<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 2, 1997
GIGA-TRONICS INCORPORATED
(Exact Name of Registrant as Specified in Charter)
California 0-12719 94-2656341
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation ) Number) Identification Number)
4650 Norris Canyon Road
San Ramon, California 94583
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (510) 328-4650
<PAGE> 2
PAGE 3
Item 2. Acquisition or Disposition of Assets
On December 2, 1997, Giga-tronics Incorporated, a California
corporation (the "Registrant") acquired Ultracision, Inc., a California
corporation ("Ultracision"), by merging Giga Acquisition Inc., a wholly owned
subsidiary of the Registrant, with and into Ultracision with Ultracision as
the surviving corporation. By virtue of the merger, Ultracision became a
direct, wholly-owned subsidiary of the Registrant, and all of Ultracision's
outstanding capital stock was converted into capital stock of the Registrant
as adjusted to reflect an exchange ratio (the "Exchange Ratio") of
approximately .75 shares of the Registrant's common stock for each share of
Ultracision common stock. As a result, each shareholder of Ultracision became
the owner of shares of capital stock of the Registrant as adjusted to reflect
the Exchange Ratio. Additionally, each outstanding option to purchase shares
of Ultracision common stock was automatically converted into an option to
purchase, upon the same terms and conditions, shares of the Registrant's
common stock in an amount adjusted to reflect the Exchange Ratio.
The Registrant timely filed a Current Report of Form 8-K, dated
December 2, 1997, on December 16, 1997, reporting in Item 2, the acquisition
by Registrant of Ultracision, Inc., with the Securities and Exchange
Commission.
The Registrant further reported in Item 7 of such Report, that it
would file financial statements of the acquired corporation within the time
period and as specified by the rules relating to filing reports on a Current
Report on Form 8-K, by amendment.
<PAGE> 3
PAGE 2
GIGA-TRONICS INCORPORATED
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
<S> <C>
ITEM 1 Not Applicable
ITEM 2 Acquisition or Disposition of Assets........................................3
ITEM 3
to 6 Not applicable
ITEM 7 Financial Statements and Exhibits
A Financial Statements
1. Ultracision, Inc and subsidiary.
(a) Independent Auditors' Report.....................................................5
(b) Consolidated Balance Sheet - March 31, 1997......................................6
(c) Consolidated Statement of Operations -
Year Ended March 31, 1997..................................................7
(d) Consolidated Statement of Shareholders' Equity -
Year Ended March 31, 1997..................................................8
(e) Consolidated Statement of Cash Flows -
Year Ended March 31, 1997..................................................9
(f) Notes to Consolidated Financial Statements.................................10 - 15
2. Unaudited Pro Forma Condensed Combined Financial Statements.........................16
(a) Pro Forma Condensed Combined Balance Sheet -
September 27, 1997 (unaudited)............................................17
(b) Pro Forma Condensed Combined Statements of Operations
For the Years Ended March 25, 1995, March 30, 1996
and March 29, 1997 (unaudited).......................................18 - 20
(c) Pro Forma Condensed Combined Statements of Operations
For the Six Months Ended September 28, 1996,
and September 27, 1997 (unaudited)...................................21 - 22
(d) Notes to Unaudited Pro Forma Condensed Combined
Financial Statements.................................................23 - 24
3. Ultracision, Inc.
(a) Consolidated Balance Sheet - September 30, 1997 (unaudited).....................25
(b) Consolidated Statements of Operations (unaudited)
For the Six Months Ended September 30, 1997 and 1996......................26
(c) Consolidated Statements of Cash Flows (unaudited)
For the Six Months Ended September 30, 1997 and 1996......................27
(e) Notes to Unaudited Condensed Consolidated
Financial Statements......................................................28
SIGNATURES ...........................................................................29
</TABLE>
<PAGE> 4
PAGE 4
ULTRACISION, INC. AND SUBSIDIARY
Consolidated Financial Statements
March 31, 1997
(With Independent Auditors' Report Thereon)
<PAGE> 5
PAGE 5
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Ultracision, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Ultracision, Inc.
and subsidiary as of March 31, 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ultracision, Inc.
