As filed with the Securities and Exchange Commission on July 31, 2023

Registration Statement No. 333-333-269737______

AS FILED WITH THE UNITED STATES

SECURITIES AND EXCHANGE COMMISSIONON OCTOBER17, 2018

Washington, D.C. 20549

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549FORM S-1/A

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Giga-tronics Incorporated
GIGA-TRONICS INCORPORATED 

GIGA TRONICS INC

(Exact name of Registrantregistrant as specified in its charter)

5990 Gleason Drive7272 E. Indian School Road, Suite 540

Dublin, California 94568Scottsdale, AZ85251

Telephone: 925-328-4650(833) 457-6667

(Address, Including Zip Code, and telephone numberTelephone Number, Including Area Code, of principal executive offices)Registrant’s Principal Executive Offices)

John R. Regazzi
Jonathan Read

Chief Executive Officer
5990 Gleason Drive
Dublin, California 94568
Telephone: 925-328-4650

7272 E. Indian School Road, Suite 540

Scottsdale, AZ85251

(833) 457-6667

(Name, addressAddress, Including Zip Code, and telephone numberTelephone Number, Including Area Code, of agent for service)

Copy to:

David J. Gershon, Esq.

Thomas G. Reddy, Esq.

Sheppard, Mullin, Richter and Hampton LLP

Four Embarcadero Center, 17^th Floor

San Francisco, California 94111

Telephone: (415) 434-9100Agent For Service)

Copies to:

Approximate Datedate of Commencementcommencement of Proposed Saleproposed sale to the Public:public:

As soon as practicable after the effective date of this registration statement.Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or 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. (Check one):

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 7(a)(2)(B) of the Securities Act Act. ☐

CALCULATION OF REGISTRATION FEE

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.determine.

Explanatory Note

11,624,452

GIGA-TRONICS INCORPORATED

70,077,753 Shares of Common Stock

GIGA-TRONICS INCORPORATED7272 E. Indian School Road, Suite 540

Scottsdale, AZ 85251

(833) 457-6667

This prospectus relates to the saledistribution of 6,880,128 shares of common stock, no par value per share of Giga-tronics Incorporated, a California corporation (the “Company”), to be distributed as a dividend payable to the shareholders of record of common stock, par value $0.001 per share, of Ault Alliance, Inc. (“AAI”), at the close of business on [_______], 2023, the record date for the distribution, on the basis of ___ share of the Company’s common stock for approximately every ___ shares of AAI common stock, owned of record at the close of business on that date (the “Distribution”). No fractional shares of the Company’s common stock will be issued in the Distribution. In lieu of receiving fractional shares, holders who would otherwise be entitled to receive fractional shares of the Company’s common stock in the Distribution will receive cash for their fractional interests. For AAI stockholders who own AAI common stock in registered form, in most cases the transfer agent, acting as the distribution agent, will credit their shares of the Company’s common stock to book-entry accounts established to hold the Company’s common stock. The distribution agent will mail these shareholders a statement reflecting the Company’s common stock ownership following the Distribution. For shareholders who own AAI common stock through a broker, bank or other nominee, their shares of the Company’s common stock will be credited to their accounts by that broker, bank or other nominee.

This Prospectus also relates to the offering and resale by the selling securityholders named in this prospectusshareholders identified herein (the “Selling Securityholders”Shareholders”) of up to 11,624,45263,197,625 shares of our common stock which consists of Giga-tronics Incorporated (we, the “Company” or “Giga-tronics”), including 7,000,000 shares of common stock issuable upon conversion of our 6.0% Series E Senior Convertible Voting Perpetual Preferred Stock, which we refer to as “Series E Shares,” 3,451,594 shares of common stock issuable uponcertain notes and the exercise of common stock purchasecertain warrants 572,858in connection with our recent financing transactions (the “PIPE Securities”). The prices at which these shares of common stock that we issued upon exercise of warrantsmay be offered and 600,000 shares of common stock potentially issuable as dividends onsold to the Series E Shares. We will not receive any of the proceeds from the salepublic by the Selling SecurityholdersShareholders may be determined based on a variety of such securities. However, we will receive proceeds from the exercisepotential methods as described under “Determination of the warrants if they are exercisedOffering Price” at page 88 and “Plan of Distribution” at page 52. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Our Recent Financings.” and “Selling Shareholders” for cash by the Selling Securityholders. We will bear all expenses of registration incurred in connection with this offering, but all selling and other expenses incurred by the selling shareholders will be borne by them.more information.

Our Common Stockcommon stock is currently quoted on the OTC Bulletin BoardOTCQB, under the symbol GIGA.QB. The high“GIGA.” On July 26, 2023, the closing price per share of our common stock as reported by the OTCQB was $0.37 per share. See “Trading and low bid prices forDividend Information.”

The shares of our Common Stock on October 15, 2018, were $0.37the Company’s common stock, which are the subject of the Distribution are being registered under the Securities Act of 1933 (the “Securities Act”), and $0.25 per share, respectively, based upon bids that represent prices quotedAAI is deemed by broker-dealers on the OTC Bulletin Board. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.SEC to be an underwriter with respect to the Distribution.

The Selling SecurityholdersShareholders may sell the PIPE Securities described in this Prospectus in a number of different ways and any broker-dealers that participateat varying prices. The prices at which the Selling Shareholders may sell the PIPE Securities in this offering will be determined by the distributionprevailing market price for the shares of our common stock or in negotiated transactions. See “Plan of Distribution” for more information about how the securitiesSelling Shareholders may sell the PIPE Securities being registered pursuant to this Prospectus. Each Selling Shareholder may be deemed to be “underwriters” as that term is defined inan “underwriter” within the meaning of Section 2(a)(11) of the Securities ActAct. The Selling Shareholders have informed us that they do not currently have any agreement or understanding, directly or indirectly, with any person to distribute the PIPE Securities.

We have agreed to pay the expenses of 1933,the registration of the shares of our common stock offered and sold under the Registration Statement under the Distribution and by the Selling Shareholders. Each Selling Shareholder will pay any commissions and applicable to the PIPE Securities it sells as amended.will AAI stockholders who receive common stock as part of the Distribution.

________________

Investing in our common stock is highly speculative and involves a high degree of risk. You should carefully consider the risks and uncertainties described under the heading “Risk Factors” beginning onShareholders Should Be Aware Of Certain Risks Related To The Ownership Of The Company’s Common Stock. See “Risk Factors.” Beginning at page 118. of this prospectus before making a decision to purchase our common stock.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESETHE SECURITIES OR PASSED UPON THE ACCURACYDETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR ADEQUACY OF THIS PROSPECTUS.COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectusProspectus is ______ ___, 2023.

October 17, 2018.TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

In this prospectus, unless the context suggests otherwise, unless otherwise noted, referencesNo person is authorized to “the Company,” “we,” “us,” and “our” refer to Giga-tronics Incorporated and its consolidated subsidiaries.

This prospectus describes the specific details regarding this offering and the terms and conditions of the common stock being offered hereby and the risks of investing in our common stock. You should read this prospectus,give any free writing prospectus and the additional information about us described in the section entitled ‘‘Where You Can Find More Information’’ before making your investment decision.

Neither we, nor any of our officers, directors, agents or representatives make any representation not contained in this Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized. This prospectus does not constitute an offer to you about the legalitysell, or a solicitation of an investmentoffer to purchase, the securities offered by this prospectus, or an offer or solicitation to any person in our common stock. You should not interpretany jurisdiction in which such offer or solicitation is unlawful. Neither the contentsdelivery of this prospectus to be legal, business, investmentnor any exchange or tax advice. You should consult with your own advisors forsale hereunder shall, under any circumstances, create any implication that typethere has been no change in the information contained herein or in the affairs of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.

ADDITIONAL INFORMATION

Company since the date as of which information is furnished or the date hereof. You should rely only on the information contained or incorporated by reference in this prospectus and in any accompanying prospectus supplement. No one has beenProspectus. We have not authorized anyone to provide you with information that is different or additional information.from that contained in this Prospectus. The shares of common stockSelling Shareholders are not being offeredoffering to sell or seeking offers to buy securities in any jurisdictionjurisdictions where the offer isoffers and sales are not permitted. You should not assumeWe are responsible for updating this Prospectus to ensure that all material information is included and will update this Prospectus to the extent required by law.

________________

Market, Industry and Other Data

Unless otherwise indicated, information in this prospectus or any prospectus supplementProspectus concerning economic conditions, our industry, our markets, and our competitive position is accurate asbased on a variety of any date other thansources, including information from third-party industry analysts and publications and our own estimates and research. Some of the dateindustry and market data contained in this Prospectus are based on the frontthird-party industry publications. This information involves a number of such documents.assumptions, estimates and limitations, and you are cautioned not to give undue weight to these estimates.

TRADEMARKS AND TRADE NAMESThe industry publications, surveys and forecasts and other public information generally indicate or suggest that their information has been obtained from sources believed to be reliable. None of the third-party industry publications used in this Prospectus were prepared on our behalf. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this Prospectus.” These and other factors could cause results to differ materially from those expressed in these publications.

Trademarks

This prospectus includesProspectus contains references to our trademarks which are protected under applicable intellectual property laws and are our property or the property of our subsidiaries. This prospectus also contains trademarks, service marks trade names and/ or copyrights ofand to those belonging to other companies, which are the property of their respective owners.entities. Solely for convenience, trademarks and trade names referred to in this prospectusProspectus may appear without the ® or TM™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rightrights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by any other companies.

INDUSTRY AND MARKET DATA

RISK FACTORS

Risk Related to Substantial Dilution

Because of the number of Distribution Shares and PIPE Securities being registered in this Prospectus, holders of our common stock will experience substantial dilution.

There are 5,931,582 shares of our common stock issued and outstanding of notes as of the date of this Prospectus, of which 2,934,985 shares are beneficially owned by AAI. We are registering a total of 70,077,753 shares of our common stock in this Prospectus comprised of 6,880,128 Distribution Shares (which includes an additional 3,960,043 shares of common stock will be issuable upon the conversion by AAI of 514.8 shares of Series F by AAI prior to the Distribution) and 63,197,625 shares of our common stock issuable upon the conversion of notes or exercise of warrants, as applicable, by the Selling Shareholders. See “The Distribution” and “Selling Shareholders” for more information. Upon consummation of this offering, we will have 73,089,250 shares of common stock outstanding excluding 1,200,000 shares of our common stock, issuable upon exercise of placement agent warrants and 749,626 shares issuable upon final vesting of restricted stock units issued to our Audited Consolidatedexecutive management team and shares issuable under outstanding stock options held by them.

Risks Related to our Financial Statements atCondition

We have doubts about our ability to continue as a going concern.

As of March 31, 2023, we believe that there is doubt about our ability to continue as a going concern because we have incurred recurring net losses, our operations have not provided cash flows, and AAI ended its support of our operations although it did recently provide us with an additional $165,000. There was no written documentation in connection with this advance. Our inability to continue as a going concern could have a negative impact on the Company, including our ability to obtain needed financing, and could adversely affect the trading price of our common stock. We owe $3.3 million to holders of our convertible notes which are due in October 2023 and do not expect we will have the funds to repay these notes without completing a financing. In additional, we have struggled to make our payroll and have relied on loans from AAI as well as one officer and one director of the Company and some of our executives have agreed to pay cuts and deferrals of their compensation. See “Related Party Transactions” for more information. Convertible notes issued to AAI and Ault Lending mature on December 31, 2024.

Because we need to engage in one or more equity linked financings, our shareholders will be subject to even more dilution

We need to raise capital to provide working capital and pay $3,300,000 of convertible notes due on October 6, 2023. We cannot borrow money from a bank or similar lender. Any new financing or modification may be even further dilutive to our shareholders. Further, the fiscal yearAAI and Ault Lending notes and the Notes and warrants each have price protection so if we enter into a new financing with a lower conversion or exercise price, those instruments will automatically be adjusted resulting in further dilution.

Our legacy business consisting of our Giga-tronics Division and Microsource has declined and its prospects are uncertain. 

We refer to the Giga-tronics Division and Microsource Inc. (“Microsource”) as our legacy Giga-tronics business. A large Microsource customer will not place any significant new orders since it has been scaling back legacy fighter programs. While our Giga-tronics Division’s product offerings are state-of-the-art, it currently has no backlog. While it expects an order from a customer in 2023 the timing has been delayed, and there are no assurances that the order will be placed. Moreover, due to timing and the need to acquire inventory, this Division is likely only to generate $2.0 million in 2023 revenue assuming it receives the order. As a result, it is unlikely that the legacy Giga-tronics business can generate sufficient cash to cover its operating expenses and will require approximately $6.0 million to break even in 2023. While the Company believes that the legacy Giga-tronics business has prospects for growth over the next 12-24 months including sales of Microsource products to customers outside of the United States, the timing and volume of such business remains uncertain and such growth will require an influx of additional working capital to support its operations. Accordingly, there can be no assurance that we will continue to operate the legacy Giga-tronics business. 

We have historically incurred net losses and negative cash flow and our operating results may significantly vary from quarter-to-quarter, so we may not be able to achieve or sustain profitability.

We have historically experienced net losses and we anticipate continuing to experience some losses in the future. Our operating results are largely determined by the results of operations of Gresham because they are more significant than our legacy Giga-tronics business. Following the closing of the Business Combination, we adopted the financial statements of Gresham as the accounting acquirer. The results for 2021 were solely of Gresham; for 2022, beginning on September 8 they reflected the operations of Gresham and the legacy Giga-tronics business. For the years ended December 31, 2022 and 2021, we reported revenue of $30,255,000 and $25,580,000 and net losses of $18,418,000 and $2,863,000 respectively. For the three months ended March 31, 20182023 and March 25, 2017 attached2022, we reported revenue of $8,723,000 and $7,244,000 and net losses of $2,450,000 and $510,000, respectively. As said before, 2022 solely reflected Gresham’s results of operations. We expect to this prospectus

We have significant working capital requirements and have experienced operating losses. If we continue to experience incur substantial expenditures to develop and market our products and services and we could continue to incur losses and negative operating losses,cash flow for the foreseeable future.

