As filed with the Securities and Exchange Commission on July 28, 2016

Registration No. 333-      

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

MICROPHASE CORPORATION

(Exact name of registrant as specified in its charter)

 

Connecticut		3679		06-0710848
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

100 Trap Falls Road Extension
Suite 400
Shelton, Connecticut 06484
(203) 866-8000

(Address, including zip code, and telephone number including
area code, of Registrant’s principal executive offices)

 

Necdet Ergul
Chief Executive Officer
100 Trap Falls Road Extension
Suite 400
Shelton, Connecticut 06484
(203) 866-8000

(Name, address, including zip code, and telephone number including area code, of agent for service)

 

With copies to:

Joseph M. Lucosky, Esq. Scott E. Linsky, Esq. Lawrence Metelitsa, Esq. Lucosky Brookman LLP 101 Wood Avenue South, 5th Floor Woodbridge, NJ 08830 Tel. No.: (732) 395-4400 Fax No.: (732) 395-4401		Edwin L. Miller Jr., Esq. Benjamin J. Armour, Esq. Sullivan and Worcester LLP One Post Office Square Boston, MA 02109   Tel. No.: (617) 338-2800 Fax No.: (617) 338-2880

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o		Accelerated Filer o
Non-Accelerated Filer o		Smaller Reporting Company x

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CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price(1)(2)				Amount of Registration Fee(1)
Common Stock, no par value		$	11,500,000			$	1,158.05
Representative’s Warrants to Purchase Common Stock(3)
Common Stock underlying Representative’s Warrants(4)			750,000				75.52
Total			12,250,000				1,233.58

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS		SUBJECT TO COMPLETION		, 2016

Shares Common Stock
Microphase Corporation

This is an initial public offering of shares of common stock of Microphase Corporation.

Our common stock is not presently traded or quoted on any quotation system or national securities exchange, but we have applied to have our common stock quoted on OTC Markets Group Inc.’s OTCQB quotation system. We intend to apply to the NASDAQ Capital Market to list our common stock prior to effectiveness of this registration statement.

We are an “emerging growth company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 9 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

		Per Share				Total
Offering Price		$				$
Underwriting discounts and commissions(1)		$				$
Proceeds, before expenses		$				$

We have granted the underwriters a 45-day option to purchase up to additional shares of common stock at the public offering price less the underwriting discount solely to cover over-allotments, if any. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $    , and the additional proceeds to us, before expenses, from the over-allotment option exercise will be     .

The underwriters are offering the common stock as set forth under “Underwriting.” Delivery of the shares will be made on or about            , 2016.

Joseph Gunnar & Co.

Prospectus dated            , 2016

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Prospectus Summary			1
Risk Factors			9
Use of Proceeds			32
Capitalization			32
Dilution			33
Management’s Discussion and Analysis of Financial Condition and Results of Operations			35
Business			41
Management			47
Executive Compensation			51
Security Ownership of Certain Beneficial Owners and Management			54
Transactions with Related Persons			55
Description of Capital Stock			56
Underwriting			60
Transfer Agent and Registrar			60
Legal Matters			68
Experts			68
Where You Can Find More Information			68
Index to Consolidated Financial Statements			F-1

We have not authorized anyone to provide you with any information or to make any representation, other than those contained in this prospectus or any free writing prospectus we have prepared. We take no responsibility for, and provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only in circumstances and in jurisdictions where it is lawful to so do. The information contained in this prospectus is accurate only as of its date, regardless of the time of delivery of this prospectus or of any sale of our common stock.

Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than the United States. You are required to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.

Our logo, Microphase®, is the only registered trademark of the Company. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks, tradenames and service marks referred to in this prospectus may appear without the ®, ^TM and SM symbols, but those references are not intended to indicate in any way that we will not assert to the fullest extent under applicable law our rights or the rights of the applicable licensor to these trademarks, tradenames and service marks.

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PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be important information about us, you should carefully read this entire prospectus before investing in our common stock, especially the risks and other information we discuss under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and our consolidated financial statements and related notes beginning on page F-3. Our fiscal year end is June 30 and our fiscal years ended June 30, 2015 and 2014 and our fiscal year ending June 30, 2016 are sometimes referred to herein as fiscal years 2014, 2015 and 2016, respectively. Some of the statements made in this prospectus discuss future events and developments, including our future strategy and our ability to generate revenue, income and cash flow. These forward-looking statements involve risks and uncertainties which could cause actual results to differ materially from those contemplated in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements”. Unless otherwise indicated or the context requires otherwise, the words “we,” “us,” “our”, the “Company” or “our Company” and “Microphase” refer to Microphase Corporation, a Connecticut corporation, and our wholly owned subsidiaries.

Our Business

We design, manufacture and sell microwave electronics components for radar, electronic warfare (“EW”) and communication systems. Such components include radio frequency (“RF”) and microwave filters, diplexers, multiplexers, detectors, switch filters, integrated assemblies and detector logarithmic video amplifiers (“DLVA”). We and our predecessors have been engaged in this business for over 50 years. Our customers are comprised of the U.S. military and allied militaries, and contractors to the U.S. military including prime contractors and sub-contractors. Our recent technology innovations are used in many significant U.S. Government defense programs, including the Polaris submarine, the F-16 aircraft, the F-35 aircraft and the Predator Drone. Other notable programs in which the Company’s products were used include the Atlas Missile, Vanguard Missile, Polaris Missile System (recipient of citation from Bureau of Naval Weapons), SHRIKE Missile, ARM Missile, Patriot Missile System, THAAD (Terminal High Altitude Area Defense), the Samos, Tiros, and Currier Space Probes, the B-1 Bomber, the F-1, EA6B, F-14, F-18, and the Gripen fighter.

Received reflected radar signals are usually weak and require complex components and devices for detection, filtering, conditioning, and amplification. Our sophisticated and proprietary technologies enable the ultra-sensitive detection and high precision video amplification that are necessary in order to accurately recover the signals and facilitate use of the information received.

Products

Our advanced technology products include:

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Competitive Advantages

We believe that our primary competitive advantages in our core business are our many years of experience in our industry and our many innovative and proprietary advanced technologies. The Company is able to serve customers with product requirements which are highly complex and demand the highest level of precision engineering and manufacturing. Our first diplexer was designed for Lockheed Martin in 1955, and our award-winning multiplexer technology was used on the first Telstar satellite in 1958. Our recent technology innovations are used in significant U.S. Government defense programs, including the F-16 aircraft, the F-35 aircraft and the Predator Drone.

In the test and measurement (“T&M”) market, our primary competitive advantage is a unique and innovative product line which delivers superior performance compared to existing products and solutions at a fraction of the price of the existing products. Our new T&M products enable customers to conduct tests and measurements on electronic components and receive results in minutes instead of days or weeks, which could dramatically reduce the development time of new electronic products.

Growth Strategy

While our core market historically has been the military electronics defense industry, we intend to leverage our high-frequency RF and microwave expertise to expand into high growth sectors of the wireless and RF microwave industries where we believe that we can command significant leadership. Our strategic plan for future growth is to develop and/or acquire proprietary technologies and solutions that will dramatically leapfrog existing solutions and products in the areas of cost, size, weight, reliability and performance.

As a customer-driven global provider of RF/Microwave components, devices, and integrated assemblies, we plan to expand market penetration in emerging technology markets, including fifth generation (5G) wireless mobile communications, commercial drone systems, and the Internet of Things (“IoT”), which provides for advanced interconnection of devices, systems, and services within the existing Internet infrastructure and is expected to rely heavily on wireless links to enable automation in nearly all fields from residential to commercial, healthcare and industrial markets.

The Company is working to develop innovative solutions that we expect will drive our strategic roadmap for long-term growth and profitability. Discussions are underway for collaboration and joint development with certain potential strategic partners as we aggressively pursue access to niche products and solutions with first-to-market opportunities in these high growth market segments. This strategy should enable Microphase to broaden its customer base and reduce risk by spreading its revenue base across multiple market sectors. Acquisitions, if completed successfully, could increase our market share and the technology value of our product lines as well as broaden our product offerings and diversify our customer base. We believe that we are well positioned to capitalize on growth opportunities in the following three key market segments:

Test and Measurements

We believe that there are significant potential opportunities in the RF/Microwave Test and Measurement industry for low-cost high frequency test solutions. We plan to use our core competencies, technologies, and resources to develop, manufacture, and market a unique portfolio of the industry’s first low-cost RF/Microwave and Millimeter-wave test and measurement products as alternative commercial products to conventional expensive custom test solutions.

On January 21, 2016, the Company entered into the T&M industry by closing on a purchase agreement with Dynamac, Inc. (“Dynamac”), pursuant to which the Company acquired certain assets in a line of proprietary RF and microwave test and measurement products, as well as related intellectual property. These test and measurement products are designed to test active and passive electronic components, devices and board level systems. The product line includes a unique portfolio of test and measurement products that we expect could reduce the test and measurement time for developers of electronic products from days or weeks to minutes.

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According to the U.S. Department of Labor and Frost and Sullivan, the global RF/microwave test and measurement industry is estimated to reach $4.2 billion in 2016, growing at a compound annual rate of 7% as the increasing complexity of products translates into growth opportunities for RF/microwave test and measurement vendors. Key factors include the growth in wireless and mobile devices, constantly changing wireless standards, and a focus on Multiple Input Multiple Output (“MIMO”) technology using multiple antennas to make use of reflected signals to provide gains in channel quality and improved clarity. As standards continue to evolve and emerge, there is expected to be a greater demand for state of the art vector network and spectrum analyzers and related accessories.

This product line is proprietary and protected by two issued patents and more than 18 patent applications currently in process. The RF/Microwave test and measurement industry is dominated by five major global test equipment manufacturers, including Keysight Technologies (formerly Agilent Technologies), Anritsu, Rohde & Schwarz, Tektronix (a division of Danaher), and National Instruments. These manufacturers offer a range of vector network and spectrum analyzers which are key electronic test and measurement instruments for test and performance characterization of RF and microwave components, devices, and circuits. In addition to these five major test equipment manufacturers, there are several small manufacturers that offer a wide range of test and measurement tools and accessories, many of which are designed and intended to work and/or interface with test instruments manufactured by these five major manufacturers. Our T&M products include tools and solutions that are intended to interface directly with customers’ test instruments purchased from all the five major test equipment manufacturers, as well as to operate independently of these test instruments and, in some cases, compete with these test instruments.

Electronic Filters

An electronic filter provides a fundamental and necessary function in a communication system or device by allowing a band of desired frequencies to pass and attenuating all others. In doing so, the electronic filter eliminates interference and noise to allow communications to take place reliably. Virtually all communications systems, equipment, and devices use electronic filters in one or more places within their network architectures. Electronic filters are vital to the performance and operation of modern commercial, wireless, military and aerospace communications and electronic systems and devices. Electronic filters, which are also widely known as RF & Microwave filters, are designed to operate at radio, microwave, and millimeter-wave frequencies and are also used as building blocks for construction of duplexers, triplexers, quadplexers and the like, allowing two or more receivers and/or transmitters to simultaneously operate using a common single antenna.

Microphase has been developing and manufacturing high value, low volume electronic filters for the aerospace and defense market for over 50 years. Recently, the Company has been collaborating with another company to develop a line of filters based on an innovative new technology being jointly developed. This arrangement is expected to be structured as a joint venture, with such new technology to be owned by the joint venture company. These filters will be designed to be a fraction of the size of current filters, and also be a fraction of the cost. The target markets are defense and aerospace, wireless infrastructure, cellular handsets and other markets. Target customers include existing defense and aerospace customers and new commercial customers. The estimated target market size for the filters is expected to be $3.2 billion in 2016.

High Power Amplifiers

Microphase has been developing low power amplifiers for over 50 years and recently has been working with another company towards developing a new series of high power amplifiers based on a new technology developed by such other company. This arrangement is expected to be structured as a joint venture, with such new technology to be owned by such joint venture company. As proposed, the joint venture partner has developed the two patents and would contribute this intellectual property to the joint venture company and Microphase would commercialize the prototypes and take to market, as well as finishing development, marketing, manufacturing and selling the new amplifier product line. The new technology has been designed to generate multi-kilowatt RF/microwave power and operate at the safety of low DC voltage. It will be designed to be powerful, efficient, light-weight, compact, reliable, tunable, and easily serviceable with low manufacturing cost. The dollar per watt cost is competitive with magnetrons, the lowest price and least

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reliable source of RF power. The new amplifier will be used in RF/microwave amplifier systems for a wide range of military, commercial and industrial applications. The target market for the high power amplifiers is expected to be $1.7 billion in 2016.

Recent Developments

On April 19, 2016, the Company issued in a private placement to a single investor, in exchange for an investment of $250,000, 125,000 shares of its common stock and a warrant to purchase 125,000 shares of the Company’s common stock at an exercise price of $2.50 per share.

Our Risks and Challenges

An investment in our common stock involves a high degree of risk, including risks related to the following:

We are subject to a number of additional risks which you should be aware of before you buy our common stock. These risks are discussed more fully in the section entitled “Risk Factors” following this prospectus summary.

Emerging Growth Company under the JOBS Act

As a company with less than $1.0 billion in revenues during our last fiscal year, we qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of reduced reporting requirements and are relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

We may take advantage of these provisions for up to five years if we continue to be an emerging growth company. We would cease to be an emerging growth company if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of our shares held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these reduced burdens. We have elected to provide two years of audited financial statements.

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Additionally, we have elected to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act.

Our Corporate Information

Microphase Corporation was founded in 1955 and is currently a Connecticut corporation. Prior to the effectiveness of the registration statement of which this prospectus forms a part, the Company intends to complete reincorporation in Delaware. Its predecessors have been in business for over 50 years. Our executive offices are located at 100 Trap Falls Road Extension, Shelton, CT 06484. Our telephone number is (203) 866-8000. Our web site is located at www.microphase.com. The information contained on our website is not incorporated by reference into this prospectus.

