Giga-tronics Incorporated

Steve Lance - Chief Financial Officer John Regazzi - Chief Executive Officer

Thank you, Sherry. First I’d like to read our Safe Harbor statement.

This conference call contains forward-looking statements concerning profitability, backlog of order 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 deferral of orders, 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 30, 2013, 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 of -- and Analysis of Financial Condition and Results of Operations. Now I will turn the call over to our CEO, John Regazzi.

John?

Thank you, Steve. Good afternoon.

And thank you for joining our quarterly earnings conference call. After some brief remarks, I’ll open the call for questions.

Net sales for the second quarter were $4 million, as compared with $3 million in the prior quarter and gross margins were $1.3 million, as compared with $1.1 million. These improvements are primarily due to the Microsource business fulfilling schedule shipments related to our F-15 and F-18 contracts.

Net sales for the first six months of fiscal 2014 were $7 million as compared to $7.5 million for the first six months of the prior fiscal year. The decrease in net sales was primarily due to the Giga-tronics Division fulfilling a large order associated with its legacy switching products in the first half of last year prior to selling the product line to Teradyne early this fiscal year.

Net loss for the second quarter of fiscal 2014 was $1.1 million or $0.21 per fully diluted share. Net loss for the first six months of the current fiscal year was $1.8 million, or $0.35 per fully diluted share.

On average, the company is spending more than $1 million in research and development per quarter. The majority of these expenses are associated with the development of the company’s new product platform and with the preparations in manufacturing.

These expenses have significantly contributed to the losses thus far in fiscal 2014 and all of fiscal 2013. During the second quarter of fiscal 2014, Giga-tronics received initial orders of $330,000 from a large aerospace company for its new product.

Shipments are scheduled to occur in the fourth quarter. The Microsource operation now co-located with Giga-tronics in San Ramon, California successfully manufactured filter units from start to finish for the first time, demonstrating to the end-customer our readiness to begin full rate production on the F-15 program.

In addition, Microsource received the first phase contract for the development of a new filter for the F-16 aircraft. The contract is valued at $733,000.

And I'll add the initial phase of the contract is valued at $733,000. Work on this phase is underway while Microsource negotiates the subsequent phases, including production quantities with the end product.

During the second quarter of this fiscal year, Giga-tronics completed a five-year supplier agreement with a large aerospace prime contractor for new switching products, and received an initial order for $476,000 to be delivered next fiscal year. With that, I would like to open the call for questions.

Okay, Sherry. Thank you very much and that concludes our call.

Thank you very much for your interest in Giga-tronics. Have a good afternoon.