From Earlier: Giga-tronics Incorporated Reverses Its Deferred Tax Asset and Announces Covenant Default on Its Loan Agreements

Giga-tronics Incorporated (Nasdaq: GIGA) announced yesterday that it had recorded a full valuation allowance against the deferred tax asset previously carried on the balance sheet at approximately $13,841,000 as of the end of its previous fiscal quarter. This action will create a non-cash expense in approximately that amount and will result in a substantial loss for the quarter ended December 31, 2011. The Company expects to complete its review and to announce complete financial results for the quarter ended December 31, 2011, on or about February 2, 2012.

The Company is party to an Amended and Restated Loan and Security Agreement, dated September 15, 2011, as amended, and a Loan and Security Agreement (Export-Import Loan Facility), dated September 15, 2011 (together the "Loan Agreements"), with Silicon Valley Bank (the "Lender"). Both Loan Agreements include a covenant requiring the Company to maintain a tangible net worth, as defined, of not less than $21,000,000.

On January 20, 2012, the Company informed the Lender that the Company had determined that as of December 31, 2011 it was not, or upon completion of its procedures for that period end would not be, in compliance with the tangible net worth covenant requirement in the Loan Agreements. The Company's tangible net worth will decline below the required level as a result of recording a full valuation allowance on the Company's net deferred tax assets. This charge combined with other expected losses for the quarter will cause the Company's tangible net worth to decline to less than $9,000,000, subject to completion of quarter-end procedures.

(c) 2013 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.