and subsidiary as of March 31, 1997, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick
----------------------------
KPMG Peat Marwick
San Jose, California
January 12, 1998
<PAGE> 6
PAGE 6
ULTRACISION, INC. AND SUBSIDIARY
Consolidated Balance Sheet
March 31, 1997
<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets:
Cash and cash equivalents $ 203,229
Short-term investments 200,000
Accounts receivable, net of allowance for doubtful accounts of $25,000 762,111
Income tax receivable 52,985
Inventories 1,798,540
Deferred income taxes 306,508
-----------
Total current assets 3,323,373
-----------
Property and equipment:
Equipment 436,723
Vehicles 10,829
Leasehold improvements 1,032
-----------
448,584
Less accumulated depreciation (262,402)
-----------
Net property and equipment 186,182
-----------
Other assets 8,980
-----------
Total assets $ 3,518,535
===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 318,796
Customer deposits 540,786
Accrued payroll and benefits 227,747
Accrued warranty 70,000
Accrued commissions 5,445
Accrued expenses 95,957
Dividends payable 27,513
Accrued profit sharing contribution 38,031
-----------
Total current liabilities 1,324,275
Deferred rent 32,709
-----------
Total liabilities 1,356,984
Commitments
Shareholders' equity:
Common stock, no par value; 10,000,000 shares authorized; 687,832 shares
issued and outstanding 398,785
Retained earnings 1,762,766
-----------
Total shareholders' equity 2,161,551
-----------
Total liabilities and shareholders' equity $ 3,518,535
===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 7
PAGE 7
ULTRACISION, INC. AND SUBSIDIARY
Consolidated Statement of Operations
Year ended March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Sales $ 5,602,888
Cost of goods sold 2,656,542
-----------
Gross profit 2,946,346
-----------
Operating expenses:
Sales and marketing 508,381
Research and development 1,126,052
General and administrative 772,362
-----------
2,406,795
-----------
539,551
-----------
Income from operations
Other income (expenses):
Interest and dividend income 15,085
Interest expense (3,001)
Miscellaneous 2,348
-----------
14,432
-----------
Income before provisions for income taxes 553,983
Provision for income taxes 166,939
-----------
Net income $ 387,044
===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 8
PAGE 8
ULTRACISION, INC. AND SUBSIDIARY
Consolidated Statement of Shareholders' Equity
Year ended March 31, 1997
<TABLE>
<CAPTION>
Common stock Total
----------------------- Retained shareholders'
Shares Amount earnings equity
------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balances, March 31, 1996 686,936 $ 371,226 $1,422,181 $1,793,407
Common stock issued 35,000 70,000 -- 70,000
Common stock repurchased (34,104) (42,441) (18,946) (61,387)
Dividends declared -- -- (27,513) (27,513)
Net income -- -- 387,044 387,044
------- --------- --------- ---------
Balances, March 31, 1997 687,832 $ 398,785 $1,762,766 $2,161,551
======= ========= ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 9
PAGE 9
ULTRACISION, INC. AND SUBSIDIARY
Consolidated Statement of Cash Flows
Year ended March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income $ 387,044
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 59,436
Deferred income taxes 8,080
Loss on disposal of property and equipment 3,738
Changes in operating assets and liabilities:
Accounts receivable 1,350,682
Inventories (418,129)
Other assets 10,375
Accounts payable (488,353)
Customer deposits (331,037)
Income taxes payable (68,478)
Income taxes refundable (52,985)
Accrued payroll and benefits 39,488
Accrued expenses 53,062
Deferred rent 4,342
Profit sharing payable 24,172
-----------
Net cash provided by operating activities 581,437
-----------
Cash flows from investing activities:
Purchase of property and equipment (80,466)
Purchase of investments (200,000)
-----------
Net cash used in investing activities (280,466)
-----------
Cash flows from financing activities:
Proceeds from issuance of common stock 70,000
Repurchase of common stock (61,387)
Dividends paid (20,608)
Payments on line of credit, net (199,800)
Repayments of long-term debt (30,287)
-----------
Net cash used in financing activities (242,082)
-----------
Net increase in cash and cash equivalents 58,889
Cash and cash equivalents at beginning of year 144,340
-----------
Cash and cash equivalents at end of year $ 203,229
===========
Supplementary disclosures of cash flow information:
Cash paid for income taxes $ 277,482
===========
Cash paid for interest $ 4,718
===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 10
ULTRACISION, INC. AND SUBSIDIARY PAGE 10
Notes to Consolidated Financial Statements
March 31, 1997
(1) The Company and Significant Accounting Policies
The Company
Ultracision, Inc. (the Company), manufactures probing and robotic
equipment for the computer disc drive industry. The Company develops,
manufactures, and markets automation equipment for the test and
inspection of silicon wafers and a line of probers for the testing and
inspection of silicon devices.