In addition, our operating results have in the past been subject to quarter-to-quarter fluctuations, and we expect that these fluctuations will continue, and may increase in magnitude, in future periods. Demand for our products is driven by many factors, including the availability of funding for our products in our customers’ budgets. There is a trend for some of our customers to place large orders near the end of a quarter or fiscal year, in part to spend remaining available budget funds. Seasonal fluctuations in customer demand for our products driven by budgetary and other concerns can create corresponding fluctuations in period-to-period revenue, and we therefore cannot assure you that our results in one period are necessarily indicative of our revenue in any future period. In addition, the number and timing of large individual sales and the ability to obtain acceptances of those sales, where applicable, have been difficult for us to predict, and large individual sales have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all. The loss or deferral of one or more significant sales in a quarter could harm our operating results for such quarter. It is possible that, in some quarters, our operating results will be below the expectations of public market analysts or investors. Finally, supply chain issues may affect future quarters.

With expected reductions in California expenses, it is uncertain whether our operating expenses may continue to increase. Expanding our operations may also impose significant demands on our management, finances, and other resources. Our accounting staff is presently shorthanded. Our comptroller resigned earlier this year although he is assisting on a part-time basis. We need to replace him and another staff accountant. Our ability to manage the anticipated future growth, should it occur, will depend upon expansion of our accounting and other internal management systems and the implementation and subsequent improvement of a variety of systems, procedures and controls. We cannot assure you that significant problems in these areas will not occur. Our failure to expand these areas and implement and improve such systems, procedures, and controls in an efficient manner at a pace consistent with our business could have a material adverse effect on itsour business, financial condition and results of operations. Our attempts to expand our marketing, sales, manufacturing, and customer support efforts may not succeed or generate additional sales or profits in any future period. With an increase in our operating expenses, along with the difficulty in forecasting revenue levels, we may experience significant fluctuations in our results of operations.

We are dependent upon obtaining revenues from sales and raising additional capital to meet our working capital needs. Since 2011, we have relied on a series of private placements, legacy product line sales, and loans to fund our operating cash flow deficits. There is no assurance that we will be able to achieve a level of revenue adequate to generate sufficient cash flow from operations or obtain additional financings necessary to support our working capital requirements.

Because AAI is ending its support, we will need additional capital to fund our operations, and our inability to generate or obtain such capital on acceptable terms, or at all, could harm our business, operating results, financial condition and prospects.

AAI has publicly announced that it intends to distribute its shares of our common stock, on a pro rata basis to the necessary net income or operating cash flowsholders of AAI common stock in the Distribution, subject to meetregulatory approval. AAI will not support us financially in the future although it did recently provide us with an additional $165,000. There was no written documentation in connection with this advance. We will need to raise additional capital to pay our indebtedness and to support our working capital requirements and pay our debts as they become dueplanned growth. AAI currently has over 35,000 stockholders that will receive shares of our common stock in connection with the future due to a varietyDistribution. We estimate that the cost of factorsprinting and other factors discussedmailing of proxy materials for an annual meeting in this “Risk Factors” section.

To bringcompliance with the RADAR/EW product platform to its full potential, we maySEC rules and regulations will increase by approximately $100,000 on annual basis. This will further increase our need to seeksecure additional working capital; however, there arefinancing to fund our operations. Any other future financing may include shares of common stock, shares of preferred stock, warrants to purchase shares of common stock or preferred stock, debt securities, units consisting of the foregoing securities, equity investments from strategic development partners or some combination of the foregoing. There is no assurancesassurance that such working capitaladditional financing will be available, or if available, will be on terms acceptable terms. If we are unable to us. Weraise additional capital, we may also be required to furthercurtail our operations and take additional measures to reduce expenses ifcosts, including reducing our RADAR/EW product platform sales goals are not achievedworkforce and eliminating outside consultants in order to conserve cash in amounts sufficient to sustain operations and meet our obligations. This could for example, choose to focus solelyin its turn have a material adverse effect on our profitable Microsource component business, segmentoperating results and future prospects. There can be no assurance that we will be able to generate profitscomplete any future financing. 

Because we require consents for certain debt financings and cash from operating activities. As partacquisitions, we not be able to pursue these transactions if we cannot obtain the consents.

We issued AAI Series F preferred stock and common stock upon the consummation of such a restructuring, management believes the microwave componentsBusiness Combination. The terms of the Series F contain negative covenants that apply until AAI completes the Distribution. Until that occurs, we must obtain AAI’s consent before, among other things, incurring indebtedness of $1,000,000 in any individual transaction or $2,500,000 in the aggregate, or acquiring any business in which the Company developedaggregate consideration as payable by us is $1 million or more. In addition, if we issue further equity, subject to exceptions for certain excluded securities, such as limited issuances of option to our employees pursuant to equity incentive plans, AAI will have the RADAR/EW test products could be a sourceright to purchase additional equity to maintain its ownership interest. Even when AAI fully converts the Series F into shares of future growth forour common stock prior to the Microsource business segment.

To address these matters,Distribution, the Convertible Notes that we have taken several actionsissued in connection with the AAI Financing and the transaction documents that we entered into in connection with our January 2023 sale of the Notes with the two investment funds (the “Lenders”) contain similar covenants to provide additional liquidity and reduce costs and expenses going forward. These actionsthose that are describedincluded in the section of this prospectus titledSeries F. These provisions could limit our ability to raise capital or make future acquisitions, particularly larger acquisitions. For more information about these negative covenants, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations - Liquidity and Capital Resources – Our Recent Financings.”

Economic, Policy and Business Risks

A large percentage of our current revenue is derived from prime defense contractors to the U.S. government and its allies, and the loss of these relationships, a reduction in Note 2government funding or a change in government spending priorities or bidding processes could have an adverse impact on our business, financial condition, results of operations and cash flows.

Our defense programs compete with other policy needs, which may be viewed as more necessary, for limited resources and an ever-changing amount of available funding in the budget and appropriation process. For example, budget and appropriations decisions made by the governments of the United States, the UK and Israel are outside of our control and have long-term consequences for our business. Government spending priorities and levels remain uncertain and difficult to predict and are affected by numerous factors, and the purchase of our audited financial statementsproducts could be superseded by alternate arrangements. While defense budgets in countries around the world have recently increased, there can be no assurance that such increases will continue for the fiscal years ended March 31, 2018 and March 25, 2017 attached to this prospectus. We cannot assure you, however,foreseeable future, or even if they did, that we willwould be a beneficiary thereof. A change in government spending priorities or an increase in non-procurement spending at the expense of our programs, or a reduction in total defense spending, could have material adverse consequences on our future business.

If our reputation or relationships with the governments of the U.S., the UK or Israel or the limited number of defense contractors with which we work were harmed, our future revenues and cash flows would be adversely affected. 

Gresham Worldwide derives most of its revenue from the governments of the U.S., the UK and Israel as well defense contractors around the world that supply those countries and their allies. Our reputation and relationships with various government entities and agencies, in particular with the U.S. Department of Defense and Ministries of Defense in the UK and Israel, and the limited number of defense contractors serving these bodies, are key factors in maintaining and growing these revenues and winning bids for new business. Negative press reports or publicity, regardless of accuracy, could harm our reputation. If our reputation or relationships with government agencies were to be negatively affected, or if we are suspended or barred from contracting with government agencies for any reason, the amount of business with government and other customers would decrease and our financial condition and results of operations could be adversely affected.

Because we engage in fixed fee contracts with our customers, we face pressure on our gross profit margins and operating costs from inflation.

Our financial condition, results of operations, and liquidity may be negatively impacted by increased levels of inflation. We are not able to predict the timing and effect of inflation, or its duration and severity. Inflation may cause our costs to purchase inventory to be higher than we planned and reduce our gross profit margins. Also, inflation tends to increase compensation of our workforce and other costs. We may not be able to successfully takesell our products to our customers at correspondingly increased prices to cover the impact of inflation, resulting in decreased profit margins.

Governments typically may terminate our contracts at any time prior to their completion, which could lead to unexpected loss of sales and reduction in our backlog.

Under the terms of our contracts with prime defense contractors, the military may unilaterally:

The government can terminate or modify any of these actions, including adjusting expenses sufficientlyits contracts with us or in a timely manner,our prime contractors either for the federal government’s convenience, or raising additional equity, increasing borrowingsif we or completing a financing on any terms or on terms that are acceptableour prime contractors default, by failing to us. Our inability to take these actions as and when necessary would materially adversely affect our liquidity, results of operations, financial condition and ability to operate. 

Holders of our Series E Shares have voting rights and preferences that may limit our access to additional capital and their interests may conflict with those of our other shareholders.

We must obtain the approval of the holders of our Series E Shares to complete certain types of transactions. For example, the Certificate of Determination for our Series E Shares prohibits us from issuing any shares having preferences that are superior to or on parity with our Series E Shares. Upon a liquidation of the Company, a sale of our Microsource business line, or sale of our Simulation and Electronic Warfare (formerly known as Hydra) business line, the holders of Series E Shares would be entitled to receive their full liquidation preference of $37.50 per Series E Share, or approximately $2.6 million in the aggregate from the liquidation or sale proceeds before we would be permitted to make distributions to holders of our common stock or other series of preferred shares. In addition,perform under the terms of our Investor Rights Agreement with the holdersapplicable contract. A termination arising out of our Series E Shares,default could expose it to liability and have a material adverse effect on its ability to compete for future government contracts and subcontracts. If the government or its prime contractors terminate and/or materially modify any of our contracts or if any applicable options are not exercised, our failure to replace sales generated from such contracts would lower sales and would adversely affect our earnings, which could have a material adverse effect on its business, results of operations and financial condition. While our backlog as of March 31, 2023, was approximately $27 million, our backlog could be adversely affected if contracts are modified or terminated.

We may have liabilities that are not known, probable or estimable at this time. 

We remain subject to certain past, current, and future liabilities. There could be unasserted claims or assessments against or affecting us, including the failure to comply with applicable laws and regulations. In addition, there may be liabilities of ours that are neither probable nor estimable at this time that may become probable or estimable in the future, including indemnification requests received from our customers relating to claims of infringement or misappropriation of third party intellectual property or other proprietary rights, tax liabilities arising in connection with ongoing or future tax audits and liabilities in connection with other past, current and future legal claims and litigation. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our financial condition. We may learn additional information that adversely affects us, such as unknown, unasserted, or contingent liabilities and issues relating to compliance with applicable laws or infringement or misappropriation of third-party intellectual property or other proprietary rights.

The integration of our business and any future acquisitions may disrupt or have a negative impact on our business.

Achieving the anticipated benefits of the Business Combination will depend in significant part upon whether we are able to integrate our combined business in an efficient and effective manner. The actual integration may result in additional and unforeseen expenses, and the anticipated benefits of the integration plan may not be realized. The companies may not be able to accomplish the integration process smoothly, successfully or on a timely basis. The necessity of coordinating geographically separated organizations, managements, systems of controls, and facilities and addressing possible differences in business backgrounds, corporate cultures and management philosophies may increase the difficulties of integration. The companies operate numerous systems and controls, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance. The integration of operations following the Business Combination and future acquisitions will continue to require the dedication of significant management and external resources, which may distract management’s attention from the day-to-day business of the Company and be costly. Employee uncertainty and lack of focus during the integration process may also disrupt our business. Any inability of management to successfully and timely integrate the operations of the two companies could have a material adverse effect on our business and results of operations. For example, our former Chief Executive Officer elected to retire in January 2023, which may be perceived negatively by our legacy employees, contractors, customers, or other stakeholders.

In addition, we plan to make additional acquisitions as part of our growth strategy. Whenever we make acquisitions, we could have difficulty integrating the acquired companies’ personnel and operations with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect any expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by inherent risks, including, without limitation, the following:

Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with these acquisitions, many of which cannot be presently identified, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.

Our goodwill or other intangible assets may become impaired, which could result in material non-cash charges to its results of operations.

We have goodwill and other intangible assets resulting from acquisitions by Gresham of its subsidiaries in the past. At least annually, or whenever events or changes in circumstances indicate a potential impairment in the carrying value as defined by generally accepted accounting principles or GAAP, we will evaluate this goodwill and other intangible assets for impairment based on the fair value of each reporting unit. If the carrying value of a reporting unit exceeds its estimated fair value, we will record an impairment charge. Determination of fair value requires considerable judgment and is sensitive to changes in underlying assumptions, estimates and market factors. Estimated fair values could change if there are changes in our capital structure, cost of debt, interest rates, capital expenditure levels, operating cash flows, or market capitalization. If we are required to obtainrecognize future non-cash charges related to impairment of goodwill, our results of operations would be materially and adversely affected.

At December 31, 2022, we carried a significant amount of goodwill on our balance sheet. To the approvalextent any of holders representing 66.6%our acquisitions do not perform as anticipated and its underlying assumptions and estimates related to the fair value determination are not met, the value of such assets may be negatively affected and we could be required to record impairment charges. During the fourth quarter of 2022, we recorded a non-cash goodwill impairment charge of $10.46 million associated with the deterioration of the Series E Shareslegacy Giga-tronics business. Refer to incur any additional indebtedness, other than commercial bank debt or trade debt.Note 9 - Goodwill of our consolidated financial statements included in this Prospectus.

These restrictions

Our utilization of net operating loss carryforwards may be limited

As of December 31, 2022, we had a federal net operating loss (“NOL”) carryforward of $18,384,000 and a state NOL carryforward of $22,360,000 available to reduce future taxable income, if any, prior to limitations that may be imposed under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) or otherwise. The federal and state NOL carryforwards begin to expire from year ending 2023 through 2038 and from 2031 through 2042, respectively. The federal NOL amount of $3,286,000 from year ended 2017 through 2022 will have an indefinite life. As of December 31, 2022, we had $10,206,000 of foreign NOL carryforward. 

