8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

September 30, 2015

Date of Report (date of earliest event reported)

GIGOPTIX, INC.

(Exact name of Registrant as specified in its charter)

Delaware	001-35520	26-2439072
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification Number)

130 Baytech Drive

San Jose, CA 95134

(Address of principal executive offices)

(408) 522-3100

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

EXPLANATORY NOTE

The purpose of this report is to amend the Current Report on Form 8-K filed by GigOptix, Inc., a Delaware corporation (the “Company”), filed with the Securities and Exchange Commission on October 2, 2015 (the “Original Report”), which reported the completion of the acquisition of all of the outstanding shares of Terasquare Co., Ltd. (“Terasquare”) from the former stockholders of Terasquare (the “Terasquare Acquisition”) on September 30, 2015. This Amendment No. 1 to the Original Report (“Amendment No. 1”) amends and supplements the disclosure to include the audited and unaudited financial statements and information required by Item 9.01(a) and the pro forma financial information required by Item 9.01(b). No other amendments to the Original Report are being made by this Amendment No. 1.

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The Audited Financial Statements of Terasquare as of December 31, 2014 and 2013 and for each of the two years in the period ended December 31, 2014 are included in this Form 8-K/A as Exhibit 99.1 and are incorporated into this Item 9.01(a) by reference. The Unaudited Interim Financial Statements of Terasquare as of June 30, 2015 and for the six months ended June 30, 2015 and 2014 are included in this Form 8-K/A as Exhibit 99.2 and are incorporated into this Item 9.01(a) by reference.

(b) Pro Forma Financial Information.

The Unaudited Pro Forma Condensed Combined Balance Sheet of the Company and Terasquare as of June 28, 2015, and the Unaudited Pro Forma Condensed Combined Statements of Operations of the Company and Terasquare for the year ended December 31, 2014 and for six months ended June 28, 2015, all giving pro forma effect to the Company’s acquisition of Terasquare, are included in this Form 8-K/A as Exhibit 99.3 and are incorporated into this Item 9.01(b) by reference.

(d) Exhibits

23.1 Consent of Yeil Accounting Corporation independent auditors.

99.1 Audited consolidated financial statements of Terasquare Co., Ltd. as of December 31, 2014 and 2013 and for each of the two years in the period ended December 31, 2014 and Independent Auditor’s Report, therein.

99.2 Unaudited condensed interim consolidated financial statements of Terasquare Co., Ltd. as of June 30, 2015 and for the six months ended June 30, 2015 and 2014.

99.3 Unaudited pro forma condensed combined balance sheet of the Company and Terasquare as of June 28, 2015 and unaudited pro forma condensed combined statements of operations of the Company and Terasquare for the year ended December 31, 2014 and for six months ended June 28, 2015, all giving pro forma effect to the Company’s acquisition of Terasquare.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	GIGOPTIX, INC.
	By:	/s/ Dr. Avi Katz
		Name:	Dr. Avi Katz
		Title:	Chief Executive Officer
Date: December 7, 2015

EXHIBIT INDEX

Exhibit No.	Description
23.1	Consent of Yeil Accounting Corporation independent auditors.
99.1	Audited consolidated financial statements of Terasquare Co., Ltd. as of December 31, 2014 and 2013 and for each of the two years in the period ended December 31, 2014 and Independent Auditor’s Report, therein.
99.2	Unaudited condensed interim consolidated financial statements of Terasquare Co., Ltd. as of June 30, 2015 and for the six months ended June 30, 2015 and 2014
99.3	Unaudited pro forma condensed combined balance sheet of the Company and Terasquare as of June 28, 2015 and unaudited pro forma condensed combined statements of operations of the Company and Terasquare for the year ended December 31, 2014 and for six months ended June 28, 2015, all giving pro forma effect to the Company’s acquisition of Terasquare.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-182070, 333-202832 and 333-208170) and Form S-8 (Nos. 333-153362, 333-157291, 333-164742, 333-171947, 333-179070, 333-187506, 333-194658, and 333-202828) of GigOptix, Inc. of our report dated December 3, 2015 relating to the Terasquare Co., Ltd. consolidated financial statements, which appears in this Current Report on Form 8-K/A Amendment No. 1 dated December 7, 2015.

/s/ Yeil Accounting Corporation.

Seoul, Korea

December 7, 2015

EX-99.1

 

Exhibit 99.1

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page Number
Report of Independent Auditors	1
Balance Sheets	2
Statements of Operations	3
Statements of Stockholders’ Equity	4
Statements of Cash Flows	5
Notes to Financial Statements	6

Independent Auditor’s Report

To the Board of Directors and Stockholders of

Terasquare Co., Ltd.

We have audited the accompanying financial statements of Terasquare Co., Ltd, which comprise the balance sheets as of December 31, 2014 and 2013, and the related statement of operations, changes in stockholders’ deficit and cash flows for the years then ended.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Terasquare Co., Ltd as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Yeil Accounting Corporation

Seoul, Korea

December 3, 2015

Terasquare Co., Ltd.