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The Offering

The number of shares of our common stock to be outstanding immediately after this offering is based on 6,200,789 shares of our common stock outstanding as of June 30, 2016 and excludes:

Unless otherwise stated, all information in this prospectus assumes:

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SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following summary consolidated statements of operations data for the years ended June 30, 2015 and 2014 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated statements of operations data for the nine month periods ended March 31, 2016 and 2015 and the consolidated balance sheets data as of March 31, 2016 are derived from our unaudited consolidated financial statements that are included elsewhere in this prospectus. The historical financial data presented below is not necessarily indicative of our financial results in future periods, and the results for the nine month period ended March 31, 2016 are not necessarily indicative of our operating results to be expected for the full fiscal year ending June 30, 2016 or any other period. You should read the summary consolidated financial data in conjunction with those financial statements and the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our consolidated financial statements are prepared and presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Our unaudited consolidated financial statements have been prepared on a basis consistent with our audited financial statements and include all adjustments, consisting of normal and recurring adjustments that we consider necessary for a fair presentation of the financial position and results of operations as of and for such periods.

SUMMARY OPERATING DATA

		For the Nine Months Ended March 31,								Fiscal Years Ended June 30,
		(unaudited)				(unaudited)
		2016				2015				2015				2014
Total Revenues		$	7,002,891			$	6,084,743			$	8,176,352			$	7,198,816
Cost of Sales			4,136,725				3,489,355				(4,557,285	)			(4,285,313	)
Gross Profit			2,866,166				2,595,388				3,619,067				2,913,503
Selling, general and administrative expenses			2,596,430				2,753,061				3,678,133				2,573,984
Engineering and Research expenses			725,874				724,193				943,084				717,847
Other income (expense) net			(3,250	)			(1,947	)			(212,143	)			(59,854	)
Interest income (expense)			(216,290	)			(179,117	)			(264,015	)			(421,597	)
Realized Gain on Sale of Building			—				—				—				2,355,904
Net (Loss) Income			(829,170	)			(1,293,046	)			(1,478,308	)			1,496,125
Preferred dividends declared			—				(659,649	)			(659,649	)			—
Net (Loss) Income available to common shareholders		$	(829,170	)		$	(1,952,695	)		$	(2,137,957	)		$	1,496,125
Basic & Diluted Net income (loss) per share:		$	(0.16	)		$	(0.49	)		$	(0.51	)		$	0.53
Weighted Average shares outstanding			5,132,942				3,953,208				4,233,158				2,844,806

The following table presents consolidated balance sheets data as of March 31, 2016 on:

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The pro forma as adjusted information set forth below is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

		As of March 31, 2016
		Actual				Pro Forma				Pro Forma As Adjusted(1)
Consolidated Balance Sheets Data:
Cash and cash equivalents		$	73,669			$	73,669			$
Working Capital (deficit)			(2,276,725	)			(2,276,725	)
Total assets			4,775,264				4,775,264
Total liabilities			5,477,210				5,477,210
Total stockholders’ equity (deficit)			(711,946	)			(711,946	)

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RISK FACTORS

Investing in our common stock involves a great deal of risk. Careful consideration should be made of the following factors as well as other information included in this prospectus before deciding to purchase our common stock. There are many risks that affect our business and results of operations, some of which are beyond our control. Our business, financial condition or operating results could be materially harmed by any of these risks. This could cause the trading price of our common stock to decline, and you may lose all or part of your investment. Additional risks that we do not yet know of or that we currently think are immaterial may also affect our business and results of operations.

Risks Related To Our Business

WE HAVE A HISTORY OF LOSSES AND OUR FUTURE PROFITABILITY ON A QUARTERLY OR ANNUAL BASIS IS UNCERTAIN, WHICH COULD HAVE A HARMFUL EFFECT ON OUR BUSINESS AND THE VALUE OF OUR COMMON STOCK.

During the past three fiscal years we have incurred losses from operations. These losses are attributable to lower volumes of our products sold to major defense contractors partially as a result of the overall reduction in defense spending and sequestration by the U.S. Congress. As of June 30, 2015, we had an accumulated deficit of $12,855,220 and a total stockholders’ deficit of $787,676. As of March 31, 2016, we had an accumulated deficit of $13,684,390 and a total stockholders’ deficit of $711,946. Since the financial crisis of 2008, Microphase has been significantly short of capital needed to acquire parts for production of its products to complete orders for such products. At times, the Company has not had the cash available to make advance payments for the purchase of parts, and then, as a consequence, the Company would not receive the parts from its vendors required to finish a customer order. This would then delay the delivery of products to customers, and would also delay recognition of the resulting revenues and the receipt of cash from the customer. Sometimes after experiencing a delay in delivery of an order from Microphase, the customer would not place its next order with the Company, resulting in a loss of business. Although access to the public financial markets could increase our ability to raise capital, no assurances can be given that a significant liquid market will develop for our common stock, and we may not be, therefore, provided with greater access to capital.

Our future profitability depends upon many factors, including several that are beyond our control. These factors include, without limitation:

In addition, we will incur significant legal, accounting, and other expenses related to being a public company. As a result of these expenditures, we will have to generate and sustain increased revenue to achieve and maintain future profitability.

OUR CURRENT REVENUE IS ALMOST ENTIRELY DERIVED FROM PRIME DEFENSE CONTRACTORS TO THE U.S. GOVERNMENT AND ITS ALLIES, AND THE LOSS OF THESE RELATIONSHIPS, A REDUCTION IN U.S. GOVERNMENT FUNDING OR A CHANGE IN U.S. GOVERNMENT SPENDING PRIORITIES OR BIDDING PROCESSES COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS.

We are highly dependent on sales to major defense contractors of the U.S. military and its allies, including Boeing, Lockheed Martin, Raytheon, BAE Systems and SAAB. The percentages of our revenue that were derived from sales to these named major defense contractors and directly to the U.S. Government were 65.8% in fiscal 2015, 56.1% in fiscal 2014 and 48.4% in fiscal 2013. Therefore, any significant disruption or

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deterioration of our relationship with any such major defense contractors or the U.S. Government could materially reduce our revenue. In the nine months ended March 31, 2016 there were three customers which each accounted for more than 10% of sales: Lockheed Martin, BAE Systems and Raytheon at 27.5%, 17.2% and 10.3% respectively. In the nine months ended March 31, 2015 there were two customers which each accounted for more than 10% of sales: Lockheed Martin and BAE Systems at 29.5% and 13.7% respectively. Our competitors continuously engage in efforts to expand their business relationships with the same major defense contractors and the U.S. Government and will continue these efforts in the future, and the U.S. Government may choose to use other contractors. We expect that a majority of the business that we seek will be awarded through competitive bidding. We operate in highly competitive markets and our competitors may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas, and we may not be able to continue to win competitively awarded contracts or to obtain task orders under multi-award contracts. Further, the competitive bidding process involves significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, as well as the risk that we may fail to accurately estimate the resources and costs required to fulfill any contract awarded to us. Following any contract award, we may experience significant expense or delay, contract modification or contract rescission as a result of our competitors protesting or challenging contracts awarded to us in competitive bidding. Major defense contractors to whom we supply components for systems must compete with other major defense contractors (to whom we may not supply components) for military orders from the U.S. Government. In addition, we compete with other policy needs, which may be viewed as more necessary, for limited resources and an ever-changing amount of available funding in the budget and appropriation process. Budget and appropriations decisions made by the U.S. Government are outside of our control and have long-term consequences for our business. U.S. Government spending priorities and levels remain uncertain and difficult to predict and are affected by numerous factors, including sequestration (automatic, across-the-board U.S. Government budgetary spending cuts), and the purchase of our products could be superseded by alternate arrangements. A change in U.S. Government spending priorities or an increase in non-procurement spending at the expense of our programs, or a reduction in total U.S. Government spending, could have material adverse consequences on our future business.

OUR FEDERAL GOVERNMENT CONTRACTS MAY BE TERMINATED BY THE FEDERAL GOVERNMENT AT ANY TIME PRIOR TO THEIR COMPLETION, WHICH COULD LEAD TO UNEXPECTED LOSS OF SALES AND REDUCTION IN OUR BACKLOG.

Under the terms of our federal government contracts, the federal government may unilaterally:

The federal government can terminate or modify any of its contracts with us or its prime contractors either for the federal government’s convenience, or if we or its prime contractors default, by failing to perform under the terms of the applicable contract. A termination arising out of our default could expose us to liability and have a material adverse effect on our ability to compete for future federal government contracts and subcontracts. If the federal government or its prime contractors terminate and/or materially modify any of our contracts or if any applicable options are not exercised, our failure to replace sales generated from such contracts would result in lower sales and could adversely affect our earnings, which could have a material adverse effect on our business, results of operations and financial condition. Our backlog as of March 31, 2016 was approximately $4.8 million. Our backlog could be adversely affected if contracts are modified or terminated.

OUR PRODUCTS WITH MILITARY APPLICATIONS ARE SUBJECT TO EXPORT REGULATIONS, AND COMPLIANCE WITH THESE REGULATIONS MAY BE COSTLY.

We are required to obtain export licenses before filling foreign orders for many of our products that have military or other governmental applications. United States Export Administration regulations control technology exports like our products for reasons of national security and compliance with foreign policy, to guarantee domestic reserves of products in short supply and, under certain circumstances, for the security of a

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destination country. Thus, any foreign sales of our products requiring export licenses must comply with these general policies. Compliance with these regulations is costly, and these regulations are subject to change, and any such change may require us to improve our technologies, incur expenses or both in order to comply with such regulations.

WE DEPEND ON U.S. GOVERNMENT CONTRACTS ISSUED TO MAJOR DEFENSE CONTRACTORS, WHICH OFTEN ARE ONLY PARTIALLY FUNDED, SUBJECT TO IMMEDIATE TERMINATION, AND HEAVILY REGULATED AND AUDITED. THE TERMINATION OR FAILURE TO FUND, OR NEGATIVE AUDIT FINDINGS FOR, ONE OR MORE OF THESE CONTRACTS COULD HAVE AN ADVERSE IMPACT ON OUR BUSINESS.

Over its lifetime, a U.S. Government program awarded to a major defense contractor may be implemented by the award of many different individual contracts and subcontracts. The funding of U.S. Government programs is subject to Congressional appropriations. Although multi-year contracts may be authorized and appropriated in connection with major procurements, Congress generally appropriates funds on a fiscal year basis. Procurement funds are typically made available for obligations over the course of one to three years. Consequently, programs often receive only partial funding initially, and additional funds are designated only as Congress authorizes further appropriations. The termination of funding for a U.S. Government program with respect to major defense contractors for whom we are a subcontractor would result in a loss of anticipated future revenue attributable to that program, which could have an adverse impact on our operations. In addition, the termination of, or failure to commit additional funds to, a program for which we are a subcontractor could result in lost revenue and increase our overall costs of doing business.

Generally, U.S. Government contracts are subject to oversight audits by U.S. Government representatives. Such audits could result in adjustments to our contract costs. Any costs found to be improperly allocated to a specific contract will not be reimbursed, and such costs already reimbursed must be refunded. We have recorded contract revenues based on costs we expect to realize upon final audit. However, we do not know the outcome of any future audits and adjustments, and we may be required to materially reduce our revenues or profits upon completion and final negotiation of audits. Negative audit findings could also result in termination of a contract, forfeiture of profits, suspension of payments, fines and suspension or debarment from U.S. Government contracting or subcontracting for a period of time.

In addition, U.S. Government contracts generally contain provisions permitting termination, in whole or in part, without prior notice at the U.S. Government’s convenience upon the payment only for work done and commitments made at the time of termination. We can give no assurance that one or more of the U.S. Government contracts with a major defense contractor under which we provide component products will not be terminated under these circumstances. Also, we can give no assurance that we will be able to procure new contracts to offset the revenue or backlog lost as a result of any termination of our U.S. Government contracts. Because a significant portion of our revenue is dependent on our performance and payment under our U.S. Government contracts, the loss of one or more large contracts could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Our government business also is subject to specific procurement regulations and other requirements. These requirements, although customary in U.S. Government contracts, increase our performance and compliance costs. In addition, these costs might increase in the future, thereby reducing our margins, which could have an adverse effect on our business, financial condition, results of operations and cash flows. Failure to comply with these regulations and requirements could lead to fines, penalties, repayments, or compensatory or treble damages, or suspension or debarment from U.S. Government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various laws, including those related to procurement integrity, export control, U.S. Government security regulations, employment practices, protection of the environment, accuracy of records, proper recording of costs and foreign corruption. The termination of a U.S. Government contract or relationship as a result of any of these acts would have an adverse impact on our operations and could have an adverse effect on our standing and eligibility for future U.S. Government contracts.

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OUR FAILURE TO COMPLY WITH THE OBLIGATIONS SET FORTH IN THE AGREEMENTS ENTERED INTO WITH GERBER FINANCE, INC., INCLUDING FAILURE TO COMPLY WITH FINANCIAL COVENANTS, MAY RESULT IN THE FORECLOSURE OF OUR, INCLUDING OUR SUBSIDIARIES’, PLEDGED ASSETS AND OTHER ADVERSE CONSEQUENCES.

We entered into a revolving credit facility with Gerber Finance, Inc. (“Gerber”) in 2012, as amended, with a maximum borrowing availability of $1,400,000 (the “Gerber Facility”). We have been in non-compliance with certain covenants since 2012 and are currently in discussions with Gerber regarding revising those covenants. Our failure to resolve any non-compliance with respect to the obligations under this credit facility and related documents or the occurrence of certain other specified events could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our debt, potential foreclosure on our assets and other adverse consequences. Such obligations include satisfaction of certain financial covenants including those related to our net worth and net income and subordinated debt, with which we may not be able to comply. Any such failure to resolve any non-compliance with respect to such financial covenants could result in an event of default.

OUR BUSINESS COULD BE NEGATIVELY IMPACTED BY CYBERSECURITY THREATS AND OTHER SECURITY THREATS AND DISRUPTIONS.