As a result of the Business Combination, we generally continue to carry such NOLs, but we may be unable to fully use such NOLs, if at all. Under Section 382 of the Code, if a corporation undergoes an “ownership change” (very generally defined as a greater than 50% change, by value, in the corporation’s equity ownership by certain shareholders or groups of shareholders over a rolling three-year period), the corporation’s ability to use its pre-ownership change NOLs to offset its post-ownership change income may be limited. In addition, we may experience an ownership change in the future as a result of subsequent shifts in its stock ownership. Future regulatory changes could also limit our ability to utilize its NOLs. To the extent our NOLs are not utilized to offset future taxable income, our net income and cash flows may be adversely affected. The Tax Cuts and Jobs Act (the “Tax Act”), as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), among other things, includes changes to U.S. federal tax rates and the rules governing NOL carryforwards. For U.S. federal NOLs arising in tax years beginning after December 31, 2017, with certain exceptions, the Tax Act as modified by the CARES Act limits a taxpayer’s ability to utilize NOL carryforwards in taxable years beginning after December 31, 2020, to 80% of taxable income. In addition, U.S. federal NOLs arising in tax years beginning after December 31, 2017, can be carried forward indefinitely. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect when the NOLs are expected to be utilized. The new limitation on use of NOLs may significantly impact our ability to utilize our NOLs to offset taxable income in the future. In addition, for state income tax purposes, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

The effects of Russia’s invasion of Ukraine and tensions elsewhere in the world on the capital markets and the economy is uncertain, and we may have to deal with a recessionary economy and economic uncertainty including possible adverse effects upon the capital markets.

While the effects of Russia’s invasion of Ukraine and the resulting international sanctions are uncertain, they have already had an immediate effect on the global economy, including the economies of the United States and the United Kingdom by causing, among other things, continued inflation and substantial increases in the prices of oil, gas and other commodities. The conflict has created increased uncertainty in the capital markets. The small and microcap markets have not rebounded. The duration of this conflict and its impacts are uncertain. Similarly, tensions in Asia with aggressive conduct in China and North Korea and ongoing conflicts in the Middle East have the potential further add to uncertainty and cause disruption in capital markets. Finally, the recent banking crisis may limit traditional bank financing and lead to more issuers seeking capital from investment bankers and institutional investors. This may make it more difficult for us to raise capital through salesand the result may be more expense and dilution. We cannot predict how these factors will affect the capital markets, but the impact may be adverse and may delay or prevent us from completing future financings or make any financings.

If the inflationary pressures in the United States and elsewhere where we operate continue, we could experience reduced margins and lose future business.

The current inflationary pressures are affecting our gross profit margins particularly since we have lacked the capital to accumulate material inventory. Most of new seriesour contracts (except with Relec) are fixed price, which reduces our margins when inflation occurs. Reducing our selling prices results in further reduction of preferred stock our margins. This customer pricing pressure may also result in the loss of contracts and/or debt withoutfuture business. Finally, we are experiencing rising labor and other costs which may further increase our losses.

We may be unable to execute our acquisition growth strategy.

Once we solve our working capital needs, we plan to make additional acquisitions as part of our growth strategy. Our acquisition growth strategy will involve a number of risks and uncertainties. We may be unable to successfully identify suitable acquisition targets and complete acquisitions. Our ability to execute our growth strategy depends in part on our ability to identify and acquire desirable acquisition candidates as well as our ability to successfully integrate any target’s operations into our business.

Additional factors may negatively impact our growth strategy. Our strategy may require spending significant amounts of capital. If we are unable to obtain additional needed financing on acceptable terms, we may need to reduce the approvalscope of our acquisition growth strategy, which could have a material adverse effect on our growth prospects. If any of the holdersaforementioned factors force management to alter our growth strategy, our growth prospects could be adversely affected.

We will have to pay cash, incur debt, or issue equity as consideration in any future acquisitions, each of which could adversely affect our financial condition or the market price of our Series E Shares, who interestscommon stock. The sale of equity or issuance of equity-linked debt to finance any future acquisitions could result in dilution to our shareholders. Incurring indebtedness may result in increased fixed obligations and could limit our flexibility in managing our business due to covenants or other restrictions contained in debt instruments. In addition, AAI, prior to the Distributions and the Lenders, will have the right to approve or disapprove of any such indebtedness and certain acquisitions.

Further, we may not be able to realize the anticipated benefits of completed acquisitions. Some acquisition targets may not have a developed business or will be experiencing inefficiencies and incur losses. Additionally, small defense contractors which we consider suitable acquisition targets may be different than thoseuniquely dependent on their prior owners and the loss of such owners’ services following the completion of acquisitions may adversely affect their business. Therefore, we may lose our investment in the event that the acquired businesses do not develop as planned or that we are unable to achieve the anticipated cost efficiencies or reduction of losses. Even if we are able to do so, we may not realize the full anticipated benefits of such acquisitions, and our business, financial conditions and results of operations may suffer.

Additionally, our and Gresham’s acquisitions have previously required, and any similar future transactions may also require, significant management efforts and expenditures. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, divert the attention of our other shareholders who are not entitled to similar preferences or approval rights.management and key employees and increase our expenses.

If we lose key personnel, it could have a material adverse effect on our financial condition, results of operations, and growth prospects.

Our success will depend on the continued contributions of key officers and employees. The loss of the services of key officers and employees, whether such loss is through resignation or other causes, or the inability to attract additional qualified personnel, could have a material adverse effect on our financial condition, results of operations, and growth prospects. Our financial difficulties and reduction in workforce, could cause employees to leave if they become insecure. Although we expect most of our employees will continue to remain as our employees, it is possible some employees may quit. Depending upon who they are and how many employees quit, we may be adversely affected. In addition we need to hire accounting executives to support our Chief Financial Officer although our cash flow issues may preclude us from doing so.

With the closing of the Business Combination, our management, with the exception of our Chief Financial Officer and Chief Technology Officer, was replaced by Gresham’s management. Our former Chief Executive Officer remained with us in the transition but elected to retire in January 2023 as a full-time employee. If we were to lose Jonathan Read, Timothy Long, and/or Lutz Henckels, our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer respectively, our business would be materially and adversely affected. The loss of Zvika Avni, who manages our Israeli operations, could also materially harm our business.

Our sales and profitability may be affected by changes in economic, business and industry conditions.

If the economic climate in the United States or abroad deteriorates, customers or potential customers could reduce or delay their orders. In this environment, our customers may experience financial difficulty, reduce operations and fail to budget or reduce budgets for the purchase of our products. This may lead to longer sales cycles, delays in purchase decisions, payment and collection, and can also result in downward price pressures, causing our sales and profitability to decline. In addition, general economic uncertainty and general declines in capital spending in the defense electronics sector make it difficult to predict changes in the purchasing requirements of our customers and the markets we serve. There are many other factors which could affect our business, including:

These trends and factors could adversely affect our business, results of operations and financial condition and diminish our ability to achieve our strategic objectives.

We have been significantly short of capital needed to acquire parts for manufacture of our products to complete orders. At times, we have not had the cash available to make advance payments for the purchase of parts, and then, as a consequence, we would not receive the parts from our vendors required to finish a customer order. This would then delay the delivery of our products to customers and would also delay recognition of the resulting revenue and the receipt of cash from the customer. There can be no assurance that we will not operate at a loss during the current or future fiscal years.

Our future profitability depends upon many factors, including several that are beyond our control. These factors include, without limitation: 

OSales, Business Development and Competitive Risks

urOur sales cycles can be long and unpredictable,and our sales efforts require considerable time and expense. As a result, our sales and revenue are difficult to predict and may vary substantially from period (except for Relec which is a distributor) to period, which may cause our operating results to fluctuate significantly.significantly. 

The timing of our revenues is difficult to predict. Factors that may contribute to these fluctuations include our dependence on the defense industry, a limited number of customers, the nature and length of our sales cycles for our products and services, the duration and delivery schedules within our customer contracts and our ability to timely develop, produce and upgrade our products.

Most of our revenues result from a limited number of relatively large orders that we receive from prime defense contractors.contractors and government agencies. We spend substantial time and resources on our sales efforts without any assurance that our efforts will produce any sales. In addition, purchases of our products are frequently subject to budget constraints (including constraints imposed by governmental agencies), multiple approvals, and unplanned administrative, processing and other delays. Even if we receive a purchase order from a customer, there may be circumstances or terms relating to the purchase that delay our ability to recognize revenue from that purchase, which makes our revenue difficult to forecast. Our financial condition may also cause potential customers to delay, postpone or decide against placing orders for our products. As a result, it is difficult to predict whether a sale will be completed, the particular fiscal period in which a sale will be completed or the fiscal period in which revenue from a sale will be recognized. For these reasons, our operating results may vary significantly from quarter to quarter. Such unpredictable operating results may adversely impact the trading price of our common stock.

Our boardsales are significantly dependent on the defense industry and a limited number of directorscustomers and its Audit and Nominating Committees are comprised of directors, a majority of whom are not considered to be independent under the standards of the Nasdaq Stock Market..

The rules applicable to companiesA significant proportion of our current product and service offerings are directed towards the defense marketplace, which has a limited number of customers. If the defense market demand decreases, our sales may be less than projected with securities listeda resulting decline in revenues. As a result, our business depends upon continued U.S., Israeli, United Kingdom and other countries’ government expenditures on certain securities exchanges require that a listed company’s boarddefense systems for which we provide support. These expenditures have not remained constant over time and have been reduced in some periods. Our business, prospects, financial condition, operating results, and the trading price of directors meet certain independence standards. For example, the Nasdaq Stock Market, where our common stock was listed until 2017, requires thatcould be materially harmed, among other causes, by the majorityfollowing:

Additionally, the loss of any one customer may have a company’s directors be independentmaterial adverse effect on future operating results and thatfinancial condition. Our product backlog also has a company’s nominating, auditnumber of risks and compensation committee be comprised entirelyuncertainties such as the cancellation or deferral of independent directors. We are no longer required to comply with these independence standards because our common stock is no longer listed on the Nasdaq Stock Market. We would not meet these standards if they applied to use because a majorityorders, dispute over performance of our board of directors would not be considered to be independent under Nasdaq’s standards and our audit and nominating and governance committees include directors who would not be considered independent under Nasdaq’s independence standards. See “Management - Committees of the Board of Directors” and “—Independence of Board of Directors.” Accordingly, you may not have the same protections afforded to shareholders of companies that have or that are required to have a board and committees that satisfy Nasdaq’s independence standards.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers and business partners, some of which is stored on our network and some of which is stored with our third-party vendors. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to operator error, malfeasance or other disruptions. Any such breach could compromise our network and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in competitive hardship, legal claims or proceedings, liability under laws that protect the confidentiality of information, disrupt our operations, and damage our reputation, which could adversely affect our business.

If we are deemed to infringe on the proprietary rights of third parties, we could incur unanticipated expense and be prevented from providing our products and services.

We could be subject to intellectual property infringement claims as the number of our competitors grows and if our products or the functionality of our products overlap with patents of our competitors. While we do not believe that we have infringed or are infringing on any proprietary rights of third parties, we cannot assure you that infringement claims will not be asserted against us or that those claims will be unsuccessful. We could incur substantial costs and diversion of management resources defending any infringement claims whether or not such claims are ultimately successful. Furthermore, a party making a claim against us could secure a judgment awarding substantial damages, as well as injunctive or other equitable relief that could effectively block our ability to provide products or services. In addition, we cannot assure you that licenses for any intellectual property of third parties that might be required for our products or services will be available on commercially reasonable terms, or at all.

Our business depends on our intellectual property rights, and if we are unable to protect them, our competitive position may suffer.

Our business plan is predicated on our proprietary technology. Accordingly, protecting our intellectual property rights is critical to our continued success and our ability to maintain our competitive position. Our goal iscollect amounts due under these orders. If any of these events were to protect our proprietary rights through a combination of patent, trademark, trade secretoccur, actual shipments could be lower than projected and copyright law, confidentiality agreements and technical measures. We generally enter into non-disclosure agreements with our employees, consultants and suppliers and limit access to our trade secrets and technology. We cannot assure you that the steps we have taken will prevent misappropriation of our technology. Misappropriation of our intellectual propertyrevenues could decline which would have an adverse effect on our competitive position.operating results and liquidity.

IfWe face intense industry competition and product obsolescence, which, in turn, could increase our losses.

We operate in an industry that is generally characterized by intense competition. Our competitors continuously engage in efforts to expand their business relationships with the same major defense contractors and the government with whom we loseenter contracts and will continue these efforts in the servicesfuture, and the governments may choose to use other contractors. We believe that the principal bases of competition in our markets are breadth of product line, quality of products, stability, reliability, business relationships and reputation of the provider, along with cost. Quantity discounts, price erosion, and rapid product obsolescence due to technological improvements are therefore common in our industry as competitors strive to retain or expand market share. Product obsolescence can lead to increases in unsaleable inventory that may need to be written off and, therefore, could reduce our profitability. Additionally, as we are seeing with Microsource, the U.S. military’s decision to discontinue ordering certain aircraft where Microsource acts as a supplier, results in our loss of orders.

Because our competitors have greater resources, we may not compete effectively. 

Several of our Chief Executive Officer, Chief Financial Officercompetitors, including, among others, K&L Microwave, Q Microwave, Amplitech, Qorvo, Northrop Grumman, Textron, Keysight, Rohde & Schwarz and National Instruments have substantially greater research and development, manufacturing, marketing, financial, technological personnel, and managerial resources than us. These resources also make these competitors better able to withstand difficult market conditions than us. We cannot provide assurance that any products developed by these competitors will not gain greater market acceptance than any developed by us.

Our products compete and will compete with similar, if not identical, products produced by our competitors. These competitive products could be marketed by well-established, successful companies that possess greater financial, marketing, distribution personnel, and other resources than we do. These companies can implement extensive advertising and promotional campaigns. They can introduce new products to new markets more rapidly. In certain instances, competitors with greater financial resources may be able to enter a market in direct competition with us, offering attractive marketing tools to encourage the sale of products that compete with our products or other key personnel,present cost features that customers may find attractive.