Balance sheets

December 31, 2014

(in Korean Won)	December 31
	2014			2013
ASSETS
Current assets:
Cash and cash equivalents (Note 3)		153,552,629			321,451,039
Restricted Cash (Note 3)		311,803,037			74,130,334
Short-term financial instruments (Note 4)		156,479,966			551,809,428
Account receivable		28,732,330			33,901,612
Advance payments		28,704,837			16,896,000
Prepaid expenses		999,186			911,100
Prepaid income taxes		1,352,720			5,344,474
Total current assets		681,624,705			1,004,443,987
Property and equipment, net (Note 5)		42,211,845			68,281,368
Intangible assets, net		3,199,810			-
Other non-current assets (Note 6)		144,879,000			144,879,000
Total assets		871,915,360			1,217,604,355
LIABILTIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Account payables		294,061,877			72,457,703
Withholdings		20,270,880			14,106,400
Unearned government grant		311,803,037			74,130,334
Accrued expenses		16,790,875			17,552,235
Total current liabilities		642,926,669			178,246,672
Redeemable convertible preferred stock (Note 7)		5,483,661,960			4,493,829,050
Total liabilities		6,126,588,629			4,672,075,722
Commitments and contingencies
Stockholders' deficit
Capital stock (Note 8)		399,997,500			399,997,500
Accumulated deficit (Note 9)		(5,654,670,769	)		(3,854,468,867	)
Total stockholders’ deficit		(5,254,673,269	)		(3,454,471,367	)
Total liabilities and stockholders’ deficit		871,915,360			1,217,604,355

The accompanying notes are an integral part of these financial statements.

2

Terasquare Co., Ltd.

Statements of operations

December 31, 2014

(in Korean Won)	Years Ended December 31
	2014			2013
Revenues		135,288,487			64,500,000
Cost of sales		-			-
Gross profit		135,288,487			64,500,000
Operating expenses
Research and development expense (Note 10)		678,357,367			1,405,378,459
Selling, general and administrative expense (Note 11)		1,269,800,381			951,561,398
Total operating expenses		1,948,157,748			2,356,939,857
Loss from operations		(1,812,869,261	)		(2,292,439,857	)
Interest income, net		9,504,061			37,171,969
Other income (expense), net		3,163,298			(4,734,155	)
Net and comprehensive loss		(1,800,201,902	)		(2,260,002,043	)

The accompanying notes are an integral part of these financial statements.

3

Terasquare Co., Ltd.

Statements of changes in stockholders’ deficit

December 31, 2014

(in Korean Won)	Common Stock				Accumulated
	Shares		Amount		Deficit			Total
January 1, 2013		2,666,650		266,665,000		(1,594,266,824	)		(1,327,801,824	)
Increase of capital stock without consideration		1,333,325		133,332,500		-			133,332,500
Net loss		-		-		(2,260,002,043	)		(2,260,002,043	)
December 31, 2013		3,999,975		399,997,500		(3,854,468,867	)		(3,454,471,367	)
Net loss		-		-		(1,800,201,902	)		(1,800,201,902	)
December 31, 2014		3,999,975		399,997,500		(5,654,670,769	)		(5,254,673,269	)

The accompanying notes are an integral part of these financial statements.

4

Terasquare Co., Ltd.

Statements of cash flows

December 31, 2014

(in Korean Won)	Years Ended December 31
	2014			2013
Cash flows from operating activities:
Net loss		(1,800,201,902	)		(2,260,002,043	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		32,564,433			50,866,142
Provision for severance and retirement benefits		44,053,517			52,078,225
Research and development  cost		-			556,756,165
Changes in operating assets and liabilities:
Account  receivable		5,169,282			(2,849,286	)
Advance payments		(11,808,837	)		(14,190,000	)
Prepaid expenses		(88,086	)		(449,031	)
Prepaid income tax		3,991,754			(5,344,474	)
Account  payable		177,550,657			(36,291,086	)
Accrued expenses		(761,360	)		(3,046,976	)
Advance from customers		-			(289,000	)
Withholdings		6,164,480			(93,160	)
Net cash used in operating activities		(1,543,366,062	)		(1,662,854,524	)
Cash flows from investing activities:
Proceeds from sale of short-term financial instruments		395,329,462			538,190,572
Proceeds from termination of leasehold agreement		-			27,288,450
Purchase of property and equipment		(6,494,910	)		(14,544,773	)
Purchase of intangible assets		(3,199,810	)		-
Net cash provided by investing activities		385,634,742			550,934,249
Cash flows from financing activities:
Proceeds from issuance of redeemable convertible preferred stock		989,832,910			-
Net cash provided by financing activities		989,832,910			-
Net decrease in cash and cash equivalents		(167,898,410	)		(1,111,902,275	)
Cash and cash equivalents at beginning of year		321,451,039			1,433,371,314
Cash and cash equivalents at end of year		153,552,629			321,451,039

The accompanying notes are an integral part of these financial statements.

5

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

1. General  information

Terasquare Co., Ltd (“The Company”) was incorporated on December, 2010 under the laws of the Republic of Korea to design and sell semiconductors.

The Company’s business is made up of industry leading 100Gbps+ datacom solutions for Ethernet, Fiber Channel, and Infiniband Data Center connectivity.

As of December 31, 2014, the Company’s common stockholders are as follows:

Name of stockholders	Shares of common stock		Percentage of Ownership
Hyunmin Bae		2,846,250		71	%
Hyungsuk Yoon		846,225		21	%
Jinho Park		307,500		8	%
		3,999,975		100	%

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the year presented, unless otherwise stated.

2.1 Basis for preparation

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to allowances for doubtful accounts, valuation of long-lived assets, including property and equipment and identified intangible assets, valuation of deferred taxes and contingencies. The Company bases its estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumption that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Actual results could differ from these estimates.

6

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

2.2 Revenue recognition

Revenue from sales of optical drivers and receivers, multi-chip modules (MCMs), ASICs and other products is recognized when persuasive evidence of a sales arrangement exists, transfer of title occurs, the sales price is fixed or determinable and collection of the resulting receivable is reasonably assured. Revenue for product shipments is recognized upon delivery of the product to the customer. Provisions are made for sales returns and warranties at the time revenue is recorded.

2.3 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The Company considers investments with maturities of three months or less on acquisition date to be cash and cash equivalents.

