8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of report (date of earliest event reported): August 5, 2003

GIGA-TRONICS INCORPORATED

(Exact name of registrant as specified in its charter)

California
(State or jurisdiction of
incorporation or organization) 0-12719
(Commission File Number) 94-2656341
(I.R.S. Employer
Identification No.)

4650 Norris Canyon Road
San Ramon, CA 94583
(Address, including zip code, of principal executive offices)

Registrant’s telephone number, including area code: (925) 328-4650

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

TABLE OF CONTENTS

	Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
	Item 12. Results of Operations and Financial Condition.
SIGNATURE
Exhibit Index
Exhibit 99.1
Exhibit 99.2

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits

(a)	Financial Statements.
	Not applicable.
(b)	Pro Forma Financial Information.
	Not applicable.
(c)	Exhibits
99.1	Press Release dated August 5, 2003 announcing the Registrant’s results for the fiscal quarter ended June 28, 2003.
99.2	Letter to Shareholders.

Item 12. Results of Operations and Financial Condition.

     On August 5, 2003, Giga-tronics Incorporated issued a press release reporting its results for the fiscal quarter ended June 28, 2003, and announcing the discontinuation of its Dymatix subsidiary. The full text of the press release is set forth in Exhibit 99.1 hereto. The Company also issued a letter to Shareholders, a copy of which is filed as Exhibit 99.2.

SIGNATURE

     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.

	GIGA-TRONICS INCORPORATED
Dated: August 5, 2003	By:	/s/ Mark H. Cosmez II Mark H. Cosmez II, VP Finance, Chief Financial Officer and Secretary

Exhibit Index

Exhibit Number	Exhibit Title
99.1	Press Release dated August 5, 2003 announcing the Registrant’s results for the fiscal quarter ended June 28, 2003.
99.2	Letter to Shareholders from Chief Executive Officer, G.H. Bruns.

EX-99.1 3 f92135exv99w1.htm EXHIBIT 99.1

Exhibit 99.1

NEWS RELEASE
For Release on August 5, 2003	Contact: Mark H. Cosmez II
4:00 PM (ET) (925) 328-4656	Vice President, Finance/Chief Financial Officer

Giga-tronics Reports Discontinuance of Subsidiary and First
Quarter FY 2004 Results

San Ramon, CA — Giga-tronics Incorporated (NASDAQ/NMS: GIGA) announced today that in the latter part of the first quarter, it had elected to discontinue operations of its Dymatix division.

     “Despite the strong commitment of its dedicated staff and the recent successful development of new product, the division was not able to overcome the effects of a very weak capital equipment market, affecting the semiconductor industry” said G.H. Bruns, Jr., CEO of parent company, Giga-tronics. “Substantial losses from the division over the last two years were affecting our core business and had, therefore, become unsustainable. Losses stemming from this discontinued operation were approximately $2,452,000.”

     Giga-tronics will continue to provide support service to existing customers of Dymatix, but is otherwise free to focus totally on its core business in wireless communication and test & measurement.

     Sales for continuing operations were up 11% to $5,239,000 for the quarter compared to $4,730,000 the preceding quarter, but down 8.6% from the $5,731,000 of the first quarter last year. The net loss from continuing operations in the first quarter of FY 2004 was $1,180,000 or $0.25 per fully diluted share versus a loss from continuing operations of $1,231,000 or $0.26 per fully diluted share for the same quarter last year. However, the current period operating loss when combined with the cost of discontinuance of Dymatix operations, produced a net loss of $3,632,000 or $0.77 per fully diluted share.

     Orders booked in the first quarter from continuing operations were $2,818,000 compared to $2,828,000 for the first quarter of last year. Backlog at quarter end was $14.3 million (about

$5.7 million is shippable within one year) as compared to $18.3 million (about $4.8 million shippable within one year) in the first quarter of the prior year.

     Cash and cash equivalents at June 28, 2003 were $3,811,000 versus $5,005,000 as of March 29, 2003.

     The Instrument division has recently released the first in a series of breakthrough Microwave Synthesizers that have been extremely well received in the marketplace. Our dedication to research and development will continue in order for the Company to push the technological edge in new product design. Giga-tronics continues to reduce costs and expenses in our drive toward profitability.

     Giga-tronics will host a conference call today at 4:30 PM ET to discuss the first quarter results. To participate in the call, dial 612-332-0418. The call will also be broadcast on the internet at www.gigatronics.com under “Corporate Info/Investor Relations”. The conference call discussion reflects management’s views as of August 5, 2003 only.

     Giga-tronics produces instruments, subsystems and sophisticated microwave components that have broad applications in both defense electronics and wireless telecommunications.

     Giga-tronics is a publicly held company, traded on the NASDAQ National Market under the symbol “GIGA”.

     This press release contains forward-looking statements concerning profitability, backlog and shipments. Actual results may differ significantly due to risks and uncertainties, such as future orders, cancellations or deferrals, disputes over performance and the ability to collect receivables. For further discussion, see Giga-tronics’ annual report on Form 10-K for the fiscal year ended March 29, 2003 Part I, under the heading “Certain Factors Which May Adversely Affect Future Operations or an Investment in Giga-tronics” and Part II, under the heading “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.