The markets for some of our products (such as our commercial products in the United Kingdom) are also subject to specific competitive risks because these markets are highly price sensitive. Our competitors have competed in the past by lowering prices on certain products. If they do so again, we may be forced to respond by lowering our prices or foregoing business. Either response would constrain revenue growth and/or result in losses. Failure to anticipate and respond to price competition may also further reduce our revenue and increase our losses.

If we are unable to replace them,monetize our EW business, we may be required to discontinue its business.

We initially sold our test solutions in laboratory settings. Competing against market incumbents in this segment exposed greater than expected challenges. Consequently, our EW test sales have fallen short of our expectations due to the longer than expected time required to establish credibility and grow market share in the laboratory segment.

During fiscal 2021, we moved beyond the laboratory environment and pursued opportunities for open-air range applications for our Threat Emulation System (“TEmS”) solution. Market incumbents on these ranges offer single-purpose solutions because the applications being addressed are less data-intensive and narrower in their requirements compared to those in the laboratory environment. We successfully won sales into applications for air-crew training and air-to-ground missile testing.

Through December 31, 2022, we have spent over $24.0 million towards the development of the TEmS solution, but in calendar year 2022, we only sold $1.8 million of EW test products. Over the last four years the sales of EW test products have averaged $2.6 million annually. Our inventory of EW test products was $1.43 million and $1.44 million as of December 31, 2022, and March 31, 2023, respectively. We have no backlog for our EW test and training products as of the date of this Prospects. However, we expect a new order which continues to be delayed.

Accordingly, if we are unable to monetize our EW business, we may be forced to liquidate our remaining inventory and discontinue its operations. 

The sale of our products is dependent upon our ability to satisfy the proprietary requirements of our customers.

We depend upon a relatively narrow range of products for the majority of our revenue. Our success in marketing our products is dependent upon their continued acceptance by our customers. In some cases, our customers require that our products meet their own proprietary requirements. If we are unable to satisfy such requirements, or forecast and adapt to changes in such requirements, our business could be materially harmed.

If we fail to anticipate and adequately respond to rapid technological changes in our industry, including evolving industry-wide standards, in a timely and cost-effective manner, our business, financial condition and results of operations would be materially and adversely affected.

Rapid technology changes in our industry require us to anticipate, sometimes years in advance, which technologies and/or distribution platforms our products must take advantage of in order to make them competitive in the market at the time they are released. Therefore, we usually start our product development with a range of technical development goals that we hope to be able to achieve for our customers. We may not be able to achieve these goals, or our competition may be able to achieve them more quickly than we can. In either case, our products may be technologically inferior to competitive products, or less appealing to consumers, or both. If we cannot achieve our technology goals for our customers within the original development schedule of our products, then our customers may opt for competitive offerings or we may delay products until these technology goals can be achieved, which may delay or reduce revenue and increase our development expenses. Alternatively, we can increase the resources employed in research and development in an attempt to accelerate our development of new technologies, either to preserve promised delivery date to our customers or to keep up with our competition, which would increase our development expenses and adversely affected.affect our results of operations.

Performance and Operational Risks

If we are unable to identify, attract, train and retain qualified personnel, especially our design and technical personnel, our business and results of operations would be materially and adversely affected and we may not be able to effectively execute our business strategy.

Our performance and future success largely dependsdepend on its continuing ability to identify, attract, train, retain and motivate qualified personnel, including its management, sales and marketing, finance and in particular its engineering, design and technical personnel. For example, we currently have a limited number of qualified personnel for the assembling, tuning and testing processes. Members of our technical staff are nearing retirement, and it may be difficult to replace them, given their experience and expertise. In addition, we will need additional staff to deliver on Microphase’s forecasted growth and to allow Enertec to handle more large orders. We do not know whether we can expand our workforce as needed. Our engineering, design and technical personnel represent a significant asset. The competition for qualified personnel in the defense industry in the United States, United Kingdom and Israel is intense and constrains our ability to attract qualified personnel. The loss of the services of one or more of our key employees, especially our key engineering, design and technical personnel, or its inability to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition, and operating results.

Performance problems in our products or problems arising from the use of our products together with other vendors’ products may harm our business and reputation.

Products as complex as those we produce may contain unknown and undetected defects or performance problems. For example, it is possible that one of our products might not comply with stipulated specifications under all circumstances. In addition, our customers generally use our products together with their own products and products from other vendors. As a result, when problems occur in a combined equipment environment, it may be difficult to identify the source of the problem. A defect or performance problem could result in lost revenues, increased warranty costs, diversion of engineering and management time and effort, impaired customer relationships and injury to our reputation generally.

Our EW test and training products are complex and could have unknown defects or errors, which may increase our costs, harm our reputation with customers, give rise to costly litigation, or divert our resources from other purposes. 

Our EW test and training systems are extremely complex. Despite testing, our initial products contained defects and errors and may in the future contain defects, errors or performance problems following the sale or when new versions or enhancements are released, or even after these products have been used by our customers for a period of time. These problems could result in expensive and time-consuming design modifications or warranty charges, delays in the introduction of new products or enhancements, significant increases in our service and maintenance costs, diversion of our personnel’s attention from our product development and sales efforts, exposure to liability for damages, damaged customer relationships, and harm to our reputation, any of which could have a material adverse impact on our results of operations. In addition, increased development and warranty costs could be substantial and could reduce our operating margins.

We face risks related to production delays, delays of customer orders and the relatively high selling price of our EW testing and training solutions.

Our EW test and training platform has been a primary product development focus for the legacy Giga-tronics business for the last several years. However, delays in completing its initial development, together with early design and manufacturing issues and longer than anticipated sales cycles have contributed to our inability to generate material sales. Additionally, the average selling price of our EW test and training system is considerably higher than our prior general-purpose test and measurement products, which requires additional internal approvals on the part of the customer and generally leads to longer sales cycles. Our financial condition may also cause potential customers to delay, postpone or decide against placing orders for our products. Continued longer than anticipated sales cycles in future fiscal years, or delays in production and shipping volume quantities, could have a material adverse impact on our operating results and liquidity.

Our business could be negatively impacted by cybersecurity threats and other security threats and disruptions.

As a defense contractor, we face certain security threats, including threats to our information technology infrastructure, attempts to gain access to our proprietary or classified information, threats to physical security, and domestic terrorism events. Our information technology networks and related systems are critical to the operation of our business and essential to our ability to successfully perform day-to-day operations. We are also involved with information technology systems for certain customers and other third parties, which generally face similar security threats. Cybersecurity threats in particular, are persistent, evolve quickly and include, but are not limited to, computer viruses, attempts to access information, denial of service and other electronic security breaches believe that we have implemented appropriate measures and controls and invested in skilled information technology resources to appropriately identify threats and mitigate potential risks, but there can be no assurance that such actions will be sufficient to prevent disruptions to mission critical systems, the unauthorized release of confidential information or corruption of data. A security breach or other significant disruption involving these types of information and information technology networks and related systems could: 

Any or all of the foregoing could have a negative impact on its business, financial condition, results of operations and cash flows. 

Failure of our information technology infrastructure to operate effectively could adversely affect our business.

We depend heavily on information technology infrastructure to achieve our business objectives. If a problem occurs that impairs this infrastructure, the resulting disruption could impede our ability to communicate with our customers, to record or process orders, manufacture, and ship in a timely manner, or otherwise carry on business in the normal course. Any such events could cause us to lose customers or revenue and could require us to incur significant expense to remediate.

Because of the COVID-19 pandemic, we had disruptions to its business which caused a material effect on its business and results of operations. The future impacts on us, if any, are uncertain.

Our business was materially affected by the COVID-19 pandemic. The disruptions caused by the pandemic included temporary closures of our facilities, including a shutdown of our Microphase facility in Connecticut for three weeks in December 2020 and suspension of production operations for our Gresham Power subsidiary located in Salisbury, United Kingdom from March 19, 2020, until June 2020 and from November 2020 until the Spring of 2021. This resulted in a significant decrease of revenue in December 2020 and a decrease in January to February 2021. In addition, Gresham Power experienced substantial revenue decreases while shut down. In January 2022, Israel experienced a fifth wave of COVID-19 with the Omicron variant. Many of the workers of Enertec became ill and/or worked from home. Despite this disruption, it did not materially impact Enertec’s operations.

We also incurred expenses related to implementing the workplace safety protocols and adjusting for remote working arrangements. Some non-production employees work remotely part of the time. However, not all employees are as efficient working remotely and our business may be adversely affected as the result. Additionally, certain employees at our production facilities must continue to work on site to continue manufacture for essential government programs.

Further, lockdowns affected our sales and market strategy. This resulted in an increase in the average length of sales cycles to onboard new customers and delays in new projects, which could materially adversely impact our business, results of operations, and financial condition in future periods. 

As a result of the COVID-19 pandemic, the American, Israeli and United Kingdom economies sustained material slowdowns during part of the pandemic. While people continue to be infected with COVID-19, serious illnesses and deaths have diminished. As new variants rise, this trend may not continue.

Because of the uncertainty surrounding COVID-19, we cannot know whether COVID-19 will adversely affect us in the future.

Earthquakes and other events could have a material adverse effect on our business, financial condition and results of operations. 

Our Giga-tronics facility is located in the San Francisco Bay Area near known earthquake default zones and is vulnerable to significant damage from earthquakes. We are also vulnerable to other natural disasters, epidemics, such as COVID-19, and other events that could disrupt our operations that may be beyond our control. We do not carry insurance for earthquakes and we may not carry sufficient business interruption insurance to compensate us for losses that may occur. Any losses or damages we incur could have a material adverse effect on our operating results, cash flows and success as an overall business.

Supply chain disruptions and our inability to procure necessary component parts for our products have materially and adversely affected our results of operations and could materially and adversely affect our results of operations in the future.

We manufacture some components for our products, but we rely on contract manufacturers to supply components for many of our product offerings. Our reliance upon such contract manufacturers involves several risks, including reduced control over manufacturing costs, delivery times, reliability and quality of components, unfavorable currency exchange fluctuations, and continued inflationary pressures on many of the raw materials used in the manufacturing of our products. If we were to encounter a shortage of key manufacturing components from limited sources of supply, or experience manufacturing delays caused by reduced manufacturing capacity, the inability of our contract manufacturers to procure raw materials, the loss of key assembly subcontractors, difficulties associated with the transition to our new subcontract manufacturers or other factors, we could experience lost revenue, increased costs, and delays in, or cancellations or rescheduling of, orders or shipments, any of which would materially harm our business.

Supply chain disruptions have affected us. During our fiscal year ended December 31, 2022, we have experienced delays in our receipt of certain components, which temporarily delayed shipments in the U.S., the UK and Israel. Extended delivery lead times have continued into the first three months ended March 31, 2023, delaying revenue realization and requiring extra management focus to work around these delays.

Our Microsource, Microphase, Enertec, Gresham Power and Relec subsidiaries and Giga-tronics’ Division all have experienced supply chain disruptions, albeit in different ways. Our Giga-tronics Division experienced a 55-week delivery lead-time for a memory card and 36-week delivery lead-time for the chassis on which to build its TEmS that constrains the revenue that it can generate and cash flow. Microphase experienced a 45-week delay in securing certain video component parts for a customer, which adversely impacted Microphase’s revenues and cash flows. While Relec experienced a spike in bookings, it encountered longer delivery lead-times for products it distributes. That in turn also delays fulfillment of orders, defers revenue recognition and increases capital requirements to finance the interval between payment for goods and release of goods from inventory to customers for payment. Enertec experienced problems with component delivery times in 2022 and during the first six months of 2023. Enertec began purchasing component parts at least nine months in advance in 2022. The current situation has put a lot of pressure on Enertec’s cash flow. As noted above, extended delivery lead times have persisted into the first three months ended March 31, 2023, delaying revenue realization and requiring extra management focus to work around these delays. [All our operating companies have implemented strategies to deal with extended delivery lead-times and manage customer expectations on delivery dates for our product offerings. We cannot assure you that these initiatives will succeed and supply chain issues will continue to cause challenges for our operating subsidiaries in the future.

The COVID-19 pandemic had significant impacts on our supply chain throughout 2021 and 2022. Many of our suppliers have indicated similar challenges in keeping their own operations running and management believes there may still be some residual delays in fulfilling orders due to limited availability of parts and services. We expect this situation to improve toward the end of 2023. 

We may not be able to procure necessary key components for our products, or we may purchase too much inventory.

The defense industry, and the electronics industry as a whole, can be subject to business cycles. During periods of growth and high demand for our products, we may not have adequate supplies of inventory on hand to satisfy our customers’ needs. Furthermore, during these periods of growth, our suppliers may also experience high demand and, therefore, may not have adequate levels of the components and other materials that we require to build products so that it can meet our customers’ needs. Our inability to secure sufficient components to build products for our customers could negatively impact our sales and operating results. We may choose to mitigate this risk by increasing the levels of inventory for certain key components assuming we have available cash resources. Increased inventory levels can increase the potential risk for excess and obsolescence should our forecasts fail to materialize or if there are negative factors impacting our customers’ end markets. If we purchase too much inventory, we may have to record additional inventory reserves or write-off the inventory, which could have a material adverse effect on our gross margins and on our results of operations.

We depend on a limited number of major customers for a significant portion of our revenue. The loss of any of these customers, or the substantial reduction in the quantity of products that they purchase from us, would materially adversely affect our business and results of operations.