Principles of Consolidation
The accompanying consolidated financial statements include the assets,
liabilities, and results of operations of Ultracision, Inc. and its
wholly owned subsidiary, Ultracision Foreign Sales Corporation, Inc. All
intercompany transactions and accounts in the accompanying consolidated
financial statements have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that effect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. Cash equivalents
consisted of approximately $147,000 in money market funds as of March 31,
1997.
Short-Term Investments
The Company's investments are classified as available for sale securities
and are stated at fair value. The cost of securities is determined on the
specific identification method. As of March 31, 1997, the fair value of
investments approximated cost. Realized gains and losses on the sales of
short-term investments were immaterial during the fiscal year then ended.
Significant Group Concentrations of Credit Risk
Financial instruments, which potentially subject the Company to credit
risk, consist principally of investments and trade accounts receivable.
The Company's investments consist of auction rate preferred securities.
Concentration of credit risk in trade accounts receivable results
primarily from sales to major customers. The Company individually
evaluates the creditworthiness of its customers and generally does not
require collateral or other security. Historically, the Company has not
incurred any significant credit related losses.
<PAGE> 11
PAGE 11
Inventories
Inventories are stated at the lower of first-in, first-out cost or
market.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the
respective assets, which range from 5 to 10 years. Leasehold improvements
are amortized using the straight-line method over the shorter of the
estimated useful lives or the lease term.
The Company evaluates property and equipment for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of property and equipment
is measured by comparison of its carrying amount to future net cash flows
the property and equipment are expected to generate. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the property and equipment
exceeds its fair market value. To date, the Company has made no
adjustments to the carrying value of long-lived assets.
Software Development Costs
The Company classifies the costs of planning, designing, and establishing
the technological feasibility of a computer software product as research
and development costs and charges those costs to expense when incurred.
After technological feasibility has been established, costs of producing
a marketable product and product masters are capitalized. Costs of
maintenance and customer support are charged to expense when costs are
incurred. As of March 31, 1997, all costs incurred have been charged to
expense, as technological feasibility had not been achieved.
Revenue Recognition
Revenue is recognized upon product shipment.
Income Taxes
The Company accounts for income taxes using the asset and liability
method which results in the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been recognized in the Company's consolidated financial statements or tax
returns. In estimating future tax consequences, all expected future
events are considered other than enactment of changes in tax laws or
rates.
Accounting for Stock-Based Compensation
The Company uses the intrinsic value method to measure compensation for
its stock and stock purchase plans.
<PAGE> 12
PAGE 12
(2) Inventories
Inventories as of March 31, 1997, consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Raw materials $ 1,075,299
Work in process 723,241
------------
$ 1,798,540
============
</TABLE>
(3) Line of Credit
The Company has an available line of credit agreement, expiring in
September 1998, with Silicon Valley Bank. Borrowings under the agreement
bear interest at the bank's prime rate plus 0.75%, are secured by
substantially all assets of the Company, and are limited to $750,000. The
agreement requires the Company to comply with various financial
covenants. As of March 31, 1997, management is not aware of any
violations of the covenants.
(4) Stock Option Plan
As of March 31, 1997, the Company has reserved 100,000, 75,000, and
75,000 shares of common stock for issuance to employees under its 1986
Stock Option Plan, 1987 Stock Option Plan, and 1991 Stock Option Plan
(the Plans), respectively. Incentive or nonstatutory stock options can be
granted at not less than 100% of the fair market value of the stock on
the date the option is granted, as determined by the Company's Board of
Directors. Options generally become exercisable at a rate of 20% each
year, commencing two years from date of grant. If the Board of Directors
designates options as incentive stock options, they are fully exercisable
at 100% commencing two years from date of grant. If unexercised, options
will expire on a predetermined date as determined by the Board of
Directors, but not more than 10 years from the date of grant, or 3 months
after termination as an employee of the Company.
During 1997, activity in the Plan was as follows:
<TABLE>
<CAPTION>
Exercise price per share
-------------------------
Available Number Weighted-
for grant outstanding Actual average
--------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Balances, March 31, 1996 117,759 52,000 $ 2.00 $ 2.00
Granted (55,000) 55,000 2.00 - 2.2 2.09
Terminated 22,000 (22,000) 2.00 2.00
------- -------
Balances, March 31, 1997 84,759 85,000 2.00 - 2.2 2.06
======= =======
</TABLE>
<PAGE> 13
PAGE 13
As of March 31, 1997, all outstanding options expire five years from
grant date and none were exercisable. The weighted-average contract life
of options outstanding is approximately four years. The Company applies
the intrinsic value method in accounting for its plan. Accordingly, no
compensation cost has been recognized for its stock options in its
results of operations. Had the Company recorded a charge for the fair
value of options granted consistent with SFAS No. 123, the charge to net
earnings would not have been material for the year ended March 31, 1997.
