Q1 2022 Frequency Electronics Inc Earnings Call

[music].

Greetings and welcome to the frequency electronics first quarter fiscal year 2022 earnings release Conference call.

At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad 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 stand Sloane President and CEO.

Thank you.

Good afternoon, everyone. Thanks for joining us today to discuss <unk> first quarter 'twenty two fiscal year <unk>.

Following my comments I will ask Steve to provide financial details.

After which we will take questions.

Underlying financial trends were generally stable this quarter and while unusual legal expenses impacted income and cash generation. The bulk of these expenses are now behind us.

Steve will give you a detailed explanation of the accounting associated with the litigation settlement in a minute.

The Covid pandemic also impacted us in the quarter due mostly to supply chain issues and customer delays in processing new contracts.

Most exciting this quarter. However is the new technology, which we have embarked upon highlighted in our August 18, 2021 press release.

Which will result in a new and very advanced atomic clock for space defense and commercial applications.

This post optically pumped rubidium atomic clock will be a game changer in the marketplace.

We also continue to evaluate other advanced technologies for potential development as well.

These new technologies will be the growth engine for the company in the years to come.

And will enable spinoff technologies and products that will accelerate growth further.

From my point of view the company is at an inflection point.

With the distractions of litigation behind Us, some new and promising technology developments ahead of us.

The imminent commencement of the qualification program for our space qualified GPS atomic clock about to begin.

And a robust portfolio of new business opportunities to tackle.

As prospects never been brighter.

Now, let me turn things over to Steve to discuss the financial data for the quarter Steve.

Thank you Stan and good afternoon.

For the three months ended July 31, 2021, consolidated revenue was $13 million, which is consistent with the same period of the prior fiscal year. The components of revenue are as follows revenue from commercial and U S. Government satellite programs was approximately $13.0 million, which is consist.

With the same period of the prior fiscal year and accounted for approximately 52% of consolidated revenue compared to 51% for the prior fiscal year.

Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the New York segment.

Revenues from non space U S government and Dod customers, which are recorded in both the FBI, New York and <unk> segments were $10.0 million compared to $8.0 million in the same period of the prior fiscal year and accounted for approximately 42% of consolidated revenue compared to 41%.

For the prior fiscal year.

Other commercial and industrial revenues were 725000 compared to 965000 in the prior fiscal year Intersegment revenues are eliminated in consolidation.

For the three months ended July 31.2021.

The gross margin and gross margin rate were consistent with the same period of the prior fiscal year GAAP.

Gross margin was affected by variation and engineering costs associated with programs and their development versus production phase and external issues, such as COVID-19 related supply chain impacts.

For the three months ended July 31, 2021, and 2020, selling and administrative expenses were approximately 34% and 25% respectively of consolidated revenue. The increase in SG&A expense was mainly due to an increase in professional fees associated with ongoing litigation and fluctuation.

Other expenses.

The company anticipates that SG&A expenses will decrease following settlement of the litigation issue.

R&D expense for the three months ended July 31, 2021, and 2020 increased to $5.0 million from $3.0 million, an increase of 200000 and were 10% and 9% of consolidated revenue.

The company's R&D expense increased year over year as R&D efforts have begun on new product development. The company plans to continue to invest in R&D to keep its products at the state of the art as well as work on developing new technologies.

For the three months ended July 31, 2021, the company recorded an operating loss of $8.0 million compared to 300000 in the prior year.

In addition to fact decided above increased professional fees associated with litigation significantly contributed to the Companys operating loss for the period. Other factors that contributed were the continuing effort effects of the COVID-19, pandemic and engineering costs cited above.

Other income consisted primarily investment income derived from the company's holdings of marketable securities earnings our marketable securities may vary based on fluctuating interest rates dividend payout levels and the timing of purchases sales redemptions or maturity of securities. The fluctuation in other income.

<unk> was due to less interest expense and higher other income compared to the same period of the prior fiscal year.

This yields a pretax loss of approximately $7.0 million compared to 300000 for the prior year.

For the three months ending July 31, 2021, the company recorded a tax provision of $1000 compared to 9000 for the prior fiscal year.

Consolidated net loss for the three months ended July 31, 2021 was $7.0 million or <unk> 17 per share compared to 300000 net loss or <unk> <unk> per share in the previous fiscal year.

