FORM 10-Q
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[ X ]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
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June 30, 2012
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[ ]
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
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to
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Commission File No. 0-12719
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GIGA-TRONICS INCORPORATED
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(Exact name of registrant as specified in its charter)
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California
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94-2656341
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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4650 Norris Canyon Road, San Ramon, CA 94583
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(925) 328-4650
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(Address of principal executive offices)
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Registrant’s telephone number, including area code
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Large accelerated filer
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Accelerated filer
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[ ]
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Non-accelerated filer
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Smaller reporting company
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[ X ]
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(Do not check if a smaller reporting company)
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Page No.
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PART I - FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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Condensed Consolidated Balance Sheets as of June 30, 2012(Unaudited) and March 31, 2012
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3
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Unaudited Condensed Consolidated Statements of Comprehensive Loss, Three Months Ended June 30, 2012 and June 25, 2011
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4
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Unaudited Condensed Consolidated Statements of Cash Flows, Three Months Ended June 30, 2012 and June 25, 2011
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5
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Notes to Unaudited Condensed Consolidated Financial Statements
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6
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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10
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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14
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Item 4.
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Controls and Procedures
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14
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PART II - OTHER INFORMATION
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Item 1.
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Legal Proceedings
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15
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Item 1A.
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Risk Factors
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15
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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15
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Item 3.
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Defaults Upon Senior Securities
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15
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Item 4.
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Mine Safety Disclosures
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15
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Item 5.
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Other information
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15
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SIGNATURES
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16
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Item 6.
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Exhibits
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31.1 Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act. | |||
31.2 Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act. | |||
32.1 Certification of CEO pursuant to Section 906 of Sarbanes-Oxley Act. | |||
32.2 Certification of CFO pursuant to Section 906 of Sarbanes-Oxley Act. |
(In thousands except share data)
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June 30, 2012
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March 31, 2012
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Assets
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Current assets:
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Cash and cash-equivalents
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$ | 1,436 | $ | 2,365 | ||||
Trade accounts receivable, net of allowance of $97 and $96, respectively
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3,573 | 1,270 | ||||||
Inventories, net
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4,202 | 4,700 | ||||||
Prepaid expenses and other current assets
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398 | 328 | ||||||
Total current assets
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9,609 | 8,663 | ||||||
Property and equipment, net
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599 | 611 | ||||||
Other assets
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- | 16 | ||||||
Total assets
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$ | 10,208 | $ | 9,290 | ||||
Liabilities and shareholders' equity
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||||||||
Current liabilities:
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Accounts payable
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$ | 804 | $ | 613 | ||||
Accrued commission
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177 | 129 | ||||||
Accrued payroll and benefits
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673 | 739 | ||||||
Accrued warranty
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189 | 210 | ||||||
Deferred revenue
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1,435 | 7 | ||||||
Deferred rent
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65 | 59 | ||||||
Capital lease obligations
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20 | 20 | ||||||
Other current liabilities
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321 | 318 | ||||||
Total current liabilities
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3,684 | 2,095 | ||||||
Long term obligations - deferred rent
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414 | 433 | ||||||
Long term obligations - capital lease
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13 | 15 | ||||||
Total liabilities
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4,111 | 2,543 | ||||||
Commitments
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Shareholders' equity:
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Convertible Preferred stock of no par value;
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Authorized - 1,000,000 shares
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Series A - designated 250,000 shares; 0 shares at June 30, 2012 and March 31, 2012 issued and outstanding | ||||||||
Series B - designated 10,000 shares; 9,997 shares at June 30, 2012 and 0 shares at March 31, 2012 issued and outstanding; (liquidation preference of $2,309)
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1,997 | 1,997 | ||||||
Common stock of no par value;
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Authorized - 40,000,000 shares; 5,029,747 shares at June 30, 2012 and March 31, 2012 issued and outstanding
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14,879 | 14,822 | ||||||
Accumulated deficit
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(10,779 | ) | (10,072 | ) | ||||
Total shareholders' equity
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6,097 | 6,747 | ||||||
Total liabilities and shareholders' equity
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$ | 10,208 | $ | 9,290 |
Three Months Ended
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(In thousands except per share data)
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June 30, 2012
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June 25, 2011
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Net sales
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$ | 4,058 | $ | 3,497 | ||||
Cost of sales
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2,428 | 2,054 | ||||||
Gross margin
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1,630 | 1,443 | ||||||
Engineering
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933 | 680 | ||||||
Selling, general and administrative
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1,310 | 1,434 | ||||||
Restructuring
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92 | - | ||||||
Total operating expenses
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2,335 | 2,114 | ||||||
Operating loss
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(705 | ) | (671 | ) | ||||
Interest expense, net
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- | - | ||||||
Loss before income taxes