As a U.S. Government defense contractor, we face certain security threats, including threats to our information technology infrastructure, attempts to gain access to our proprietary or classified information, threats to physical security, and possible domestic terrorism events. Our information technology networks and related systems are critical to the operation of our business and essential to our ability to successfully perform day-to-day operations. We are also involved with information technology systems for certain customers and other third parties, which generally face similar security threats. Cybersecurity threats in particular, are persistent, evolve quickly and include, but are not limited to, computer viruses, attempts to access information, denial of service and other electronic security breaches. We believe we have implemented appropriate measures and controls and we have invested in skilled information technology resources to appropriately identify threats and mitigate potential risks, but there can be no assurance that such actions will be sufficient to prevent disruptions to mission critical systems, the unauthorized release of confidential information or corruption of data. A security breach or other significant disruption involving these types of information and information technology networks and related systems could:

Any or all of the foregoing could have a negative impact on our business, financial condition, results of operations and cash flows.

WE ENTER INTO FIXED-PRICE CONTRACTS THAT COULD SUBJECT US TO LOSSES IN THE EVENT OF COST OVERRUNS OR A SIGNIFICANT INCREASE IN INFLATION.

We have a number of fixed-price contracts which allow us to benefit from cost savings but subject us to the risk of potential cost overruns, particularly for firm fixed-price contracts, because we assume all of the cost burden. If our initial estimates are incorrect, we can lose money on these contracts. U.S. Government contracts can expose us to potentially large losses because the U.S. Government can hold us responsible for

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completing a project or, in certain circumstances, paying the entire cost of its replacement by another provider regardless of the size or foreseeability of any cost overruns that occur over the life of the contract. Because many of these contracts involve new technologies and applications, unforeseen events such as technological difficulties, fluctuations in the price of raw materials, problems with our suppliers and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to us. The U.S. and other countries also may experience a significant increase in inflation. A significant increase in inflation rates could have a significant adverse impact on the profitability of these contracts. Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages or suffer major losses if the customer exercises its right to terminate. In addition, some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts we may not realize their full benefits. Our results of operations are dependent on our ability to maximize our earnings from our contracts. Cost overruns could have an adverse impact on our financial results.

WE DERIVE A PORTION OF OUR REVENUE FROM INTERNATIONAL OPERATIONS AND ARE SUBJECT TO SOME OF THE RISKS OF DOING BUSINESS INTERNATIONALLY.

We are dependent on sales to customers outside the U.S. The percentage of our total revenue represented by revenue from products and services exported from the U.S. (including foreign military sales) or manufactured or rendered abroad was 13.9% in fiscal 2015, 4% in fiscal 2014 and 3% in fiscal 2013. Although we are paid in U.S. dollars for our export products and are therefore not subject to currency fluctuation risks, we are subject to other international business risks including:

OUR BUSINESS COULD BE ADVERSELY AFFECTED BY A NEGATIVE AUDIT OR INVESTIGATORY FINDING BY THE U.S. GOVERNMENT.

As a government contractor, we are subject to audits and investigations by U.S. Government agencies including the Defense Contract Audit Agency (the “DCAA”), the Defense Contract Management Agency (the “DCMA”), the Inspector General of the Department of Defense (the “DoD”) and other departments and agencies, the Government Accountability Office, the Department of Justice (the “DoJ”) and Congressional Committees. From time to time, these and other agencies investigate or conduct audits to determine whether a contractor’s operations are being conducted in accordance with applicable requirements. The DCAA and DCMA also review the adequacy of, and compliance with, a contractor’s internal control systems and policies, including the contractor’s accounting, purchasing, property, estimating, earned value management and material management accounting systems. Our final allowable incurred costs for each year are also subject to audit and have from time to time resulted in disputes between us and the U.S. Government. Any costs found to be improperly allocated to a specific contract will not be reimbursed or must be refunded if already reimbursed. If an audit or investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, which may include termination of contracts, forfeiture of profits,

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suspension of payments, fines and suspension or prohibition from doing business with the U.S. Government. In addition, we could suffer serious reputational harm if allegations of impropriety were made against us.

FUTURE LITIGATION OR ADMINISTRATIVE PROCEEDINGS RELATED TO OUR MILITARY PROJECTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In the future, we may be involved in legal proceedings, administrative proceedings, claims and other litigation that arise in the ordinary course of business related to military, aerospace and telecommunications projects. Unfavorable outcomes or developments relating to any such proceedings, such as judgments for monetary damages, injunctions or denial or revocation of permits, could have a material adverse effect on our business, financial condition and results of operations.

OUR OPERATING RESULTS HAVE HISTORICALLY BEEN SUBJECT TO SIGNIFICANT YEARLY AND QUARTERLY FLUCTUATIONS AND ARE EXPECTED TO CONTINUE TO FLUCTUATE.

Our operating results have historically been, and are expected to continue to be, subject to quarterly and yearly fluctuations as a result of a number of factors including:

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THERE ARE A NUMBER OF TRENDS AND FACTORS WHICH AFFECT OUR MARKETS, INCLUDING ECONOMIC CONDITIONS IN THE UNITED STATES, EUROPE AND GLOBALLY, THAT ARE BEYOND OUR CONTROL. THESE TRENDS AND FACTORS MAY RESULT IN REDUCED DEMAND AND PRICING PRESSURE ON OUR PRODUCTS.

There are trends and factors affecting our markets that are beyond our control and may affect our operations. Such trends and factors include:

A NUMBER OF FACTORS COULD NEGATIVELY IMPACT OUR GROSS MARGINS, WHICH IN TURN WOULD NEGATIVELY AFFECT OUR OPERATING RESULTS.

Our gross margins may be negatively affected by a result of a number of factors, including:

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FUTURE CASH FLOW FLUCTUATIONS MAY AFFECT OUR ABILITY TO FUND OUR WORKING CAPITAL REQUIREMENTS OR ACHIEVE OUR BUSINESS OBJECTIVES IN A TIMELY MANNER.

Our working capital requirements and cash flows historically have been, and are expected to continue to be, subject to quarterly and yearly fluctuations, as described above. However, a substantial slow-down in capital spending by our customers may require us to adjust our current business model. As a result, our revenues and cash flows may be materially lower than we expect and we may be required to reduce our capital expenditures and investments or take other measures in order to meet our cash requirements. We may seek additional funds from liquidity-generating transactions and other conventional sources of external financing (which may include a variety of debt, convertible debt and/or equity financings). We cannot provide any assurance that our net cash requirements will be as we currently expect. Our inability to manage cash flow fluctuations resulting from the above factors could have a material adverse effect on our ability to fund our working capital requirements from operating cash flows and other sources of liquidity or to achieve our business objectives in a timely manner.

OUR BUSINESS MAY BE MATERIALLY AND ADVERSELY AFFECTED BY INCREASED LEVELS OF DEBT.

In order to finance our business or to finance possible acquisitions we may incur significant levels of debt compared to historical levels. A high level of debt, arduous or restrictive terms and conditions relating to accessing certain sources of funding, failure to meet the financial and/or other covenants in our credit facility and any significant reduction in, or access to, such facilities, poor business performance or lower than expected cash inflows could have adverse consequences on our ability to fund our business and the operation of our business. Other effects of a high level of debt include the following:

THE TESTING OF ELECTRONIC COMMUNICATIONS EQUIPMENT AND THE ACCURATE TRANSMISSION OF INFORMATION ENTAIL A RISK OF PRODUCT LIABILITY CLAIMS BY CUSTOMERS AND OTHERS.

Product liability claims may be asserted against us by end-users of any of our products. We maintain product liability insurance coverage with an aggregate annual liability coverage limit, regardless of the number of occurrences, of $2.0 million. There is no assurance that such insurance will continue to be available at a reasonable cost or will be sufficient to cover all possible liabilities. In the event of a successful suit against us, lack or insufficiency of insurance coverage could result in substantial cost and could have a material adverse effect on our business.

WE CANNOT PREDICT THE CONSEQUENCES OF FUTURE GEO-POLITICAL EVENTS, BUT THEY MAY ADVERSELY AFFECT THE MARKETS IN WHICH WE OPERATE, OUR ABILITY TO INSURE AGAINST RISKS, OUR OPERATIONS OR OUR PROFITABILITY.

Ongoing instability and current conflicts in global markets, including in the Middle East and Asia, and the potential for other conflicts and future terrorist activities and other recent geo-political events throughout the world have created economic and political uncertainties that could have a material adverse effect on our business, operations and profitability. These matters cause uncertainty in the world’s financial and insurance

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markets and may significantly increase the political, economic and social instability in the geographic areas in which we operate. These matters also may cause our insurance coverages and performance bonds to increase in cost, or in some cases, to be unavailable altogether.

WE PLAN TO CONTINUE TO PURSUE AND CONSUMMATE, STRATEGIC ACQUISITIONS AND DIVESTITURES THAT COULD INVOLVE SIGNIFICANT RISKS AND UNCERTAINTIES.

Strategic acquisitions, joint ventures and divestitures that we plan to continue to pursue and consummate present significant risks and uncertainties, which include:

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Our inability to successfully operate and integrate newly-acquired businesses appropriately, effectively and in a timely manner could have a material adverse effect on our ability to take advantage of further growth in demand for products in our marketplace, as well as on our revenues, gross margins and expenses.

OUR STRATEGY INCLUDES ORGANIC GROWTH, WHICH MAY NOT RESULT IN INCREASED REVENUES OR PROFITABILITY AND MAY DEPLETE OUR LIMITED CASH RESERVES WITHOUT RETURN ON INVESTMENT.

In addition to making acquisitions we intend to grow our business organically, focusing on sales to further increase our revenues and backlog, and ramping up manufacturing to meet the increased demand. This has been especially challenging in the past given our limited success in significantly expanding our product offerings. We may encounter difficulties caused by a number of factors, some of which are out of our control, including: operational or personnel issues; delays in obtaining (or failure to obtain) required parts, supplies, or third-party technology; global recession concerns; and access to credit by our customers, our suppliers, or ourselves. In addition, our competitors may be more successful than we are technologically or in terms of sales generation.

THE OUTCOME OF LITIGATION OR ARBITRATION IN WHICH WE ARE INVOLVED OR MAY BECOME INVOLVED IS UNPREDICTABLE AND AN ADVERSE DECISION IN ANY SUCH MATTER COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOWS.

From time to time, we may become defendants in a number of litigation matters and we may become involved in a number of arbitrations. These actions may divert financial and management resources that would otherwise be used to benefit our operations. No assurances can be given that the results of these or new matters will be favorable to us. An adverse resolution of lawsuits or arbitrations could have a material adverse effect on our financial condition, results of operations and cash flows.

WE FACE CERTAIN SIGNIFICANT RISK EXPOSURES AND POTENTIAL LIABILITIES THAT MAY NOT BE COVERED ADEQUATELY BY INSURANCE OR INDEMNITY.

We are exposed to liabilities that are unique to the products and services we provide. A significant portion of our business relates to designing, developing and manufacturing, components, integrated assemblies and subsystems for advanced defense, technology and communications systems and products. New technologies associated with these systems and products may be untested or unproven. Components of certain of the defense systems and products we develop are inherently dangerous. Failures of satellites, missile systems, air traffic control systems, homeland security applications and aircraft have the potential to cause loss of life and extensive property damage. In most circumstances, we may receive indemnification from the U.S. Government. While we maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs from an accident or incident. It also is not possible for us to obtain insurance to protect against all operational risks and liabilities. Substantial claims resulting from an incident in excess of U.S. Government indemnity and our insurance coverage would harm our financial condition, results of operations and cash flows. Moreover, any accident or incident for which we are liable, even if fully insured, could negatively affect our standing with our customers and the public, thereby making it more difficult for us to compete effectively, and could significantly impact the cost and availability of adequate insurance in the future.

WE ARE NOT ABLE TO INSURE AGAINST ALL POTENTIAL RISKS AND MAY BECOME SUBJECT TO HIGHER INSURANCE PREMIUMS.

We will have insurance policies covering certain risks associated with our business. However, any such insurance policies will not cover losses as a result of force majeure, natural disasters, terrorist attacks or sabotage, among other things. We do not expect to maintain insurance for certain environmental risks. In addition, our insurance policies may be subject to annual review by our insurers and may not be renewed at all or on similar or favorable terms. A serious uninsured loss or a loss significantly exceeding the limits of our future insurance policies could have a material adverse effect on our business, financial condition and results of operations.

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CHANGES IN FUTURE BUSINESS OR OTHER MARKET CONDITIONS COULD CAUSE BUSINESS INVESTMENTS AND/OR RECORDED GOODWILL OR OTHER LONG-TERM ASSETS TO BECOME IMPAIRED, RESULTING IN SUBSTANTIAL LOSSES AND WRITE-DOWNS THAT WOULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

As part of our overall strategy, we will, from time to time, acquire a minority or majority interest in businesses. These investments are made upon careful analysis and due diligence procedures designed to achieve a desired return or strategic objective. These procedures often involve certain assumptions and judgment in determining acquisition price. After acquisition, unforeseen issues could arise which adversely affect the anticipated returns or which are otherwise not recoverable as an adjustment to the purchase price. Even after careful integration efforts, actual operating results may vary significantly from initial estimates.

IF WE ARE UNABLE TO FULFILL BACKLOG ORDERS DUE TO CIRCUMSTANCES INVOLVING US OR ONE OR MORE OF OUR SUPPLIERS OR CUSTOMERS, OUR ANTICIPATED RESULTS OF OPERATIONS WILL SUFFER.