Our fully funded backlog at the end of July 2021 was approximately $37 million down approximately $3 million from the previous fiscal year ended April 32021 the.

The company's balance sheet continues to reflect the strong working capital position of approximately $40 million at July 31, 2021, and a current ratio of approximately $3 six to one. Additionally, the company is debt free.

The company believes that its liquidity is adequate to meet its operating and investing needs for the next 12 months and foreseeable future.

Now for an explanation of the accounting associated with the legal settlement that was announced on August 25th via the company's 8-K filing.

When you look at the balance sheet, you will see a current asset for $6 million, both cash surrender value of life insurance current and non current liability of $8.0 million call deferred compensation current the.

The company surrendered life insurance policies and used available cash from deferred compensation plan assets, which were previously classified as non current assets to cover the $6 million mentioned above.

The $8.0 million deferred compensation Curran as a liability previously accrued and was moved from long term liabilities to current liability as a result of the settlement.

The difference between these two amounts of approximately 646000 was recorded as an increase to accrued liabilities current and a corresponding charge to deferred compensation expense in the P&L.

The effect of this settlement will be to reduce deferred compensation assets by $6 million reduced deferred compensation liability by $8.0 million and increased deferred compensation expense in the P&L by 646000.

There was no effect on the company's cash cash equivalents marketable securities as a result of the settlement I will turn the call back to stand and we look forward to your questions soon.

Thanks, Steve.

I'll take some questions now and we will let the operator explain to you how you can submit those operator.

Thank you we will now be conducting a question and answer session.

Like to ask a question. Please press star one on your telephone keypad.

Information tone will indicate that Youre line is in the question queue.

You May press Star two 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 one.

One moment, please while we poll for questions.

Okay.

Thank you. Our first question is from Michael Cooper Private Investor. Please proceed with your question.

Oh, Hi, Dan Hi, Steve.

How are you.

Fine.

So I've been pretty patient investor and frequency electronics for five years and I know a lot of people have been in there for 20 or 25 years.

Yes.

And with very little to show for it.

And now you've come up with what seems to be some.

Very strong technology that introduces new value to the company, but we have as.

As investors know way to assess what that is what it means can you give us some kind of like.

Like how does this leverage the leadership position.

Frequency.

In your current space markets in your military and.

Defense markets.

But also the new commercial markets could open up to like what does this mean.

Thanks.

So in the world of atomic clocks clocks, its really all about stability and this.

This technology will produce clocked it is much better stability then.

For example, a card products.

It is.

And it will have application not only for space, but we intend to develop.

Versions of the core non space and also potentially for <unk>.

Communications commercial communications at least this development, we're just starting the development.

The initial goal.

Technological hurdles.

<unk> the development of the sort of thing.

We have behind US now so we're starting the development the development will take some time depending on.

Whether we can attract government money or not but.

Once this is developed it.

We would expect it'll be a game changer.

Initially for the space market.

And then I think the defense tactical market would follow shortly and then commercial potentially after that.

So what's your total addressable market with this technology.

For space and defense.

On the order of $450 million to $500 million annually, and then commercial a little harder to calibrate.

But.

Probably equal or bigger.

On the commercial side is the database or our data center market, there's half nine data centers out there and I understand that the synchronization of high speed.

Data flows.

Could be an application for atomic clock do you.

And did that kind of market now, yes, we would we would want to target that market as well.

So theres once.

Major supplier that has like 90% of that market correct.

I don't know, if it's 90% but.

Depending on where you are talking about geographically, but okay.

So your technological strength reliability.

And your cost.

This is an advantage.

You think that would be enough to dislodge the current.

No.

Of course in the market.

I think that we should be able to capture significant market share.

Okay, Great now I do.

I have to point out those products not completed development yet so if you take.

The space version in the terrestrial version for Defense and then the commercial version those all look quite different there.

Targeted at different markets. They all have different features all of those things are subject to a development now we're just starting.

And for taking these things to market and especially the new markets would you partner with people that are already have.

We have significant channels into those markets sure.

There's a variety of business markets, particularly if you're talking about the commercial marketplace.

That we would leverage so yes.

Okay great.

Sounds great.

It is we're excited about it.

Thanks, Dan.

Thank you. Our next question comes from Richard Johns Private Investor. Please proceed with your question.

Good afternoon.

My first question has to do with the 650000.

Hum.

A final apparently.