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(705 | ) | (671 | ) | ||||
Provision for income taxes
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2 | 3 | ||||||
Net loss and comprehensive loss
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$ | (707 | ) | $ | (674 | ) | ||
Loss per share - basic
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$ | (0.14 | ) | $ | (0.13 | ) | ||
Loss per share - diluted
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$ | (0.14 | ) | $ | (0.13 | ) | ||
Weighted average shares used in per share calculation:
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Basic
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5,029 | 4,995 | ||||||
Diluted
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5,029 | 4,995 |
Three Months Ended
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(In thousands)
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June 30, 2012
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June 25, 2011
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Cash flows from operating activities:
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Net loss
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$ | (707 | ) | $ | (674 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities:
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Depreciation and amortization
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57 | 34 | ||||||
Share based compensation
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57 | 54 | ||||||
Change in deferred rent
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(13 | ) | (8 | ) | ||||
Change in other assets
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16 | - | ||||||
Changes in operating assets and liabilities
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(292 | ) | 2,839 | |||||
Net cash (used in) provided by operating activities
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(882 | ) | 2,245 | |||||
Cash flows from investing activities:
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Purchases of property and equipment
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(45 | ) | (36 | ) | ||||
Net cash used in investing activities
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(45 | ) | (36 | ) | ||||
Cash flows from financing activities:
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Proceeds from exercise of stock options
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- | 4 | ||||||
Principal payments on capital leases
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(2 | ) | (29 | ) | ||||
Net cash used in financing activities
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(2 | ) | (25 | ) | ||||
(Decrease) increase in cash and cash-equivalents
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(929 | ) | 2,184 | |||||
Beginning cash and cash-equivalents
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2,365 | 1,408 | ||||||
Ending cash and cash-equivalents
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$ | 1,436 | $ | 3,592 | ||||
Supplementary disclosure of cash flow information:
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Cash paid for income taxes
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$ | 2 | $ | 40 | ||||
Cash paid for interest
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- | - |
a.
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It is commensurate with either of the following:
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1.
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The Company’s performance to achieve the milestone.
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2.
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The enhancement of the value of the delivered item or items as a result of a specific outcome resulting from the Company’s performance to achieve the milestone.
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b.
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It relates solely to past performance.
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c.
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It is reasonable relative to all of the deliverables and payment terms (including other potential
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milestone consideration) within the arrangement.
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(In thousands)
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June 30, 2012
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March 31, 2012
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Raw materials
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$ | 2,074 | $ | 2,313 | ||||
Work-in-progress
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1,607 | 1,651 | ||||||
Finished goods
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123 | 241 | ||||||
Demonstration inventory
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398 | 495 | ||||||
Total
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$ | 4,202 | $ | 4,700 |
Three Months Ended
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(In thousands except per share data)
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June 30, 2012
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June 25, 2011
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Net loss
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$ | (707 | ) | $ | (674 | ) | ||
Weighted average:
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Common shares outstanding
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5,029 | 4,995 | ||||||
Potential common shares
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- | - | ||||||
Common shares assuming dilution
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5,029 | 4,995 | ||||||
Net loss per share of common stock – basic
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$ | (0.14 | ) | $ | (0.13 | ) | ||
Net loss per share of common stock - diluted
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$ | (0.14 | ) | $ | (0.13 | ) | ||
Stock options not included in computation that could potentially dilute EPS in the future
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1,282 | 852 | ||||||
Restricted stock awards not included in computation
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- | 90 | ||||||
Convertible preferred stock not included in computation that could potentially dilute EPS in the future
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1,000 | - | ||||||
Warrants not included in computation that could potentially dilute EPS in the future
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849 | - |
Three Months Ended
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June 30, 2012
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June 25, 2011
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Dividend yield
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None
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None
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Expected volatility
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92.00 | % | 94.00 | % | ||||
Risk-free interest rate
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0.76 | % | 1.55 | % | ||||
Expected term (years)
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8.36 | 5.9 |
Shares
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Weighted
Average |
Weighted Average
Remaining Contractual |
Aggregate
Intrinsic |
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Outstanding at March 26, 2011
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885,014 | $ | 1.96 | 2.5 | $ | 459,708 | ||||||||||
Granted
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827,500 | 1.58 | ||||||||||||||
Exercised
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35,590 | 1.36 | ||||||||||||||
Forfeited / Expired
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372,112 | 1.96 | ||||||||||||||
Outstanding at March 31, 2012
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1,304,812 | $ | 1.74 | 6.9 | $ | 3,041 | ||||||||||
Granted
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85,500 | 1.01 | ||||||||||||||
Exercised
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- | - | ||||||||||||||
Forfeited / Expired
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108,810 | 1.45 | ||||||||||||||
Outstanding at June 30, 2012
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1,281,502 | $ | 1.71 | 7.0 | $ | 15,858 | ||||||||||
Exercisable at June 30, 2012
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302,627 | $ | 2.06 | 2.0 | $ | - | ||||||||||
At June 30, 2012, expected to vest in the future
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647,448 | $ | 1.61 | 8.6 | $ | 10,489 |
June 30, 2012 (Dollars in thousands)
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Giga-tronics Division
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Microsource
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Total
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Net sales
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$ | 2,827 | $ | 1,231 | $ | 4,058 | ||||||
Net loss
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(644 | ) | (63 | ) | (707 | ) | ||||||
Total assets
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6,246 | 3,962 | 10,208 |
June 25, 2011 (Dollars in thousands)
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Giga-tronics Division
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Microsource
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Total
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Net sales
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$ | 2,423 | $ | 1,074 | $ | 3,497 | ||||||