2.4 Restricted cash

Restricted cash as of December 31, 2014 was KRW 311,803 thousand which is primarily subject to withdrawal restrictions to government-sponsored research and development projects and other activities.

2.5 Financial instruments

Financial instruments, such as time deposits and restricted bank deposits, which are traded by financial institutions and are held for short-term cash management purposes or which will mature within one year, are accounted for as short-term financial instruments. Financial instruments other than cash equivalents and short-term financial instruments are recorded as long-term financial instruments.

2.6 Allowance for doubtful accounts

The Company provides an allowance for doubtful accounts in consideration of estimated total losses that may arise from the non-collection of its receivables. The estimate of losses, if any, is based on a review of the aging and current status of the outstanding receivables.

2.7 Property and equipment, net

Property and equipment are recorded at cost and depreciation using the declining balance method over their estimated useful lives, 5 years. Repairs and maintenance costs are charged to expenses as incurred.

7

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

2.8 Long-lived assets and intangible assets

Long-lived assets include equipment, furniture and fixtures and intangible assets. When events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable, the Company tests for recoverability by comparing the estimate of undiscounted cash flows to be generated by the assets against the assets’ carrying amount. If the carrying value exceeds the estimated future cash flows, the assets are considered to be impaired. The amount of impairment equals the difference between the carrying amount of the assets and their fair value. Factors the Company considers important that could trigger an impairment review include continued operating losses, significant negative industry trends, significant underutilization of the assets and significant changes in how it plans to use the assets.

Intangible assets are amortized on a straight-line basis over their estimated economic lives.

2.9 Research and development expense

Research and development expenses are expensed as incurred. Research and development expense consists primarily of salaries and related expenses for research and development personnel, consulting and engineering design, non-capitalized tools and equipment, engineering related semiconductor masks, depreciation for equipment, engineering expenses paid to outside technology development suppliers.

2.10 Defined contribution plan

The Company introduced a contribution pension plan, where the Company pays fixed contributions to each employee, who selected the plan, every year. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due.

2.11 Foreign currency

Transactions involving foreign currencies are recorded in the Company’s accounts at the exchange rates prevailing at the time the transactions are made. Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the appropriate exchange rates on the balance sheet dates. The resulting unrealized foreign currency translation gains (losses) are credited (charged) to current operations.

2.12 Current and deferred tax

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

8

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

The Company must assess the likelihood that the Company’s deferred tax assets will be recovered from future taxable income, and to the extent the Company believes that recovery is not likely, the Company establishes a valuation allowance. Management judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against the net deferred tax assets. The Company recorded a full valuation allowance as of December 31, 2014, and 2013. Based on the available evidence, the Company believes it is more likely than not that it will not be able to utilize its deferred tax assets in the future. The Company intends to maintain valuation allowances until sufficient evidence exists to support the reversal of such valuation allowances. The Company makes estimates and judgments about its future taxable income that are based on assumptions that are consistent with its plans. Should the actual amounts differ from the Company’s estimates, the carrying value of the Company’s deferred tax assets could be materially impacted.

The Company recognizes in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not believe there are any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.

2.13 Government grants

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

When the Company receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset by equal annual instalments.

9

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

3. Cash and cash equivalents

Details of cash and cash equivalents as of December 31, 2014 and 2013 are as follows:

(In thousands of Korean Won)	2014		2013
Bank deposits		153,553		321,451
Restricted bank deposits		311,803		74,130
		465,356		395,581

Restricted cash as of December 31, 2014 was KRW 311,803 thousand which is primarily subject to withdrawal restrictions to government-sponsored research and development projects and other activities.

4. Short-term financial instruments

Details of Short-term financial instruments as of December 31, 2014 and 2013 are as:

(In thousands of Korean Won)	2014		2013
Bank deposits		156,480		551,809
		156,480		551,809

5. Property and equipment, net

Property and equipment, net as of December 31, 2014 and 2013  consisted of following:

(In thousands of Korean Won)	2014			2013
Vehicles		33,150			33,150
Equipment		104,594			98,099
Facilities		63,440			63,440
		201,184			194,689
Accumulated depreciation		(158,972	)		(126,408	)
Property and equipment, net		42,212			68,281

Depreciation expense related to property and equipment was KRW 32,564 thousand and KRW 50,866 thousand for the years then ended December 31, 2014 and 2013, respectively.

10

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

6. Other non-current assets

Details of other non-current assets as of December 31, 2014 and 2013 are as:

(In thousands of Korean Won)	2014		2013
Leasehold deposits		144,749		144,749
Other guarantee deposits		130		130
		144,879		144,879

7. Redeemable convertible preferred stock

The Company’s Series A preferred stock and Series B, B-1 preferred stocks are redeemable preferred stock that is convertible into a common stock.  As of December 31, 2014 and 2013, redeemable convertible preferred stocks are as follows:

(In thousands of Korean Won)	2014		2013
Redeemable convertible preferred stock		5,483,662		4,493,829
		5,483,662		4,493,829

The details of redeemable convertible preferred stock are as follows:

	Series A	Series B	Series B-1
Par value	100 per share	100 per share	100 per share
Issue price	875 per share	3,467 per share	161 per share
Date of issue	December 16, 2010	December 5, 2012	July 17, 2014
Issued stocks	1,714,125 shares	865,350 shares	6,211,180 shares
Conversion ratio	One common stock per preferred stock	One common stock per preferred stock	One common stock per preferred stock
Voting right	Same as common stock	Same as common stock	Same as common stock
Dividend rate	One percent	One percent	One percent
Redemption amount	Issuing price per share plus 15 % (compound interest) per annum	Issuing price per share plus 15 % (compound interest) per annum	Issuing price per share plus 15 % (compound interest) per annum
Exercise period	Within 10 years from the date of issue	Within 10 years from the date of issue	Within 10 years from the date of issue