Litigation settlement expense is that a is that going to show up and did it show up in the July quarter or is that gonna be accrued in the October quarter.

It was accrued and Joel in July it's on the P&L now okay, Okay and.

The news about the new rubidium clock is exciting I wanted to go back though and.

Refer to the other products you have you've mentioned in the past that you've had bids outstanding AR.

600 upwards of 600 million I think the last number I remember was $500 million.

Are we still looking at that.

Those numbers don't relate to the route bidding new rubidium clock. So are we still looking at that kind of potential for the existing products.

Yes.

Bids outstanding hasn't changed a whole lot and I have to recognize that things come in to that and things go out of that so it's dynamic, but it's about that.

That level right now in Europe, correct, although that does not include anything associated with this new technology development. Okay.

Yeah.

I know you don't like to make specific forecasts, but will it.

Is the is the period of development for the new rubidium clock to applications.

Is it going to be measured in quarters or years, what would you say.

It's very dependent on whether we can attract government funding or not which is we're working on but.

Without the government funding you're talking about a few years to get that to the market.

And I mean, with this kind of technology Wouldnt government funding be a pretty much a sure thing.

We would certainly hope so.

Right.

Alright, thank you.

You bet.

Thank you. Our next question is from Sam robots with SCR asset management. Please proceed with your question.

Great Good afternoon, Stan and Steve.

When do we expect this to flow into the backlog do we expect to get products out there.

In a year or two years, what do we expect.

<unk> you.

Youre, referring to the advanced development I, just talked about Covid, yes, yes, the rubidium.

So again, that's highly dependent on the government, let's say.

Hypothetically that Monday of the government awarded US a contract will that will immediately go into backlog.

So you know.

It depends on.

On that end.

And without any government funding and internal developments.

You're not looking at a backlog impact.

In the near term.

Okay.

And I guess, our main customers are Lockheed and Grumman and.

And.

They would be the ones that would.

Give us some more business or.

In the.

Whether it's we're bidding them or.

Or what were working on is that what we're looking for.

Yes.

So for the space version of that clock would be are.

Usual customer set.

So you know would be the big aerospace primes are for the U S defense market.

And then.

Commercial there are some potential commercial space.

Non U S government.

Place jobs that.

For folks that.

Currently fielding satellites.

In Europe for example.

And then on the terrestrial side, it's the defense primes also potentially direct some direct government sales to the government agencies that.

Install and operate communication networks.

For example.

Alright, Thank you very much hopefully youll get some contract soon and that you could be profitable going forward. Good luck. Thank you were working on it.

Okay.

Thank you. Our next question is from Brett Reiss with Janney. Please proceed with your question.

Hi, Stanton, Hi, Steve Hi, Brett.

You mentioned in your prepared remark that.

Apart from the Rebidding and advanced atomic clock.

You are working on other advanced <unk>.

Technology without you know.

Letting the cat out of the hat with trade secret. There can you just give us a little bit more color on you know the areas you're working on there.

No.

Can't get into too much detail, but we are evaluating other potential.

Atomic clock technology.

<unk>.

Debt.

It's premature to get into too much detail about.

But.

The atomic clock side.

That's technology totally different than the rubidium clocks.

And then of course, we continue to work on our what I would call our core technology portfolio their precision courts oscillators and frequency conversion stuff and all of that that's still.

That's still ongoing.

And that's part of our internal research and development program.

Now the type of clock that is on the satellite that helped a customer prevent hacking and spoofing.

What type of clock is that.

Yes, it's a very good block.

Okay.

You want a very precise clock.

A very good hold over so it tends to be a very high performance type of clot.

Okay.

Hum.

On the last call you.

You were looking to to hire another 10 people in this last quarter. We are successful in in accomplishing that.

I don't remember exactly the timing, but our employment's up about I.

Think about 15 people since the start of the year roughly so I think I think my answer to you is yes.

Okay.

Great. Thank you for always taking my questions.

You bet.

Thank you. Our next question is from Michael Eisner Private Investor. Please proceed with your question.

Good day, how are you.

Okay.

I am guessing you have about 255 employees now.

From what.

The numbers are.

Correct, Yes, that's approximate system wide.

Alright, what is the lumpiness for this quarter or was that because of one revenue is recognized under COVID-19 issues or supply chain issues.

All of the above.

Everything.

Alright.

And you.

You mentioned before one one company is 90% of this business.