As of March 31, 2016, we had approximately $4.8 million in backlog orders for our products. Backlog orders represent revenue that we anticipate recognizing in the future, as evidenced by purchase orders and other purchase commitments received from customers, but on which work has not yet been initiated or with respect to which work is currently in progress. Our backlog orders are due, in large part, to the long lead-times associated with our electronic device products, which products generally are custom built to order. We may encounter difficulties in fulfilling these orders and commitments, which could lead to failing to deliver them in a timely manner. We may not ultimately recognize as revenue the amounts reflected as backlog. Factors that could affect our ability to fulfill backlog orders include difficulty we may experience in obtaining raw materials or sub-assemblies from suppliers, whether due to obsolescence, cash limitations, production difficulties on the part of suppliers, including the longer lead times we have recently seen with many suppliers, or customer-induced delays and product holds. If we are required to locate new suppliers or additional sources of supply, we could experience a disruption in our operations or incur additional costs in procuring required materials. Our anticipated results of operations and cash flows will suffer to the extent we are unable to fulfill backlog orders within established timeframes, particularly if delays in fulfilling backlog orders cause our customers to reduce or cancel their orders. Analysts and investors are likely to view us negatively if we fail to recognize as revenue the amounts reflected as backlog, which could lead to a decrease in our common stock price.

We may not sustain these backlog amounts in the future, particularly if we are not successful in continuing to grow our sales or if our investment in technologies and products or acquisitions fails to translate into increased sales.

THE HIGH COSTS OF BEING A U.S. PUBLIC REGISTRANT HAVE INCREASED OUR OPERATING COSTS.

We have adopted rigorous procedures in connection with corporate governance. We observe such procedures because we consider this to be in the best interest of our stakeholders, including employees, customers, suppliers, financiers and shareholders. These measures carry a cost, and these costs, plus the expected costs of maintaining the quotation for our stock relative to the size of our business, are high and place pressure on our credit facilities.

THE UNCERTAIN GLOBAL ECONOMY MAY NEGATIVELY AFFECT OUR BUSINESS, MARKET SHARE, RESULTS OF OPERATIONS, AND FINANCIAL CONDITION.

The uncertainty and lack of confidence in the global economy since global financial crisis — which has included, among other things, significant reductions in available capital and liquidity from banks and other providers of credit, substantial reductions and/or fluctuations in equity and currency values worldwide, and concerns that the worldwide economic recession may be prolonged — has had and may continue to have a significant negative effect on our business and operating results. The potential effects of the uncertain global economy are difficult to forecast and mitigate. As a consequence, our operating results for a particular period are difficult to predict, and, therefore, prior results are not necessarily indicative of results to be expected in future periods.

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The economic crisis and recession has affected and may continue to affect our direct and indirect customers’ access to capital or willingness to spend capital on our products, and/or their levels of cash liquidity or willingness to pay for products that they will order or have already ordered from us. The effect of the current economic conditions on our customers may therefore lead to decreased demand, including order delays or cancellations, which in turn may result in lower revenue and may materially adversely affect our business, results of operations and financial condition.

Likewise, the current global economy may negatively affect our suppliers’ access to capital and liquidity with which to maintain their inventories and production levels and could cause them to raise prices or lower production levels, or result in their ceasing operations. The challenges that our suppliers may face in selling their products or otherwise in operating their businesses may lead to our inability to obtain the materials we use to manufacture our products. We have observed a trend among our suppliers to have decreased inventory and therefore longer lead times in obtaining parts, supplies and other goods. These actions could cause us to have longer lead times in producing products for delivery to our customers, reductions in our revenue, increased price competition and increased operating costs, which could materially adversely affect our business, results of operations and financial condition.

WE MUST BE ABLE TO ESTABLISH AND MAINTAIN REQUIRED DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROLS OVER FINANCIAL REPORTING AND TO MEET THE PUBLIC REPORTING AND THE FINANCIAL REQUIREMENTS FOR OUR BUSINESS.

Our management has a legal and fiduciary duty to establish and maintain disclosure controls and control procedures in compliance with the securities laws, including the requirements mandated by the Sarbanes-Oxley Act of 2002. The standards that must be met for management to assess the internal control over financial reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards. In addition, our independent registered public accounting firm has not yet performed the attestation process as it was not required, and, if and when it becomes required, we may encounter problems or delays in completing the implementation of any requested improvements and receiving an attestation of our assessment by our independent registered public accounting firm. If our independent registered public accounting firm is unable to provide an unqualified attestation report on such assessment, investor confidence and share value may be negatively impacted.

Under current SEC rules, we are required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, and related rules and regulations of the SEC. We are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. This process also results in a diversion of management’s time and attention. In the event that we are unable to maintain compliance with the applicable provisions of Section 404 of the Sarbanes-Oxley Act and related rules, we and the market price of our common stock may be adversely affected.

COMPETITION WITHIN OUR MARKETS MAY REDUCE OUR REVENUES AND MARKET SHARE.

We operate in highly competitive markets and our competitors may have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas. We anticipate increasing competition in our core markets as a result of continued defense industry consolidation, including cross-border consolidation of competition, which has enabled companies to enhance their competitive position and ability to compete against us. We are also facing heightened competition in our domestic and international markets from foreign and multinational firms. In addition, as discussed in more detail above, increased pressure to limit U.S. defense spending and changes in the U.S. Government procurement environment may limit certain future market opportunities. For example, the DoD increasingly is awarding contracts through competitive bidding and relying on competitive contract award types. Additionally, some customers, including the DoD, are increasingly turning to commercial contractors, rather than traditional defense contractors, for information technology and other support work. If we are unable to continue to compete successfully against our current or future competitors, we may experience declines in revenues and market share which could negatively impact our results of operations, financial condition or liquidity. In addition, due to the current competitive environment, we continue to see an increase in bid protests from unsuccessful bidders on new program awards. Generally, a bid protest will delay the start of contract activities, delay earnings, and could result in

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the award decision being overturned, requiring a re-bid of the contract. Our direct competitors include: Akon, American Microwave, LabTec (England), Miteq, Genesis Microwave, Planar Microwave, Teledyne Microwave, Herotech, Skyworks, K & L Microwave, Filtronetics, Anatech Electronics, Delta Microwave, Eastern Wireless TeleComm Inc., Lark Engineering, Lorch Microwave, Narda Microwave East, and Spectrum Microwave.

ESTIMATES IN ACCOUNTING FOR MANY OF OUR PROGRAMS ARE ESPECIALLY CHALLENGING IN OUR INDUSTRY AND CHANGES IN OUR ESTIMATES COULD ADVERSELY AFFECT OUR FUTURE FINANCIAL RESULTS.

Contract accounting in our industry requires especially difficult judgments relative to assessing risks, including risks associated with customer directed delays and reductions in scheduled deliveries, unfavorable resolutions of claims and contractual matters, judgments associated with estimating contract revenues and costs, and assumptions for schedule and technical issues. Due to the size and nature of many of our contracts, the estimation of total revenues and cost at completion is complicated and subject to many variables. For example, we must make assumptions regarding the length of time to complete the contract because costs also include expected increases in wages and prices for materials; consider whether the intent of entering into multiple contracts was effectively to enter into a single project in order to determine whether such contracts should be combined or segmented; consider incentives or penalties related to performance on contracts in estimating sales and profit rates, and record them when there is sufficient information for us to assess anticipated performance; and use estimates of award fees in estimating sales and profit rates based on actual and anticipated awards. Because of the significance of the judgments and estimation processes described above, it is likely that materially different amounts could be recorded if we used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances or estimates may adversely affect our future results of operations and financial condition.

IF WE CANNOT EFFECTIVELY MANAGE OUR INTERNAL GROWTH, OUR POTENTIAL BUSINESS PROSPECTS, REVENUES AND PROFIT MARGINS MAY SUFFER.

If we fail to effectively manage our internal growth in a manner that minimizes strains on our resources, we could experience disruptions in our operations and ultimately be unable to generate revenues or profits. We expect that we will need to significantly expand our operations to successfully implement our business strategy. As we add manufacturing, marketing, sales and installation and build our infrastructure, we expect that our operating expenses and capital requirements will increase. To effectively manage our growth, we must continue to expend funds to improve our operational, financial and management controls, and our reporting systems and procedures. In addition, we must effectively expand, train and manage our employee base. If we fail in our efforts to manage our internal growth, our prospects, revenue and profit margins may suffer.

RAPID GROWTH ESSENTIAL TO OUR BECOMING PROFITABLE COULD RESULT IN A STRAIN ON OUR RESOURCES.

Because of our size, growth will likely place a significant strain on our financial, technical, operational and management resources. The failure to continue to upgrade our technical, administrative, operating and financial control systems or the occurrence of unexpected expansion difficulties, including difficulties associated with the recruitment and retention of experienced managers and engineers, could have a material adverse effect on our business, financial condition and results of operations and our ability to timely execute this aspect of our business plan.

WE DEPEND ON MANUFACTURING LINES FOR CERTAIN OF OUR PRODUCTS, AND ANY SIGNIFICANT DISRUPTION IN PRODUCTION COULD IMPAIR OUR ABILITY TO DELIVER OUR PRODUCTS.

We currently manufacture and assemble our products at our facilities using production lines. Every product is hand assembled by our skilled and uniquely trained employees. Once a product is assembled it goes to a test area for testing, tuning and troubleshooting where every piece is tested and checked to make sure it meets customer specification requirements. Testing includes environmental testing for temperature and vibration tolerance. Some products are sent out to third parties for testing for additional parameters including altitude, shock and acceleration. Once products are tested most are solder-sealed in house but some are sent out to

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third parties to be laser-sealed. After the products are sealed, they are painted, marked with an identification number, and then shipped. Any significant disruption to one of these production lines will require time either to reconfigure and equip an alternative production line or to restore the original line to full capacity. Some of our production processes are complex, and we may be unable to respond rapidly to the loss of the use of any production line. This could result in delayed shipments, which could result in customer dissatisfaction, loss of sales and damage to our reputation.

WE DESIGN CUSTOM PRODUCTS TO MEET SPECIFIC REQUIREMENTS OF OUR CUSTOMERS. THE UNCERTAIN NATURE OF THE DEVELOPMENT CYCLE FOR CUSTOM PRODUCTS CAN RESULT IN VARIABILITY IN THE TIMING OF OUR RECEIPT OF REVENUE FROM SUCH PRODUCTS.

The design and sales cycle for our custom products, from initial contact by our sales force to the commencement of shipments of those products, may be lengthy. In this process, our engineers work closely with the customer to analyze the customer’s system requirements and establish a technical specification for the custom product. We then select a process, evaluate components, and establish assembly and test procedures before manufacturing can begin. The length of this cycle is influenced by many factors, including the difficulty of the technical specification, the novelty and complexity of the design and the customer’s procurement processes. Our customers typically do not commit to purchase significant quantities of the custom product until they are ready to commence volume shipments of their own system or equipment. Our receipt of substantial revenue from sales of a custom product often depends on that customer’s commercial success in manufacturing and selling its system or equipment that incorporates our custom product. As a result, a significant period may elapse between our investment of time and resources in designing and developing a custom product and our receipt of substantial revenue from sales of that custom product.

The length of this process may increase the risk that a customer will decide to cancel or change its plans related to its system or equipment. Such a cancellation or change in plans by a customer could cause us to lose anticipated sales. In addition, our business, results of operations and financial condition could be materially adversely affected if a significant customer curtails, reduces or delays orders during our sales cycle, chooses not to release its system or equipment that contains our custom products, or is not successful in the sale and marketing of its system or equipment that contains our custom products.

WE DEPEND ON COMPONENT AVAILABILITY, SUBCONTRACTOR PERFORMANCE AND OUR KEY SUPPLIERS TO MANUFACTURE AND DELIVER OUR PRODUCTS AND SERVICES.

We are dependent upon the delivery by suppliers of materials and the assembly by subcontractors of major components and subsystems used in our products in a timely and satisfactory manner and in full compliance with applicable terms and conditions. Some products require relatively scarce raw materials. We also are subject to specific procurement requirements that may, in effect, limit the suppliers and subcontractors we may utilize, including requirements for genuine original equipment manufacturer parts.

In some instances, we are dependent on sole-source suppliers. If any of these suppliers or subcontractors fails to meet our needs or becomes insolvent, we may not have readily available alternatives. While we enter into long-term or volume purchase agreements with certain suppliers and take other actions, such as accelerating supplier payments commensurate with value delivered, to ensure financial viability and the availability of needed materials, components and subsystems, we cannot be sure that such items will be available in the quantities we require, if at all. In addition, some of our suppliers or subcontractors, especially smaller entities, may continue to be impacted by global economic conditions, which could impair their ability to meet their obligations to us. If we experience a material supplier or subcontractor problem, our ability to satisfactorily and timely complete our customer obligations could be negatively impacted which could result in reduced sales, termination of contracts and damage to our reputation and relationships with our customers. We could also incur additional costs in addressing such a problem. Any of these events could have a negative impact on our results of operations, financial condition or liquidity. In addition, we must comply with other procurement requirements, including restrictions on the use of certain chemicals in the European Union and conducting diligence and providing disclosure regarding the use of certain minerals, known as conflict minerals, which may impact our procurement practices and increase our costs.

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IF WE CANNOT ESTABLISH AND MAINTAIN RELATIONSHIPS WITH DISTRIBUTORS, WE MAY NOT BE ABLE TO INCREASE REVENUE.

In order to increase our revenues and successfully commercialize our systems, we must establish and maintain relationships with potential distributors, sales representatives or other resellers. A reduction, delay or cancellation of orders from one or more significant customers could significantly reduce our revenues and could damage our reputation among our potential customers.

IF WE EXPERIENCE QUALITY CONTROL PROBLEMS OR SUPPLIER SHORTAGES FROM POTENTIAL SUPPLIERS, OUR REVENUES AND PROFIT MARGINS MAY SUFFER.

Our dependence on third-party suppliers for components involves several risks, including limited control over pricing, availability of materials, quality and delivery schedules. Any quality control problems or interruptions in supply with respect to one or more components or increases in component costs could materially adversely affect our potential customer relationships, revenues and profit margins.

OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO DEVELOP NEW OFFERINGS AND TECHNOLOGIES FOR OUR CURRENT AND FUTURE MARKETS.