Pro forma net income reflects only options granted in fiscal 1997 and
1996. Therefore, the full impact of calculating compensation cost for
stock options under Statement of Financial Accounting Standards (SFAS)
No. 123 is not reflected in the pro forma net income amount calculated
for the year ended March 31, 1997 because compensation cost is reflected
over the options' vesting period of five years, and compensation cost for
options granted prior to January 1, 1995, is not considered.
The per share weighted-average fair value of each stock option granted
during 1997 is estimated on the date of the grant using the minimum value
method, with the following weighted-average assumptions: dividend yield
of 2%, risk-free interest rate of 6.5%, and expected lives of 5 years.
(5) Employee Benefit Plans
The Company maintains a qualified profit sharing plan for all eligible
employees. Contributions to the profit sharing plan is determined by the
Board of Directors upon review of annual operations. For the year ended
March 31, 1997, the Company contributed approximately $38,031 to the
profit sharing plan. The Company also has a 401(k) plan that provides for
matching funds by the employer. Contributions to the 401(k) plan for the
year ended March 31, 1997, were approximately $16,757.
(6) Income Taxes
Following are the components of income taxes for the year ended March 31,
1997:
<TABLE>
<CAPTION>
<S> <C>
Current:
Federal $130,049
State 28,811
--------
Total current 158,860
--------
Deferred:
Federal 7,206
State 873
--------
Total deferred 8,079
--------
$166,939
========
</TABLE>
<PAGE> 14
PAGE 14
Income tax expense differs from the amounts computed by applying the U.S.
federal income tax rate to pretax income as a result of the following:
<TABLE>
<CAPTION>
<S> <C>
Federal income tax at statutory rate $ 195,698
State income tax, net of federal benefit 19,592
Foreign sales corporation benefit (21,163)
Tax credits (27,500)
Other 312
---------
Effective income tax $ 166,939
=========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
<S> <C>
Future state tax effect $ (12,592)
Accruals and allowances not currently
deductible for tax purposes 106,232
Inventory reserves and additional costs capitalized 212,868
---------
$ 306,508
=========
</TABLE>
Management believes that it is more likely than not, based on historical
operating results, that the Company will generate sufficient future
taxable income to realize the net deferred tax assets. As such, the
Company has not provided a valuation against net deferred tax asset.
<PAGE> 15
PAGE 15
(7) Commitments
The Company leases its facilities under a noncancelable operating lease
agreement expiring in June 2002. The lease stipulates scheduled rent
increases over its life, resulting in uneven cash flows. The total
commitment of the lease is being amortized over its life on the
straight-line method. The differences between the lease payments required
and the recognition of lease expense on the straight-line method is
recorded as deferred rent. As of March 31, 1997, the Company has recorded
deferred rent of $32,709 related to the facility lease. Rent expense
recorded under this lease for the year ended March 31, 1997, was
approximately $184,676.
The future minimum annual lease payments are as follows:
<TABLE>
<CAPTION>
Year ending
March 31,
<S> <C>
1998 $ 206,063
1999 207,054
2000 214,488
2001 216,966
2002 220,875
Thereafter 54,901
----------
$1,120,347
==========
</TABLE>
(8) Export Sales
International sales were 48.7% of revenues for the year ended March 31,
1997. A significant portion of such sales, 29.8%, are to customers in
Malaysia, Korea, Taiwan, and Japan.
Two customers accounted for 30% and 18% of revenues, respectively, for
the year ended March 31, 1997. Accounts receivable for these two
customers as of Mach 31, 1997 were $337,888 and $36,400, respectively.
(9) Subsequent Event
On December 2, 1997, the Company entered into an agreement with
Giga-tronics Inc. (Giga-tronics) to sell the Company. Giga-tronics
designs, manufactures, and markets microwave and radio frequency signal
generation and power measurement instruments. The transaction will be
structured as a pooling of interest in which 517,000 shares of
Giga-tronics common stock will be exchanged for all of the outstanding
shares of the Company, which will operate as a subsidiary of
Giga-tronics.
<PAGE> 16
GIGA-TRONICS INCORPORATED PAGE 16
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma condensed combined statements of operations
give effect to the acquisition by Giga-tronics Incorporated ("Giga-tronics" or
the "Company") of Ultracision, Inc. ("Ultracision") in a transaction accounted
for by the pooling-of-interests method of accounting.