Ah we.

10 times.

That at times to build any than they are.

As in your press release on August.

All this 18th.

I'm sorry, Michael I missed the last part of your question broke up would you say it again. Please are you alright on your August 18th Press release, you said you had 10 times.

That got time stability with this technology, yes, that's what I was alluding to.

Earlier, the better the clock better stability.

Are the better the stability better the clock I guess, but it isn't a customer that.

Has 90% of the market now.

I think the reference that you're talking about there was two.

Market share.

Yes, yes, yes, so our intent is to provide a better clock at competitive price and capture part of that market share.

What was it.

Does is it 10 times bigger time stability.

Compared to them.

Much better times to boat that's the objective of this of this clock.

Charter is to build and we may not see revenue for a while.

It's going to take a little while to get it developed again dependent on.

How successful we are in attracting government funding.

Alright, and the GPS III, yes, I saw that.

S B O O six O seven in OE that ready for launch.

That's not GPS III, that's GPS III.

Alright, so where are we on three yes.

So on three of our DRAM, our digital rubidium atomic frequency standard drams.

It's about ready to start its qualification program.

So that to me is.

Great success, and we've got to get through qualification, but all indications are that that clock is performing exceedingly well so.

That process will start now it takes a couple of months to get through through qualification.

Was that.

Number 11 that you're trying to get on or did you were you able to get on number 10.

Number number 10, <unk> 10 is the GPS III satellite GPS III F.

We will not be on 11, we won't be on the early GPS three up satellites, it'll probably be the later ones.

Which is what number.

I don't know it depends on the Qual program and when Lockheed Martin.

Elects to exercise its options.

Alright, Thank you you bet.

Yes.

Yes.

Thank you there are no further questions at this time I'd like to turn the floor back over to management for any closing comments.

Great. Thank you let.

Let me thank everybody for joining us today.

Been a interesting quarter and exciting one I think from my point of view.

And we look forward to updating you with.

More news next.

Quarter between here and there I would encourage you to watch the <unk>.

Press releases on see how we're doing so thanks, everybody, we'll talk to you next quarter.

Yes.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation have a wonderful evening.

Okay.

[music].

[music].

Greetings and welcome to the frequency electronics first quarter fiscal year 2022 earnings release Conference call.

At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

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 stand Sloane President and CEO.

Thank you.

Good afternoon, everyone. Thanks for joining us today to discuss <unk> first quarter, but we're 22 fiscal year.

Following my comments I will ask Steve to provide financial details after which we will take questions.

Underlying financial trends were generally stable this quarter and while unusual legal expenses impacted income and cash generation. The bulk of these expenses are now behind us.

Steve will give you a detailed explanation of the accounting associated with the litigation settlement in a minute.

The Covid pandemic also impacted us in the quarter due mostly to supply chain issues and customer delays in processing new contracts.

Most exciting this quarter. However is the new technology, which we have embarked upon highlighted in our August 18, 2021 press release.

Which will result in a new and very advanced atomic clock for space defense and commercial applications.

This pulse optically pumped rubidium atomic clock will be a game changer in the marketplace.

We also continue to evaluate other advanced technologies for potential development as well.

These new technologies will be the growth engine for the company in the years to come.

And will enable spinoff technologies and products that will accelerate growth further.

From my point of view the company is at an inflection point.

Uh huh.

With the distractions of litigation behind Us, some new and promising technology developments ahead of us.

The imminent commencement of the qualification program for our space qualified GPS atomic clock about to begin and a robust portfolio of new business opportunities to tackle.

<unk> prospects never been brighter.

Now, let me turn things over to Steve to discuss the financial data for the quarter Steve.

Thank you Stan and good afternoon.

For the three months ended July 31, 2021, consolidated revenue was $13 million, which is consistent with the same period of the prior fiscal year. The components of revenue are as follows revenue from commercial and U S. Government satellite programs was approximately $13.0 million, which is <unk>.

<unk> with the same period of the prior fiscal year and accounted for approximately 52% of consolidated revenue compared to 51% for the prior fiscal year.

Revenues on satellite payload contracts are recognized primarily under the percentage of completion method and are recorded only in the New York segment.

Revenues from non space U S government and Dod customers, which are recorded in both the FBI, New York and <unk> segments were $10.0 million compared to $8.0 million in the same period of the prior fiscal year and accounted for approximately 42% of consolidated revenue compared to 41%.