To achieve our business strategies and continue to grow our revenues, we must successfully develop new offerings and technologies or adapt or modify our existing offerings and technologies for our current core defense markets and our future markets, including new growth and emerging markets. Accordingly, our future performance depends on a number of factors, including our ability to:

We believe that, in order to remain competitive in the future, we will need to continue to invest significant financial resources to develop new offerings and technologies or to adapt or modify our existing offerings and technologies, including through internal research and development, acquisitions and joint ventures or other teaming arrangements. These expenditures could divert our attention and resources from other projects, and we cannot be sure that these expenditures will ultimately lead to the timely development of new offerings and technologies or identification of and expansion into new markets. Due to the design complexity of our products, we may in the future experience delays in completing the development and introduction of new products. Any delays could result in increased costs of development or deflect resources from other projects. In addition, there can be no assurance that the market for our offerings will develop or continue to expand or that we will be successful in newly identified markets as we currently anticipate. The failure of our technology to gain market acceptance could significantly reduce our revenues and harm our business. Furthermore, we cannot be sure that our competitors will not develop competing technologies which gain market acceptance in advance of our products.

Additionally, the possibility exists that our competitors might develop new technology or offerings that might cause our existing technology and offerings to become obsolete. If we fail in our new product development efforts or our products or services fail to achieve market acceptance more rapidly than our competitors, our ability to procure new contracts could be negatively impacted, which would negatively impact our results of operations and financial condition.

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THIRD PARTIES MAY CLAIM IN THE FUTURE THAT WE ARE INFRINGING DIRECTLY OR INDIRECTLY UPON THEIR INTELLECTUAL PROPERTY RIGHTS, AND THIRD PARTIES MAY INFRINGE UPON OUR INTELLECTUAL PROPERTY RIGHTS.

Many of the markets we serve are characterized by vigorous protection and pursuit of intellectual property rights, which may result in protracted and expensive litigation. Third parties may claim in the future that we are infringing directly or indirectly upon their intellectual property rights, and we may be found to be infringing or to have infringed directly or indirectly upon those intellectual property rights. Claims of intellectual property infringement might also require us to enter into costly royalty or license agreements, and we may not be able to obtain royalty or license agreements on terms acceptable to us, or at all. We also may be subject to significant damages or injunctions against development and sale of certain of our products, services and solutions. Our success depends in large part on our proprietary technology. We rely on a combination of patents, copyrights, trademarks, trade secrets, know-how, confidentiality provisions and licensing arrangements to establish and protect our intellectual property rights. If we fail to successfully protect and enforce these rights, our competitive position could suffer. Our prospective patent and trademark registration applications may not be allowed, or competitors may challenge the validity or scope of our patents or trademark registrations. In addition, our patents may not provide us a significant competitive advantage. We may be required to spend significant resources to monitor and police our intellectual property rights. We may not be able to detect infringement and our competitive position may be harmed before we do so. In addition, competitors may design around our technology or develop competing technologies.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, WHICH COULD AFFECT OUR ABILITY TO COMPETE.

There can be no assurance that trade secrets and other intellectual property will not be challenged, invalidated, misappropriated or circumvented by third parties. In some instances, we have augmented our technology base by licensing the proprietary intellectual property of others. In the future, we may not be able to obtain necessary licenses on commercially reasonable terms. We enter into confidentiality and invention assignment agreements with our employees and enter into non-disclosure agreements with our suppliers and appropriate customers so as to limit access to and prevent disclosure of our proprietary information. These measures may not suffice to deter misappropriation or third party development of similar technologies. Moreover, the laws concerning intellectual property vary among nations and the protection provided to our intellectual property by the laws and courts of foreign nations may not be as advantageous to us as the remedies available under U.S. law. In order to maintain strict confidentiality, we do not file patents to protect our intellectual property.

MANY OF OUR COMPETITORS HAVE GREATER RESOURCES THAN WE DO. IF WE ARE UNABLE TO KEEP PACE WITH OUR COMPETITORS IN ANTICIPATING AND RESPONDING TO THE RAPID CHANGES INVOLVING THE MILITARY INDUSTRIES, WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH THEM, AND OUR STOCK PRICE MAY DECLINE.

Our future success depends, in part, upon our ability to enhance our current products and services and to develop and introduce new products and services that keep pace with technological developments, respond to the growth in the military, aerospace and telecommunications equipment markets in which we compete, encompass evolving customer requirements, and provide a broad range of products and achieve market acceptance of our products. Most of our existing and potential competitors have larger technical staffs, more established and larger marketing and sales organizations and significantly greater financial resources than we do. Our lack of resources relative to our competitors may cause us to fail to anticipate or respond adequately to technological developments and customer requirements or to experience significant delays in developing or introducing new products and services. These failures or delays could reduce our competitiveness, revenues, profit margins or market share, cash flow and stock price.

BECAUSE WE DEPEND ON COMPUTER AND TELECOMMUNICATIONS SYSTEMS WE DO NOT OWN OR CONTROL, WE ARE POTENTIALLY SUBJECT TO THE ADVERSE EFFECTS OF THIRD PARTY OPERATIONAL SYSTEM FAILURES.

We have entered into licenses and other agreements with third parties for hardware, software, telecommunications and database services in connection with the operation of our facilities. We may be subject to disruptions of our operational systems arising from events that are wholly or partially beyond our

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control (for example, natural disasters, acts of terrorism, epidemics, computer viruses and telecommunications outages). These third party systems and licenses on which we rely could also suffer operational system failure. Any interruptions to our arrangements with third parties, to our computing and communications infrastructure, or our information systems could significantly disrupt our business operations and result in potential liability or reputational damage or otherwise have an adverse impact on our financial results.

TECHNOLOGICAL CHANGE COULD AFFECT OUR OPERATIONS.

The military, aerospace, and telecommunications industries are characterized by rapid and significant technological advancements and introductions of new products and services utilizing new technologies. As others use or develop new technologies, we may be placed at a competitive disadvantage, and competitive pressures may force us to implement such new technologies at substantial costs. In addition, other companies in our industries have greater financial, technical and personnel resources that may allow them to enjoy technological advantages and may in the future allow them to implement new technologies before we can. We may be unable to respond to such competitive pressures and implement such technologies on a timely basis or at an acceptable cost. One or more of the technologies that we currently use or may implement in the future may become obsolete.

WE DO NOT HAVE A FORMAL SUCCESSION PLAN.

Mr. Necdet F. Ergul, our Chief Executive Officer and President, is 92 years old. His age creates the risk of the loss of his services, either permanently or for an indeterminate period of time. In such circumstances, we would be obligated to find a replacement for him and during the period of the search for replacement, our operating results might be adversely affected. We do not have a formal succession plan and cannot assure you that we will establish one in a timely fashion or at all.

WE MAY NOT BE ABLE TO ATTRACT OR RETAIN THE SPECIALIZED TECHNICAL AND MANAGERIAL PERSONNEL NECESSARY TO ACHIEVE OUR BUSINESS OBJECTIVES.

Competition for certain key positions and specialized technical personnel in the high-technology industry is strong. We believe that our future success depends in part on our continued ability to train, hire, assimilate, and retain qualified personnel in a timely manner, particularly our Chief Executive Officer, other senior executives and other key positions in our areas of potential growth.

We may find it difficult to attract or retain qualified employees because of our size. In addition, if we do not properly size our workforce and retain those employees with the appropriate skills, our ability to compete effectively may be adversely affected. If we are not successful in attracting and retaining qualified employees, we may not have the necessary personnel to effectively compete in the highly dynamic, specialized and volatile industry in which we operate or to achieve our business objectives.

OUR REPUTATION AND ABILITY TO DO BUSINESS MAY BE IMPACTED BY THE IMPROPER CONDUCT OF OUR EMPLOYEES, AGENTS OR BUSINESS PARTNERS.

We have implemented compliance controls, policies and procedures designed to prevent reckless or criminal acts from being committed by our employees, agents or business partners that would violate the laws of the jurisdictions in which we operate, including laws governing payments to government officials (such as the FCPA), and to detect any such reckless or criminal acts committed. We cannot ensure, however, that our controls, policies and procedures will prevent or detect all such reckless or criminal acts. If not prevented, such reckless or criminal acts could subject us to civil or criminal investigations and monetary and non-monetary penalties and could have a material adverse effect on our ability to conduct business, our results of operations and our reputation.

THE LOSS OF ONE OR MORE MEMBERS OF OUR SENIOR MANAGEMENT TEAM OR KEY PERSONNEL MAY ADVERSELY AFFECT OUR ABILITY TO IMPLEMENT OUR STRATEGY.

Our success depends to a significant extent upon the continued services of Mr. Necdet F. Ergul, Mr. James Ashman, Mr. Michael Ghadaksaz and Mr. Brian Kelly. The loss of the services of Messrs. Ergul, Ashman, Ghadaksaz or Kelly could have a material adverse effect on our growth, revenues, and prospective business. In particular, the departure of Mr. Kelly, a consultant currently acting as the Company’s General Manager,

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from the Company could result in an event of default under the Gerber Facility. These individuals are committed to the Company and willing to devote their full time and energy to the Company; however, any of these persons could terminate their employment with us with little or no prior notice. We do not have “key person” life insurance policies covering any of our employees. Additionally, there are a limited number of qualified technical personnel with significant experience in the design, development, manufacture, and sale of our products, and we may face challenges hiring and retaining these types of employees.

We depend on our experienced management team and the loss of one or more key executives could have a negative impact on our business. We also depend on our ability to retain and motivate key employees and attract qualified new employees. If we lose a member of the management team or a key employee, we may not be able to replace him or her. Integrating new employees into our management team and training new employees with no prior experience in our industry could prove disruptive to our operations, require a disproportionate amount of resources and management attention and ultimately prove unsuccessful. An inability to attract and retain sufficient technical and managerial personnel could limit or delay our development efforts, which could have a material adverse effect on our business, financial condition and results of operations.

RISKS RELATING TO OWNERSHIP OF OUR COMMON STOCK

WE CURRENTLY DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK. AS A RESULT, YOUR ONLY OPPORTUNITY TO ACHIEVE A RETURN ON YOUR INVESTMENT IS IF THE PRICE OF OUR COMMON STOCK APPRECIATES.

We currently do not expect to declare or pay dividends on our common stock. In addition, in the future we may enter into agreements that prohibit or restrict our ability to declare or pay dividends on our common stock. As a result, your only opportunity to achieve a return on your investment may be if the market price of our common stock appreciates and you sell your shares at a profit.

YOU MAY EXPERIENCE DILUTION OF YOUR OWNERSHIP INTEREST DUE TO THE FUTURE ISSUANCE OF ADDITIONAL SHARES OF OUR COMMON STOCK.

While we expect to have sufficient funds to execute our business plan for at least 12 months post this public offering, we may need additional funds in the future to execute additional prospective joint ventures or acquisitions or due to changed business conditions or other future developments.. As a result, we may require additional funds from future equity or debt financings, including sales of preferred shares or convertible debt, to complete the development of new projects and pay the general and administrative costs of our business. We may in the future issue our previously authorized and unissued securities, resulting in the dilution of the ownership interests of holders of our common stock. We are currently authorized to issue 7,800,000 shares of common stock and 200,000 shares of preferred stock. Additionally, assuming completion of our proposed reincorporation in Delaware, we will be authorized to issue 110,000,000 shares, of which 100,000,000 are for shares of common stock, $0.0001 par value per share, 200,000 are for shares of preferred stock, par value $100 per share, all of which have been designated as Series A Convertible Preferred Stock and 9,800,000 are for shares of “blank check” preferred stock, having such designations, rights and preferences as the Board of Directors may determine, in its sole discretion, from time to time. The potential issuance of such additional shares of common stock or preferred stock or convertible debt may create downward pressure on the trading price of our common stock. We may also issue additional shares of common stock or other securities that are convertible into or exercisable for common stock in future public offerings or private placements for capital raising purposes or for other business purposes. The future issuance of a substantial number of common shares into the public market, or the perception that such issuance could occur, could adversely affect the prevailing market price of our common shares. A decline in the price of our common shares could make it more difficult to raise funds through future offerings of our common shares or securities convertible into common shares.

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OUR AMENDED AND RESTATED CERTIFICATE OF INCORPORATION ALLOWS FOR OUR BOARD OF DIRECTORS TO CREATE NEW SERIES OF PREFERRED STOCK WITHOUT FURTHER APPROVAL BY OUR STOCKHOLDERS, WHICH COULD HAVE AN ANTI-TAKEOVER EFFECT AND COULD ADVERSELY AFFECT HOLDERS OF OUR COMMON STOCK.

Our authorized capital includes preferred stock issuable in one or more series. Our board of directors has the authority to issue preferred stock and determine the price, designation, rights, preferences, privileges, restrictions and conditions, including voting and dividend rights, of those shares without any further vote or action by stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. The issuance of additional preferred stock, while providing desirable flexibility in connection with possible financings and acquisitions and other corporate purposes, could make it more difficult for a third party to acquire a majority of the voting power of our outstanding voting securities, which could deprive our holders of common stock of a premium that they might otherwise realize in connection with a proposed acquisition of the Company.

TWO OF OUR STOCKHOLDERS OWN A SIGNIFICANT PERCENTAGE OF OUR STOCK AND WILL BE ABLE TO EXERT SIGNIFICANT CONTROL OVER MATTERS SUBJECT TO STOCKHOLDER APPROVAL.

Prior to this offering, assuming conversion of preferred stock, 37.55% of our outstanding common stock was owned by Microphase Holding Company, LLC and 36.84% by the RCKJ Trust. After this offering, such entities will continue to own a significant percentage of our outstanding common stock.

Microphase Holding is owned 50% by RCKJ Trust and 50% by the Ergul Family Trust. Decisions with respect to the voting and disposition of the Company shares owned by Microphase Holding are made by a majority of the members. Ronald A. Durando, who was the Company’s chief operating officer until his resignation in January 2015 and who is currently employed by the Company as Strategic Advisor, assigned all his direct and indirect interests in the capital stock of the Company to the RCKJ Trust. Decisions with respect to the voting and disposition of such shares are made by the trustee, Dennis Durando, Ronald A. Durando’s brother.

