Giga-tronics Incorporated

Good afternoon. This conference call contains forward-looking statements concerning profitability, backlog of orders, shipments and the likelihood of realizing certain tax benefits.

Actual results may differ significantly due to risks and uncertainties, such as future orders, cancellations or deferrals, disputes over performance, the ability to collect receivables and general market conditions.

For further discussion, see the most recent annual report filed by Giga-tronics on Form 10-K for the fiscal year ended March 31, 2012 Part I, under the heading “Certain Factors Which May Adversely Affect Future Operations or an Investment in Giga-tronics” and Part II, under the heading “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”.

With that, I’d like to turn the call to John Regazzi, CEO.

Thanks, Frank. Good afternoon, and thank you all for joining our quarterly earnings conference call.

Following my opening comments, I’ll open the call for questions. On $3.4 million in revenue for the quarter, Giga-tronics posted a net loss of $1,064,000 or $0.21 per fully diluted share

Approximately, half of that loss continues to come from our increased quarterly R&D spending as compared to a year ago, and to expenses associated with the relocation of the Microsource operation to our facility in San Ramon.

The balance of the loss is the result of insufficient volume relative to our fixed overhead structure. We’ve partly addressed this overhead problem with the reduction enforced that occurred in February of this year, but the company is also attacking the order side of this problem by building an improved sales organization and sales channel.

And although revenue remained essentially flat for the first 6 months of this fiscal year as compared to the first half of last year, I see the potential for upside particularly in our fourth quarter as the selling organization changes take effect.

As previously mentioned, our sales situation is also the result of not having introduced a significant new product for some time. The company -- an instrument product for some time.

The company is directly addressing this with the major R&D investment I’ve been talking about, which continues forward in our product development group and is on schedule for introduction early next fiscal year.

I believe the benefits of this strategy will first appear as revenue growth in the immediate quarters ahead, then as improved gross margins when the Microsource relocation is completed. And finally as a return to profitability following the introduction of the new microwave product in the first quarter of fiscal 2014.

With that, I will now open the call for questions.

Now, you plan on trying on maintaining that level?

I’m sorry, Larry, the first part of your question, I didn’t hear. It was blank for some reason.

Oh, I am sorry.

Can you repeat that?

Sure. The cash now, it’s about $2 million, and I believe in your couple of last conference calls, you mentioned that you want to keep that level of about $2 million?

Yes.

It’s nice to see. And backlog is up 80%, correct; 80%, 90%?

The backlog is primarily due to our large Boeing contracts with our Microsource division for our filters.

And orders have increased about 55% or so?

Again, the orders are from the prime contractor that we deal with from our Microsource division, but yes.

Okay. And profitability, I think you mentioned in the release that it should be the first quarter of fiscal 2014?

Well, we’re banking on the introduction on schedule of a pretty major R&D program, so I’ve been involved with a lot of them, and those are always -- you got to stay on top of them. But I did say that, following the introduction in the first quarter, I expect to return to profitability.

So it all depends on the ramp of sales from that introduction. However, we have been staying close to customers.

My Vice President of Marketing is continually traveling, and we have an active beta evaluation program, so I’m hoping the time to getting the orders and shipment is short as it possibly can.

That’s great. And I think Mr.

Penta has joined the company, correct?

Yes. That’s correct.

And isn’t he from LeCroy Corporation?

He has worked at LeCroy, and he has also worked at SyntheSys Research recently.

Oh, very good. And best wishes over there.

Thank you.

All right. Thank you all for joining the call and for your continued interest in Giga-tronics.

Good afternoon.