<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the period ended December 26, 1998, or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from to
------ --------
Commission File No. 0-12719
-------------------------------
GIGA-TRONICS INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2656341
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4650 Norris Canyon Road, San Ramon, CA 94583
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (925) 328-4650
--------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Common stock outstanding as of January 28, 1998: 4,344,304
----------------
<PAGE> 2
PAGE 2
GIGA-TRONICS INCORPORATED
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page No.
--------
<S> <C>
ITEM 1 Consolidated Condensed Financial Statements:
Consolidated Condensed Balance Sheets as of December 26, 1998
and March 28, 1998 (unaudited) ............................................... 3
Consolidated Condensed Statements of Operations, three and nine months
ended December 26, 1998 and December 27, 1997 (unaudited)..................... 4
Consolidated Condensed Statements of Cash Flows, nine months
ended December 26, 1998 and December 27, 1997 (unaudited)..................... 5
Notes to Unaudited Consolidated Condensed Financial Statements................ 6
ITEM 2 Management's Discussion and Analysis of
Operations and Financial Condition............................................ 9
PART II - OTHER INFORMATION
ITEM 1
TO 5 Not applicable
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
SIGNATURES.................................................................................... 13
</TABLE>
<PAGE> 3
PAGE 3
GIGA-TRONICS INCORPORATED
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
December 26, 1998 March 28, 1998
----------------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 1,640 $ 4,611
Investments -- 5,724
Notes receivable -- 860
Trade accounts receivable, net of allowance 7,161 6,924
of $280 and $292, respectively
Inventories, net 13,370 8,064
Prepaid expenses 1,135 997
Deferred income taxes 2,401 2,092
-------- --------
Total current assets 25,707 29,272
Property and Equipment:
Land 279 279
Building and leasehold improvements 1,052 782
Machinery and equipment 13,324 8,880
Office furniture and fixtures 1,069 689
-------- --------
Property and equipment, gross cost 15,724 10,630
Less accumulated depreciation and amortization 8,921 7,885
-------- --------
Property and equipment, net cost 6,803 2,745
Patents and licenses 426 577
Goodwill, net 1,172 --
Other assets 113 78
-------- --------
Total assets $ 34,221 $ 32,672
======== ========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 3,005 $ 2,659
Accrued commissions 493 516
Accrued payroll and benefits 1,251 939
Accrued warranty 673 673
Customer advances 1,816 612
Current portion of capital lease and other long term
obligations 135 27
Other current liabilities 801 670
-------- --------
Total current liabilities 8,174 6,096
Capital lease and other long term obligations, net 463 58
Deferred income taxes 42 57
-------- --------
Total liabilities 8,679 6,211
-------- --------
Shareholders' Equity
Preferred stock of no par value;
Authorized 1,000,000 shares; no shares outstanding at December
26, 1998 and March 28, 1998 -- --
Common stock of no par value;
Authorized 40,000,000 shares; 4,344,304 shares at December 26, 1998 and
4,326,299 shares at March 28, 1998
issued and outstanding 11,578 11,532
Accumulated other comprehensive income -- (18)
Retained earnings 13,964 14,947
-------- --------
Total shareholders' equity 25,542 26,461
-------- --------
Total liabilities and shareholders' equity $ 34,221 $ 32,672
======== ========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
<PAGE> 4
PAGE 4
GIGA-TRONICS INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- --------------------------------
Dec. 26, 1998 Dec. 27, 1997 Dec. 26, 1998 Dec. 27, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 11,343 $ 9,514 $ 29,050 $ 28,169
Cost of sales 7,653 5,598 19,213 15,734
-------- -------- -------- --------
Gross profit 3,690 3,916 9,837 12,435
Product development 1,124 1,792 4,100 4,396
Selling, general and administrative 2,404 2,019 6,919 6,757
Amortization of intangibles 143 102 408 332
-------- -------- -------- --------
Operating expenses 3,671 3,913 11,427 11,485
Operating income (loss) 19 3 (1,590) 950
Other income 27 7 65 32
Interest income, net 2 97 120 319