GIGA-TRONICS INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

		Three Months Ended
		June 28, 2003			June 29, 2002
Net sales		$	5,239		$	5,731
Cost of sales			3,876			3,930
Gross profit			1,363			1,801
Product development			988			1,488
Selling, general and administrative			1,644			1,681
Amortization of intangibles			—			4
Operating expenses			2,632			3,173
Operating loss			(1,269	)		(1,372	)
Other expense			—			(26	)
Interest income, net			93			67
Loss before provision (benefit) for income taxes and discontinued operations			(1,176	)		(1,331	)
Provision (benefit) for income taxes			4			(100	)
Loss before discontinued operations			(1,180	)		(1,231	)
Discontinued operations			(2,452	)		(368	)
Net loss		$	(3,632	)	$	(1,599	)
Basic and diluted net loss per share:
	Before discontinued operations	$	(0.25	)	$	(0.26	)
	Discontinued operations		(0.52	)		(0.08	)
	Basic and diluted net loss per share	$	(0.77	)	$	(0.34	)
Shares used in per share calculation:
	Basic and dilutive		4,693			4,656

GIGA-TRONICS INCORPORATED
CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except share data)

	June 28, 2003			Mar. 29, 2003
ASSETS
Cash, cash equivalents and investments	$	3,811		$	5,005
Notes and trade accounts receivable, net		2,737			3,245
Inventories, net		7,691			10,244
Income tax receivable		100			100
Prepaid expenses		459			488
Total current assets		14,798			19,082
Property and equipment		17,819			18,189
Less accumulated depreciation & amortization		15,926			15,915
Property and equipment, net		1,893			2,274
Other assets		416			433
Total assets	$	17,107		$	21,789
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts payable and accrued commissions	$	1,733		$	1,972
Accrued expenses and payroll		2,561			2,692
Customer advances		141			796
Total current liabilities		4,435			5,460
Capital lease and Other long term obligations, net		344			369
Total liabilities		4,779			5,829
Common stock of no par value		12,695			12,695
Retained earnings		(367	)		3,265
Total shareholders’ equity		12,328			15,960
Total liabilities and shareholders’ equity	$	17,107		$	21,789

EX-99.2 4 f92135exv99w2.htm EXHIBIT 99.2

Exhibit 99.2

To Our Shareholders

     Continuing weakness throughout FY 2003 in the markets we serve, caused a reduction in our revenue of more than 40% from the prior year, in spite of some increase in revenue from the defense business.

     New orders booked were $18,086,000 in FY 2003, down from $20,461,000 the prior year. Shipments were $22,281,000, compared with $39,036,000 the year before. Loss from operations in FY 2003 increased to $5,214,000, compared with $2,102,000 in the prior year. Restructuring and termination costs added another $1,450,000 to the loss in FY 2003.

     Lastly in FY 2003, we removed $4,844,000 current tax assets from our balance sheet. This is a non-cash, non-operations related item and, although taken against net earnings during this period, is fully available to reduce future income tax liabilities.

     In order to improve future operating results, a number of decisive actions were taken throughout FY 2003 and into the first quarter of FY 2004. Some of these had a one-time incremental negative impact on profitability in these periods, although they will have a very substantial positive impact on future results.

During of the first quarter of FY 2004, the decision was made to discontinue operations of the Dymatix division. Despite the outstanding efforts of a dedicated staff – and the successful development of new product – the division was not able to overcome the lethargy that has plagued the semiconductor market these last two years. This was a most difficult decision, but losses of approximately $1,182,000 and $2,594,000 over the last two years and the need to eliminate such losses in the future forced this decision. Service support and spare parts availability will continue to be made available to existing product users, fully supported by the parent Company.

Facilities and the attendant lease obligations were reduced from five to three by (a) consolidating Dymatix with the Ascor division and (b) negotiating settlement of a lease contract on a previously discontinued R&D facility in England.

We also renegotiated leases at Microsource and the Ascor divisions which, together with preceding actions, produced lease cost savings of approximately $625,000 a year.

Reductions in force produced annualized payroll savings of approximately $2,800,000 in FY 2003 and another approximate $1,000,000 in FY 2004, Q1.

When Giga-tronics acquired Microsource, Inc. in May of 1998, we were required to write up the assets of that Company to then market value. Those assets were subsequently depreciated over the last five years at a cost of approximately $900,000 a year. This depreciation was completed at the end of May 2003. Thus, Microsource division is relieved of that expense in the future.

Andy Perez joined Giga-tronics as Sales and Marketing Manager of its Instrument Group (Instrument and Ascor divisions.) Andy came from Agilent, the industry leader in test and

measurement and our major competitor. Andy spent 32 years in front line sales positions as Sales Engineer, Area Manager and Regional Manager. We believe he will provide strong leadership and effective direction in reinvigorating our field sales organization.

It is now clear that our prior commitment to maintain a high level of investment in engineering for new product development was well justified. Instrument division recently released the first of a series of unique Microwave Synthesizers that were extremely well received by both our own sales force and by many potential users when introduced at the Microwave Industry MTT Show in Philadelphia this past June.

Based upon this product’s unique design concepts, reflecting a significant departure from normal industry practices, Giga-tronics was subsequently given the Frost & Sullivan Product Differentiation Innovation award for 2003. We, of course, are extremely pleased by this recognition and this strong confirmation of our decision to maintain a high level of commitment to new product development.

Despite the balance sheet adjustment reducing current assets by $4,844,000, our financial condition remains healthy. Cash at the end of FY 2003 was $5,005,000, compared to $7,180,000 a year earlier. We ended FY 2003 with a ratio of current assets to current liabilities of 3.5:1 and Shareholders equity per share of $3.40.

     There has been a marked increase in the numbers of sales leads, inquiries and requests for proposals in recent weeks. This is attributable in part, it appears, to the release of the award winning new Model 2400 Microwave Signal Generator. As we pursue these specific opportunities, we believe that the concomitant effort to strengthen and rejuvenate our sales and field selling organizations, as well as the early release of additional new products, should add substantially to these opportunities.

     We look forward to the future with enthusiasm and optimism.

Sincerely,

/s/ G. H. Bruns, Jr.

George H. Bruns, Jr.
Chairman and Chief Executive Officer

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