Our operating companies typically depend upon a limited number of major customers to generate a significant portion of its revenue. For the years ended December 31, 2022 and 2021 and for the three months ended March 31, 2023 and 2022, Enertec derived close to 90% to 95% of its revenues from two customers. 83% and 87% of Microphase revenues came from the same six customers while three customers accounted for 76% and 67% of the revenues of Microphase for the years ended December 31, 2022 and 2021, respectively. For the three month periods ended March 31, 2023 and 2022, Microphase derived 75% and 66% of its revenue from the same three customers, respectively. However, there is no assurance that the customers, which account for the great proportion of sales in our operating companies will continue placing further orders beyond the backlog orders on hand now. Among the factors that affect future orders are:

If one or more of our major customers reduce or cancel their orders scaling back some of their activities, our revenue would be significantly reduced. Furthermore, reduction or diversions in defense spending may lead to reduced demand for our products, which could, in turn, have a material adverse effect on our business and results of operations. If the financial condition of one or more of our major customers were to deteriorate, or if such customers have difficulty acquiring investment capital due to any of these or other factors, a substantial decrease in our revenue would likely result. 

If we fail to effectively manage our growth, our business and operating results could be harmed.

We are experiencing growth in our operations. This growth will place, significant demands on our management, operational and financial infrastructure. If we do not manage our growth effectively, the quality of our products and services could suffer, which could negatively affect our operating results. To effectively manage our growth, we must continue to improve our operational, financial and management controls and reporting systems and procedures. These system improvements may require significant capital expenditures and management resources. Failure to implement these improvements could hurt our ability to effectively manage our growth and would in its turn have a material adverse impact on our business and future operating results.

If we are unable to successfully expand our production capacity, it could result in material delays, quality issues, increased costs, and loss of business opportunities, which may negatively impact our profit margins and operating results.

Part of our future growth strategy is to increase our production capacity to meet increasing demand for our products. Assuming we obtain sufficient funding to increase our production capacity, any projects to increase such capacity may not be implemented on the anticipated timetable or within budget. We may also experience quality control issues as we implement any production upgrades. Any material delay in completing these projects, or any substantial cost increases or quality issues in connection with these projects could materially delay our ability to bring our products to market and adversely affect our business, reduce our revenue, income, and available cash, all of which could harm our financial condition. 

Our strategic focus on purpose-built electronics solution competencies and concurrent cost reduction plans may be ineffective or may limit our ability to compete.

We devote significant resources to developing and manufacturing bespoke electronics solutions for our customers. Each product typically represents a uniquely tailored solution for a specific customer’s requirements. Failure to meet these customer product requirements or a failure to meet production schedules and/or product quality standards may put us at risk with one or more of these customers. Moreover, changes in market conditions and changes in the needs and requirements of our customers may affect their purchasing decisions. The loss of one or more of our significant custom electronics solution customers could have a material adverse impact on our revenue, business or financial condition.

We have implemented a series of initiatives designed to increase efficiency and reduce costs. While we believe that these actions will have a positive impact, they may not be sufficient to achieve the required operational efficiencies that will enable us to respond more quickly to changes in the market or result in the improvements in our business that we anticipate. Early in 2023, we implemented a reduction in force by laying off 14 employees in our U.S. operations. We may be forced to take additional cost-reducing initiatives, including those involving personnel, which may negatively impact quarterly results of operations as it accounts for severance and other related costs. In addition, there is the risk that such measures could have long-term adverse effects on our business by reducing our pool of talent, decreasing or slowing improvements in our products or services, making it more difficult for us to respond to customers, limiting our ability to increase production quickly if and when the demand for its solutions increases and limiting our ability to hire and retain key personnel. These circumstances could adversely affect our operating results.

Although we depend on sales of our legacy products for a meaningful portion of our revenue, as these products mature, we risk component parts becoming obsolete.

A significant portion of our sales have historically been attributable to our legacy products. We expect that these products may continue to account for a meaningful percentage of our revenue for the foreseeable future. As products mature, however, component parts may become obsolete and to the extent we require component parts we may incur significant expenses to find acceptable substitutes for obsolete parts or to retool and/or re-design such component part. If we fail to do so, we will be unable to sell such mature products.

A significant portion of our contracts are fixed-price contracts that could subject us to losses in the event of cost overruns or a significant increase in inflation.

We negotiate most of our contracts on a fixed-price basis which allows us to benefit from cost savings but also subject us to the risk of potential cost overruns, particularly for firm fixed-price contracts, because we assume the entire cost burden. If our initial estimates are incorrect, we can lose money on these contracts. Government contracts can expose us to potentially large losses because the government can hold us responsible for completing a project or, in certain circumstances, paying the entire cost of our replacement by another provider regardless of the size or foresee ability of any cost overruns that occur over the life of the contract. Because many of these contracts involve new technologies and applications, unforeseen events such as technological difficulties, fluctuations in the price of raw materials, problems with our suppliers and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to us. The United States, the United Kingdom and Israel are experiencing a significant increase in inflation, which could have a significant adverse impact on the profitability of these contracts. Furthermore, if we fail to meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages or suffer major losses if the customer exercises its right to terminate. In addition, some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts we may not realize their full benefits. Cost overruns could have an adverse impact on our operating results.

Many of our operating companies purchase a significant amount of its components and products outside of the countries in which they operate.

With the exception of Microphase and Microsource which source all of their components, and Enertec which sources most of its parts, in the United States, we purchase a majority of our components from foreign manufacturers. In addition, we have a substantial majority of our commercial products assembled, packaged, and tested by subcontractors located outside the United States. These activities are subject to the uncertainties associated with international business operations, including trade barriers and other restrictions, changes in trade policies, governmental regulations, currency exchange fluctuations, reduced protection for intellectual property, war and other military activities, terrorism, changes in social, political, pandemic, or economic conditions, and other disruptions or delays in production or shipments, any of which could have a materially adverse effect on our business and operating results. 

If we are unable to satisfy our customers’ specific product quality, certification or network requirements, our business could be disrupted, and our financial condition could be harmed.

Our customers demand that our products meet stringent quality, performance and reliability standards. We have, from time to time, experienced problems in satisfying such standards. Defects or failures have occurred in the past, and may occur in the future, relating to our product quality, performance and reliability. From time-to-time, our customers also require us to implement specific changes to our products to allow these products to operate within their specific network configurations. If we are unable to remedy these failures or defects or if we cannot complete such required product modifications, we could experience lost revenue, increased costs, including inventory write-offs, warranty expense and costs associated with customer support, delays in, or cancellations or rescheduling of, orders or shipments and product returns or discounts, any of which would harm our business.

Risks Related to our Foreign Operations

We depend on international sales for a material portion of our revenue.

Sales to customers outside of North America accounted for more than two thirds of our net revenue for the years ended December 31, 2022 and 2021, respectively. For the three month period ended March 31, 2023, sales to customers outside of North America were 73%. We expect that international sales will continue to represent a material portion of our total revenue. International sales are subject to the risks of international business operations as described above, as well as generally longer payment cycles, greater difficulty collecting accounts receivable, and currency restrictions. These risks include the following:

International sales are also subject to the export laws and regulations of the United States and other countries. Further, our subsidiaries in the United Kingdom and Israel are subject to local regulation which may increase our costs.

Any one or more of these factors could increase our costs and adversely affect our results of operations.

Our financial condition and operating results may be adversely affected by potential political, economic, and military instability in Israel.

A material portion of our business is conducted through Enertec, our Israeli subsidiary. Political, economic, and military conditions in Israel directly affect Enertec’s operations. Beginning in 2021, the state of hostility facing Israel has increased and has led to political turmoil as well as security and economic problems for Israel. Such ongoing hostilities may hinder Israel’s international trade relations and may limit the geographic markets where Enertec can sell its products and solutions. Hostilities involving or threatening Israel, or the interruption or curtailment of trade between Israel and its present trading partners, could materially and adversely affect our operations. There also has been more friction between the Biden Administration and the Israeli government, particularly with the recent change in that government and the proposed judicial reforms which have caused massive protests in Israel. If this were to result in reduced U.S. aid for Israel, it is possible that Enertec’s business could be adversely affected. Further, the protests may result in operating inefficiencies.

In addition, Israel-based companies and companies doing business with Israel have been the subject of an economic boycott by members of the Arab League and certain other predominantly Muslim countries, including Iran, since Israel’s establishment. Although Israel has entered into various agreements with certain Arab countries and the Palestinian Authority, and various declarations have been signed in connection with efforts to resolve some of the economic and political problems in the Middle East, we cannot predict whether or in what manner these problems will be resolved. Wars and acts of terrorism have resulted in significant damage to the Israeli economy, including reducing the level of foreign and local investment. Damages to Enertec’s operations or injuries to employees from rockets launched from Gaza, Lebanon or Iran, — or outright war against Israel — may have a material and adverse effect upon our company.

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover its potential damages. Any losses or damages incurred by us could have a material adverse effect on our business.

Many of Enertec’s employees are obligated to perform military reserve duty in Israel, which could have a disruptive impact on our business.

Certain number of Enertec’s officers and employees may be obligated to perform annual reserve duty in the Israel Defense Forces and are subject to being called up for active military duty at any time. All Israeli male citizens who have served in the army are subject to an obligation to perform reserve duty until they are between 40 and 49 years old, depending upon the nature of their military service. These military service obligations could have a disruptive impact on our business, if hostilities develop in the future, which may adversely affect our business.

If we are unable to replace Relec’s senior management, it may encounter losses of business and operating losses.

We acquired Relec on November 30, 2020, from its three owners who remained as employees following the closing. We expect that the two of three principals may resign or take a step back from the business after the three-year earn-out period expires in December 2023 or perhaps earlier.Relec relies upon its former owners’ personal relationships and skills experience,to grow and maintain relationships with customers and suppliers. Once they resign, although management believes that it has a sound succession plan in place, Relec may encounter losses of business and operating losses.

A material portion of our revenue and expenses is denominated in foreign currencies, so fluctuations in exchange rates could have a material adverse effect on our operating results. 

We face foreign exchange risks because a significant portion of our revenue and expenses is denominated in foreign currencies. Further, some suppliers to Enertec and Relec require payment in U.S. dollars, which also exposes us to risk. Generally, U.S. dollar strength adversely impacts the translation of the portion of our revenue that is generated in foreign currencies into the U.S. dollar. For the years ended December 31, 2022 and 2021 and the three months ended March 31, 2023 and 2022, a substantial portion of our revenue was denominated in currencies other than U.S. dollars. Our results of operations could also be negatively impacted by a strengthening of the U.S. dollar as a large portion of our costs are U.S. dollar denominated.

We also have foreign exchange risk exposure with respect to certain of its assets that are denominated in currencies other than the functional currency of its subsidiaries, and its financial results are affected by the re-measurement and translation of these non-U.S. currencies into U.S. dollars, which is reflected in the effect of exchange rate changes on cash, cash equivalents, and restricted cash on the consolidated statements of cash flows. Strengthening of the U.S. dollar could materially and adversely affect our results of operations and financial condition. For the years ended December 31, 2022 and December 31, 2021, we had gains from foreign currency exchange adjustment of $45,000 and $0 respectively. For the three months ended March 31, 2023 and 2022, we had gains from foreign currency exchange adjustment of $44,000 and zero, respectively.

Legal Risks

Our limited ability to protect our proprietary information and technology may adversely affect our ability to compete, and our products could infringe upon the intellectual property rights of others, resulting in claims against us, the results of which could be costly.

Many of our products consist entirely or partly of proprietary technology owned by us. Although we seek to protect our technology through a combination of copyrights, trade secret laws and contractual obligations, these protections may not be sufficient to prevent the wrongful appropriation of our intellectual property, nor will they prevent our competitors from independently developing technologies that are substantially equivalent or superior to our proprietary technology. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as the laws of the United States. In order to defend our proprietary rights in the technology utilized in our products from third party infringement, we may be required to institute legal proceedings, which would be costly and would divert our resources from the development of our business. If we are unable to successfully assert and defend our proprietary rights in the technology utilized in our products, our future results could be adversely affected.

Although we attempt to avoid infringing known proprietary rights of third parties in our product development efforts, we may become subject to legal proceedings and policiesclaims for alleged infringement from time to time in the ordinary course of business. Any claims relating to the infringement of third-party proprietary rights, even if not meritorious, could result in costly litigation, divert management’s attention and resources, require us to reengineer or cease sales of our products or require us to enter into royalty or license agreements which are not advantageous to us. In addition, parties making claims may be able to obtain an injunction, which could prevent us from selling our products in the United States or abroad.

We may in the future be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time-consuming and unsuccessful.

Competitors may infringe on our patents, trade secrets or the patents of our licensors. To counter such infringement or unauthorized use, we may be required to file infringement claims, or we may be required to defend the validity or enforceability of such patents, which can be expensive and time-consuming. In an infringement proceeding, a court may decide that either one or more of our patents or our licensors’ patents is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue because our patents do not cover that technology. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

Interference proceedings filed by third parties or brought by us may be necessary to determine the priority of inventions regarding our patents or patent applications or those of our partners or licensors. An unfavorable outcome could require us to cease using the related technology or to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful, may cause us to incur substantial costs and distract the attention of our management and other key personnelemployees. We may not be able to prevent, alone or with our licensors, misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the United States.

Because of the substantial amount of discovery required in intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of our common stock.

Regulatory and Compliance Risks

Our businesses are subject to government procurement laws and regulations.

We must comply with certain laws and regulations relating to the formation, administration and performance of government contracts. These laws and regulations affect how we conduct business with the government, including the business that we do as a subcontractor to large prime contractors that contract directly with the government. In complying with these laws and regulations, we incur additional costs. These costs may increase in the future, thereby reducing our margins, which could have an adverse effect on our business, financial condition, results of operations and cash flows. Failure to comply with these regulations and requirements could lead to fines, penalties, repayments, or compensatory or treble damages, or suspension or debarment from government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various laws, including those related to procurement integrity, export control, government security regulations, employment practices, protection of the environment, accuracy of records, proper recording of costs and foreign corruption. The termination of a government contract or relationship as a result of any of these acts would have an adverse impact on our operations and could have an adverse effect on our standing and eligibility for future government contracts.