11

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

8. Capital stock

The Company’s common stock as of December 31, 2014 and 2013 are as follows:

	2014		2013
Authorized stocks	10,000,000 shares		10,000,000 shares
Par value (Per value)		100		100
Issued stocks		3,999,975 shares		3,999,975 shares
Common stock		399,997,500		399,997,500

9. Statements of appropriations of accumulated deficit

	2014			2013
Unappropriated accumulated deficit before Appropriations
Unappropriated accumulated deficit carried forward from the prior year		(3,854,468,867	)		(1,594,466,824	)
Net loss		(1,800,201,902	)		(2,260,002,043	)
		(5,654,670,769	)		(3,854,468,867	)
Appropriations		-			-
Unappropriated accumulated deficit carried over to the subsequent year		(5,654,670,769	)		(3,854,468,867	)

10. Research and development expenses

Research and development expenses for the years ended December 31, 2014 and 2013 are as follows:

(In thousands of Korean Won)	2014		2013
Salaries		409,557		292,140
Bonuses		36,137		41,519
Others		232,663		1,071,719
		678,357		1,405,378

12

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

11. Selling, general and administrative expenses

Selling, general and administrative expenses for the years ended December 31, 2014 and 2013 are as follows:

(In thousands of Korean Won)	2014		2013
Salaries		186,359		217,278
Bonuses		20,398		41,025
Retirement benefits		44,054		52,078
Employee benefits		85,306		84,863
Travel		107,441		78,720
Meals & Entertainment		97,439		99,793
Communication		5,327		7,074
Utilities		-		36
Tax and dues		23,413		19,458
Depreciation		32,564		50,866
Rent		39,550		26,009
Repairs		-		800
Insurance		26,236		18,577
Vehicle maintenance		16,597		12,336
Transportation		1,868		830
Education		417		935
Printing		1,020		1,969
Office supplies		2,150		2,218
Supplies		233,705		48,885
Service fees		268,638		108,072
Advertising		2,200		2,200
Outsourcing		75,118		77,539
		1,269,800		951,561

12. Approval of financial statements

Financial statements as of and for the year ended December 31, 2014, was approved by the Board of Directors on March 13, 2015.

13

Terasquare Co., Ltd.

Notes to the financial statements

December 31, 2014

13. Subsequent events

Change of major stockholder

On September 30, 2015, GigOptix, Inc. completed its acquisition of all of the outstanding common shares and redeemable convertible preferred shares of the Company from the four former stockholders of the Company.

Convertible bond

As of June 19, 2015, the Company issued convertible bond (KRW 500 million).

Borrowing from related party

The Company had borrowed from director and major stockholders, amounting to KRW 244 million for the years then ended.

14

EX-99.2

 

Exhibit 99.2

Item 8. Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page Number
Balance Sheets	1
Statements of Operations	2
Statements of Stockholders’ Equity	3
Statements of Cash Flows	4
Notes to Financial Statements	5

Terasquare Co., Ltd.

Interim balance sheets

June 30, 2015

(In Korean Won)	June 30			December 31
	2015			2014
				(audited)
ASSETS
Current assets:
Cash and cash equivalents (Note 3)		393,112,855			153,552,629
Restricted Cash (Note 3)		265,979,411			311,803,037
Short-term financial instruments (Note 4)		54,600,000			156,479,966
Account receivable		-			28,732,330
Advance payments		19,036,519			28,704,837
Prepaid expenses		931,242			999,186
Prepaid income taxes		65,570			1,352,720
Prepaid value added tax		92,000			-
Total current assets		733,817,597			681,624,705
Property and equipment, net (Note 5)		33,420,528			42,211,845
Intangible assets, net		4,654,356			3,199,810
Other non-current assets (Note 6)		174,879,000			144,879,000
Total assets		946,771,481			871,915,360
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Account payables		182,399,751			294,061,877
Withholdings		13,188,480			20,270,880
Accrued expenses		11,730,158			16,790,875
Unearned government grant		265,979,411			311,803,037
Value added tax withheld		6,183,264			-
Short-term borrowing (Note 7)		194,000,000			-
Convertible bonds (Note 8)		500,000,000			-
Total current liabilities		1,173,481,064			642,926,669
Long-term borrowings (Note 7)		50,000,000			-
Redeemable convertible preferred stock (Note 9)		5,483,661,960			5,483,661,960
Total liabilities:		6,707,143,024			6,126,588,629
Commitments and contingencies
Stockholders' deficit
Common stock (Note 10)		399,997,500			399,997,500
Accumulated deficit		(6,160,369,043	)		(5,654,670,769	)
Total stockholders’ deficit		(5,760,371,543	)		(5,254,673,269	)
Total liabilities and stockholders’ deficit		946,771,481			871,915,360

The accompanying notes are an integral parts of these interim financial statements.

1

Terasquare Co., Ltd.

Interim statements of operations

For the six months ended June 30

(In Korean Won)	2015			2014
Revenues		310,227,273			5,515,760
Cost of sales		-			-
Gross profit		310,227,273			5,515,760
Operating expenses
Research and development expense (Note 11)		329,189,947			289,019,853
Selling, general and administrative expense (Note 12)		480,817,769			723,980,653
Total operating expenses		810,007,716			1,013,000,506
Loss from operations		(499,780,443	)		(1,007,484,746	)
Interest income (expense), net		(4,366,170	)		6,063,764
Other income (expense), net		(1,551,661	)		21,129
Net  and comprehensive loss		(505,698,274	)		(1,001,399,853	)

The accompanying notes are an integral parts of these interim financial statements.

