Giga-tronics Incorporated

Good afternoon and welcome to the Giga-tronics quarterly earnings call. My name is Frank Romejko, I’m the Vice President of Finance of Giga-tronics and with me on the call is John Regazzi, the CEO of Giga-tronics.

This conference call contains forward-looking statements about orders, backlog, future financial results, future product offerings and other events that have not yet occurred. These forward-looking statements can be generally identified by the words believes, intends, should, anticipate, forecast, may, estimate, would, could, expects and other words of similar import.

While Giga-tronics believes that these statements are accurate as of the time that they are made. Actual results could vary and may differ materially from our expressed expectations due to risk and uncertainties about the future.

Some of the factors include among others cancellation or deferral of orders, shortages of critical parts, timely ability to ramp manufacturing capacity to meet order demand, ability to quickly adapt cost structures to changing market conditions and if current or future products will achieve market acceptance.

To see a discussion of factors that could cause actual results to differ from those expressed here, see our filings with the Securities and Exchange Commission including our annual report on Form-10K and our most recent quarterly report on Form 10-Q.

Until this next quarterly or annual Securities and Exchange Commission filing, Giga-tronics will not update or publicly release revisions to any forward-looking statement after the date such statement was released whether as a result of new information, future events or otherwise.

And with that, I’d like to turn the call back to John Regazzi.

Thank you, Frank. Good afternoon, everyone, and thank you for joining our quarterly earnings conference call.

I’ll make some brief remarks and then I’ll open the call for questions.

On $4.1 million in revenue for the quarter, Giga-tronics posted a net loss of $700,000 or $0.14 per fully diluted share. Approximately, half of that loss is related to our increased quarterly R&D spending as compared to a year ago and to the accruals for retention bonuses associated with the relocation of the Microsource operation to our facility in San Ramon.

The balance of the loss is the result of volume related variances due to our relatively high combined overhead structure. While we partially address this problem with a reduction in force that occurred in February, the excess overhead issue won’t be fully addressed until the move of our Microsource division is completed at the end of the year of this current fiscal year.

To reap this recurring benefit, the Company will incur a onetime expense of approximately $800,000 during the year executing the move.

The increase in sales and in bookings were mainly driven by the Microsource division. We finally received the component contracts for the F18 and F15 aircraft and we were able to ship a number of units against these contracts in the first quarter.

Also in the first quarter, we saw some of our commercial switching business from Asia return.

Moving on, changes to the executive team are nearly complete with the recent hiring of our new VP of Sales. I believe the resulting improved effectiveness of the sales organization can get the company back to breakeven performance by the fourth quarter of this fiscal year.

The major investment I’ve discussed previously continues forward in our product development group and is on schedule for an introduction early next year. During the development, we continue to remain close to prospective customers to assure we have the right features and performance levels to meet their needs.

I believe sales from this new product will then drive the company back to profitability by the first quarter of the next fiscal year.

Although I anticipate the company’s earnings will be negative for the next two quarters, Giga-tronics has the liquidity to execute this strategy from the capital provided by Alara along with the advanced payments from the F18 and F15 component programs and from the reduction in gross inventory plan for the year.

Finally, I fully expect the combination of all the changes discussed to produce double digit revenue growth for the company starting this fiscal year and going forward, along with a greatly improved bottom line due to the efficiency gained from the consolidation of operations. This is the strategy to significantly improve shareholder value.

With that I’d like to open the call for questions [Operator Instructions].

Okay, I assume there is no questions. With that I’d like to thank you all for participating in the call and your continued tracking of the company.

Thank you.

Good afternoon.