-------- -------- -------- --------
Earnings (loss) before income taxes 48 107 (1,405) 1,301
Provision (benefit) for income taxes 14 35 (422) 393
-------- -------- -------- --------
Net earnings (loss) $ 34 $ 72 $ (983) $ 908
======== ======== ======== ========
Net earnings (loss) per common share
- - basic $ 0.01 $ 0.02 $ (0.23) $ 0.21
======== ======== ======== ========
Net earnings (loss) per common share
- - diluted $ 0.01 $ 0.02 $ (0.23) $ 0.21
======== ======== ======== ========
Weighted average basic common shares
outstanding 4,344 4,320 4,334 4,318
-------- -------- -------- --------
Weighted average diluted common
shares outstanding 4,362 4,413 4,334 4,377
-------- -------- -------- --------
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
<PAGE> 5
PAGE 5
GIGA-TRONICS INCORPORATED
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
Dec. 26,1998 Dec. 27, 1997
------------ -------------
<S> <C> <C>
Cash flows from operations:
Net earnings (loss) $ (983) $ 908
Adjustments to reconcile net earnings (loss) to net cash provided
by (used in) operations:
Depreciation and amortization 1,635 1,062
Gain (loss) on sale of fixed assets 7 (3)
Deferred income taxes, net (324) (406)
Changes in operating assets and liabilities (2,404) (2,403)
------- -------
Net cash used in operations: (2,069) (842)
Cash flows from investing activities
Investment maturities, net 5,742 (797)
Additions to property and equipment, net (922) (621)
Payment for purchase of Microsource Inc, including transaction costs (692) --
Advances to Microsource (940) --
Other assets (21) (708)
------- -------
Net cash provided by (used in) investing activities 3,167 (2,126)
Cash flows from financing activities:
Issuance of common stock 46 27
Dividends paid -- (27)
Payment on line of credit (1,500) (189)
Payment on notes payable and long term debt (2,530) (985)
Payment on capital lease and other long term (85) (24)
------- -------
Net cash used in financing activities (4,069) (1,198)
Decrease in cash and cash equivalents (2,971) (4,166)
------- -------
Beginning cash and cash equivalents 4,611 6,999
Ending cash and cash equivalents $ 1,640 $ 2,833
======= =======
</TABLE>
Supplementary disclosure of cash flow information:
(1) No cash was paid for interest in the nine month period ended
December 26, 1998. Cash paid for interest in the nine month
period ended December 27, 1997 was $46,000.
(2) Cash paid for income taxes in the nine month period ended
December 26, 1998 was $7,000. Cash paid for income taxes in the
nine month period ended December 27, 1997 was $741,000.
See accompanying notes to unaudited consolidated condensed financial statements.
<PAGE> 6
PAGE 6
GIGA-TRONICS INCORPORATED
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) Basis of Presentation
The financial statements included herein have been prepared by the
Company, pursuant to the rules and regulations of the Securities and
Exchange Commission. The results of operations for the interim periods
shown in this report are not necessarily indicative of results to be
expected for the fiscal year. In the opinion of management, the
information contained herein reflects all adjustments necessary to make
the results of operations for the interim periods a fair statement of
such operations. For further information, refer to the financial
statements and footnotes thereto, included in the Annual Report on Form
10-K, filed with the Securities and Exchange Commission for the year
ended March 28, 1998.
(2) Business Combinations
On May 18, 1998, the Company acquired Microsource, Inc. of Santa Rosa,
California. Microsource develops and manufactures a broad line of YIG
tuned oscillators, filters, and microwave synthesizers. The acquisition
was accounted for using the "purchase" method of accounting, and
accordingly, the results of operations of Microsource have been included
in the Company's consolidated financial statements from May 18, 1998.
The purchase price consisted of $1,500,000 plus contingent payments
based upon future net income of Microsource during the two fiscal years
after the effective time of the merger. The excess of the purchase price
over the fair value of the net identifiable assets of $1,323,000 was
recorded as goodwill and is being amortized on a straight-line basis
over five years. The additional payments, if any, over the next two
years contingent on future net income of Microsource will be accounted
for as additional goodwill.