2

Terasquare Co., Ltd.

Interim statements of changes in stockholders’ deficit

For the six months ended June 30

(In Korean Won)	Common stock				Accumulated
	Shares		Amount		Deficit			Total
January 1, 2014		3,999,975		399,997,500		(3,854,468,867	)		(3,454,471,367	)
Net loss		-		-		(1,001,399,853	)		(1,001,399,853	)
June 30, 2014		3,999,975		399,997,500		(4,855,868,720	)		(4,455,871,220	)
January 1, 2015		3,999,975		399,997,500		(5,654,670,769	)		(5,254,673,269	)
Net loss		-		-		(505,698,274	)		(505,698,274	)
June 30, 2015		3,999,975		399,997,500		(6,160,369,043	)		(5,760,371,543	)

The accompanying notes are an integral parts of these interim financial statements.

3

Terasquare Co., Ltd.

Interim statements of cash flows

For the six months ended June 30

(In Korean Won)	2015			2014
Cash flows from operating activities:
Net loss		(505,698,274	)		(1,001,399,853	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		9,762,117			15,702,400
Provision for severance and retirement benefits		25,889,353			14,760,253
Changes in operating assets and liabilities:
Account receivable		28,732,330			31,966,692
Advance payments		9,668,318			(18,301,990	)
Prepaid expenses		67,944			(88,086	)
Prepaid income tax		1,287,150			4,483,214
Prepaid value added tax		(92,000	)		(48,765,737	)
Account payable		(137,551,479	)		341,760,676
Accrued expenses		(5,060,717	)		8,567,295
Withholdings		(7,082,400	)		770,098
Value added tax withheld		6,183,264			-
Net cash used in operating activities		(573,894,394	)		(650,545,038	)
Cash flows from investing activities:
Proceeds from sale of short-term financial instruments		101,879,966			551,809,428
Payment  of additional leasehold deposits		(30,000,000	)		-
Purchase of property and equipment		(970,800	)		(2,638,000	)
Purchase of intangible assets		(1,454,546	)		(700,000	)
Net cash provided by investing activities		69,454,620			548,471,428
Cash flows from financing activities:
Increase in short-term borrowings		194,000,000			-
Increase in long-term borrowings		50,000,000			-
Proceeds from issuance of convertible bonds		500,000,000			-
Net cash provided by financing activities		744,000,000			-
Net increase (decrease) in cash and cash equivalents		239,560,226			(102,073,610	)
Cash and cash equivalents at beginning of year		153,552,629			321,451,039
Cash and cash equivalents at end of year		393,112,855			219,377,429

The accompanying notes are an integral parts of these interim financial statements.

4

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

1. General  information

Terasquare Co., Ltd (“The Company”) was incorporated on December, 2010 under the laws of the Republic of Korea to design and sell semiconductors.

The Company’s business is made up of industry leading 100Gbps+ datacom solutions for Ethernet, Fiber Channel, and Infiniband Data Center connectivity.

As of June 30, 2015, the Company’s common stockholders are as follows:

Name of stockholders	Shares of common stock		Percentage of Ownership
Hyunmin Bae		2,846,250		71	%
Hyungsuk Yoon		846,225		21	%
Jinho Park		307,500		8	%
		3,999,975		100	%

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the year presented, unless otherwise stated.

2.1 Basis for preparation

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including those related to allowances for doubtful accounts, valuation of long-lived assets, including property and equipment and identified intangible assets, valuation of deferred taxes and contingencies. The Company bases its estimates of the carrying value of certain assets and liabilities on historical experience and on various other assumption that are believed to be reasonable under the circumstances, when these carrying values are not readily available from other sources. Actual results could differ from these estimates.

5

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

2.2  Revenue recognition

Revenue from sales of optical drivers and receivers, multi-chip modules (MCMs), ASICs and other products is recognized when persuasive evidence of a sales arrangement exists, transfer of title occurs, the sales price is fixed or determinable and collection of the resulting receivable is reasonably assured. Revenue for product shipments is recognized upon delivery of the product to the customer. Provisions are made for sales returns and warranties at the time revenue is recorded.

2.3 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The Company considers investments with maturities of three months or less on acquisition date to be cash and cash equivalents.

2.4 Restricted cash

Restricted cash as of June 30, 2015 was KRW 265,979 thousand which is primarily subject to withdrawal restrictions to government-sponsored research and development projects and other activities.

2.5 Financial instruments

Financial instruments, such as time deposits and restricted bank deposits, which are traded by financial institutions and are held for short-term cash management purposes or which will mature within one year, are accounted for as short-term financial instruments. Financial instruments other than cash equivalents and short-term financial instruments are recorded as long-term financial instruments.

2.6 Allowance for doubtful accounts

The Company provides an allowance for doubtful accounts in consideration of estimated total losses that may arise from the non-collection of its receivables. The estimate of losses, if any, is based on a review of the aging and current status of the outstanding receivables.

2.7 Property and equipment, net

Property and equipment are recorded at cost and depreciation using the declining balance method over their estimated useful lives, 5 years. Repairs and maintenance costs are charged to expenses as incurred.

6

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

2.8 Long-lived assets and intangible assets

Long-lived assets include equipment, furniture and fixtures and intangible assets. When events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable, the Company tests for recoverability by comparing the estimate of undiscounted cash flows to be generated by the assets against the assets’ carrying amount. If the carrying value exceeds the estimated future cash flows, the assets are considered to be impaired. The amount of impairment equals the difference between the carrying amount of the assets and their fair value. Factors the Company considers important that could trigger an impairment review include continued operating losses, significant negative industry trends, significant underutilization of the assets and significant changes in how it plans to use the assets.

Intangible assets are amortized on a straight-line basis over their estimated economic lives.