Some U.S. federal statutes and regulations provide for penalties, including automatic debarment based on actions such as violations of the U.S. False Claims Act or the U.S. Foreign Corrupt Practices Act. The suspension or debarment in any particular case may be limited to a facility, contract or subsidiary involved in the violation or could be applied to our entire Company in severe circumstances. Even a narrow scope suspension or debarment could result in negative publicity that could adversely affect our ability to continuerenew contracts and to attract, motivatesecure new contracts, both with governments and retain highly qualified employees. In particular, the services of John Regazzi, our Chief Executive Officer,private customers, which could materially and Lutz Henckels, our Chief Financial Officer, are integral to the execution of our business strategy. We believe that the loss of the services of Mr. Regazzi or Dr. Henckels could adversely affect our business, financial condition and results of operations. 

If we fail to comply with anti-bribery, anti-corruption, anti-money laundering laws, and similar laws, or allegations of such failure, it could have a material adverse effect on our business, financial condition and operating results.

We are subject to various anti-bribery, anti-corruption, anti-money laundering laws, including the FCPA, the U.S. Travel Act, and the USA PATRIOT Act. In addition, we are subject to the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, Chapter 9 (sub-chapter 5) of the Israeli Penal Law, 1977, the Israeli Prohibition on Money Laundering Law–2000, and possibly other similar laws in countries outside of the United States in which we conduct our business or seek to sell our products. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly to generally prohibit companies, their employees, agents, representatives, business partners, and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.

We, our employees, agents, representatives, business partners and third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities and may be held liable for the corruptor other illegal activities of these employees, agents, representatives, business partners or third-party intermediaries even if we do not explicitly authorize such activities.

These laws also require that we keep accurate records and maintain internal controls and compliance procedures designed to prevent any such actions. While we have policies and procedures to address compliance with such laws, we cannot assure you that Mr. Regazzi or Dr. Henckels or our other executive officers will continue to provide services to the Company. We do not maintain key man insurance for anynone of our key personnel.

Our directors and executive officers and their affiliates beneficially own a significant number of sharesemployees, agents, representatives, business partners or third-party intermediaries will take actions in violation of our common stock.  Their interests may conflict with our outside shareholders, whopolicies and applicable law, for which we may be unableultimately held responsible. In addition, we may be held liable for violations committed of the FCPA or similar foreign laws by companies that we acquire.

Any alleged or actual violation of the FCPA or other applicable anti-bribery, anti-corruption laws, and anti-money laundering laws could result in whistleblower complaints, investigations, enforcement actions, fines and other criminal or civil sanctions, adverse media coverage, loss of export privileges, or suspension or termination of government contracts. Responding to influenceany investigation or enforcement action would require significant attention of our management and exerciseresources, including significant defense costs and other professional fees. Failure to comply with anti-bribery, anti-corruption, anti-money laundering laws, and similar laws, or allegations of such failure, could therefore have a material adverse effect on our business, results of operations, financial condition and future prospects.

We are subject to certain governmental regulatory restrictions and regulations relating to international sales.

Some of our products are subject to International Traffic in Arms Regulation (“ITAR”), which are interpreted, enforced and administered by the U.S. Department of State. ITAR regulation controls not only the export, import and trade of certain products specifically designed, modified, configured or adapted for military systems, but also the export of related technical data and defense services as well as foreign production. Any delays in obtaining the required export, import or trade licenses for products subject to ITAR regulation and rules could have a material adverse effect on our business, financial condition, and/or operating results. In addition, changes in United States export and import laws that require us to obtain additional export and import licenses or delays in obtaining export or import licenses currently being sought could cause significant shipment delays and, if such delays are too great, could result in the cancellation of orders. Any future restrictions or charges imposed by the United States or any other country on our international sales or foreign subsidiary could have a materially adverse effect on our business, financial condition, and/or operating results. In addition, from time to time, Gresham has entered into contracts with the Israeli Ministry of Defense which were governed by the U.S. Foreign Military Financing program (“FMF”). Any such future sales would be subject to these regulations. Failure to comply with FMF rules could subject us to investigations that could lead to civil, administrative and possible criminal prosecution, which have a material adverse effect on its financial condition, operating results and/or prospects for obtaining future government business. Failure to comply with ITAR or FMF rules could also have a material adverse effect on our financial condition, and/or operating results.

We are also required to obtain export licenses before filling foreign orders for many of our products that have military or other governmental applications. United States Export Administration regulations control technology exports like our products for reasons of national security and compliance with foreign policy, to guarantee domestic reserves of products in short supply and, under certain circumstances, for the security of a destination country. Thus, any foreign sales of our products requiring export licenses must comply with these general policies. Compliance with these regulations is costly, and these regulations are subject to change, and any such change may require us to improve our technologies, incur expenses or both in order to comply with such regulations.

If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to accounting controls and procedures, or if we discover material weaknesses and deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult.

If we fail to comply with the rules under the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover material weaknesses and other deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more difficult. Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over our business.financial reporting.

As of the date of this prospectus, our executive officers and directors beneficially own approximately 12% of our shares of common stock.  As a result, our executive officers and directors may be able to: affect the election or defeat the election of our directors, amend or prevent amendment to our certificates of incorporation or bylaws, effect or prevent a merger, sale of assets or other corporate transaction, and control the outcome of any other matter submitted to the shareholders for vote. Accordingly, our outside shareholders may be unable to influence management and exercise control over our business.

We do not intend to pay cash dividends to our shareholders, so you will not receive any return on your investment in our common stock prior to selling your shares.

We have never paid any dividendsnoted the following deficiencies that we believe to be material weaknesses: 

We are focused on remediating these material weaknesses, but our common shareholders and do not foresee doing so. We currently intend to retain any future earnings for funding growth and, therefore, do notmanagement has been distracted with our liquidity concerns. When we can obtain the cash resources, we expect to pay any cash dividends in the foreseeable future. If we determine that we will pay cash dividends to the holders ofincrease our common stock, we cannot assure that such cash dividends will be paid on a regular basis. The success of your investment in the Company will likely depend entirely upon any future appreciation.  As a result, you will not receive any return on your investment prior to selling your shares in our Company and, for the other reasons discussed in this “Risk Factors” section, you may not receive any return on your investment even when you sell your shares in our Company.

We require additional capitalaccounting staff to support our current operationsChief Financial Officer. With our recent reductions of employees, we did not lay off any accounting personnel. However, our vice president of finance recently resigned and this capital has not been readily available.

We will require additional debt or equity financing to fund our current operations. Our recent history of losses, changes to our product focus and the development of new products makes it difficult to evaluate our current business model and future prospects. Accordingly, investors should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies developing new products as we have, in fact, encountered. Potential investors should carefully consider the risks and uncertainties that a company with limited funds and recently developed products, will face. In particular, potential investors should consider that there is a significant risk that we will not be able to:

If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our existing capital stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities. In addition, we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our current operations and to respond to business challenges would be significantly limited. If we cannot access the capital necessary to support our business, we would be forced to curtail our business activities or even shut down operations. If we cannot execute any one of the foregoing or similar matters relating to our business, the business may fail, in which case you would lose the entire amount of your investment in the Company.

If we fail to maintain anmust replace him. Moreover, effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud.  Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our common stock.

Effective internal controls are necessary for us to provideproduce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly.

Risks Related to the Ownership of Our Common Stock

We may not achieve the benefits expected from the Distribution and may be more susceptible to adverse events.

We expect that, as a company independent from AAI, we will be able to grow organically and through acquisitions. Nonetheless, we may not be able to manage our business as effectively asachieve any of these benefits. Further, by separating from AAI, there is a risk that we may be more susceptible to adverse events than we would if an effective control environment existed,have otherwise experienced as a subsidiary of AAI. As a subsidiary of AAI, we enjoyed certain benefits, including economies of scope and ourscale in securing capital, covering accounting, finance and benefits costs, and business and reputation with investors may be harmed.  With each prospective acquisition, we will conduct whatever due diligence is necessary or prudent to assure us that the acquisition target can comply with the internal controls requirements of The Sarbanes-Oxley Act of 2002.  Notwithstanding our diligence, certain internal controls deficienciesrelationships. These benefits may not be detected.as readily achievable as a smaller, stand-alone company.

Because the Distribution and the sale of our stock by the Selling Shareholders will significantly increase the number of free trading shares it is likely many AAI shareholders and the Selling Shareholders will sell their common stock which may depress our stock price.

Immediately after the Distribution, it is possible that there may be a larger number of sellers than purchasers of the Company’s common stock, as our new shareholders may not be interested in owning our common stock and may sell their shares of our common stock. In addition, the Selling Shareholders shall have the ability to sell their common stock upon the conversion and exercise, as applicable, of the PIPE Securities subject to the Beneficial Ownership Limitation. See “Selling Shareholders” and “Plan of Distribution.” If such a situation occurs, the price of our common stock would likely be materially reduced. 

The price of our common stock may have little or no relationship to the historical bid prices of our common stock on the OTCQB.

There has been a relatively illiquid public market for our common stock on the OTCQB. The average daily trading volume of our shares of common stock was 4,426 shares for the three months ended March 31, 2023. It is difficult to predict the broader market demand for our common stock and thus the price of our common stock after giving effect to the Distribution, sales by AAI shareholders and the sale of our common stock by the Selling Shareholders. As a result, any internal control deficienciesyou should not rely on these historical sales prices as they may differ materially from subsequent prices and the trading volume of our common stock following the Distribution and the sale of our common stock by the Selling Shareholders.

The rights of the holders of common stock may be impaired by the potential issuance of preferred stock.

Our charter documents give our Board, the right to create new series of preferred stock. As a result, our Board may, without stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights which could adversely affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The possible impact on takeover attempts could adversely affect the price of our financial condition, resultscommon stock. Although we have no present intention to issue any shares of operations and access to capital.  We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, andpreferred stock, we may issue such shares in the future discover areas of our internal controls that need improvement.future.

Risks Related to Our Securities

Our stock price may be volatile, which could result in substantial losses to investors and you may not be able to resell your shares at or above the purchase price.litigation.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

In addition to changes to market prices based on our results of operations and the securitiesfactors discussed elsewhere in this “Risk Factors” section, the market price of and trading volume for our common stock may change for a variety of other reasons, not necessarily related to our actual operating performance. The capital markets have from time to time experienced significant price and volume fluctuationsextreme volatility that arehas often been unrelated to the operating performance of particular companies. Our stock at any time has historically traded on low volume on the OTCQB Market and, previously, on the NASDAQ Capital Market. Market and volumeThese broad market fluctuations may also materially and adversely affect the trading price of our common stock. In addition, the average daily trading volume of the securities of small companies can be very low, which may contribute to future volatility. Factors that could cause the market price of our common stock.stock to fluctuate significantly include:

Any of these factors, as well as broader market and industry factors, may result in large and sudden changes in the trading volume of our common stock and could seriously harm the market price of our common stock, regardless of our operating performance. This may prevent you from being able to sell your shares at or above the price you paid for your shares, if at all. In addition, following periods of volatility in the market price of a company’s shares, shareholders often institute securities class action litigation against that company. Our involvement in any class action suit or other legal proceeding could divert our senior management’s attention and could adversely affect our business, financial condition, results of operations and prospects.

If equity research analysts do not publish research or reports about our business, or if they issue unfavorable commentary or downgrade our common stock, the market price of our common stock will likely decline. 

The trading market for our common stock will rely in part on the research and reports that equity research analysts, over whom we have no control, publish about our business and us. We may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the market price for our common stock could decline. In the event we obtain securities or industry analyst coverage, the market price of our common stock could decline if one or more equity analysts downgrade our common stock or if those analysts issue unfavorable commentary, even if it is inaccurate, or cease publishing reports about us or our business.

WeIf our shares of common stock are subject to the penny stock regulationsrules, it would become more difficult to trade our shares. 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and restrictionsvolume information with respect to transactions in such securities is provided by the exchange or system. Unless we are listed on the NYSE American, or the Nasdaq Capital Market or if the price of our common stock is less than $5.00 (as it is now), our common stock will be a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and youreceive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore shareholders may have difficulty selling their shares.

We do not anticipate paying any dividends on our common stock for the foreseeable future.

We have not paid any dividends on our common stock to date, and we do not anticipate paying any such dividends in the foreseeable future. We anticipate that any earnings experienced by us will be retained to finance the implementation of our operational business plan and expected future growth. 

Additionally, any additional financings may be dilutive to our shareholders, and such dilution may be significant based upon the size of such financing.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains “forward-looking statements.” Forward-looking statements can be identified by the use of the words “may,” “will,” “should,” “could,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “proposed,” or “continue” or the negative of those terms.

Such statements are based on currently available operating, financial and competitive information, and are subject to inherent risks, uncertainties and changes in circumstances that are difficult to predict and many of which are outside of our control. Future events and our actual results and financial condition may differ materially from those reflected in these forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause these differences include, but are not limited to, the following:

Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements contained or incorporated by reference in this Prospectus are based on our current expectations, intentions and beliefs using information currently available to us only as of the date of such statement, and we assume no obligation to update any forward-looking statements, except as required by U.S. federal securities laws. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements.

THE DISTRIBUTION

The management of AAI has concluded that it is in the best interests of AAI and its shareholders for AAI to divest all of its existing securities (but not its common stock equivalents (including the shares into which the Series F are convertible) of its interest in the Company. AAI has decided to divest such interest by distributing, based on the number of shares of our outstanding common stock on July 13, 2023, 69.6% of all outstanding shares of the Company’s common stock (representing the 6,880,128 shares of our common stock that AAI acquired upon the completion of the Business Combination and the conversion of the Series F) in the Distribution. We are a publicly traded company whose shares of common stock are currently quoted on the OTCQB, under the symbol “GIGA.”

Reasons for the Distribution

The principal considerations that led AAI to conclude that it should divest a substantial portion of its interest in the Company are:

Manner of the Distribution

In order to effect the Distribution, on or before the Distribution Date, AAI will transfer to Broadridge, as distribution agent (the “Agent”) for holders of record of AAI common stock at the close of business on the Record Date, 6,880,128 shares of the Company’s common stock representing 69.6% of our then outstanding shares, which shares will be distributed when the Distribution occurs. Such shares will be distributed to AAI shareholders on the Record Date, without any consideration being paid by such holders, on the basis of ___ share of our common stock for approximately every ____ shares of AAI held..