The total purchase price of $1,500,000 has been allocated to the net
assets acquired based on the estimated fair value as follows (in
thousands):
<TABLE>
<S> <C>
Accounts receivable $ 1,390
Net inventory 3,661
Prepaid expenses 254
Property and equipment 4,370
Goodwill 1,323
Line of credit (1,500)
Bank term loans and short term capital leases (913)
Notes to related parties (682)
Accounts payable (985)
Accrued commissions (33)
Accrued payroll (340)
Accrued warranty (63)
Customer advances (2,004)
Other current liabilities (498)
Capital lease and other long term obligations, net (517)
-------
3,463
-------
Less advances to Microsource, net, and transaction costs (1,963)
-------
$ 1,500
=======
</TABLE>
<PAGE> 7
PAGE 7
(3) Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
December 26, 1998 March 28, 1998
----------------- --------------
<S> <C> <C>
Raw materials $ 7,799 $ 3,943
Work-in-process 4,447 2,999
Finished goods 1,124 1,122
------- -------
Total inventories $13,370 $ 8,064
======= =======
</TABLE>
(4) Earnings Per Share
Basic earnings per share is calculated by dividing net income or loss by
weighted average common shares outstanding during the period. Diluted
earnings per share reflects the net incremental shares that would be
issued if dilutive outstanding stock options were exercised, using the
treasury stock method. In the case of a net loss, it is assumed that no
incremental shares would be issued because they would be antidilutive.
In addition, certain options are considered antidilutive because the
options' exercise price was above the average market price during the
period. Antidilutive shares are not included in the computation of
diluted earnings per share, in accordance with SFAS No. 128. The shares
used in per share computations for the fiscal periods ended December 26,
1998 and December 27, 1997 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
Dec. 26, 1998 Dec. 27, 1997 Dec. 26, 1998 Dec. 27, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net earnings (loss) $ 34 $ 72 $ (983) $ 908
======= ======= ======= =======
Weighted average common shares
outstanding: 4,344 4,320 4,334 4,318
Common share equivalents: 18 93 -- 59
------- ------- ------- -------
Weighted average common shares
outstanding assuming dilution 4,362 4,413 4,334 4,377
======= ======= ======= =======
Net earnings (loss) per share of common
stock $ 0.01 $ 0.02 $ (0.23) $ 0.21
======= ======= ======= =======
Net earnings (loss) per share of common
stock assuming dilution $ 0.01 $ 0.02 $ (0.23) $ 0.21
======= ======= ======= =======
Number of stock options not included in
the computation 443 -- 376 165
------- ------- ------- -------
</TABLE>
The number of stock options not included in the computation of diluted
EPS for the nine month period ended December 26, 1998 reflects a loss
from continuing operations and the options are therefore antidilutive.
The number of stock options not included in the computation of diluted
EPS for the three month period ended December 26, 1998 and the nine
month period ended December 27, 1997 reflects stock options where the
exercise prices were greater than the average market price of the common
shares and are therefore antidilutive.
<PAGE> 8
PAGE 8
(5) Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130,"Reporting Comprehensive Income". SFAS No. 130 establishes standards
of reporting and display of comprehensive income and its components of
net income and "other comprehensive income" in a full set of general
purpose financial statements. " Other comprehensive income" refers to
revenues, expenses, gains and losses that are not included in net income
but rather are recorded directly in shareholders' equity. SFAS No. 130
is effective for annual and interim periods beginning after December 15,
1997 and for periods ended before that date when presented for
comparative purposes. The Company has not yet determined the format it
will use to display the information required by SFAS No. 130 in the
financial statements for the year ending March 27, 1999. Total
comprehensive gain was $34,000 and $66,000 for the three month period
ended December 26, 1998 and December 27, 1997. Total comprehensive loss
was $965,000 for the nine months ended December 26,1998. Total
comprehensive income was $881,000 for the nine months ended December 27,
1997.
<PAGE> 9
PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS AND FINANCIAL CONDITION
The forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, which reflect management's
best judgment based on factors currently known, involve risks and uncertainties.
Actual results could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including but not
limited to those discussed below. Forward-looking information provided by
Giga-tronics pursuant to the safe harbor established by recent securities
legislation should be evaluated in the context of these factors.