Net loss
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(316 | ) | (358 | ) | (674 | ) | ||||||
Total assets
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8,826 | 3,231 | 12,057 |
Three Months Ended
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(In thousands)
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June 30, 2012
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June 25, 2011
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Balance at beginning of period
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$ | 210 | $ | 200 | ||||
Provision, net
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4 | 65 | ||||||
Warranty costs incurred
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(25 | ) | (65 | ) | ||||
Balance at end of period
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$ | 189 | $ | 200 |
Type of cost expected to be incurred:
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Total Restructuring Cost
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Recognized during the fiscal year ended March 31, 2012
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Recognized during the three months ended June 30, 2012
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Expected to be recognized between July 1, 2012 and Dec 31, 2013
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(Dollars in thousands)
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Retention agreements for employees
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$ | 506 | $ | 31 | $ | 92 | $ | 383 | ||||||||
Preparation of San Ramon facility
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103 | 103 | ||||||||||||||
Training of San Ramon employees
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34 | 34 | ||||||||||||||
Moving expenses
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56 | 56 | ||||||||||||||
Clean-up of Santa Rosa facility
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67 | 67 | ||||||||||||||
Total
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$ | 766 | $ | 31 | $ | 92 | $ | 643 |
Three Months Ended
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(Dollars in thousands)
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June 30, 2012
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June 25, 2011
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% change
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Giga-tronics Division
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$ | 2,181 | $ | 3,885 | (44 | %) | ||||||
Microsource
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6,499 | 1,663 | 291 | % | ||||||||
Total
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$ | 8,680 | $ | 5,548 | 56 | % |
Three Months Ended
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(Dollars in thousands)
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June 30, 2012
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June 25, 2011
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% change
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Backlog of unfilled orders
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$ | 8,461 | $ | 5,700 | 48 | % | ||||||
Backlog of unfilled orders shippable within one year
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5,667 | 4,177 | 36 | % | ||||||||
Previous fiscal year end (FYE) long term backlog reclassified during year as shippable within one year
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1,573 | 28 | 5518 | % | ||||||||
Net cancellations during year of previous FYE one-year backlog
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- | - | - |
Three Months Ended
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(Dollars in thousands)
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June 30, 2012
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June 25, 2011
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% change
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Giga-tronics Division
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$ | 2,827 | $ | 2,423 | 17 | % | ||||||
Microsource
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1,231 | 1,074 | 15 | % | ||||||||
Total
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$ | 4,058 | $ | 3,497 | 16 | % |
Three Months Ended
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(Dollars in thousands)
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June 30, 2012
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June 25, 2011
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% change
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Cost of sales
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$ | 2,428 | $ | 2,054 | 18 | % |
Three Months Ended
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(Dollars in thousands)
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June 30, 2012
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June 25, 2011
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% change
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Engineering
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$ | 933 | $ | 680 | 37 | % | ||||||
Selling, general and administrative
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1,310 | 1,434 | (9 | %) | ||||||||
Restructuring
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92 | - | 0 | % | ||||||||
Total
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$ | 2,335 | $ | 2,114 | 10 | % |
Type of Cost
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Estimated Total Expense (In thousands) | |||
Retention Agreements for employees
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$ | 506 | ||
Preparation of San Ramon facility
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$ | 103 | ||
Training of San Ramon Employees
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$ | 34 | ||
Moving expenses
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$ | 56 | ||
Clean-up of Santa Rosa facility
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$ | 67 | ||
Total
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$ | 766 |
31.1
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Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act.
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31.2
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Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act.
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32.1
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Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act.
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32.2
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Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act.
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GIGA-TRONICS INCORPORATED
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(Registrant)
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By:
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Date:
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August 9, 2012
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/s/ John R. Regazzi
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John R. Regazzi
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President and Chief Executive Officer
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(Principal Executive Officer)
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Date:
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August 9, 2012
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/s/ Frank D. Romejko
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Frank D. Romejko
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Vice President of Finance
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Chief Financial Officer (Acting)
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(Principal Accounting Officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of Giga-tronics Incorporated;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
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8/09/2012
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/s/ John R. Regazzi
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John R. Regazzi
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Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Giga-tronics Incorporated;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
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8/09/2012
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/s/ Frank D. Romejko
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Frank D. Romejko
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Vice President of Finance
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Chief Financial Officer (Acting)
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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8/09/2012
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/s/ John R. Regazzi
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John R. Regazzi
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Chief Executive Officer
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||||
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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8/09/2012
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/s/ Frank D. Romejko
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Frank D. Romejko
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||||
Vice President of Finance
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Chief Financial Officer (Acting)
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