As of July 13, 2023, 6,895,127 shares of our common stock were held by AAI which includes 14,900 held by a subsidiary. No certificates or scrip representing fractional shares of the Company’s common stock will be issued as part of the Distribution. No fractional shares of the Company’s common stock will be issued in the Distribution. In lieu of receiving fractional shares, holders who would otherwise be entitled to receive fractional shares of the Company’s common stock in the Distribution will receive cash for their fractional interests.

The Distribution will be made in book-entry form. For AAI shareholders who own AAI common stock in registered form, in most cases the transfer agent will credit their shares of the Company’s common stock certificates to book-entry accounts established to hold the Company’s common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are issued. The Agent will mail these shareholders a statement reflecting the Company’s common stock ownership shortly after the Distribution Date. For shareholders who own AAI common stock through a broker, bank or other nominee, their shares of the Company’s common stock will be credited to their accounts by that broker, bank or other nominee. Each share of the Company’s common stock that is distributed will be validly issued, fully paid and non-assessable. See “Description of Our Securities.” Following the Distribution, shareholders whose shares are held in book-entry form may request the transfer of their shares of the Company’s common stock to a brokerage or other account at any time, without charge.

No holder of AAI common stock will be required to pay any cash or other consideration for the shares of the Company’s common stock to be received by them in the Distribution or to surrender or exchange their respective shares in order to receive shares of the Company’s common stock.

Market Price and Trading

Our common stock is subjectcurrently quoted on the OTCQB, under the symbol “GIGA.” See “Trading and Dividend Information.”

Conditions to the provisions of Section 15(g)Distribution

We expect that the Distribution will be effective on the Distribution Date, if the following conditions shall have been satisfied or waived by AAI:

Any of the Exchange Actabove conditions may be waived by the AAI Board to the extent such waiver is permitted by law and Rule 15g-9 thereunder, commonly referredregulation. If the AAI Board waives any condition prior to as the “penny stock rule”. Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1effectiveness of the Exchange Act. Registration Statement or change the terms of the Distribution, and the result of such waiver or change is material to AAI shareholders, we will file an amendment to the Registration Statement to revise the disclosure in the Prospectus accordingly. In the event that AAI waives a condition or changes the terms of the Distribution after this Registration Statement on S-1 becomes effective and such waiver or change is material to AAI shareholders, we would communicate such waiver or change to AAI’s shareholders by filing a prospectus supplement or Form 8-K describing the waiver or change.

The SEC generally defines a penny stockfulfillment of the above conditions will not create any obligation on AAI’s part to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions.complete the Distribution. We are subject tonot aware of any material federal, foreign or state regulatory requirements with which we must comply, other than SEC rules and regulations, or any material approvals that we and AAI must obtain, other than the SEC’s penny stock rules.declaration of the effectiveness of the Registration Statement, in connection with the Distribution. AAI may at any time until the Distribution decide to abandon the Distribution or modify or change the terms of the Distribution.

Because our common stock is deemedReasons for Furnishing this Prospectus

We are furnishing this Prospectus solely to be penny stock, trading in theprovide information to AAI’s shareholders who will receive shares of our common stock in the Distribution. You should not construe this Prospectus as an inducement or encouragement to buy, hold or sell any of our securities or any securities of the Company. We believe that the information contained in this Prospectus is subjectaccurate as of the date set forth on the cover. Changes to additional sales practice requirements on brokerthe information contained in this Prospectus may occur after that date, and neither we nor AAI undertakes any obligation to update the information except in the normal course of our and AAI’s public disclosure obligations and practices.

Relationship between AAI and the Company after the Distribution

After the Distribution, AAI may for a limited period continue to perform certain administrative services for Giga. These services will include certain use of AAI’s management information system, assist in the preparation of federal and state tax returns, assist in the preparation of financial information and handling of certain cash management services.

Pursuant to the Agreement entered into in connection with the Business Combination and the Series F issued to AAI, AAI received the right to appoint four members of a seven-member Board. Its designees are Jonathan Read, Jeffrey Bentz, William Horne and Robert Smith. Except for Mr. Read, AAI’s other designees are AAI directors. Three non-AAI designees, John Regazzi, William Thompson and Thomas Vickers, are directors.

Federal Income Tax Aspects of the Distribution

The following is a summary of the material federal income tax consequences of the distribution. This summary does not discuss tax consequences to categories of holders entitled to special treatment under the code, including, without limitation, foreign persons, tax-exempt organizations, insurance companies, financial institutions and dealers who sell pennyin stocks and securities. No rulings will be sought from the internal revenue service with respect to the federal income tax consequences of the distribution. Shareholders are urged to consult their own tax advisors as to specific tax consequences to them of the distribution.

If the fair market value of the Company’s common stock distributed to AAI shareholders exceeds the tax basis of the Company’s common stock (in the hands of AAI), then AAI will recognize gain in the amount of such excess to the same extent as if the Company’s common stock were sold to AAI shareholders at fair market value. We anticipate that the Company’s common stock distributed to AAI shareholders in respect of their AAI stock will be taxable to such shareholders as a dividend to the extent of the stockholder’s pro rata share of AAI’s current or accumulated earnings and profits. In addition, such stockholder’s basis in AAI common stock would be reduced (but not below zero) to the extent the amount of the Company’s common stock received by such AAI stockholder exceeds such stockholder’s pro rate share of AAI’s current or accumulated earnings and profits. See “The Distribution-Federal Income Tax Aspects of the Distribution.” You should consult your tax advisor as to the tax consequences of the spin-off to you.

Resale of the Company’s Common Stock received in the Distribution; Affiliates

The Company’s common stock to personsbe received in the Distribution will be freely transferable under the Securities Act, except for shares of the Company’s common stock issued to any affiliates (as such term is defined under the Securities Act) of the Company at the time of the Distribution. Affiliates may not sell the Company’s common stock acquired in connection with the Distribution except pursuant to an effective Registration Statement under the Securities Act covering such shares, in compliance with Rule 144 promulgated under the Securities Act or any other than established customersapplicable exemption from the registration requirements of the Securities Act. Persons who may be deemed to be affiliates of the Company generally include individuals or entities that control or are controlled by or under the common control with the Company and accredited investors. “Accredited investors”include executive officers and directors of the Company, as well as the principal shareholders of the Company.

We believe that AAI’s designees on the Board are generally persons with assets in excessaffiliates. See “Principal Shareholders” which discloses the beneficial ownership of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions coveredthese affiliates.

This Prospectus may not be used by these rules, broker dealers must make a special suitability determinationsuch affiliates for the purchasepurpose of securities and must haveresale of the purchaser’s written consentCompany’s common stock that they may so receive.

QUESTIONS AND ANSWERS ABOUT THE DISTRIBUTION

The following provides only a summary of certain information regarding the Distribution. The Distribution is also referred to as a spin-off. You should read this Prospectus in its entirety for a more detailed description of the matters described below.

Assuming 5,931,582 shares of the Company’s common stock outstanding on the Distribution Date, 6,880,128 shares of the Company’s common stock, representing 69.6% of its then outstanding shares, will be distributed when the Distribution is effected. No certificates or scrip representing fractional shares of the Company’s common stock will be issued as part of the Distribution. In lieu of receiving fractional shares, holders who would otherwise be entitled to receive a fractional share of the Company’s common stock will receive cash for such fractional interest. Such cash will be derived from the sale of fractional interests by the Agent on behalf of holders otherwise entitled to fractional shares. The Agent, as promptly as practicable after the Distribution Date, will sell all fractional share interests on the OTCQB, or under certain circumstances to the transaction priorCompany, at then prevailing prices and distribute the net proceeds to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document prepared by the SEC relating to the penny stock market. A broker dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements mustshareholders entitled thereto.

The Distribution will be sent disclosing recent price information for penny stocks heldmade in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in ourbook-entry form. For AAI shareholders who own AAI common stock and may affectin registered form, in most cases the ability of our shareholders to sell their shares.

Consequently, these rules may restrict the ability or willingness of a broker-dealer to trade and/or maintain a market in our common stock and may affect the ability of our shareholders to selltransfer agent will credit their shares of the Company’s common stock to book-entry accounts established to hold their shares of Company’s common stock. Book-entry refers to a method of recording stock ownership in our records in which no physical certificates are issued. The Agent will mail these shareholders a statement reflecting the Company’s common stock ownership shortly after the Distribution Date. For shareholders who own AAI common stock through a broker, bank or other nominee, their shares of the Company’s common stock will be credited to their accounts by that broker, bank or other nominee. Each share of the Company’s common stock that is distributed will be validly issued, fully paid and non-assessable. See “Description of Our Securities.” Following the Distribution, shareholders whose shares are held in book-entry form may request the transfer of their shares of the Company’s common stock to a brokerage or other account at any time, without charge.

The letter which follows has been supplied by AAI which plans to deliver it to its shareholders in connection with the Distribution.

AULT ALLIANCE, INC.

11411 Southern Highlands Parkway, Suite 240

Las Vegas, Nevada 89141

_______ ____, 2023

To the Holders of Common Stock of Ault Alliance, Inc.:

Ault Alliance, Inc., (formerly known as BitNile Holdings, Inc.) (“AAI”) is hereby distributing shares of common stock of Giga-tronics Incorporated (to change its name to Gresham Worldwide, Inc.) (the “Company,” “Giga” or “Giga-tronics”), a publicly-traded company currently engaged in the design, manufacture, and distribution of specialized electronic solutions, automated test solutions, power electronics, supply and distribution solutions, and radio, microwave and millimeter wave communication systems and components for a variety of applications with a focus on the global defense industry for military airborne, sea and ground applications, on a pro rata basis to the holders of AAI common stock pursuant to the enclosed Prospectus (the “Distribution”).

The Prospectus sets forth information about the Company, its organization, business and properties and the background of its recent acquisition of Gresham Holdings, Inc. (formerly Gresham Worldwide, Inc.) on September 8, 2022, together with historical and pro forma financial statements. Due to the importance of the information contained in this document, you are urged to read it carefully. 

As explained in the Prospectus, each holder of record of AAI common stock on , 2023, the record date for the Distribution, is receiving ___ share of the Company’s common stock for approximately every ___ shares of AAI common stock held as of such date. No fractional shares of the Company’s common stock are being issued. In lieu of receiving fractional shares, holders of AAI common stock who would otherwise be entitled to receive fractional shares of the Company’s common stock will be receiving cash from AAI for their fractional interests. The Company’s stock certificate or book-entry statement and, if applicable, a check for fractional interests, are enclosed herewith.

The shares of the Company’s common stock that you are receiving have been registered with the Securities and Exchange Commission, which permits you, subject to certain securities laws and rules discussed in the Prospectus, to sell these securities from time to time in either public or privately negotiated transactions. This Prospectus is being sent as information to all AAI stockholders of record on the record date for the Distribution. Holders on the record date are not required to do anything to become entitled to participate in this Distribution.

USE OF PROCEEDS

We will not receive any of the proceeds from the Distribution. We will not receive any proceeds upon the sale of our common stock by the Selling Shareholders in this offering. However, we will receive gross proceeds upon the exercise of the certain warrants issued to the Selling Shareholders if exercised for cash. Any proceeds will be used for general corporate purposes and working capital. See “Plan of Distribution” elsewhere in this Prospectus for more information.

CAPITALIZATION

We had 5,931,582 shares of common stock outstanding as of March 31, 2023. The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2023 (i) on an actual basis, and (ii) on a pro forma basis giving effect to the issuance of (a) 3,960,043 shares of common stock upon conversion of the Series F held by Ault; and (b) 63,197,625 shares of common stock upon conversion of all outstanding convertible note and warrants held by the Selling Shareholders. All numbers are in thousands except for share data.

(1) The pro forma table give effect to the issuance of shares of common stock byupon conversion of the Selling Securityholders. However, we will receive proceeds fromSeries F and 63,197,625 upon conversion of outstanding convertible notes and the exercise of the warrants if they are exercised for cash byat the Selling Securityholders, and will use such proceeds for working capital purposes.

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

Common Stock Market Prices

Our common stock is traded on the OTCQB market under the symbol “GIGA”. The number of record holders of our common stock as September 28, 2018 was approximately 10,939,011. A significantly larger number of shareholders may be “street name” or beneficial holders, whose shares of record are held by banks, brokers and$0.25 floor price other financial institutions. The following table shows the high and low closing bid quotations for the common stock during the indicated fiscal periods. These quotations reflect inter-dealer prices without mark-ups, mark-downs, or commission and may not reflect actual transactions.

Dividend Policy

We have not paid cash dividends on our common stock in the past and have no current plansthan warrants to do so in the future, believing our available capital is best used to fund our operations, including product development and enhancements. In addition, in the absence of positive retained earnings, California law permits payment of cash dividends on our common stock only to the extent total assets exceed the sum of total liabilities and the liquidation preference amounts of preferred securities. At June 30, 2018, the Company’s assets were less than this sum by $4.2 million. Our Series E Shares provide for semi-annual 6% cash dividends based on the original purchase price of $25.00 per share, however we expect that we will exercise our right to pay any such dividends inacquire 2,000,000 shares of our common stock insteadheld by Ault Lending with an exercise price of $0.01 per share. If the warrants are exercise at a higher price certain pro numbers will be higher including cash; if the warrants are exercised on a cashless basis, there will less cash forand fewer shares outstanding.

(2) No effect has been given to the foreseeable future.exercise of 1,200,000 warrants held by a placement agent or 249,875 shares of common stock issuable upon the vesting of restricted stock units held by two executive officers or upon their exercise of stock options.

(3) Consists of $3,300,000 in principal due October 11, 2023.

(4) Consists of $282,000 in notes payable and a total of $11,932,545 in convertible notes held by AAI and Ault Lending measured at Fair value (including accrued and unpaid interest as of March 31, 2023).

The foregoing pro forma information as adjusted is illustrative only, and our capitalization following the completion of the offerings covered by this Prospectus. You should read this table together with our financial statements and the related notes appearing elsewhere in this Prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this Prospectus.