For the prior fiscal year.

Other commercial and industrial revenues were 725000 compared to 965000 in the prior fiscal year Intersegment revenues are eliminated in consolidation.

For the three months ended July 31, 2021, the gross margin and gross margin rate were consistent with the same period of the prior fiscal year gross margin was affected by variation and engineering costs associated with programs and their development, whereas production phase and external issues such.

As COVID-19 related supply chain impacts.

For the three months ended July 31, 2021, and 2020, selling and administrative expenses were approximately 34% and 25% respectively of consolidated revenue. The increase in SG&A expense was mainly due to an increase in professional fees associated with ongoing litigation and fluctuation in other.

<unk> the company anticipates that SG&A expenses will decrease following settlement of the litigation issue.

R&D expense for the three months ended July 31, 2021, and 2020 increased to $5.0 million from $3.0 million, an increase of 200000 and were 10% and 9% of consolidated revenue.

The Companys R&D expense increased year over year as R&D efforts have begun a new product development. The company plans to continue to invest in R&D to keep its products at the state of the art as well as work on developing new technologies.

For the three months ended July 31, 2021, the company recorded an operating loss of $8.0 million compared to 300000 in the prior year.

In addition to factors cited above increased professional fees associated with litigation significantly contributed to the Companys operating loss for the period. Other factors that contributed were the continuing effects of the COVID-19, pandemic and engineering costs cited above.

Other income consisted primarily investment income derived from the company's holdings of marketable securities earnings our marketable securities may vary based on fluctuating interest rates dividend payout levels and the timing of purchases sales redemptions or maturity of securities. The fluctuation in other income ex.

<unk> was due to less interest expense and higher other income compared to the same period of the prior fiscal year.

This yields a pretax loss of approximately $7.0 million compared to 300000 for the prior year.

For the three months ending July 31, 2021, the company recorded a tax provision of $1 compared to 9000 for the prior fiscal year.

Consolidated net loss for the three months ended July 31, 2021 was $7.0 million or <unk> 17 per share compared to 300000 net loss or <unk> <unk> per share in the previous fiscal year.

Our fully funded backlog at the end of July 2021 was approximately $37 million down approximately $3 million from the previous fiscal year ended April 32021.

The company's balance sheet continues to reflect the strong working capital position of approximately $40 million at July 31, 2021, and a current ratio of approximately $3 six to one. Additionally, the company is debt free.

The company believes that its liquidity is aggregate to meet its operating and investing needs for the next 12 months and foreseeable future.

Now for an explanation of the accounting associated with the legal settlement that was announced on August 25th via the company's 8-K filing.

When you look at the balance sheet, you will see a current asset for $6 million, while cash surrender value of life insurance current and in current liability of $8.0 million call deferred compensation carrier to.

The company surrendered life insurance policies and use available cash from deferred compensation plan assets, which were previously classified as non current assets to cover the $6 million mentioned above.

The $8.0 million deferred compensation Curran as a liability previously accrued and was moved from long term liabilities to current liability as a result of the settlement.

The difference between these two amounts of approximately 646000 was recorded as an increase to accrued liabilities current and a corresponding charge to deferred compensation expense in the P&L.

The effect of this settlement will be to reduce deferred compensation assets by $6 million.

<unk> deferred compensation liability by $8.0 million and increased deferred compensation expense in the P&L by 646000, and there was no effect on the company's cash cash equivalents in marketable securities as a result of the settlement I will turn the call back to stand and we look forward to your questions soon.

Thanks, Steve.

We'll take some questions now and we'll let the operator explain to you how you can submit those operator.

Thank you we will now be conducting a question and answer session.

I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate that your line is in the question queue you.

You May press Star two if you would like to remove your question from the queue.

For participants using speaker equipment that may be necessary to pick up your handset before pressing the star keys one.

One moment, please while we poll for questions.

Okay.

Thank you. Our first question is from Michael Cooper Private Investor. Please proceed with your question.

Oh, Hi, Dan Hi, Steve.

How are you.

Fine.

So I've been pretty patient investor and frequency electronics for five years and I know a lot of people have been in there for 20 or 25 years.

<unk>.

And with very little to show for it.

And now you've come out with what seems to be some.

Very strong technology that introduces new value to the company, but we have as.