2.9 Research and development expense

Research and development expenses are expensed as incurred. Research and development expense consists primarily of salaries and related expenses for research and development personnel, consulting and engineering design, non-capitalized tools and equipment, engineering related semiconductor masks, depreciation for equipment, engineering expenses paid to outside technology development suppliers.

2.10 Defined contribution plan

The Company introduced a contribution pension plan, where the Company pays fixed contributions to each employee, who selected the plan, every year. The Company has no further payment obligations once the contributions have been paid. The contributions are recognized as employee benefit expense when they are due.

2.11 Foreign currency

Transactions involving foreign currencies are recorded in the Company’s accounts at the exchange rates prevailing at the time the transactions are made. Monetary assets and liabilities denominated in foreign currencies are translated into Korean won at the appropriate exchange rates on the balance sheet dates. The resulting unrealized foreign currency translation gains (losses) are credited (charged) to current operations.

2.12 Current and deferred tax

The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

7

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

The Company must assess the likelihood that the Company’s deferred tax assets will be recovered from future taxable income, and to the extent the Company believes that recovery is not likely, the Company establishes a valuation allowance. Management judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against the net deferred tax assets. The Company recorded a full valuation allowance as of June 30, 2015 and December 31, 2014. Based on the available evidence, the Company believes it is more likely than not that it will not be able to utilize its deferred tax assets in the future. The Company intends to maintain valuation allowances until sufficient evidence exists to support the reversal of such valuation allowances. The Company makes estimates and judgments about its future taxable income that are based on assumptions that are consistent with its plans. Should the actual amounts differ from the Company’s estimates, the carrying value of the Company’s deferred tax assets could be materially impacted.

The Company recognizes in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does not believe there are any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date.

2.13 Government grants

Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

When the Company receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life in a pattern of consumption of the benefit of the underlying asset by equal annual instalments.

3. Cash and cash equivalents

Details of cash and cash equivalents as of June 30, 2015 and December 31, 2014 are as follows:

(In thousands of Korean Won)	2015		2014
Bank deposits		393,113		153,553
Restricted bank deposits		265,979		311,803
		659,092		465,356

Restricted cash as of June 30, 2015 was KRW 265,979 thousand which is primarily subject to withdrawal restrictions to government-sponsored research and development projects and other activities.

8

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

4. Short-term financial instruments

Details of short-term financial instruments as of June 30, 2015 and December 31, 2014 are as follows:

(In thousands of Korean Won)	2015		2014
Bank deposits		54,600		156,480
		54,600		156,480

5. Property and equipment, net

Property and equipment, net as of June  30, 2015 and December 31, 2014  consisted of following:

(In thousands of Korean Won)	2015			2014
Vehicles		33,150			33,150
Equipment		105,565			104,594
Facilities		63,440			63,440
		202,155			201,184
Accumulated depreciation		(168,734	)		(158,972	)
Property and equipment, net		33,421			42,212

Depreciation expense related to property and equipment was KRW 9,762 thousand and KRW 15,702 thousand for the six months ended June 30, 2015 and 2014, respectively.

6. Other non-current assets

Details of other non-current assets as of June 30, 2015 and December 31, 2014 are as follows:

(In thousands of Korean Won)	2015		2014
Leasehold deposits		174,749		144,749
Other guarantee deposits		130		130
		174,879		144,879

9

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

7. Borrowings

Details of borrowings as of June 30, 2015 and December 31, 2014 are as follows:

(In thousands of Korean Won)	2015		2014
Short-term borrowings
Hyunmin Bae (Major shareholder)		87,000		-
Jinho Park (CEO)		107,000		-
		194,000		-
Long-term borrowings
Gwangsuk Han		50,000		-
Total		50,000		-

8. Convertible bonds

The Company issued convertible bond on June 19, 2015. Details of convertible bond as of June 30, 2015 and December 31, 2014 are as follows:

(In thousands of Korean Won)	2015		2014
Convertible bonds		500,000		-
		500,000		-

10

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

Conversion feature for 1st privately placed convertible bonds is as follows:

	Conversion feature
Amount issued	500,000,000
Coupon rate	0% per annum
Guaranteed rate of convertible bonds	8% per annum
Date of issue	June 19, 2015
Maturity date	June 18, 2016
Conversion period	1 month after date issued until the day before maturity date
Conversion price	1,861

9. Redeemable convertible preferred stock

The Company’s Series A preferred stock and Series B, B-1 preferred stocks are redeemable preferred stock that is convertible into a common stock.  As of June 30, 2015 and December 31, 2014, redeemable convertible preferred stocks are as follows:

(In thousands of Korean Won)	2015		2014
Redeemable convertible preferred stock		5,483,662		5,483,662
		5,483,662		5,483,662

The details of redeemable convertible preferred stock are as follows:

	Series A	Series B	Series B-1
Par value	100 per share	100 per share	100 per share
Issue price	875 per share	3,467 per share	161 per share
Date of issue	December 16, 2010	December 5, 2012	July 17, 2014
Issued stocks	1,714,125 shares	865,350 shares	6,211,180 shares
Conversion ratio	One common stock per preferred stock	One common stock per preferred stock	One common stock per preferred stock
Voting right	Same as common stock	Same as common stock	Same as common stock
Dividend rate	One percent	One percent	One percent
Redemption amount	Issuing price per share plus 15 % (compound interest) per annum	Issuing price per share plus 15 % (compound interest) per annum	Issuing price per share plus 15 % (compound interest) per annum
Exercise period	Within 10 years from the date of issue	Within 10 years from the date of issue	Within 10 years from the date of issue

11

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

10. Capital Stock

The Company’s common stock as of June 30, 2015 and December 31, 2014 are as follows:

	2015		2014
Authorized stocks	10,000,000 shares		10,000,000 shares
Par value		100		100
Issued stocks	3,999,975 shares		3,999,975 shares
Common stock		399,997,500		399,997,500

11. Research and development expenses

Research and development expenses for the six months ended June 30, 2015 and 2014 are as follows:

(In thousands of Korean Won)	2015		2014
Salaries		266,709		184,930
Bonuses		32,421		13,724
Others		30,059		90,366
		329,189		289,020

12. Selling, general and administrative expenses

Selling, general and administrative expenses for the six months ended June 30, 2015 and 2014 are as follows:

(In thousands of Korean Won)	2015		2014
Salaries		54,780		61,974
Bonuses		10,904		10,529
Retirement benefits		25,889		14,760
Employee benefits		46,499		41,012
Travel		36,460		52,088
Meals & Entertainment		11,262		49,027
Communication		2,760		2,829
Tax and dues		13,279		11,180
Depreciation		9,762		15,702
Rent		16,150		20,530
Insurance		23,664		15,058
Vehicle maintenance		3,549		7,152
Transportation		917		1,446
Education		420		230
Printing		1,129		784
Office supplies		2,032		684
Supplies		88,851		9,442
Service fees		42,994		369,188
Advertising		-		2,200
Outsourcing		89,517		38,165
		480,818		723,980

12

Terasquare Co., Ltd.

Notes to the interim financial statements

For the six months ended June 30

13. Subsequent events

On September 30, 2015, GigOptix, Inc. completed its acquisition of all of the outstanding common shares and redeemable convertible preferred shares of the Company from the four former stockholders of the Company.

13

EX-99.3

 

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following unaudited pro forma condensed combined financial information combines the historical consolidated financial statements of GigOptix and Terasquare as if the merger had occurred on January 1, 2014.

Pro Forma Combined Information

The following unaudited pro forma condensed combined balance sheet as of June 28, 2015 is based on (i) the historical consolidated balance sheet of GigOptix as of June 28, 2015 and (ii) the historical balance sheet of Terasquare as of June 30, 2015. The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2014 and the six months ended June 28, 2015 are based on (i) the historical consolidated statements of operations of GigOptix for the year ended December 31, 2014 and the six months ended June 28, 2015 and (ii) the historical statements of operations of Terasquare for the year ended December 31, 2014 and the six months ended June 30, 2015.

Pro forma combined adjustments and the assumptions related to the Terasquare acquisition were prepared using the purchase method of accounting and are based on the assumption that the acquisition of Terasquare took place as of June 28, 2015 for purposes of the pro forma condensed combined balance sheet and January 1, 2014 for purposes of the pro forma condensed combined statements of operations. The preliminary purchase price allocation used in the accompanying unaudited pro forma financial statements is based on estimates as of the date of this report and may differ from the final purchase price allocation.

In accordance with the purchase method of accounting, the actual consolidated financial statements of GigOptix will reflect the Terasquare acquisition only from and after the date of acquisition.

The unaudited pro forma condensed combined financial information included herein does not give effect to any potential cost reductions or other operating efficiencies that could result from the Terasquare acquisition, including but not limited to those associated with potential (i) reductions of corporate overhead, (ii) eliminations of duplicate functions and (iii) increased operational efficiencies through the adoption of best practices and capabilities from each company.

The pro forma condensed combined financial information has been prepared in accordance with the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), have been condensed or omitted pursuant to these rules and regulations; however, management believes that the disclosures are adequate to make the information presented not misleading. The pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the combined operating results or financial position that would have occurred if such transactions had been consummated on the dates and in accordance with the assumptions described herein, nor is it necessarily indicative of future operating results or financial position.

The pro forma condensed combined financial information below should be read together with GigOptix’s and Terasquare’s historical consolidated financial statements and accompanying notes which have been previously filed with the SEC.

GIGOPTIX, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of June 28, 2015

(In thousands)

	GigOptix			Terasquare						Pro FormaCombined Adjustments				Pro Forma Combined
ASSETS	(in USD)			(in KRW)			(in USD)			(in USD)				(in USD)
Current assets:
Cash and cash equivalents	$	18,382		KRW	393,113		$	351		$	(4,447	)	A	$	14,286
Short-term investments		-			54,600			49							49
Accounts receivable, net		7,843			-			-							7,843
Restricted cash		-			265,979			238							238
Inventories		6,824			-			-							6,824
Prepaid and other current assets		789			20,125			18							807
Total current assets		33,838			733,817			656			(4,447	)			30,047
Property and equipment, net		2,309			33,421			30							2,339
Goodwill and intangible assets, net		12,342			4,654			4			4,792		B		17,138
Restricted cash		56			-			-							56
Other assets		133			174,879			156							289
Total assets	$	48,678		KRW	946,771		$	846		$	345			$	49,869
LIABILITIES AND STOCKHOLDERS’ EQUITY / (DEFICIT)
Current liabilities:
Accounts payable	$	2,702		KRW	182,400		$	163						$	2,865
Accrued and other current liabilities		3,858			297,080			266							4,124
Convertible bonds		-			500,000			447			(447	)	D		-
Long-term debt, current portion		-			194,000			173							173
Total current liabilities		6,560			1,173,480			1,049			(447	)			7,162
Pension liabilities		346													346
Redeemable convertible preferred stock		-			5,483,662			4,898			(4,898	)	D		-
Other long term liabilities		658			50,000			45							703
Total liabilities		7,564			6,707,142			5,992			(5,345	)			8,211
Stockholders’ Equity / (Deficit)
Common stock		33			-			-							33
Additional paid-in capital		145,380			399,998			378			(378	)	C		145,380
Treasury stock		(2,209	)		-			-							(2,209	)
Accumulated deficit		(102,378	)		(6,160,369	)		(5,712	)		6,256		C		(101,834	)
Accumulated other comprehensive income		288			-			188			(188	)	C		288
Total stockholders’ equity / (deficit)		41,114			(5,760,371	)		(5,146	)		5,690				41,658
Total liabilities and stockholders’ equity / (deficit)	$	48,678		KRW	946,771		$	846		$	345			$	49,869

See accompanying notes to unaudited pro forma condensed combined financial information.