The financial statement data as of September 27, 1997 and the six-month periods
ended September 27, 1997 and September 28, 1996 are unaudited, and have been
prepared on the same basis as the financial information derived from the audited
financial statements, and in the opinion of management, contain all adjustments,
consisting of normal recurring accruals, necessary for the fair presentation of
the results of operations for such periods.
The unaudited pro forma condensed combined balance sheet data combine
Giga-tronics and Ultracision balance sheets as of September 27, 1997, giving
effect to the Merger as if it had occurred on September 27, 1997. The unaudited
pro forma condensed combined statements of income combine Giga-tronics and
Ultracision results of operations for the six months ended September 27, 1997
and September 28, 1996 and each of the years in the three-year period ended
March 29, 1997, giving effect to the Merger as if it had occurred on April 1,
1994.
The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial condition that
would have occurred had the Merger been consummated at the beginning of the
periods presented, nor is it necessarily indicative of future operating results
or financial condition.
<PAGE> 17
GIGA-TRONICS INCORPORATED AND ULTRACISION, INC. PAGE 17
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 27, 1997
<TABLE>
<CAPTION>
Period Ended Pro-Forma Pro Forma
(In thousands except per share data) Giga-tronics Ultracision Adjustments Combined
ASSETS ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets: --
Cash and cash equivalents $ 3,360 $ 275 $ -- $ 3,635
Short-term investments 8,386 212 -- 8,598
Accounts receivable, net 5,016 380 -- 5,396
Inventories, net 7,254 1,755 -- 9,009
Prepaid expenses 497 -- -- 497
Deferred income taxes 1,966 400 -- 2,366
-------- -------- -------- --------
Total current assets 26,479 3,022 -- 29,501
-------- -------- -------- --------
Property and equipment: --
Equipment 8,142 528 -- 8,670
Office Furniture and fixtures 676 11 -- 687
Land 279 -- -- 279
Building and leasehold improvements 744 1 -- 745
-------- -------- -------- --------
Gross cost of Property and equipment 9,841 540 -- 10,381
Less accumulated depreciation (7,150) (286) -- (7,436)
-------- -------- -------- --------
Net property and equipment 2,691 254 -- 2,945
-------- -------- -------- --------
Patents and licenses 800 -- -- 800
Other assets 59 15 -- 74
-------- -------- -------- --------
Total assets $ 30,029 $ 3,291 $ -- $ 33,320
======== ======== ======== ========
LIABILITES AND SHAREHOLDERS EQUITY
Current liabilities:
Accounts payable $ 2,303 $ 558 $ -- $ 2,861
Accrued liabilities 2,695 252 125 3,072
Customer Advances 379 449 -- 828
-------- -------- -------- --------
Total current liabilities 5,377 1,259 125 6,761
Other long term -- 33 -- 33
Obligation under capital lease 36 -- -- 36
Deferred income taxes 120 -- -- 120
-------- -------- -------- --------
Total liabilities 5,533 1,292 125 6,950
Shareholders' equity: --
Convertible preferred stock of no par
value; -- -- -- --
Common stock, no par value; 11,090 399 -- 11,489
Unrealized gain (loss) on investments (10) -- -- (10)
Retained earnings 13,416 1,600 (125) 14,891
-------- -------- -------- --------
Total shareholders' equity 24,496 1,999 (125) 26,370
-------- -------- -------- --------
Total Liabilities and shareholder's equity $ 30,029 $ 3,291 $ -- $ 33,320
======== ======== ======== ========
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial statements
<PAGE> 18
GIGA-TRONICS INCORPORATED AND ULTRACISION, INC. PAGE 18
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 25, 1995
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Giga-tronics Ultracision Adjustments Combined
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $29,824 $ 4,156 --- $ 33,980
Cost of sales 19,991 2,001 --- 21,992
---------- -------- --------- ----------
Gross profit 9,833 2,155 --- 11,988
Product development 3,489 712 --- 4,201
Selling, general and administrative expenses 7,302 1,273 --- 8,575
Amortization of intangibles 560 --- --- 560
---------- -------- --------- ----------
Operating expenses 11,351 1,985 --- 13,336
Net operating income (loss) (1,518) 170 --- (1,348)
Other income 17 4 --- 21
Interest income, net 160 (3) --- 157
---------- --------- --------- ----------
Earnings (loss) before income taxes (1,341) 171 --- (1,170)
Provision for income taxes (benefit) (563) 88 --- (475)
----------- -------- --------- -----------
Net earnings (loss) $ (778) $ 83 $ --- $ (695)
=========== ======== ========= ===========
Earnings (loss) per share of common stock $ (0.21) $ 0.11 $ --- $ (0.16)
=========== ======== ========= ===========