As investors know way to us that's what that is what it means can you give us some kind of like how does this leverage the leadership position of.

Frequency.

On your current space markets in your military and.

The defense markets.

But also the new commercial markets.

Like what does this mean.

Thanks.

So in the <unk>.

World of atomic clubs clocks, its really all about stability.

Technology will produce clock that is much better stability than than for example, our current products.

It is.

And it will have application not only for space, but we intend to develop <unk>.

<unk> of the core non space and also potentially for.

Communications commercial communications. This development, we're just starting the development the.

The initial goal.

Technological hurdles.

Impeded the development of the sort of thing.

We have behind US now so we're starting the development the development will take some time depending on.

Whether we can attract government money or not but.

Once this is developed it.

We would expect it will be a game changer.

Initially for the space market.

And then I'll take the defensive tactical market would follow shortly and then commercial potentially after that.

So what's your total addressable market with this technology.

Technology.

For our space and defense.

On the order of $450 million to $500 million annually and then.

Commercial a little harder to calibrate.

But.

Probably equal or bigger.

On the commercial side is the database or our data center market have nine data centers out there and I understand that synchronization of high speed data.

<unk> flows.

Could be an application atomic clock do you.

And did that kind of market now, yes, we would we would want to target that market as well.

So there's one major supplier.

90% of that market correct.

Yes, it's 90%.

Yes, depending on whether youre talking about geographically, but okay.

So Europe technological strengths you'll reliability.

And your cost.

It's an advantage.

You think that would be enough to dislodge the current.

No.

Of course in the market.

I think that we should be able to capture significant market share.

Okay great.

I have to point out those products not completed development yet so if you take.

The space version in the terrestrial version for defense and commercial version those all look quite different.

Targeted at different markets they'll have different features all of those things are subject to development now we're just starting the development.

And for taking these things to market, especially the new markets would you partner with people that are already.

<unk> had significant channels into those markets sure.

There's a variety of business markets, particularly if you're talking about the commercial marketplace.

That we would leverage so yes.

Okay great.

It sounds great.

It is very excited about it.

Thanks, Dan.

Thank you. Our next question comes from Richard Johns Private Investor. Please proceed with your question.

Good afternoon.

My first question has to do with this 650000.

Hum.

Final apparently.

Litigation settlement expense is that is there.

That going to show up it did it show up in the July quarter or is that going to be accrued in the October quarter.

It was a crude and NGL in July it's on the P&L Knapp, Okay, Okay and.

The news about the new rubidium clock is exciting I wanted to go back though and.

Refer to the other products you have you've mentioned in the past that you've had bids outstanding of six.

600 upwards of 600 million I think the last number I remember was $500 million.

Are we still looking at that.

Those numbers don't relate to the room bidding new rubidium clock. So are we still looking at that kind of potential for the existing products.

Yes.

Bids outstanding Hasnt changed a whole lot and I have to recognize that things come in to that and things go out of that so it's dynamic but it's about.

That level right now in Europe, correct that does not include anything associated with this new technology development.

Okay.

<unk>.

I know you don't like to make specific forecasts, but will it.

Is the is the period of development for the new rubidium clock the applications.

Is it going to be measured in quarters or years.

What would you see it.

It's very dependent on whether we can attract government funding or not which is we're working on but.

Without the government funding you are talking about a few years to get that to the market.

And I mean, with this kind of technology Wouldnt government funding be a pretty much a sure thing.

We would certainly hope so okay.

Alright, thank you.

You bet.

Thank you. Our next question is from Sam Robot ski with SCR asset management. Please proceed with your question.

Hi, good afternoon, Stan and Steve.

When do we expect.

<unk> to flow into the backlog do we expect to get products out there.

In a year or two years, what do we expect.

<unk> Europe.

Referring to the advanced development I, just talked about Covid, yes, yes, the rubidium.

So again thats highly dependent on the government, let's say.

Pathetically that Monday of the government awarded US contract will that will immediately go into backlog so.

It depends on.

On that and.

And without any government funding and internal developments.

Youre not looking at a backlog impact.

In the near term.

Okay, and I guess, our main customers are Lockheed and grown men and.

Uh huh.

They would be the ones that would.

Give us some more business.

In the.

Whether it's for <unk>.

What we're working on is that what we're looking for.

So for the space version of that clock would be are.

Usual customer set.

So the big Aerospace primes are for the U S defense market.