GIGOPTIX, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2014

(In thousands, except per shares amounts)

	GigOptix			Terasquare						Pro FormaCombined Adjustments				Pro Forma Combined
	(in USD)			(in KRW)			(in USD)			(in USD)				(in USD)
Revenue	$	32,947		KRW	135,288		$	128		$	-			$	33,075
Cost of revenue		13,711			-			-			324		E		14,035
Gross profit		19,236			135,288			128			(324	)			19,040
Operating expenses:
Research and development expense		13,732			678,357			642			-				14,374
Selling, general and administrative expense		10,503			1,269,800			1,203			141		E		11,847
Restructuring expense		343			-			-			-				343
Total operating expenses		24,578			1,948,157			1,845			141				26,564
Loss from operations		(5,342	)		(1,812,869	)		(1,717	)		(466	)			(7,525	)
Interest and other expense, net		(39	)		-			-			-				(39	)
Other income, net		70			12,667			12							82
Net loss before income taxes		(5,311	)		(1,800,202	)		(1,705	)		(466	)			(7,482	)
Provision for income taxes		54									-				54
Loss from consolidated companies		(5,365	)		(1,800,202	)		(1,705	)		(466	)			(7,536	)
Loss on equity investment		456			-			-							456
Net loss	$	(5,821	)	KRW	(1,800,202)		$	(1,705	)	$	(466	)		$	(7,992	)
Net loss per share - basic and diluted	$	(0.18	)											$	(0.25	)
Shares used in computing basic and diluted net loss per shares		31,851													31,851

See accompanying notes to unaudited pro forma condensed combined financial information.

GIGOPTIX, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Six Months Ended June 28, 2015

(In thousands, except per shares amounts)

	GigOptix			Terasquare						Pro FormaCombined Adjustments				Pro Forma Combined
	(in USD)			(in KRW)			(in USD)			(in USD)				(in USD)
Revenue	$	18,900		KRW	310,228		$	282		$	-			$	19,182
Cost of revenue		7,278			-			-			162		E		7,440
Gross profit		11,622			310,228			282			(162	)			11,742
Operating expenses:
Research and development expense		6,472			329,190			299			-				6,771
Selling, general and administrative expense		5,212			480,818			437			71		E		5,720
Total operating expenses		11,684			810,008			736			71				12,491
Loss from operations		(62	)		(499,780	)		(454	)		(233	)			(749	)
Interest and other expense, net		(6	)		(5,918	)		(5	)		-				(11	)
Other income, net		(18	)												(18	)
Net loss before income taxes		(86	)		(505,698	)		(459	)		(233	)			(778	)
Provision for income taxes		25			-			-			-				25
Loss from consolidated companies		(111	)		(505,698	)		(459	)		(233	)			(803	)
Loss on equity investment		3			-			-							3
Net loss	$	(114	)	KRW	(505,698)		$	(459	)	$	(233	)		$	(806	)
Net loss per share - basic and diluted	$	(0.00	)											$	(0.02	)
Shares used in computing basic and diluted net loss per shares		32,705													32,705

See accompanying notes to unaudited pro forma condensed combined financial information.

Notes to Unaudited Pro Forma Condensed Combined Financial Information

(1) Basis of Purchase Price Allocation

The purchase consideration for the merger of approximately $4.4 million consisted of $4.0 million cash paid for the purchase of all of the shares of stock of Terasquare and approximately $0.4 million for the assumption of liabilities and debt of Terasquare, subject to certain adjustments

The total purchase price of $4.4 million was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition as follows (in thousands):

Tangible assets acquired:
Cash and cash equivalents	$	22
Other current assets		17
Property, plant and equipment		22
Other assets		121
Liabilities assumed:
Accounts payable		(501	)
Accrued compensation		(28	)
Other current liabilities		(2	)
Identifiable intangible assets acquired:
Trade name		990
Developed technology		2,270
IPR&D		380
Goodwill		1,156
Total purchase price		4,447

(2) Pro Forma Combined Adjustments

The following pro forma combined adjustments have been reflected in the unaudited pro forma condensed combined financial information. These adjustments give effect to pro forma events that are (i) directly attributable to the Terasquare merger, (ii) factually supportable and (iii) with respect to the statement of operations, expected to have continuing impact on the combined company.

Balance Sheet Adjustments

A) To reflect the cost paid for the purchase of all of the shares of stake of Terasquare and the payment of the convertible bonds.

B) To reflect the establishment of identifiable intangible assets of $3.6 million and goodwill of $1.2 million. For purposes of the pro forma condensed combined statement of operations, it was assumed that the $3.6 million is related to the following intangible assets: trade name, developed technology and IPR&D with assumed lives of 7 years.

(C) To reflect the elimination of Terasquare’s stockholders’ equity/(deficit) balances.

(D) To reflect the elimination of Terasquare’s convertible bonds and redeemable convertible preferred stock.

Income Statement Adjustments

(E) To reflect the expense associated with the amortization of intangibles.

For purposes of preparing these pro forma condensed combined financial statements, the fair value of Terasquare’s inventory, accounts receivable and property, plant and equipment were estimated to approximate their carrying value on the date of acquisition.