10-Q 1 giga-20220930.htm 10-Q 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

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. 001-14605

 

GIGA-TRONICS INCORPORATED

(Exact name of registrant as specified in its charter)

 

California

 

94-2656341

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

7272 E. Indian School Rd, Suite 540, Scottsdale, AZ 85251

 

(833) 457-6667

(Address of principal executive offices)

 

Registrant’s telephone number, including area code

 

Securities registered pursuant to Section 12(b) of the Act: None

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerate filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes No

 

There was a total of 5,931,582 shares of the Registrant’s Common Stock outstanding as of November 18, 2022.

 

 

 


 

TABLE OF CONTENTS

 

 

 

Page No.

PART I - FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

4

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for three months and nine month ended September 30, 2022 and 2021

5

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for nine months ended September 30, 2022 and 2021

8

 

 

 

 

Notes to Condensed Consolidated Financial Statements

9

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

 

 

PART II - OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

36

Item 3.

Defaults Upon Senior Securities

36

Item 4.

Mine Safety Disclosures

36

Item 5.

Other information

36

Item 6.

Exhibits

36

 

 

SIGNATURES

38

 

2


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. Words such as “anticipates,” "expects,” "intends,” “goals,” “plans,” “believes,” “seeks,” “estimates,” "continues,” “may,” “will,” “should,” “could,” and variations of such words and similar expressions are intended to identify forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, uncertain events or assumptions, our liquidity and other characterization of future events or circumstances are forward-looking statements. Such statements are based on management’s expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include our ability to close one or more financings in order to meet our working capital needs and those described throughout this report and our Annual Report on Form 10-K for the year ended March 26, 2022 and our Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 on Schedule 14A filed on August 2, 2022, particularly the “Risk Factors” sections of such reports. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. Readers are urged to carefully review and consider the various disclosures made in this Form 10-Q and in other documents we file from time to time with the Securities and Exchange Commission that disclose risks and uncertainties that may affect our business. In addition, the forward-looking statements in this Form 10-Q are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty to update such statements, whether as a result of new information, new developments or otherwise, except to the extent that disclosure may be required by law.

3


 

PART I FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

GIGA-TRONICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands except share data)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,083

 

 

$

1,599

 

Accounts receivable, net

 

 

5,788

 

 

 

4,554

 

Accrued revenue

 

 

2,474

 

 

 

2,283

 

Inventories, net

 

 

10,309

 

 

 

4,206

 

Prepaid expenses and other current assets

 

 

772

 

 

 

890

 

TOTAL CURRENT ASSETS

 

 

21,426

 

 

 

13,532

 

 

 

 

 

 

 

 

Intangible assets, net

 

 

9,751

 

 

 

4,035

 

Goodwill

 

 

10,192

 

 

 

9,812

 

Property and equipment, net

 

 

2,321

 

 

 

2,052

 

Right-of-use assets

 

 

4,033

 

 

 

4,333

 

Other assets

 

 

542

 

 

 

141

 

TOTAL ASSETS

 

$

48,265

 

 

$

33,905

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

6,019

 

 

$

4,125

 

Accounts payable and accrued expenses, related party

 

 

116

 

 

 

53

 

Notes payable

 

 

2,430

 

 

 

961

 

Notes payable, related parties, net

 

 

5,677

 

 

 

 

Short-term advances, related party

 

 

2,498

 

 

 

 

Operating lease liability, current

 

 

1,124

 

 

 

659

 

Other current liabilities

 

 

3,879

 

 

 

1,895

 

TOTAL CURRENT LIABILITIES

 

 

21,743

 

 

 

7,693

 

 

 

 

 

 

 

 

LONG TERM LIABILITIES

 

 

 

 

 

 

Operating lease liability, non-current

 

 

3,076

 

 

 

3,712

 

Notes payable

 

 

349

 

 

 

 

Other liabilities

 

 

139

 

 

 

 

TOTAL LIABILITIES

 

 

25,307

 

 

 

11,405

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Preferred stock; no par value; Authorized - 1,000,000 shares

 

 

 

 

 

 

Series F Preferred Stock, 520 shares designated; 514.8 shares issued and outstanding at September 30, 2022 and December 31, 2021

 

 

4,990

 

 

 

4,990

 

Common Stock; no par value; 100,000,000 shares authorized, 5,931,582 shares issued and outstanding at September 30, 2022; 13,333,333 shares authorized, 2,920,085 shares issued and outstanding at December 31, 2021

 

 

32,456

 

 

 

26,682

 

Accumulated deficit

 

 

(12,849

)

 

 

(9,988

)

Accumulated other comprehensive loss

 

 

(2,540

)

 

 

(240

)

TOTAL STOCKHOLDERS' EQUITY

 

 

22,057

 

 

 

21,444

 

 

 

 

 

 

 

 

Non-controlling interest

 

 

901

 

 

 

1,056

 

TOTAL STOCKHOLDERS' EQUITY

 

 

22,958

 

 

 

22,500

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

48,265

 

 

$

33,905

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

4


 

GIGA-TRONICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands except per share data)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

$

7,783

 

 

$

6,373

 

 

$

21,530

 

 

$

19,198

 

Cost of revenues

 

 

5,449

 

 

 

4,030

 

 

 

15,017

 

 