These two stockholders may be able to substantially determine the outcome of all matters requiring stockholder approval. For example, these stockholders may be able to substantially control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders. The interests of these stockholders may not always coincide with your interests or the interests of other stockholders and they may act in a manner that advances their best interests and not necessarily those of other stockholders, including seeking a premium value for their common stock, and might affect the prevailing market price for our common stock.

THERE CAN BE NO ASSURANCES THAT OUR SHARES WILL BE LISTED ON THE NASDAQ CAPITAL MARKET AND, IF THEY ARE, OUR SHARES WILL BE SUBJECT TO POTENTIAL DELISTING IF WE DO NOT MEET OR CONTINUE TO MAINTAIN THE LISTING REQUIREMENTS OF THE NASDAQ CAPITAL MARKET.

We intend to apply to list the shares of our common stock on the NASDAQ Capital Market, or NASDAQ, prior to the effectiveness of the registration statement of which this prospectus forms a part. An approval of our listing application by NASDAQ will be subject to, among other things, our fulfilling all of the listing requirements of NASDAQ. In addition, NASDAQ has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to obtain or maintain our listing, or de-listing from NASDAQ, would make it more difficult for shareholders to dispose of our common stock and more difficult to obtain accurate price quotations on our common stock. This could have an adverse effect on the price of our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not traded on a national securities exchange.

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THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR COMMON STOCK. FAILURE TO DEVELOP OR MAINTAIN A TRADING MARKET COULD NEGATIVELY AFFECT ITS VALUE AND MAKE IT DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR SHARES.

There is currently no public market for our common stock and an active public market for our common stock may not develop. Failure to develop or maintain an active trading market could make it difficult for you to sell your shares or recover any part of your investment in us. Even if a market for our common stock does develop, the market price of our common stock may be highly volatile. In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.

IF AND WHEN A TRADING MARKET FOR OUR COMMON STOCK DEVELOPS, THE MARKET PRICE OF OUR COMMON STOCK IS STILL LIKELY TO BE HIGHLY VOLATILE AND SUBJECT TO WIDE FLUCTUATIONS, AND YOU MAY BE UNABLE TO RESELL YOUR SHARES AT OR ABOVE THE PRICE AT WHICH YOU ACQUIRED THEM.

The market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including, but not limited to:

The trading price of our shares might also decline in reaction to events that affect other companies in our industry, even if these events do not directly affect us. Each of these factors, among others, could harm the value of your investment in our common stock. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, operating results and financial condition.

IN THE EVENT THAT OUR COMMON STOCK IS LISTED ON NASDAQ, OUR STOCK PRICE COULD FALL AND WE COULD BE DELISTED, IN WHICH CASE BROKER-DEALERS MAY BE DISCOURAGED FROM EFFECTING TRANSACTIONS IN SHARES OF OUR COMMON STOCK BECAUSE THEY MAY BE CONSIDERED PENNY STOCKS AND THUS BE SUBJECT TO THE PENNY STOCK RULES.

The SEC has adopted a number of rules to regulate “penny stock” that restricts transactions involving stock which is deemed to be penny stock. Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). These rules may have the effect of reducing the liquidity of penny stocks. “Penny stocks” generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market if current price and volume information with respect to transactions in such securities is provided by the exchange or system). If our common stock is considered “penny stock,” the additional sales practice and disclosure requirements imposed upon U.S. broker-dealers may discourage broker-dealers from effecting transactions in shares of our common stock, which could severely limit the market liquidity of such shares and impede their sale in the secondary market.

A U.S. broker-dealer selling “penny stock” to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess of $1,000,000 or an annual income exceeding

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$200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker-dealer or the transaction is otherwise exempt. In addition, the “penny stock” regulations require the U.S. broker-dealer to deliver, prior to any transaction involving a “penny stock”, a disclosure schedule prepared in accordance with SEC standards relating to the “penny stock” market, unless the broker-dealer or the transaction is otherwise exempt. A U.S. broker-dealer is also required to disclose commissions payable to the U.S. broker-dealer and the registered representative and current quotations for the securities. Finally, a U.S. broker-dealer is required to submit monthly statements disclosing recent price information with respect to the “penny stock” held in a customer’s account and information with respect to the limited market in “penny stocks”.

Stockholders should be aware that, according to SEC, the market for “penny stocks” has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, resulting in investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities.

IF SECURITIES OR INDUSTRY ANALYSTS DO NOT PUBLISH OR CEASE PUBLISHING RESEARCH OR REPORTS ABOUT US, OUR BUSINESS OR OUR MARKET, OR IF THEY CHANGE THEIR RECOMMENDATIONS REGARDING OUR STOCK ADVERSELY, OUR STOCK PRICE AND TRADING VOLUME COULD DECLINE.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

RISKS RELATED TO THE OFFERING

INVESTORS IN THIS OFFERING WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN NET TANGIBLE BOOK VALUE.

The public offering price will be substantially higher than the net tangible book value per share of our outstanding shares of common stock. As a result, investors in this offering will incur immediate dilution of $     per share, based on the assumed public offering price of $    per share. Investors in this offering will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.

WE HAVE BROAD DISCRETION IN THE USE OF THE NET PROCEEDS FROM THIS OFFERING AND MAY NOT USE THEM EFFECTIVELY.

Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the section of this prospectus entitled “Use of Proceeds.” The failure by our management to apply these funds effectively could harm our business.

SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK FOLLOWING THIS OFFERING MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND THE ISSUANCE OF ADDITIONAL SHARES WILL DILUTE ALL OTHER STOCKHOLDERS.

Sales of a substantial number of shares of our common stock in the public market or otherwise following this offering, or the perception that such sales could occur, could adversely affect the market price of our common

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stock. After completion of this offering at an assumed offering price of $     per share, our existing stockholders will own approximately     % of our common stock assuming there is no exercise of the underwriters’ over-allotment option.

After completion of this offering at an assumed offering price of $     per share there will be      shares of our common stock outstanding. In addition, our certificate of incorporation, as amended, permits the issuance of up to approximately      additional shares of common stock after the completion of this offering. Thus, we have the ability to issue substantial amounts of common stock in the future, which would dilute the percentage ownership held by the investors who purchase shares of our common stock in this offering.

We and our officers, directors and certain stockholders have agreed, subject to customary exceptions, not to, without the prior written consent of Joseph Gunnar & Co., LLC, the representative of the underwriters, during the period ending 365 days from the date of this offering in the case of our directors and officers and 180 days from the date of this offering in the case of us and our stockholders who beneficially own more than 5% of our common stock, directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose of any of shares of our common stock, enter into any swap or other derivatives transaction that transfers to another any of the economic benefits or risks of ownership of shares of our common stock, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company or publicly disclose the intention to do any of the foregoing.

After the lock-up agreements with our principal stockholders pertaining to this offering expire 180 days from the date of this offering unless waived earlier by the representative, up to 2,951,507 of the shares that had been locked up will be eligible for future sale in the public market (does not include 791,734 shares issuable to our principal stockholders upon conversion of preferred stock or exercise of warrants; however such shares would be covered under the lock-up agreements). After the lock-up agreements with our directors and officers pertaining to this offering expire 365 days from the date of this offering unless waived earlier by the managing underwriter, up to 604,318 of the shares (net of any shares also restricted by lock-up agreements with our principal stockholders) that had been locked up will be eligible for future sale in the public market (does not include 240,000 shares issuable to our directors and officers upon conversion of preferred stock or exercise of warrants or options, however such shares would be covered under the lock-up agreements). After the lock-up agreements with certain additional stockholders expire 90 days from the date of this offering unless waived earlier by the representative, up 150,000 of the shares that had been locked up will be eligible for future sale in the public market (does not include 125,000 shares issuable to such stockholders upon exercise of warrants; however such shares would be covered under the lock-up agreements). Sales of a significant number of these shares of common stock in the public market could reduce the market price of the common stock.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties and include statements regarding, among other things, our projected revenue growth and profitability, our growth strategies and opportunity, anticipated trends in our market and our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this prospectus generally. In particular, these include statements relating to future actions, prospective products, market acceptance, future performance or results of current and anticipated products, sales efforts, expenses, and the outcome of contingencies such as legal proceedings and financial results.

Additional examples of forward-looking statements in this prospectus include, but are not limited to, our expectations regarding our business strategy, business prospects, operating results, operating expenses, working capital, liquidity and capital expenditure requirements. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the cost, terms and availability of components, pricing levels, the timing and cost of capital expenditures, competitive conditions and general economic conditions. These statements are based on our management’s expectations, beliefs and assumptions concerning future events affecting us, which in turn are based on currently available information. These assumptions could prove inaccurate. Although we believe that the estimates and projections reflected in the forward-looking statements are reasonable, our expectations may prove to be incorrect.

Important factors that could cause actual results to differ materially from the results and events anticipated or implied by such forward-looking statements include, but are not limited to:

We operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for us to predict all of those risks, nor can we assess the impact of all of those risks on our business or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statement. The forward-looking statements in this prospectus are based on assumptions management believes are reasonable. However, due to the uncertainties associated with forward-looking statements, you should not place undue reliance on any forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and unless required by law, we expressly disclaim any obligation or undertaking to publicly update any of them in light of new information, future events, or otherwise.

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USE OF PROCEEDS

We estimate that the net proceeds from the sale of the shares of common stock in the offering at an assumed offering price of $     per share of common stock will be approximately $     million, after deducting the underwriting discounts and commissions and estimated offering expenses, or $     million if the underwriters exercise their over-allotment option in full.

We currently intend to use the net proceeds received from this offering to:

The amount and timing of our actual expenditures will depend on numerous factors, including the status of our development efforts, sales and marketing activities and the amount of cash generated or used by our operations. We may find it necessary or advisable to use portions of the proceeds for other purposes, and we will have broad discretion and flexibility in the application of the net proceeds. Pending these uses, the proceeds will be invested in short-term bank deposits.

DIVIDEND POLICY

To date, we have not paid any cash dividends on our common or preferred stock and do not anticipate paying any such dividends in the foreseeable future. The declaration and payment of dividends on our common stock is at the discretion of our board of directors and will depend on, among other things, our operating results, financial condition, capital requirements, contractual restrictions or such other factors as our board of directors may deem relevant. We currently expect to use all available funds to finance the future development and expansion of our business and do not anticipate paying dividends in the foreseeable future.

CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents and capitalization as of March 31, 2016. Such information is set forth on the following basis:

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The pro forma as adjusted information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual public offering price and other terms of this offering determined at pricing. You should read this table together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements and the related notes appearing elsewhere in this prospectus.

		As of March 31, 2016
		Actual				Pro forma(1)				Pro Forma as Adjusted(1)(2)
Cash and cash equivalents		$	73,669			$	73,669			$
Total indebtedness			3,867,442				3,867,442
Stockholders’ equity (deficit):			(711,946	)			(711,946	)
Series A Convertible Preferred Stock, $100 par value; 200,000 shares authorized; 15,382 shares issued and outstanding actual, 0 shares issued and outstanding pro forma and pro forma as adjusted			1,538,200				—				—
Common Stock, no par value; 100,000,000 shares of common stock authorized (assuming completion of Delaware re-incorporation); 6,200,789 shares issued and outstanding actual, 7,226,256 shares issued and outstanding pro forma, shares issued and outstanding pro forma as adjusted			9,002,133				11,053,067
Additional paid-in capital			2,432,111				2,432,111
Accumulated deficit			(13,684,390	)			(14,197,123	)
Accumulated other comprehensive loss			0				0
Total stockholders’ equity (deficit)			(711,946	)			(711,946	)
Total capitalization		$	2,078,946			$	2,078,946

DILUTION

If you invest in our shares of common stock, you will experience immediate and substantial dilution to the extent of the difference between the initial public offering price of our shares of common stock and the pro forma as adjusted net tangible book value (deficit) per share of our shares of common stock immediately after the offering.

Our historical net tangible book value (deficit) per share is determined by dividing our total tangible assets, less total liabilities, by the actual number of outstanding shares of common stock. The historical net tangible book deficit of our shares of common stock as of March 31, 2016, was ($3,354,020), or ($0.54) per ordinary share. The pro forma net tangible book value of our shares of common stock as of March 31, 2016 was $(3,354,020) or $(0.46) per ordinary share. Pro forma net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of outstanding shares of common stock, after giving effect to the pro forma adjustments referenced under “Capitalization.”

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The pro forma as adjusted net tangible book value (deficit) of our shares of common stock as of March 31, 2016, was $    , or $     per share. The pro forma as adjusted net tangible book value (deficit) gives effect to the sale of shares of common stock in this offering at the initial public offering price of $     per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The difference between the initial public offering price and the pro forma as adjusted net tangible book value (deficit) per share represents an immediate dilution of $     per share to new investors purchasing shares of common stock in this offering.

The following table illustrates this dilution on a per share basis to new investors:

Assumed initial public offering price per share						$
Pro forma net tangible book value per share before this offering, as of March 31, 2016		$
Increase in pro forma net tangible book value per share attributable to new investors in this offering
Pro forma net tangible book value per share after offering
Dilution in pro forma tangible book value per share to new investors						$

A $1.00 increase (decrease) in the assumed initial public offering price of $     per ordinary share would increase (decrease) our pro forma net tangible book value per share by $     and the dilution per ordinary share to new investors by $    , assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions.

If the underwriters’ over-allotment option to purchase additional shares from us is exercised in full, and based on the initial public offering price of $     per share, the pro forma as adjusted net tangible book value (deficit) per share after this offering would be approximately $     per share, the increase in the pro forma net tangible book value (deficit) per share attributable to new investors would be approximately $     per share and the dilution to new investors purchasing shares in this offering would be approximately $     per share.

The table below summarizes as of March 31, 2016, on the pro forma as adjusted basis described above, the number of shares of common stock we issued and sold, the total consideration we received and the average price per share (1) paid by our existing shareholders and (2) to be paid by new investors purchasing our shares of common stock in this offering at the initial public offering price of $     per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.