Weighted average common and common
equivalent shares outstanding 3,679 759 (189) 4,249
========== ======== ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial statements
<PAGE> 19
GIGA-TRONICS INCORPORATED AND ULTRACISION, INC. PAGE 19
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 30, 1996
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Giga-tronics Ultracision Adjustments Combined
------- ------- --------- -------
<S> <C> <C> <C> <C>
Net sales $35,305 $ 5,499 $ -- $40,804
Cost of sales 22,417 2,471 -- 24,888
------- ------- --------- -------
Gross profit 12,888 3,028 -- 15,916
Product development 3,398 1,097 -- 4,495
Selling, general and administrative expenses 7,354 1,305 -- 8,659
Amortization of intangibles 560 -- -- 560
------- ------- --------- -------
Operating expenses 11,312 2,402 -- 13,714
Net operating income 1,576 626 -- 2,202
Other income 200 0 -- 200
Interest income, net 217 4 -- 221
------- ------- --------- -------
Earnings before income taxes 1,993 630 -- 2,623
Provision for income taxes 245 185 -- 430
------- ------- --------- -------
Net earnings $ 1,748 $ 445 $ -- $ 2,193
======= ======= ========= =======
Earnings per share of common stock $ 0.46 $ 0.65 $ -- $ 0.51
======= ======= ========= =======
Weighted average common and common
equivalent shares outstanding 3,780 688 (171) 4,297
======= ======= ========= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial statements
<PAGE> 20
GIGA-TRONICS INCORPORATED AND ULTRACISION, INC. PAGE 20
AUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED MARCH 29, 1997
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Giga-tronics Ultracision Adjustments Combined
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales $ 32,428 $ 5,603 $ -- $ 38,031
Cost of sales 20,748 2,656 -- 23,404
-------- -------- --------- --------
Gross profit 11,680 2,947 -- 14,627
Product development 3,454 1,127 -- 4,581
Selling, general and administrative expenses 6,676 1,280 -- 7,956
Amortization of intangibles 559 -- -- 559
-------- -------- --------- --------
Operating expenses 10,689 2,407 -- 13,096
Net operating income 991 540 -- 1,531
Other income (expense) (18) 2 -- (16)
Interest income, net 521 12 -- 533
-------- -------- --------- --------
Earnings before income taxes 1,494 554 -- 2,048
Provision for income taxes 372 167 -- 539
-------- -------- --------- --------
Net earnings $ 1,122 $ 387 $ -- $ 1,509
======== ======== ========= ========
Earnings per share of common stock $ 0.29 $ 0.56 $ -- $ 0.34
======== ======== ========= ========
Weighted average common and common
equivalent shares outstanding 3,831 690 (145) 4,376
======== ======== ========= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial statements
<PAGE> 21
GIGA-TRONICS INCORPORATED AND ULTRACISION, INC. PAGE 21
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 28, 1996
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Giga-tronics Ultracision Adjustments Combined
------- ------- ---------- -------
<S> <C> <C> <C> <C>
Net sales $16,138 $ 3,126 $ -- $19,264
Cost of sales 10,173 1,482 -- 11,655
------- ------- ---------- -------
Gross profit $ 5,965 $ 1,644 $ -- $ 7,609
Product development 1,774 376 -- 2,150
Selling, general and administrative expenses 3,314 575 -- 3,889
Amortization of intangibles 279 -- -- 279
------- ------- ---------- -------
Operating expenses 5,367 951 -- 6,318
Net operating income 598 693 -- 1,291
Other income 18 -- -- 18
Interest income, net 251 4 -- 255
------- ------- ---------- -------
Earnings before income taxes 867 697 -- 1,564
Provision for income taxes 216 210 -- 426
------- ------- ---------- -------
Net earnings $ 651 $ 487 $ -- $ 1,138
======= ======= ========== =======
Earnings per share of common stock $ 0.17 $ 0.71 $ -- $ 0.26
======= ======= ========== =======
Weighted average common and common
equivalent shares outstanding 3,838 689 (158) 4,369
======= ======= ========== =======
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial statements
<PAGE> 22
GIGA-TRONICS INCORPORATED AND ULTRACISION, INC. PAGE 22
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 27, 1997
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Giga-tronics Ultracision Adjustments Combined
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $16,122 $ 2,533 -- $18,655
Cost of sales 8,897 1,239 -- 10,136
------- ------- ------- -------
Gross profit 7,225 1,294 -- 8,519
Product development 1,910 694 -- 2,604
Selling, general and administrative expenses 3,894 844 (297) 4,441
Amortization of intangibles 230 -- -- 230
------- ------- ------- -------
Operating expenses 6,034 1,538 (297) 7,275
Net operating income (loss) 1,191 (244) 297 1,244
Other income 16 9 -- 25