 

12,982

 

Gross profit

 

 

2,334

 

 

 

2,343

 

 

 

6,513

 

 

 

6,216

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

450

 

 

 

453

 

 

 

1,364

 

 

 

1,190

 

Selling and marketing

 

 

416

 

 

 

238

 

 

 

1,034

 

 

 

737

 

General and administrative

 

 

2,330

 

 

 

1,580

 

 

 

7,025

 

 

 

6,307

 

Total operating expenses

 

 

3,196

 

 

 

2,271

 

 

 

9,423

 

 

 

8,234

 

(Loss) income from continuing operations

 

 

(862

)

 

 

72

 

 

 

(2,910

)

 

 

(2,018

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, related party

 

 

(208

)

 

 

(58

)

 

 

(395

)

 

 

(260

)

Interest expense

 

 

(23

)

 

 

(97

)

 

 

(171

)

 

 

(209

)

Change in fair value of marketable equity securities

 

 

 

 

 

(257

)

 

 

 

 

 

(162

)

Foreign currency exchange adjustment

 

 

175

 

 

 

(50

)

 

 

44

 

 

 

(114

)

Realized gain on marketable equity securities

 

 

 

 

 

 

 

 

 

 

 

397

 

Gain on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

447

 

Interest and other income

 

 

 

 

 

40

 

 

 

1

 

 

 

40

 

Other income (expense)

 

 

5

 

 

 

5

 

 

 

67

 

 

 

13

 

Total other (expense) income, net

 

 

(51

)

 

 

(417

)

 

 

(454

)

 

 

152

 

Loss from continuing operations before income taxes

 

 

(913

)

 

 

(345

)

 

 

(3,364

)

 

 

(1,866

)

Income tax benefit (provision)

 

 

10

 

 

 

(18

)

 

 

3

 

 

 

(139

)

Net loss

 

 

(903

)

 

 

(363

)

 

 

(3,361

)

 

 

(2,005

)

Net loss (gain) attributable to non-controlling interest

 

 

166

 

 

 

(63

)

 

 

501

 

 

 

(93

)

Net loss attributable to common stockholders

 

 

(737

)

 

 

(426

)

 

 

(2,860

)

 

 

(2,098

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted

 

$

(0.20

)

 

$

(0.15

)

 

$

(0.90

)

 

$

(0.72

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic and diluted

 

 

3,656

 

 

 

2,920

 

 

 

3,168

 

 

 

2,920

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income

 

 

 

 

 

 

 

 

 

 

 

 

Loss available to common stockholders

 

 

(737

)

 

 

(426

)

 

 

(2,860

)

 

 

(2,098

)

Foreign currency translation adjustments

 

 

693

 

 

 

610

 

 

 

2,300

 

 

 

678

 

Total comprehensive (loss) income

 

$

(44

)

 

$

184

 

 

$

(560

)

 

$

(1,420

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

5


 

GIGA-TRONICS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

(Unaudited)

Three and Nine Months Ended September 30, 2022

(In thousands except share data)

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated Other

 

 

Non-

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Accumulated

 

 

Comprehensive

 

 

Controlling

 

 

Stockholder's

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Loss

 

 

Interest

 

 

Equity

 

Balance at January 1, 2022

 

 

515

 

 

$

4,990

 

 

 

2,920,085

 

 

$

26,682

 

 

$

(9,988

)

 

$

(240

)

 

$

1,056

 

 

$

22,500

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

 

 

 

41

 

Capital contribution from parent

 

 

 

 

 

 

 

 

 

 

 

517

 

 

 

 

 

 

 

 

 

 

 

 

517

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(497

)

 

 

 

 

 

 

 

 

(497

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(391

)

 

 

 

 

 

(391

)

Net loss attributable to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13

)

 

 

(13

)

Balance at March 31, 2022

 

 

515

 

 

 

4,990

 

 

 

2,920,085

 

 

 

27,240

 

 

 

(10,485

)

 

 

(631

)

 

 

1,043

 

 

 

22,157

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

 

 

 

42

 

Capital contribution from parent

 

 

 

 

 

 

 

 

 

 

 

688

 

 

 

 

 

 

 

 

 

 

 

 

688

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,627

)

 

 

 

 

 

 

 

 

(1,627

)

Foreign currency translation adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,216

)

 

 

 

 

 

(1,216

)

Net loss attributable to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(322

)

 

 

(322

)

Balance at June 30, 2022

 

 

515

 

 

 

4,990

 

 

 

2,920,085

 

 

 

27,970

 

 

 

(12,112

)

 

 

(1,847

)

 

 

721

 

 

 

19,722

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

 

 

 

 

56

 

Capital contribution from parent

 

 

 

 

 

 

 

 

 

 

 

514

 

 

 

 

 

 

 

 

 

 

 

 

514

 

Shares acquired in reverse capitalization

 

 

 

 

 

 

 

 

2,782,229

 

 

 

4,404

 

 

 

 

 

 

 

 

 

 

 

 

4,404

 

Fair value of convertible note, related party, in excess of cash received

 

 

 

 

 

 

 

 

 

 

 

(142

)

 

 

 

 

 

 

 

 

 

 

 

(142

)

Common stock issued on warrant exercise

 

 

 

 

 

 

 

 

229,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(737

)