Penny StockMANAGEMENT

Our common stock is subject to the provisions of Section 15(g) of the Exchange Act and Rule 15g-9 thereunder, commonly referred to as the “penny stock rule.” Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines a penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. We are subject to the SEC’s penny stock rules. Because our common stock is deemed to be penny stock, trading in the shares of our common stock is subject to additional sales practice requirements on broker dealers who sell penny stock to persons other than established customers and accredited investors. “Accredited investors” are generally persons with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker dealers must make a special suitability determination for the purchase of securities and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the first transaction, of a risk disclosure document prepared by the SEC relating to the penny stock market. A broker dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealers to trade and/or maintain a market in our common stock and may affect the ability of our shareholders to sell their shares. 

’MANAGEMENT’SS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

On September 8, 2022, the Company acquired 100% of the capital stock of Gresham from AAI in exchange for 2,920,085 shares of the Company’s common stock and 514.8 shares of Series F that are convertible into an aggregate of 3,960,043 shares of the Company’s common stock. The following discussionCompany also assumed Gresham’s outstanding equity awards representing the right to receive up to 749,626 shares of the Company’s common stock, on an as-converted basis.

The Business Combination is accounted for as a reverse recapitalization with Gresham being the accounting acquirer and analysis should be readthe Company being the acquired company for accounting purposes. Accordingly, all historical financial information presented in conjunction with our audited (and unaudited)the consolidated financial statements represent the accounts of Gresham and its subsidiaries. The shares and net loss per common share prior to the related notes that are incorporated by reference into this prospectus. All dollar amountsbusiness combination have been retroactively restated reflecting the exchange ratio established in this registration statement refer to U.S. dollars unless otherwise indicated.the Business Combination.

Overview and Refocusing of Giga-tronics

We produce YIG (Yttrium, Iron, Garnet) tuned oscillators, RADAR filters, and microwave synthesizersThe Company manufactures specialized electronic equipment for use in military defensetest and airborne operational applications. We also produce sophisticated functional test systems which are primarily used in RADAR/EW test applications. We have two reporting segments: MicrosourceOur operations consist of three business segments, the “Precision Electronic Solutions” group, the “Power Electronics & Displays” group, and the Giga-tronics Division.

Our Giga-tronics Division’s RADAR/EW test and simulation products have been our principal new product development initiative since 2011. Between 2013 and 2016, we sold the substantial majority of our original broad product line of general purpose parametric test products used for the design, production, repairF-35 aircraft, shipboard applications and maintenancejammer systems to counter improvised explosive devices on land and produces log-video amplifiers for European military aircraft as well as for the U.S. Air Force B1B bomber. The engineering of aerospace and telecommunications equipment because of lack of growth potential and poor gross margins. We believeeach RF device variant is typically funded by governments through the RADAR/EW test product market possesses greater long-term opportunities for revenue growth and improved gross margins compared to the general purpose test equipment marketplace. We believe that customer spending for RADAR/EW systems, including our test and simulation products, will grow in future years due to the increasing complexity of RADAR signals and foreign investment in new technology which may increase customer demand for more sophisticated test solutions.respective US or European prime contractors.

The salesPower Electronics & Displays group consists of our legacy general-purpose test product lines allowed us to significantly reduce our headcounttwo subsidiaries, namely Gresham Power and operating expenses during fiscal years 2018 and 2017. For example, our operating expenses for fiscal 2018 were 15% lower as compared to fiscal year 2017 and 30% lower as compared to fiscal year 2016.

Although we believe our functional RADAR/EW test products have the potential to significantly grow our sales revenue, we have experienced significant delays in developing, manufacturing, and receiving orders for these products. These RADAR/EW test products are the most technically complex and advanced products that we have developed and manufactured, and we have experienced delays in efficiently manufacturing these products and bringing them to market. These products are priced significantly higher than our previous general-purpose test products, and we have experienced longer than anticipated procurement cyclesRelec located in the RADAR/EWUnited Kingdom which primarily produce, market we service.and sell power conversion systems. The delaysPrecision Electronic Solutions group consists of Enertec located in the development, refinement and manufacturing of the RADAR/EW platform products, along with the longer than anticipated procurement cycles, contributed to the significant operating losses in fiscal years 2018 and 2017. Through March 31, 2018, we delivered our new RADAR/EW test products to multiple customers resulting in approximately $10 million in revenue. Additionally, we have recently restructured and refocused our sales force to focus on selling complete custom test solutions to defense agencies and prime contractors as opposed to selling test instruments.

We also anticipate growth in our Microsource RADAR filter business based on our order backlog as of June 30, 2018 and the potential for additional future orders for existing products and related services.

Significant Orders

Both MicrosourceIsrael and the Giga-tronics Division located in California and New Hampshire primarily producing systems and providing services for the defense and health industries. 

Microsource, which is part of the Precision Electronic Solutions group, develops and manufactures sophisticated RADAR filters used in fighter aircraft. Microsource’s primary business is the production of Ytrium-Iron-Garnet (“YIG”) based microwave components designed for a specific customer’s intended operational application. Microsource produces a line of tunable, synthesized band reject filters for solving interference problems in RADAR/EW applications as well as low noise oscillators used on shipboard and land-based self-protection systems. Microsource designs components based upon the Company’s proprietary YIG technology, for each customer’s unique requirement, generally receiveat the customer’s expense. The Giga-tronics Division including Microsource recently executed a limitedReduction in Force (”RIF”) due to its low backlog and near term revenue forecasts.

Recent Trends and Uncertainties

On January 11, 2023, the “Company” entered into a Securities Purchase Agreement with two accredited investors (the Lenders pursuant to which the Company sold to the Lenders $3.3 million 10% original issue discount Senior Secured Convertible Notes (the “Notes”) and five-year warrants to purchase shares of common stock, no par value for total gross proceeds of $3,000,000. The net proceeds were used primarily for working capital.

The Notes are secured by the assets of the Company pursuant to a Security Agreement entered into for such purpose, and are senior to the indebtedness payable to AAI, pursuant to a Subordination Agreement entered into in connection with the Securities Purchase Agreement.

The Notes mature nine months from the issuance date, or October 6, 2023. The Notes accrue interest at a rate of 6% per annum payable monthly, which increases to 18% upon an event of default. In addition, under the Notes upon an event of default the Company is required to pay 20% of its consolidated revenues monthly on each interest payment date in reduction of the principal amount of the Notes then outstanding.

The warrants entitle the holders to purchase a total of 1,666,666 shares of common stock for a five-year period from issuance, at an exercise price determined equal to the lower of (A) $0.78 and (B) 90% of the lowest volume weighted average price (“VWAP”) for the 10 trading days prior to the date of the exercise, subject to adjustment including downward adjustment upon any dilutive issuance of securities. On October 6, 2023, the number of large customer orders each year. The timingshares of orders, and any associated milestones achievement, can cause significant differencescommon stock that may be purchased upon exercise of the warrants will be doubled, without an adjustment to the exercise price, since the Company will not be able to list its common stock on a national securities exchange by that date.

We are in orders received, backlog, sales, deferred revenue, inventory andthe process of aggressively managing our cash flow when comparing one fiscal period to another. Below isand reducing our expenses. As part of this endeavor, in January-February 2023 we implemented a reviewRIF of recently received significant orders at March 31, 2018:

Microsource

In fiscal 2015, Microsource received a $6.5approximately $1.7 million order for non-recurring engineering services and for delivery of a limited number of flight-qualified prototype hardware from a prime defense contractor to develop a variant ofover the next 12 months. We believe that the RIF will not affect our high performance, fast tuning YIG RADAR filters for a fighter jet aircraft platform. In fiscal 2016production capabilities, nor will it affect our Microsource business unit also finalized an associated multiyear $10.0 million YIG production order. We began shipping the shipping the 2106 YIG production order in the second quarter of fiscal 2017 and anticipate shipping the remainder through fiscal 2020.accounting capabilities. 

In the past, AAI has allocated certain overhead charges to us. As of December 31, 2022, AAI allocated $1,090,000 of its overhead to us comprised of $230,000 for officer salaries, $90,000 director and officers’ insurance, $630,000 in audit fees and $140,000 in administrative costs. After the Business Combination, we expect to achieve a non-cash savings of approximately $1.1 million per year, as AAI will no longer allocate such expenses. However, this non-cash savings will be partially offset by cash expenses that we will now incur in 2023 for audit fees. We estimate such cash expenditures to be $550,000 in 2023.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with GAAP. In reading and understanding this discussion of results of operations, liquidity and capital resources, you should be aware of key policies, judgments and assumptions that are important to the portrayal of financial conditions and results.

The preparation of financial statements, in conformity with GAAP, requires management to make estimates, judgments and assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Key estimates include valuations of the assets and liabilities acquired in the business combination, valuation of convertible notes, reserves for inventories, accruals of certain liabilities, useful lives and the recoverability of long-lived assets and impairment analysis of goodwill.

Revenue Recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

Foreign Currency Translation

A substantial portion of the Company’s revenues are generated in U.S. dollars. In addition, a substantial portion of the Company’s costs are incurred in U.S. dollars. Our management has determined that the U.S. dollar is the functional currency of the primary economic environment in which it operates.

Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are re-measured into U.S. dollars in accordance with Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) No. 830, Foreign Currency Matters (“ASC No. 830”). All transaction gains and losses from the re-measurement of monetary balance sheet items are reflected in the statements of operations as financial income or expenses as appropriate.

The financial statements of Relec, Gresham Power and Enertec, whose functional currencies have been determined to be their local currencies, the British Pound (“GBP”), and the New Israeli Shekel (“NIS”), respectively, have been translated into U.S. dollars in accordance with ASC No. 830. All balance sheet accounts have been translated using the exchange rates in effect at the balance sheet date. Statement of operations amounts have been translated using the average exchange rate in effect for the reporting period. The resulting translation adjustments are reported as other comprehensive income (loss) in the Consolidated Statement of Operations and Comprehensive Loss, and accumulated comprehensive income (loss) in statement of changes in shareholders’ equity (deficit).

Business Combination

We allocate the purchase price of an acquired business to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. Acquired customer relations, technology, tradenames and know-how are recognized at fair value. The purchase price allocation process requires management to make significant estimates and assumptions, especially at the acquisition date with respect to intangible assets. Direct transaction costs associated with the business combination are expensed as incurred. The allocation of the consideration transferred in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date. During the fourth quarter of 2022, our legacy Giga-tronics business experienced a lack of backlog, significant decline in sales and a drop in the trading price of its common stock. Due to these factors, we determined that a triggering event had occurred and as a result, we recognized an impairment loss of $10.5 million.

Results of Operations for the Three Months ended March 31, 2023 and 2022, respectively

Revenue

The allocation of net revenue was as follows for the periods shown (In thousands):

The Precision Electronic Solutions group generated net revenue of $3.9 million during the three months ended March 31, 2023, a 21% increase from the three months ended March 31, 2022. The increase was primarily due to the addition of $430,000 of GIGA revenue which was not included in the first quarter of fiscal 2017, Microsource received2022. The Power Electronics & Displays group increased revenue by 21% to $3.0 million primarily due to a $4.551% increase in shipments by Gresham Power caused by the completion of a large fixed price contract. The RF solutions group increased revenue by 19% to $1.8 million YIG RADAR filter we have been manufacturing for a fighter jet platform since fiscal 2014. We shipped approximately $4.1 million of this order in fiscal 2017 and shipped the remainder in the first quarter of fiscal 2018.2023 due to improvements in the supply chain.

In July 2016, Microsource receivedCost of revenue and gross profit were as follows for the periods shown (In thousands):

Gross profits for the three months ended March 31, 2023 decreased by $330,000 to $2.2 million from $2.5 million in the three months ended March 31, 2022. Cost of revenue as a $1.9percentage of segment revenue increased by 10% for the Precision Electronic Solutions group due to low revenues of the Giga-tronics group and the associated absorption of manufacturing overhead expenses. The gross margins of the Power Electronics & Displays group decreased by 7% due to overruns upon completion of a fixed price contract resulting in a 5% gross margin. The RF solutions group recognized a 13% increase in its cost of revenues as a percentage of segment revenue primarily due to a $230,000 inventory obsolescence charge.

Operating expenses were as follows for the periods shown (In thousands): 

Total operating expenses increased 94% or $2.8 million non-recurring engineering order associatedin the first quarter ended March 31, 2023 as compared with redesigningthe first quarter of 2022. Research and development expenses increased by $234,000 due to the business combination of Gresham with the Company. Selling, general and administrative expenses increased by 103% primarily due the issuance cost of $1.2 million of the Notes and warrants, as well as the added general and administrative costs of the legacy Giga-tronics business in the first quarter of 2023 which was not incurred in the first quarter of 2022, as well as the addition of approximate $400,000 for legal and audit expenses.

Other income (expenses), net were as follows for the periods shown (In thousands):

For the three months ended March 31, 2023, interest expense increased by $146,000 primarily due to increased borrowing and higher interest rates. The Company performed a componentfair value analysis of its high performance YIG filter used ondebts and warrant liability as of March 31, 2023 and recognized a fighter jet aircraft platform. Of this non-recurring engineering services service order, we delivered servicesnon-cash gain of approximately $884,000$566,000 for related party notes and $816,000 in fiscal years 2017 and 2018, respectively, and expect to deliver$939,000 for the remaining services during fiscal 2019.Notes.

In September 2017, Microsource receivedNet Loss

Net loss was as follows for the periods shown (In thousands):

Net loss attributable to common shareholders for the quarter ended March 31, 2023 was $2.5 million, compared to a $4.8 million order for continuing the YIG RADAR filter for a fighter jet platform. The Company expects to begin initial shipmentsnet loss of these filters$497,000 recorded in the fourth quarter ended March 31, 2022. The $2.0 million increase in losses was primarily due to the combination of fiscal 2018lower gross margins and ship the bulk of the order over the succeeding 9 to 12 month period.higher operating expenses as described above.