Interest income, net 220 2 -- 222
------- ------- ------- -------
Earnings (loss) before income taxes 1,427 (233) 297 1,491
Provision for income taxes (benefit) 428 (70) 89 447
------- ------- ------- -------
Net earnings (loss) $ 999 $ (163) $ 208 $ 1,044
======= ======= ======= =======
Earnings (loss) per share of common stock $ 0.26 $ (0.24) $ -- $ 0.24
======= ======= ======= =======
Weighted average common and common
equivalent shares outstanding 3,817 693 (138) 4,372
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited pro forma condensed
combined financial statements
<PAGE> 23
PAGE 23
GIGA-TRONICS INCORPORATED AND ULTRACISION, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The Giga-tronics and Ultracision statements of operations for each
of the years in the three years ended March 27, 1997 and for each of
the six months ended September 28, 1996 and September 27, 1997 have
been combined. The balance sheets for Giga-tronics and Ultracision have
been combined as of September 27, 1997. The unaudited pro forma
condensed combined financial statements, including the notes thereto,
should be read in conjunction with the consolidated financial
statements of Ultracision included elsewhere herein, and Giga-tronics
included in the Annual Report on Form 10-K, filed with the Securities
and Exchange Commission for the year ended March 29, 1997.
No adjustments have been made to conform the accounting policies
of the combining companies. The nature and extent of such adjustments,
if any, will be based upon further study and analysis and are not
expected to be significant.
(2) UNAUDITED PRO FORMA COMBINED NET INCOME PER SHARE
The unaudited pro form condensed combined statements of operations
for Giga-tronics and Ultracision have been prepared as if the Merger
was completed at the beginning of the earliest period presented. The
unaudited pro forma combined net earnings per share is based on the
combined weighted average number of common and common equivalent shares
of Giga-tronics and Ultracision Common Stock for each period, based
upon an exchange ratio of 0.7516253969 (the Exchange Ratio as of
December 2, 1997) shares of Giga-tronics Common Stock for each
outstanding share of Ultracision Common Stock.
(3) PRO FORMA UNAUDITED COMBINED SHARES OUTSTANDING
These unaudited pro forma condensed combined financial statements
reflect the issuance of approximately 517,000 shares of Giga-tronics
Common Stock in exchange for all the outstanding shares of Ultracision
Common Stock (approximately 687,832 at September 27, 1997) and
assumption of approximately 75,000 Ultracision Common Stock options in
connection with the Merger resulting in an exchange ratio of
0.7516253969 (the Exchange Ratio as of December 2, 1997) shares of
Giga-tronics Common Stock for each outstanding share of Ultracision
Common Stock.
The following table details the pro forma share issuances (as of
September 27, 1997) in connection with the Merger:
<TABLE>
<CAPTION>
Giga-tronics
common
shares
Shares Estimated outstanding
Outstanding Exchange (in
(in thousands) ratio thousands) %
-------------- --------- ------------ ------
<S> <C> <C> <C> <C>
Giga-tronics shares outstanding
as of September 27, 1997 3,803 -- 3,803 88%
Ultracision shares outstanding
as of September 27, 1997 688 .75162539 517 12%
----- ----
Pro forma shares of Giga-tronics
Common Stock outstanding
after completion of the Merger
(as of September 27, 1997) 4,320 100%
===== ====
</TABLE>
The actual Exchange Ratio was determined at the effective time of the
Merger based on the Average Nasdaq Per Share Price on such date.
<PAGE> 24
PAGE 24
GIGA-TRONICS INCORPORATED AND ULTRACISION, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(4) TRANSACTION COSTS AND MERGER RELATED EXPENSES
Giga-tronics estimates that it will incur direct transaction costs
and merger-related integration expenses of approximately $475,000
associated with the Merger, consisting of transaction fees for
investment bankers, attorneys, accountants and financial printing. As
of September 27, 1997, $297,000 transaction-related expenses had been
incurred. The additional nonrecurring transaction costs will be charged
to operations primarily during the quarter in which the Merger closes.
The charge is a preliminary estimate only, and is therefore subject to
change.
The unaudited pro forma condensed combined balance sheet gives
effect to estimated direct transaction expenses and merger related
integration expenses as if such costs and expenses had been incurred as
of September 27, 1997, net of income taxes. These costs and expenses
are not reflected in the unaudited pro forma condensed combined
statement of operations.