		Shares Purchased								Total Consideration								Average Price Per Share
		Number				Percent				Amount				Percent
Existing shareholders								%		$						%		$
New investors								%
Total							100	%		$					100	%		$

The number of shares of common stock outstanding immediately after this offering is based on      shares of common stock, on an as converted basis, giving effect to the pro forma transactions described in “Capitalization.”

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our consolidated financial statements and the notes to those statements appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements reflecting our management’s current expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of events may differ materially from those described in or implied by these forward-looking statements due to a number of factors, including those discussed below and elsewhere in this prospectus, particularly on page 9 entitled “Risk Factors”.

RESULTS OF OPERATIONS OVERVIEW

Microphase Corporation designs and manufactures custom RF and microwave products.. Our products include components, subsystems and multi-function assemblies for the military and commercial markets. The Company has been in business for over 60 years.

The Company’s RF and microwave products enable the transmission, reception and processing of high frequency signals in defense electronics, homeland security systems and telecommunication networks. Our RF products are typically used in high frequency applications and include filters, switch filters, diplexers, multiplexers, detectors, DLVA and multi-function assemblies. The end products in which the Company’s products are used include fighter planes, missiles, submarines, ships, drones, and improvised explosive devices (IEDs) jammers. Customers include Lockheed Martin, Raytheon, Saab, Rockwell Collins, L3 Communications and Northrup Grumman. Sales to the military markets comprised 100% of the Company’s sales for the 2014 and 2015 fiscal years, as well as for the first nine months of fiscal year 2016.

Many years of deficit spending have caused U.S. Government budgets to come under significant pressure in recent years. In particular, the Budget Control Act of 2011 resulted in automatic spending reductions, known as sequestration, through budget caps for both defense and non-defense spending. According to usgovernmentspending.com, the U.S. military’s spending on defense has gone from $705.6 billion in the government fiscal year in 2011 (ending September 30), $677.9 billion in 2012, $633.4 billion in 2013, $603.5 billion in 2014 and $597.5 billion in 2015. For the 2016 fiscal year military spending is expected to show a slight rebound at $615.5 billion. These multi-year decreases have had a significant negative impact on Microphase’s customers, with a resultant negative impact on Microphase’s results during and prior to the past three fiscal years.

ACQUISITIONS AND STRATEGIC INVESTMENTS

The Company is responding to the decrease in the defense budget by pursuing the acquisition of companies and product lines which are similar and/or related to the Company’s existing product lines and which may provide the Company with opportunities to expand beyond military markets. On March 27, 2013, the Company acquired the assets of a DLVA manufacturing business in Folsom, California from Microsemi Corp. pursuant to a purchase agreement (the “Microsemi Agreement”) for a purchase price comprised of $100,000 in cash plus a $650,000 note, which was paid in full prior to its maturity in December 2014 (the “Microsemi Transaction”). The assets acquired pursuant to the Microsemi Agreement, which we operate as a division and refer to as “Microphase West,” contributed $1,577,197 in revenues and net operating losses of ($173,155) in the nine months ended March 31, 2016 and $1,595,483 in revenues and net income of $8,805 in the nine months ended March 31, 2015.

On July 9, 2014, the Company executed a securities purchase agreement with AmpliTech Group Inc. of Bohemia, New York (“AmpliTech”), which was subsequently amended (as amended, the “AmpliTech Agreement) to purchase 8,666,666 shares of AmpliTech common stock at $0.023 per share for a total purchase price of $200,000. We paid the purchase price in two equal installments of $100,000 on July 31, 2014 and on August 31, 2014. AmpliTech designs, engineers and assembles amplifiers for microwave components primarily for communication systems. As of May 12, 2016, we owned 18.8% of the outstanding shares of AmpliTech common stock. To date, this has been a passive investment.

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On January 21, 2016, Microphase Instruments LLC, a wholly-owned subsidiary of the Company, entered into a purchase agreement with Dynamac, Inc. (“Dynamac”), pursuant to which the Company acquired from Dynamac a suite of proprietary RF and microwave test and measurement products, together with certain corresponding intellectual property (“the Test and Measurement Business”), for an aggregate purchase price of $2,500,000. We believe the products and intellectual product acquired through these acquisitions will enable us to grow sales revenue in accordance with our strategy described in “Current Status and Management’s Plans.”

NINE MONTHS ENDED MARCH 31, 2016 VS. MARCH 31, 2015

Revenues.  Total revenues for the nine months ended March 31, 2016 were $7,002,891, up from $6,084,743 for the same period in 2015, an increase of $918,148, or 15%. The revenue increase for the current nine month period was due to increased revenues from our operations in Connecticut, primarily due to two DLVA programs. Over that nine month comparative period, our operations in Connecticut had increased revenues of $947,967, whereas Microphase West had reduced revenues of ($29,819). For the nine months ended March 31, 2016, the increase in sales to domestic customers was $828,574, and the increase to foreign customers was $89,574. The increase in sales is also partially due to the Company being able to purchase the parts necessary to complete and ship more orders, resulting in more fluid production as compared to the same period in 2015 when the Company was not able to source all the parts needed due to cash constraints.

Cost of sales.  Cost of sales increased $646,870 for the nine months ended December 31, 2016 from $3,489,855 for the same period in 2015 to $4,136,725, an increase of 19%. This increase in cost of sales is due to the increase in revenues. The gross profit margin was 41% for the 2016 period and 43% for the 2015 period. This reflects a less profitable mix of products in the current period as compared to the same period in 2015.

General and Administrative Expenses.  Selling, general and administrative expenses were $2,596,430 for the nine months ended March 31, 2016 compared to $2,753,061 for the nine months ended March 31, 2015, a decrease of $156,631 or 6%. The reduction in SG&A expenses in 2016 compared to 2015 was primarily due to a reduction in non-cash charges for stock grants to employees and to consultants, partially offset by increases in professional fees.

Engineering and Research Expenses.  Engineering and research expenses for the nine months ended March 31, 2016 remained virtually the same, up from $724,193 to $725,874 versus the same period in 2015, an increase of $1,681, or less than 1%.

Other Income (Loss).  Other income (loss) increased from ($1,947) in the nine months ended March 31, 2015 to ($3,250) in 2016 due to late penalty fees.

Interest (Expense and Credit costs) net.  Interest expense and credit costs increased from $179,117 during the nine months ended March 31, 2015 to $216,290 for the current period in 2016, an increase of $37,173. The higher interest costs in 2016 reflect the higher over-advance interest charges for that period on the Gerber Facility, offset by lower levels of related party debt.

Net (Loss).  Microphase recorded a net loss of ($829,170) for the nine months ended March 31, 2016 as compared to a net loss of ($1,239,046) for the same period ended March 31, 2015, an improvement of $409,876. The primary factors for this improvement in the current period are from increased shipments and revenues of $918,148, resulting in an increase in our gross profit of $270,778 and lower non-cash charges relating to the issuance of stock to employees and consultants, which decreased $334,600 during the nine months ended March 31, 2016 as compared to the nine months ended March 31, 2015.

TWELVE MONTHS ENDED JUNE 30, 2015 VS. JUNE 30, 2014

Revenues.  Total revenues for the year ended June 30, 2015 were $8,176,352 compared to $7,198,816 for the same period in 2014, an increase of $977,536, or 14%. The revenue increase was primarily due to an increase in sales to international customers.

Cost of Sales.  Cost of sales for the year ended June 30, 2015 was $4,557,285 compared to $4,285,313 for the same period in 2014, an increase of $271,972, or 6%. This increase in cost of sales is in line with the

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increase in revenues. The gross profit margin for the year ended June 30, 2015 was 44% compared to 40% for the same period in 2014. This margin improvement reflects increased manufacturing efficiencies due primarily to the higher sales volume.

General and Administrative Expenses.  Selling, general and administrative expenses were $3,678,133 for the year ended June 30, 2015 compared to $2,573,984 for the year ended June 30, 2014, an increase of $1,104,149, or 43%. SG&A expenses in 2015 include $790,000 of non-cash charges relating to stock-based compensation and consulting fees in connection with the issuance of common stock, compared to $450,000 for the prior year period, an increase of $340,000. SG&A expenses in 2015 also include $108,000 in connection with the Company’s relocation of its headquarters from Norwalk, Connecticut to Shelton, Connecticut, increased compensation expenses for two new senior executives and incentive compensation for key employees and consultants.

Engineering and Research Expenses.  Engineering and research expenses were $943,084 for the year ended June 30, 2015 compared to $717,847 for the same period in 2014, an increase of $225,237, or 31%. Engineering and research expenses increased primarily due to the Microsemi Transaction and $80,000 of stock-based compensation.

Non-operating Income (Loss).  Non-operating income was $19,023 for the year ended June 30, 2015 compared to $2,279 for the same period in 2014, an increase of $16,744. This increase was due to fixed asset dispositions and vehicle lease revenue from a related party.

Interest (Expense and Credit costs) net.  Interest expense and credit costs were $264,015 for the year ended June 30, 2015 compared to $421,597 for the same period in 2014, a decrease of $157,582, or 37%. Interest decreased in 2015 primarily due to the sale of the Company’s headquarters building during fiscal year 2014.

Realized Gain on Sale of Building.  The Company did not realize gain on the sale of any buildings for the year ended June 30, 2015. For the prior year period, however, the Company realized a gain on the sale of its headquarters building in Norwalk, Connecticut in November of 2013 of $2,355,904, net of a swap mortgage charge of $351,999. The Company sold the building and then leased back approximately 50% of the building before moving to Shelton, Connecticut in April 2015.

Realized Loss on Securities.  The realized loss on securities was $0 for the year ended June 30, 2015 compared to ($60,033) for the same period in 2014. There were no sales of securities in fiscal year 2015. In fiscal year 2014 the Company transferred 42,793,354 shares of common stock of mPhase Technologies, Inc., at an aggregate value of $34,235, to two of the Company’s officers in exchange for a $34,235 reduction in accrued salary obligations to such officers.

Net Income (Loss).  Microphase recorded a net loss of ($1,478,308) for the year ended June 30, 2015 as compared to net income of $1,496,125 for the same period in 2014, a decrease of $2,974,433. Excluding the gain on the sale of the Norwalk building, the net loss for 2014 would have been ($859,779), and the increase in loss for 2015 would have been $618,529. The increase in net loss in fiscal year 2015 was due to the increase of non-cash charges from $450,000 in 2014 to $1,093,866, which included $870,000 for services and $223,866 for debt settlements, costs of moving from Norwalk to Shelton, and increased expenses due to the addition of two new senior executives. This represents a loss per share of ($0.51) in 2015 as compared to income per common share of $0.53 in 2014, based upon weighted average common shares outstanding during the periods ending June 30, 2015 and June 30, 2014 of 4,233,158 and 2,844,806, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Through the nine months ended March 31, 2016, the Company reported net loss of $829,190 and had cash and cash equivalents of $73,669. At March 31, 2016, the Company had an accumulated deficit of $13,684,390. At March 31, 2016, the Company had a working capital deficit of $2,276,725 as compared to a working capital deficit of $1,468,082 as of June 30, 2015, a reduction of $808,643 in the deficit. This reduction is primarily due to the additional short term portion of our obligation in connection with the acquisition of the Test & Measurement product line from Dynamac, Inc. of $975,345, reduction in accounts receivable of $210,711 and inventory of $78,571, offset by increases in accounts payable of $141,270, accrued expenses of $96,788 and customer deposits of $18,300. We were able to reduce the current portion of Equity Lines of Credit by $286,548 as a result of renegotiating the guarantee to the holders of those lines, extending

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the term to repay both lines to December 31, 2018 from the previous guarantee to have been repaid in full by December 31, 2015. Our financial condition raises substantial doubt that we will be able to continue as a “going concern”, and our Independent Registered Audit Accounting Firm included an explanatory paragraph regarding this uncertainty in their report on our financial statements as of June 30, 2015 when we had an accumulated deficit of $12,855,220 and a working capital deficit of $1,468,082.

During the nine month period in 2016 the cash from operating activities was $347,102, primarily because the net loss of $(829,170) was offset by $475,400 of non-cash charges relating to stock compensation. Cash provided by operating activities was also increased by depreciation and amortization of $70,154, a decrease in inventory of $78,571 and accounts receivable of $210,711, and to increases in accounts payable of $141,270 and accrued expenses of $96,788

During the nine months ended March 31, 2015, the cash used in operating activities was ($135,744), primarily because of the net loss of ($1,293,046), was offset by a significant amount of non-cash charges relating to the issuance of stock of $1,033,866 incurred in this period; $810,000 of which related to the grant of shares to long time employees as well as consultants for additional efforts preparing the Company to be in position bring its financial reporting current and $223,866 loss on the settlement of liabilities associated with the offer to convert long standing loans to related parties and pay a cumulative preferred dividend at an equivalent rate of $1.50 per share, as approved by the shareholders, which is less than the value of our common stock offered in concurrent private placements. The net loss was also offset by depreciation and amortization of $67,305, by a decrease in other current assets of $29,845, and an increase in accrued expenses of $252,564. Cash provided by operating activities was decreased primarily due to a decrease in customer deposits of $113,910, a new lease deposit of $43,479, an increase in accounts receivable of $74,453, and a decrease in accounts payable of $15,004.

Cash (Used In) Investing Activities consisted of the purchase of $47,202 of fixed assets, $450,000 in payments on the asset acquisition from Dynamac and $9,027 in costs for a total of $459,027 for the acquisition of intangible assets during the nine month period in 2016 as compared to a $200,000 investment in Amplitech common stock, a $50,000 payment on the Dynamac purchase and $366 in net proceeds from asset sales during the nine month period in 2015. The Company has financed its operations in recent years primarily through a debt facility with a financial firm, loans from officers and related parties and several private placement offerings of its common stock to accredited investors.

