Greetings. And welcome to the Frequency Electronics First Quarter Fiscal 2026 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. Any statements made by the company during this conference call regarding the future constitute forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences are included in the company's press releases and are further detailed in the company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the company undertakes no obligation to update these statements for revisions or changes after the date of this conference call. It is now my pleasure to introduce your host, Thomas McClelland, President and Chief Executive Officer.

Thank you. Good afternoon. And thanks for joining the Frequency Electronics first quarter fiscal year 2026 earnings call. With me today is our Chief Financial Officer, Steven Bernstein. On our fourth quarter fiscal 2025 earnings call, in July, I told you that particularly strong execution allowed the company to produce revenue on certain programs in fiscal 2025, that we had originally expected to produce over a more extended period of time in fiscal 2025, 2026, and beyond. So while we do not provide guidance given the inherently lumpy nature of contract awards, and customer-driven activity, we did want to point out in July that the previous quarter, the highest revenue quarter in 25 years, should not be viewed as the near-term new normal. We anticipated instead that 2026 would look more like the first two quarters in fiscal 2025. This would have been the case but for customer-driven delays on a few key programs, that pushed revenue recognition out of the fiscal first quarter. Recall that the allocations for space and defense-related programs that were enacted by Congress were first finalized in early July, with only a few weeks left in the quarter, which created some late-quarter customer scrambling. Critically, this revenue will still be earned in the coming quarters, and predominantly in this current fiscal year. These are neither cancellations nor contract reductions. In fact, we expect at least one of these programs to be meaningfully increased in total contract value. Now that we are six weeks into this second fiscal quarter, I can clearly state that the issues we saw in the first quarter related to customer-led delays are now behind us, and we are making significant progress towards a bigger book of business. When we have a quarter like this, like this first one with lower revenue…

Thank you, Tom. Good afternoon. For the three months ending July 31, 2025, consolidated revenue was $800,000 compared to $15.1 million for the same period of the prior fiscal year. The components of revenue are as follows: Revenue from commercial and US government satellite programs was approximately $6.5 million or 47% compared to $8.3 million or 55% the same period of the prior fiscal year. Revenues on satellite payroll contracts are recognized primarily under the percentage of completion method and are recorded only in the Frequency Electronics, Inc. New York segment. Revenues from non-space US government and DOD customers, which are reported both in the Frequency Electronics, Inc. New York and Frequency Electronics, Inc. Zypher segments, were $6.9 million compared to $6.3 million in the same period of the prior fiscal year and accounted for approximately 50% of consolidated revenues compared to 42% for the prior fiscal year. Other commercial and industrial revenues were approximately $439,000 compared to approximately $544,000 in the prior fiscal year. The revenue for the three months ending July 31, 2025, is lower than expected due largely to several externally imposed program delays which halted work on the affected programs. Importantly, these delays are not expected to result in overall program revenue reductions, and the revenue shortfall from 2026 is expected to be made up in the upcoming quarters, predominantly in this fiscal year. For the three months ending July 31, 2025, both gross margin and gross margin rate decreased compared to the same period in the prior fiscal year. The decrease in gross margin was primarily due to the decrease in revenue, and the decrease in gross margin rate was attributable to quarterly fluctuations in the mix of business activity between higher margin programs and lower margin programs. As we have stated in the past,…

Thanks, Steve. I think we are now prepared to take questions.

Thank you. At this time, we will be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, please press star 1 on your phone at this time if you wish to ask a question. Please hold while we poll for questions. And the first question today is coming from George Marema from Pareto Ventures. George, your line is live.

Yeah. Hi. Thanks, Tom. Back in the beginning of the year, this last winter, you kind of outlined some of your various clock technologies, including the rubidium vapor clock, the mercury ion clock, you know, of course, quantum and the NV diamond magnetometer. And you kind of gave some timelines on that. I just wonder if I can get an update on sort of the progress on these, the productization of these things, and sort of, like, an updated timeline on when these might be converted to actual product.

Okay. Well, keep in mind that we have atomic clocks that are available off the shelf at this time, and, in fact, we are actively producing. In particular, we have a satellite-grade state-of-the-art GPS atomic clock for GNSS satellite systems that we are actively producing. But to address some of the more advanced things that we are working on, in particular, as you stated, we are working on mercury ion atomic clock, and we are actually beginning to produce prototypes at this point in time in collaboration with the Jet Propulsion Laboratory, and we anticipate that this will be ready for low-rate production in another year or so. We are also, as you stated, working on various magnetometer technologies. This is primarily to support a very important field at this point in time, which is alternate navigation sources that are completely independent of GPS and related satellite navigation systems. We have externally supported programs to develop this technology, in particular, NV Diamond magnetometer technology. And we anticipate by the middle of next calendar year to have prototypes available to support testing done by some of our potential customers. And roughly a year after that, we are anticipating that we will have next-generation higher performance devices available. Let me leave it at that.

Okay. And I had one more question, which is kind of a two-part question about quantum sensing. The first one is just sort of a general update on where we are on the space application. But and I know you guys focus on space application. But I was wondering, there seems to be some emerging research on how quantum sensing can also be used in other areas like quantum computing, for example. Has there been any thought, discussion, or interest in applying your technology to anything outside of space?

Yeah. So you know, quantum computing does not necessarily exclude space. So the space, you know, it is not like those are opposites. Space and quantum computing. But, certainly, we also do not need to do quantum computing in space. I think that at this point in time, we are not investing directly in quantum computing. But a lot of the technologies that we are working on potentially have applications in quantum computing. And I think that our approach is that quantum computing is a very tricky kind of business. I think everybody realizes it is not ready for prime time right now. And there are an awful lot of people working on it. And instead, we are focusing on some aspects of quantum sensing that it is very clear that we can make a contribution very quickly in the near future. At the same time, I think we are aware of what is going on in quantum computing. And we are trying to put together a workforce that is part of the reason for our investment in the Colorado facility. So that we put together an engineering team with the kind of expertise that can potentially contribute to quantum computing in the future.

Well, thank you, Tom, for your outstanding leadership. Appreciate it.

Thank you. And once again, as a reminder, that will be star one on your phone at this time if there were any other questions. Star one if you wish to ask a question. And there were no other questions from the lines at this time. I will now hand the call back to Thomas McClelland for closing remarks.

Okay. Well, I would like to thank everybody for taking the time to listen and to participate in today's earnings call. We look forward to providing further updates in the coming months. Thank you.

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.