GENERAL
The Company designs, manufactures, and markets microwave and radio frequency
signal generation and power measurement instruments, switching devices, and YIG
tuned oscillators. These products are used in the development, test, and
maintenance of wireless communications products and systems, electronic defense
systems, and automatic testing systems (ATE). The Company also manufactures a
line of inspection and handling devices used in the production of semiconductor
devices.
THREE MONTHS AND NINE MONTHS ENDED DECEMBER 26, 1998 AND DECEMBER 27, 1997
Net sales for the three month and nine month period ended December 26, 1998
increased 19.2% ($1,829,000) and 3% ($881,000), respectively, compared with the
same periods last year. Sales for semiconductor products decreased 10%
($304,000) in the quarter and 42% ($3,483,000) for the nine month period
principally due to declining orders related to the Asian markets and the
downturn in the semiconductor industry. Sales for power meters (PM) and
instruments also decreased 21% ($1,069,000) in the quarter and 13% ($2,039,000)
for the nine month period due to a slowdown in new orders. These declines were
offset by sales for switching modules which have increased 61% ($852,000) in the
quarter and 8% ($337,000) for the nine month period due to a pickup in new
orders. Also, these declines were offset by additional sales of $2,350,000 in
the quarter and $6,066,000 for the nine month period by Microsource Inc., which
was acquired by the Company in May 1998.
Gross profit for the three month and the nine month period decreased by 6%
($226,000) and 21% ($2,598,000), respectively, due to higher labor and material
costs in the products shipped. Gross margin as a percent of sales for the three
months decreased to 33% compared to 41% in the prior year period and the nine
months decreased to 34% compared to 44% for the prior year period due to product
mix. The lower gross profit percentage on the sales for Microsource products as
compared to the Company's other products also contributed to the decline in
margin as a percent of sales as compared to the prior year.
Operating expenses for the three month and for the nine month period declined 6%
($242,000) and 1% ($58,000), respectively, compared with the corresponding
period in the prior year. Product development expenses for the three month and
nine month period decreased 37% ($668,000) and 7% ($296,000), respectively,
compared with the prior year periods principally due to reduced external
development of semiconductor products partially offset by the addition of
Microsource's product development costs. There was $49,000 in the three months
and $273,000 in the nine months of product development spending at Microsource.
Sales and administrative expenses increased by 19% ($385,000) for the three
month and 2% ($162,000) for the nine month period compared to the corresponding
prior year periods. Sales and administrative expenses in the prior year included
$227,000 in the three months and $678,000 in the nine months of merger
transaction costs. Sales and administrative costs included approximately
$480,000 of expenses for the three months and $1,137,000 for the nine months
incurred by the Microsource subsidiary subsequent to the acquisition.
Interest income for the three month and nine month periods declined over the
prior year due to lower cash available for investment. The cash decline resulted
from the purchase of Microsource and the extinguishment of its debt.
<PAGE> 10
PAGE 10
Earnings before income taxes for the three month period decreased 55% ($59,000)
and decreased 208% ($2,706,000) for the nine month period compared to the same
period last year. The decline was primarily due to the reduction in gross margin
caused by the adverse product mix.
Orders for the current quarter were 16% ($1,340,000) lower than the comparable
period last year. Orders were 26% ($309,000) higher for switching modules while
orders for instruments were down 26% ($1,349,000) due to the softness of the
wireless industry. The decline in orders of 87% ($1,698,000) for semiconductor
products was a result of the continued effect of the Asian economy and downturn
in the semiconductor industry. Included in the current orders is $1,398,000 for
Microsource where there were no comparable orders in the prior year. Orders for
the nine month period were lower by 2% (or $714,000) which was the result of
higher orders for switches of $3,296,000 and the addition of Microsource orders
of $3,558,000 which were offset by reduced orders for instruments of $4,250,000
and semiconductor equipment of $3,318,000. Backlog at December 1998 was
$14,651,000 compared to $6,492,000 at the March year end. The backlog decreased
when excluding $12,150,000 of backlog acquired in the Microsource acquisition.
The decrease in backlog is a result of the decline in orders in the
instrumentation and semiconductor products, partially offset by increase in
switching module backlog.