And then.

Commercial there are some potential commercial space.

Non U S government space jobs that.

For folks that.

Currently fielding satellites.

In Europe for example.

And then on the terrestrial side.

Defense primes also potentially direct some direct government sales to the government agencies that <unk>.

Install and operate communication network for example.

Alright, Thank you very much hopefully youll get some contract soon.

It could be profitable going forward and good luck.

We're working on it.

Thank you. Our next question is from Brett Reiss with Janney. Please proceed with your question.

Hi, Stanton, Hi, Steve Hi, Brett.

You mentioned in your prepared remarks that apart from the Rebidding and advanced atomic clock, you'll working on other advanced technologies without.

Yeah.

Letting the cat out of that with trade secret. There can you just give us a little bit more color on the.

The areas you're working on there.

No.

I can't get into too much detail, but we are evaluating other potential.

Atomic clock technology.

Of that.

It's premature to get into too much detail about.

But.

The atomic clock side, and that's that's technology totally different than the rubidium clocks.

Yes.

And then of course, we continue to work on our what I would call our core technology portfolio, the precision courts oscillators frequency conversion stuff and all of that that's still.

That's still ongoing.

That's part of our internal research and development program.

Right now the type of clock that is on the satellite that helped a customer prevent hacking and spoofing what type of clock.

That.

Yes, it's a very good block.

Okay.

You need.

At the very precise clock.

Very good hold over so it tends to be a very high performance type of clot.

Okay.

Now on the last call.

We're looking to to hire another 10 people in this last quarter, we are successful in accomplishing that.

Yes, I don't remember exactly the timing but.

Our employment's up about.

Think about 15 people since.

Started the year roughly so I think I think my answer to you is yes, okay.

Great. Thank you for always taking my questions you.

You bet.

Thank you. Our next question is from Michael Eisner Private Investor. Please proceed with your question.

Good day, how are you.

Okay Alright.

Hi, I'm guessing you have about 255 employees now.

From what.

The numbers are.

If I'm correct, yes, that's approximate systemwide.

Alright, what is the lumpy Miss for this quarter or was that because of one.

Revenue is recognized under COVID-19 issues or supply chain issues.

All of the above.

Everything.

Alright.

And you mentioned before one one company is 90% of this business.

Are we <unk>.

10 times.

That had time stability than they are.

As in your press release on August.

<unk>.

I'm sorry, Michael I missed the last part of your question broke up would you say it again. Please are you alright on your August 18th Press release, you said you had 10 times.

Time stability with this technology, yes, that's what I was alluding to.

Earlier, the better the clock better stability.

For the better the stability and better the clock I guess.

Customer that.

It has 90% of the market now.

I think the reference that you're talking about there was two.

Market share.

Yes, yes, yes, so our intent is to provide a better clock at competitive price and capture part of that market share.

What was it.

Does is it 10 times time stability.

Compared to them.

Much better times to both steps the objective of this of this class.

Charter stability and we may not see revenue for a while.

Take a little while to get it developed again dependent on.

How successful we are in attracting government funding.

Alright, and the GPS III, yes, I saw that.

Spo, Oh, six or seven in OE that ready for launch.

That's not GPS III GPS III.

Yes.

Alright, so where are we on three yes.

On $3, four or <unk>, our digital rubidium Matamoros frequency standard drams.

Is about ready to start its qualification program. So that to me is a great success and we've got to get through qualification, but all indications are that that clock is performing exceedingly well. So that process will start now takes couple of months to get through through qualification.

Was that.

Number 11 that you're trying to get on a did you were you able to GAAP number 10.

Number number 10, <unk> 10 is the GPS III satellite GPS III.

We will not be on 11, we won't be on the early GPS III up satellites.

Will probably be the later ones.

Which is what number.

I don't know it depends on the Qual program and when Lockheed Martin.

Elects to exercise its options.

Alright, Thank you you bet.

Yes.

Yes.

Thank you there are no further questions at this time I'd like to turn the floor back over to management for any closing comments.

Great. Thank you.

Let me thank everybody for joining us today, it's been a.

Interesting quarter and exciting one I think from my point of view.

And we look forward to updating you with.

More news next.

Quarter between here and there I would encourage you to watch the <unk>.

Press releases on see how we're doing so thanks, everybody, we'll talk to you next quarter.

Yes.

This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful evening.