<PAGE> 25
ULTRACISION, INC. PAGE 25
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Six Months ended September 30, 1997
(In thousands) ------------------
ASSETS
<S> <C>
Current Assets
Cash and cash equivalents $ 275
Investments 212
Trade accounts receivable, net 380
Inventories, net 1,755
Deferred income taxes 400
-------
Total current assets 3,022
Property and Equipment:
Machinery and equipment 528
Office furniture and fixtures 11
Land --
Building and leasehold improvements 1
-------
Gross cost property and equipment 540
Less accumulated depreciation and amortization (286)
-------
Net property and equipment 254
Patents and licenses --
Other assets 15
-------
Total assets $ 3,291
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 558
Accrued current liabilities 252
Customer advances 449
-------
Total current liabilities 1,259
Other long term 33
-------
Total liabilities 1,292
Shareholders' Equity
Common stock 399
Retained earnings 1,600
Total shareholders' equity 1,999
-------
Total liabilities and shareholders' equity $ 3,291
=======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
<PAGE> 26
ULTRACISION, INC. PAGE 26
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended September 30, 1997 September 30, 1996
(In thousands except per share data) ------------------ ------------------
<S> <C> <C>
Net sales $ 2,533 $ 3,126
Cost of sales 1,239 1,482
------- -------
Gross profit 1,294 1,644
Product development 694 376
Selling, general and administrative expenses 844 575
------- -------
Operating expenses 1,538 951
Net operating income (loss) (244) 693
Other income (expense) 9 --
Interest income, net 2 4
------- -------
Earnings (loss) before income taxes (233) 697
Provision for income taxes (benefit) (70) 210
------- -------
Net earnings (loss) $ (163) $ 487
Earnings (loss) per share of common stock $ (0.24) $ 0.71
Weighted average common and common
equivalent shares outstanding 693 689
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
<PAGE> 27
ULTRACISION, INC. PAGE 27
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended September 1997 September 1996
(In thousands) -------------- --------------
<S> <C> <C>
Cash flows provided from operations:
Net earnings as reported $ 163 $ 487
Adjustments to reconcile net earnings to
net cash provided from operations:
Depreciation and amortization 34 25
Deferred income taxes (94) 181
Changes in operating assets and liabilities 89 (26)
----- -----
Net cash provided by operations 192 667
Cash flows provided by investing activities:
Investment maturities (purchases), net (12) (454)
Additions to property and equipment, net (102) (18)
Other assets (6) --
----- -----
Net cash used in investing activities (120) (472)
Cash flows from financing activities:
Issuance of common stock -- 28
Payment on line of credit -- (200)
Payment on notes payable and long term debt -- (37)
----- -----
Net cash provided by financing activities -- (209)
Increase in cash and cash equivalents 72 (14)
Beginning cash and cash equivalents 203 144
Ending cash and cash equivalents $ 275 $ 130
Supplemental disclosures of cash flow information:
Cash paid for income taxes 172 27
----- -----
Cash paid for interest 7 1
----- -----
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements
<PAGE> 28
ULTRACISION, INC. PAGE 28
Notes to Unaudited Condensed Consolidated Financial Statements
(1) Basis of Presentation
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading. These
condensed consolidated financial statements should be read in conjunction
with the audited financial statements and the notes thereto for the year
ended March 30, 1997 herein.
The anaudited condensed consolidated financial statements included herein
reflect all adjustments that are, in the opinion of management, necessary
to state fairly the results for the periods presented. The results for
such periods are not necessarily indicative of the results to be expected
for the full fiscal year ending March 31, 1998, or any other future
periods.
(2) Inventories
Inventories are stated at the lower of first-in, first-out cost or
market. As of September 30, 1997, inventories consist of the following:
Raw materials $ 1,336,000
Work in process 419,000
-----------
$ 1,755,000
===========
(3) Revenue Recognition
Revenue is recognized upon product shipment.
(4) Net Income Per Share
Net income per share is computed using the weighted average number of
common and common equivalent shares outstanding during the period. Common
equivalent shares consist of shares issuable upon the exercise of stock
options using the treasury stock method.
<PAGE> 29
PAGE 29
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 thereunto duly authorized.
GIGA-TRONICS INCORPORATED
(Registrant)
Date: 02/13/98 /s/ GEORGE H. BRUNS, JR.
-------------------------------------------
George H. Bruns, Jr.
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: 02/13/98 /s/ MARK H. COSMEZ II
-------------------------------------------
Mark H. Cosmez II
Vice President, Finance and
Chief Financial Officer
(Principal Accounting Officer)