FINANCIAL CONDITION
The Company maintains a strong financial position, with working capital of
$17,533,000 and a ratio of current assets to current liabilities of 3.1 to 1.0
at December 26, 1998. The Company continues to fund all of its working capital
needs from cash provided by operations. Cash used in operations, for the nine
months ended December 26, 1998, was $2,069,000.
Cash and cash equivalents declined $2,971,000 and investments declined
$5,724,000 in the nine month period primarily due to the acquisition of
Microsource and subsequent pay-off of their line of credit and bank notes. The
Company spent $922,000 on new manufacturing and test equipment and other capital
items. The Company will continue to invest in capital items that support growth
and new product development, raise productivity and improve quality.
Historically the Company has satisfied its cash needs internally for both
operating and capital expenses, and management expects to continue to do so.
Management believes that cash reserves and its unsecured revolving line of
credit for $7,000,000 (none of which has been utilized) remain adequate to meet
anticipated operating needs. It is also the Company's intention to increase
product development expenditures for the purpose of broadening its product base.
From time to time, the Company considers a variety of acquisition opportunities
to also broaden its product lines and expand its market. Such acquisition
activity could also increase the Company's operating expenses and require the
additional use of capital resources.
YEAR 2000 (Y2K) ISSUES
The Company is aware of and is addressing the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
Year 2000 problem is pervasive and complex, as many computer systems,
manufacturing equipment and industrial control systems will be affected in some
way by the rollover of the two-digit year value to 00. Systems that do not
properly recognize such data could generate erroneous information or cause a
system to fail. The Year 2000 issue creates risk for the Company from unforeseen
problems in its own systems and from third parties with which the Company deals
on financial transactions worldwide. Failures of the Company's and/or third
parties' computer systems, manufacturing equipment and industrial control
systems could have a material adverse impact on the Company's ability to conduct
its business.
The Company is in the process of analyzing the Company's internal systems as
well as all external systems (such as vendor, customer, banking systems, etc.)
upon which the Company is dependent, to identify and evaluate any potential Year
2000 issues. The Company is committed to achieving Year 2000 compliance;
however, with a significant portion of the problem external and therefore
outside the direct control of the Company, there can be no assurances that the
Company will be fully or even significantly Year 2000 compliant at the critical
juncture. In addition, as full testing of Year 2000 functionality must occur in
a simulated environment, the Company will not be able to test full system Year
2000 interfaces and capabilities prior to the Year 2000.
<PAGE> 11
PAGE 11
The Company has completed an inventory of internal systems, hardware, software,
manufacturing equipment and embedded chips in industrial control instruments.
Each of these items was identified as mission critical, mission essential;
mission impaired or missions non-critical. The Company is in the process of
prioritizing and evaluating mission critical and mission essential items,
identifying fixes and resources as appropriate, and performing and testing
corrective measures. While the Company believes that its evaluation has been
comprehensive, there can be no assurance that all systems critical to Year 2000
compliance have been identified, or that the corrective actions identified will
be completed on time.
The Company has completed an inventory of current products and their hardware,
software, and embedded chips. Each of the Company's products was evaluated as to
whether it maintained the date and if the date handling was Year 2000 compliant.
All of the Company's current products, which maintained the date, were found to
be Year 2000 compliant. Several of the Company's non-current products were found
not to be Year 2000 compliant but the Company has determined either a manual
work around or has an upgrade path to resolve the Year 2000 problem for such
non-current products.
Currently, the Company is inventorying key suppliers of goods and services to
the Company, and considering the potential impact on the Company and its
customers of Year 2000 compliance by these suppliers. The Giga-tronics
Instrument Division has mailed surveys to more than 600 of its suppliers, and is
in the process of evaluating responses and sending follow-up letters. The Ascor
subsidiary has mailed surveys to more than 50 of its suppliers, and is in the
process of evaluating responses and sending follow-up letters. Surveys to the
suppliers of the Company's other subsidiaries and divisions are scheduled to go
out during the next fiscal quarter. The Company plans to determine if our
sources pose a threat to us for their non compliance. If these sources pose a
threat to us we plan to disqualify these non-complaint sources, look for
alternative sources and re-qualify new suppliers to help mediate potential
business disruptions. While the Company believes that it will be able to qualify
alternative suppliers as needed, until all supplier and customer survey
responses have been received and evaluated, the Company can not fully evaluate
the extent of potential problems and the costs associated with corrective
actions.
