’s current review of operations for the third quarter of FY 2018, and remain subject to change based on actual results, and subject to review by the Company’s independent accountants.

John Regazzi, the Company’s co-CEO said, “As announced previously, revenue for the second quarter was expected to be lower than anticipated due to the lack of new order bookings for the Advanced Signal Generator between the fourth quarter of fiscal 2017 and the first quarter of fiscal 2018. As compared to the second quarter of last year, revenues were also further adversely impacted by the delay in the receipt of the next YIG RADAR filter order from the prime contractor. Although we have subsequently received the follow-on YIG RADAR contract, we don’t expect to be generating revenue from this order until the fourth quarter of the current fiscal year.”

Suresh Nair, co-CEO of Giga-tronics stated, “The receipt of the YIG RADAR follow-on contract coupled with the delivery of the third Threat Emulation System to the Navy is expected to drive better results for our second half. In addition, the settlement of the dispute between Giga-tronics and Spanawave that arose over the acquisition of the legacy power measurement business will allow us to finally recognize a $375,000 gain from the sale of those assets during the third quarter. Together, we anticipate these events will improve our operating results substantially in the third quarter of fiscal 2018.” 

Giga-tronics will host a conference call today at 4:30 p.m. ET to discuss the second quarter results. To participate in the call, dial (888) 517-2458 or (847) 413-3538, and enter PIN Code 6747 975#. 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 November 14, 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)   September 30,
2017
    March 25,
2017
 
Assets                
Current assets:                
Cash and cash-equivalents   $ 542       $ 1,421    
Trade accounts receivable, net of allowance of $11 and $45, respectively     932         954    
Inventories, net     5,200         4,811    
Prepaid expenses and other current assets     194         452    
Total current assets     6,868         7,638    
Property and equipment, net     1,008         528    
Other long-term assets     175         175    
Capitalized software development costs     431         733    
Total assets   $ 8,482       $ 9,074    
Liabilities and shareholders’ (deficit) equity                
Current liabilities:                
Line of credit   $ 552       $ 582    
Accounts payable     1,072         1,107    
Loan payable, net of discounts and issuance costs     1,370            
Equity forward, at estimated fair value     36            
Accrued payroll and benefits     380         583    
Deferred revenue     3,389         3,614    
Capital lease obligations     54         50    
Deferred liability related to asset sale     375         375    
Deferred rent     51            
Other current liabilities     831         707    
Total current liabilities     8,110         7,018    
Warrant liability, at estimated fair value     162         222    
Long term deferred rent     459            
Long term obligations – capital lease     86         114    
Total liabilities     8,817         7,354    
Commitments and contingencies                
Shareholders’ equity:                
Convertible preferred stock of no par value Authorized – 1,000,000 shares; Series A – designated 250,000 shares; no shares at September 30, 2017 and March 25, 2017 issued and outstanding                
Series B, C, D- designated 19,500 shares; 18,533.51 shares at September 30, 2017 and March 25, 2017 issued and outstanding; (liquidation preference of $3,540 at September 30, 2017 and March 25, 2017)     2,911         2,911    
Common stock of no par value; Authorized – 40,000,000 shares; 10,173,153 shares at September 30, 2017 and 9,594,203 shares at March 25, 2017 issued and outstanding     24,674         24,390    
Accumulated deficit     (27,920 )       (25,581 )  
Total shareholders’ (deficit) equity     (335 )       1,720    
Total liabilities and shareholders’ (deficit) equity   $ 8,482       $ 9,074    

 
GIGA-TRONICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
    Three Month Periods Ended     Six Month Periods Ended  
(In thousands except per share data)   September 30,
 2017
    September 24,
 2016
    September 30,
 2017
    September 24,
 2016
 
Net sales   $ 2,242       $ 4,393       $ 4,233       $ 7,835    
Cost of sales     1,755         3,163         3,280         5,680    
Gross margin     487         1,230         953         2,155    
                                 
Operating expenses:                                
Engineering     409         567         861         1,097    
Selling, general and administrative     1,096         1,047         2,267         2,352    
Total operating expenses     1,505         1,614         3,128         3,449    
                                 
Operating loss     (1,018 )       (384 )       (2,175 )       (1,294 )  
                                 
Gain on sale of product line                             802    
Gain on adjustment of warrant liability to fair value     60         28         60         74    
Interest expense:                                
Interest expense, net     (88 )       (31 )       (167 )       (60 )  
Interest expense from accretion of loan discount     (33 )       (7 )       (55 )       (18 )  
Total interest expense, net     (121 )       (38 )       (222 )       (78 )  
Loss before income taxes     (1,079 )       (394 )       (2,337 )       (496 )  
Provision for income taxes     2         2         2         2    
Net loss   $ (1,081 )     $ (396 )     $ (2,339 )     $ (498 )  
                                 
Loss per common share – basic   $ (0.11 )     $ (0.04 )     $ (0.24 )     $ (0.05 )  
Loss per common share – diluted   $ (0.11 )     $ (0.04 )     $ (0.24 )     $ (0.05 )  
                                 
Weighted average shares used in per share calculation:                                
Basic     9,791         9,550         9,754         9,550    
Diluted     9,791         9,550         9,754         9,550    

Contact: Temi Oduozor
Corporate Controller
toduozor@gigatronics.com
(925) 328-4650