To date, the Company has not incurred significant costs associated with Year
2000 compliance. The Company estimates the cost to complete its current
compliance program will not be significant. Of these costs, less than $40,000 is
associated with the upgrade of packaged software systems used by the Company's
subsidiaries. These are systems that would not otherwise have been replaced or
upgraded at this time. The Company may incur significant additional costs
depending largely on the response from the Company's suppliers and the extent to
which supplier re-qualification is needed. Cost estimates will also be
reevaluated as the status of the overall compliance program is updated.
Currently, the Company has no other contingency plan for Year 2000 compliance.
There can be no assurance that actual costs will not be materially higher than
currently anticipated. Most of these costs are not likely to be incremental
costs to the Company, but rather will represent the redeployment of existing
information technology resources. The Company is unable to determine what effect
the failure of systems because of Year 2000 issues by the Company or its
suppliers or customers will have, but any significant failures could have an
adverse material effect on the Company's results of operations and financial
condition.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS
Due to the softness in order intake for 1999, revenues for the fourth quarter,
excluding anticipated revenues from Microsource products, may be less than the
prior year. However, it is projected at this time that cost reduction activities
and improvement in manufacturing efficiencies may partially offset the
unfavorable impact caused by the decline in revenues.
As part of its business strategy, the Company intends to broaden its product
lines and expand its markets, in part through the acquisition of other business
entities. The Company had acquired Viking Semiconductor Equipment, Inc. and
Ultracision, Inc. in fiscal 1998 in transactions accounted for as a pooling of
interests and Microsource, Inc. in fiscal 1999 in a transaction accounted for as
a purchase. The Company is subject to various risks in connection with these and
any future acquisitions. Such risks include, among other things, the difficulty
of assimilating the operations and personnel of the acquired companies, the
potential disruption of the Company's business, the
<PAGE> 12
PAGE 12
inability of the Company's management to maximize the financial and strategic
position of the Company by the successful incorporation of acquired technology
and rights into the Company's product offerings, the maintenance of uniform
standards, controls, procedures and policies, and the potential loss of key
employees of acquired companies. No assurance can be given that any acquisition
by the Company will or will not occur, that if an acquisition does occur, that
it will not materially and adversely affect the Company or that any such
acquisition will be successful in enhancing the Company's business. The Company
currently contemplates that future acquisitions may involve the issuance of
additional shares of the Company's Common Stock. Any such issuances may result
in dilution to all shareholders of the Company, and sales of such shares in
significant volume by the shareholders of acquired companies may depress the
price of the Company's Common Stock.
<PAGE> 13
PAGE 13
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: 2/1/99 /s/ GEORGE H. BRUNS, JR.
---------------- ----------------------------------------
George H. Bruns, Jr.
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: 2/1/99 /s/ MARK H. COSMEZ II
---------------- ----------------------------------------
Mark H. Cosmez II
Vice President, Finance and
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-27-1999
<PERIOD-START> MAR-29-1998
<PERIOD-END> DEC-26-1998
<CASH> 1,640
<SECURITIES> 0
<RECEIVABLES> 7,441
<ALLOWANCES> 280
<INVENTORY> 13,370
<CURRENT-ASSETS> 25,707
<PP&E> 15,724
<DEPRECIATION> 8,921
<TOTAL-ASSETS> 34,221
<CURRENT-LIABILITIES> 8,174
<BONDS> 0
0
0
<COMMON> 11,578
<OTHER-SE> 13,964
<TOTAL-LIABILITY-AND-EQUITY> 34,221
<SALES> 29,050
<TOTAL-REVENUES> 29,050
<CGS> 19,213
<TOTAL-COSTS> 30,640
<OTHER-EXPENSES> (65)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (120)
<INCOME-PRETAX> (1,405)
<INCOME-TAX> (422)
<INCOME-CONTINUING> (983)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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