During the nine months ended March 31, 2016, the Company did not issue any shares of its common stock to investors in private placements. During the nine months ended March 31, 2015, the Company issued 311,782 shares of its common stock to accredited investors in private placements of its common stock at $2.00 per share. The Company paid 68,782 shares to finders and received net proceeds of $447,050 after deducting $38,950 of cash costs, which was used for working capital.

The Company entered into a revolving credit facility with Gerber Finance, Inc. (“Gerber”) in 2012 with a maximum for this line, as amended, of $1,400,000. The outstanding balance as of March 31, 2016 was $1,177,010 and as of June 30, 2015 was $1,013,406. Under this agreement the Company receives funds based on a borrowing base which consists of various percentages of certain assets. The current interest rate is 7.25% and there is an annual facility fee of 1.75% plus monthly collateral monitoring fees of $1,500 and other fees.

Financing activities provided $105,703 during the nine month period in 2016, primarily from the increased borrowings of $163,604 from our line from Gerber and $25,000 from officers, reduced by debt service of $27,579 for our equity lines, $11,329 for long term debt repayment, $10,695 for capital leases and $5,978 for payments for the extended term arrangement and $27,320 payments to related parties. For the same period in 2015 financing activities provided $49,310 of funds, which consisted primarily of $447,050 proceeds from private placements, discussed above and the increased borrowings of $96,549 from our line from Gerber reduced by debt service of $12,683 for our equity lines, $7,292 for long term debt, $11,112 for capital leases, $5,690 on payments for the extended term arrangement, $97,512 for related parties and a $360,000 pay down of the West acquisition note.

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Preferred stock dividend

Effective December 31, 2014, the Board of Directors approved and declared payable all cumulative dividends in arrears for shares of our Series A Preferred Stock outstanding at September 30, 2014. The liability for the preferred dividend payable was converted into common shares at $1.50 per share consistent with the conversion rate for debt conversions approved by shareholders at the special meeting of shareholders on October 4, 2015. This resulted in the issuance of 329,825 shares of the Company’s common stock as payment of $494,735 and the Company booked a loss on the settlement of $164,954.

Capital stock conversions

Effective December 31, 2014, an officer and a former employee converted $150,000 and $170,000, respectively, or a total of $320,000, of related party loans into 213,333 shares of the Company’s common stock. Effective December 31, 2014, another officer converted $180,000 of related party loans into 1,800 shares of the Company’s preferred stock. Effective December 31, 2014, two officers each converted $80,000, or a total of $160,000, of unpaid compensation into a total of 1,600 shares of the Company’s preferred stock. Effective December 31, 2014, a strategic vendor converted $15,000 of accounts payable into 10,000 shares of the Company’s common stock.

CURRENT STATUS AND MANAGEMENT’S PLAN OF OPERATIONS

The Company has been seeking to diversify its market focus beyond its core products. By utilizing our current capabilities together with positioning ourselves through targeted acquisitions, strategic alliances and product partnering we believe we can augment our current product offerings enabling us to continue to introduce a mix of new military and commercial products for the wireless telecom, autonomous auto, test & measurements, and medical instrumentation markets. This strategy should enable Microphase to broaden its customer base and reduce risk by spreading its revenue base across multiple market sectors. Targeted strategic acquisitions should increase our market share and the technology value of our product lines as well as broaden our product offering and diversify our customer base.

The Company expects to improve current operations relating to our core products and funding the launch of our new subsidiary, Microphase Instruments, LLC, which will include finalizing the development of the initial test and measurement product line, and in turn manufacturing and marketing our new portfolio of test products. We finalized our transaction agreement with Dynamac on January 21, 2016 whereby we acquired the proprietary line of low cost RF/Microwave and Millimeter-wave calibrated test probes and related universal test platforms together with certain corresponding intellectual property (the Test and Measurement Business”). We have continued to improve operations relating to our core products, which has resulted in increased sales volume and positive cash from operations in the first two quarters of fiscal 2016. We may need to issue shares of the Company’s common stock to provide capital to support the Test and Measurement Business and additional strategic alliances, including Microfilter, until such time as they become cash flow positive, and to engage in additional product partnering and targeted acquisitions which the Company believes it can integrate efficiently. Having integrated the Microphase West business, we plan to develop and work on additional strategic opportunities.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND ASSUMPTIONS

The SEC defines critical accounting policies as those that are, in management’s view, most important to the portrayal of our financial condition and results of operations and those that require significant judgments and estimates.

The discussion and analysis of our financial condition and results of operations is based upon our financial statements that have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities. On an on-going basis, we evaluate our estimates including the allowance for doubtful accounts, the salability and recoverability of inventory, income taxes and contingencies. We base our estimates on historical experience and on other assumptions that we believe to be reasonable under the circumstances, the results of which form our basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. We assess the impact of significant changes in laws and regulations on a regular basis and update the assumptions and estimates used to prepare our financial statements when we deem it necessary.

Allowance for Doubtful Accounts

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of the Company’s accounts receivable. It is possible that the Company’s estimate of the allowance for doubtful accounts will change in the future.

Depreciation and Amortization

Property and equipment are recorded at cost. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally, accelerated depreciation methods) for tax purposes where appropriate. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.

Income Taxes

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Tax”. ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of certain assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has adopted the provisions of FASB ASC 740-10-05 “Accounting for Uncertainty in Income Taxes”. The ASC clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The ASC prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Inventory Obsolescence

Inventory quantities and related values are analyzed at the end of each fiscal quarter to determine those items that are slow moving or obsolete. An inventory reserve is recorded for those items determined to be slow moving with a corresponding charge to cost of goods sold. Inventory items that are determined obsolete are written off currently with a corresponding charge to cost of goods sold.

Revenue Recognition

Revenues and costs of revenues are recognized during the period in which the products are shipped. The Company applies the provisions of FASB ASC 605-10, Revenue Recognition in Financial Statements ASC 605-10, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements filed with the SEC. ASC 605-10 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. In general, the Company recognizes revenue for sale of products when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fee is fixed or determinable, and (iv) the collectability is reasonably assured.

The Company’s sources of revenue are from the sale of various component amplifiers and filters. Revenue is recognized upon shipment of such products, FOB shipping point. The Company offers a 100% satisfaction guarantee against defects for 90 days after the sale of their product except for a few circumstances. There are no maintenance or service contracts related to any product sale.

OFF BALANCE SHEET TRANSACTIONS

As of July 25, 2016, we did not have any off-balance sheet arrangements.

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BUSINESS

Overview

We design, manufacture and sell microwave electronics components for radar, electronic warfare (“EW”) and communication systems. Such components include radio frequency (“RF”) and microwave filters, diplexers, multiplexers, detectors, switch filters, integrated assemblies and detector logarithmic video amplifiers (“DLVA”). We and our predecessors have been engaged in this business for over 50 years. Our customers are comprised of the U.S. military and allied militaries, and contractors to the U.S. military including prime contractors and sub-contractors. Our recent technology innovations are used in many significant U.S. Government defense programs, including the Polaris submarine, the F-16 aircraft, the F-35 aircraft and the Predator Drone. Other notable programs in which the Company’s products were used include the Atlas Missile, Vanguard Missile, Polaris Missile System (recipient of citation from Bureau of Naval Weapons), SHRIKE Missile, ARM Missile, Patriot Missile System, THAAD (Terminal High Altitude Area Defense), the Samos, Tiros, and Currier Space Probes, the B-1 Bomber, the F-1, EA6B, F-14, F-18, and the Gripen fighter.

Received reflected radar signals are usually weak and require complex components and devices for detection, filtering, conditioning, and amplification. Our sophisticated and proprietary technologies enable the ultra-sensitive detection and high precision video amplification that are necessary in order to accurately recover the signals and facilitate use of the information received.

Our advanced technology products include:

Our first diplexer was designed for Lockheed Martin in 1955, and our award-winning multiplexer technology was used on the first Telstar satellite in 1958. Our recent technology innovations are used in significant U.S. Government defense programs, including the Polaris Submarine, the F-16, the F-35 aircraft and the Predator Drone.

RF/Microwave Industry

The RF/Microwave industry is vast, comprising a wide range of diverse technologies that range from tiny components to large integrated systems. The growing scope of applications for RF/Microwave products is nearly as broad as the number of technologies themselves. RF/Microwave products support a variety of market segments, including: defense and aerospace; mobile wireless infrastructure networks; multimedia devices; household appliances such as microwave ovens, set top boxes and entertainment systems; public safety/homeland security communications; broadcast systems; automotive sensors; and other markets. These markets have traditionally presented a wide range of opportunities and diverse customers for Microphase’s RF/Microwave products.

We have a long history of supplying high power, high frequency, RF and microwave products, including filters, log video amplifiers, detectors and integrated assemblies, to prime contractors that in turn supply government military customers. These prime contractors include Lockheed Martin, BAE, Raytheon and Saab. Our products have been used in numerous programs dating back to 1955, when Microphase introduced its first diplexer to Lockheed Martin. Continuing this innovation, Microphase designed a seven channel multiplexer, now housed in the Smithsonian Institute of Technology, which was onboard the first US piloted space flight, the Mercury Freedom 7 Capsule, on May 5, 1961. Other notable programs in which the Company’s products

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were used include the Atlas Missile, Vanguard Missile, Polaris Missile System (recipient of citation from Bureau of Naval Weapons), SHRIKE Missile, ARM Missile, Patriot Missile System, THAAD (Terminal High Altitude Area Defense), the Samos, Tiros, and Currier Space Probes, the B-1 Bomber, the F-1, EA6B, F-14, F-16, F-18, Gripen fighter, and the F35 joint strike fighter, and more recently the F-16 drone programs, including the Predator, the Reaper and the Shadow.

As a customer-driven global provider of RF/Microwave components, devices, and integrated assemblies, we plan to expand market penetration in emerging technology markets, including fifth generation (5G) wireless mobile communications, commercial drone systems, and the Internet of Things (“IoT”), which provides for advanced interconnection of devices, systems, and services within the existing Internet infrastructure and is expected to rely heavily on wireless links to enable automation in nearly all fields from residential to commercial, healthcare and industrial markets.

Our existing RF/Microwave product families are as follows:

Detector Log Video Amplifiers:  Microphase DLVA products are complex subsystem modules that are used primarily to generate video output signals in advanced early warning radar and control systems. They detect and process, with high precision and accuracy, incoming signals having varying power levels in highly electromagnetic dense and noisy environments.

Detectors and Limiters:  These products are used in the receivers of radio and satellite communications, GPS, radar, and electronic countermeasure systems for detection of very low level signals while at the same time protecting high sensitivity receivers from high power interference and jamming sources.

Filters:  Microphase’s filter portfolio offers a complete line of bandpass, bandstop, lowpass, and highpass filter products for both transmitter and receiver applications. Microphase filters are used in a wide range of communications, broadcast, radar, and satellite systems and the like to provide channel selectivity and to eliminate or mitigate noise, interference and spurious emissions.

Switched Filter Banks:  A switched filter assembly typically consists of a bank of filters and a controlled high speed switch matrix. Each filter within the filter bank covers a specific frequency band. The filters are selected and switched in nanoseconds by a digital control signal. Microphase offers switched filter assemblies consisting of up to 16 filters or channels for use in EW, military and aerospace, and communications systems.

Duplexers and Multiplexers:  Our duplexers consist of two filters which provide a high degree of isolation between transmitted and received signals enabling them to operate safely and reliably via a single common antenna. Microphase multiplexers consist of multiple filters designed and arranged in such a way to provide contiguous and non-contiguous channels. Microphase designs and manufactures multiplexers with up to 16 channels using various advanced filter technologies to meet customer-specific requirements.

Amplifier Solutions:  Microphase offers a family of custom designed and manufactured amplifiers covering a frequency range up to 18 GHz providing linear amplification of signals for both transmitter and receiver applications for a wide range of military and commercial communications, radar, EW and ECM systems.

Multifunction Assemblies and Integrated Subsystems:  Many Microphase products are leveraged, used, and integrated along with other functionality and technologies in the design, development, and manufacture of higher level functionality in smaller and more compact multi-function assemblies offering solutions with substantially reduced risk and complexity when compared to discrete architectures.

Growth Strategy

While our core market historically has been the military electronics defense industry, we intend to leverage our high-frequency RF and microwave expertise to expand into high growth sectors of the wireless and RF microwave industries where we believe that we can command significant leadership. Our strategic plan for future growth is to develop and/or acquire proprietary technologies and solutions that will dramatically leapfrog existing solutions and products in the areas of cost, size, weight, reliability and performance, have general appeal to the end user markets worldwide, and enable the Company to command significant market leadership.

The Company is working to develop innovative solutions which are expected to drive our strategic roadmap for long-term growth and profitability. Discussions are underway for collaboration and joint development with

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certain potential strategic partners as we aggressively pursue access to niche products and solutions with first-to-market opportunities in these high growth market segments

This strategy should enable Microphase to broaden its customer base and reduce risk by spreading its revenue base across multiple market sectors. Targeted acquisitions, if completed successfully, could increase our market share and the technology value of our product lines as well as broaden our product offerings and diversify our customer base. As a result, we believe that, we are well positioned to capitalize on growth opportunities in the following three key market segments:

Test and Measurements

We believe that there are significant potential opportunities in the RF/Microwave Test and Measurement industry for low-cost high frequency test solutions. We plan to use our core competencies, technologies, and resources to develop, manufacture, and market a unique portfolio of the industry’s first low-cost RF/Microwave and Millimeter-wave test and measurement products as alternative commercial products to conventional expensive custom test solutions.

On January 21, 2016, the Company entered into the T&M industry by closing on a purchase agreement with Dynamac, Inc. (“Dynamac”), pursuant to which the Company acquired certain assets in a line of proprietary RF and microwave test and measurement products, as well as related intellectual property. These test and measurement products are designed to test active and passive electronic components, devices and board level systems. The product line includes a unique portfolio of test and measurement products that we expect could reduce the test and measurement time for developers of electronic products from days or weeks to minutes.

According to the U.S. Department of Labor and Frost and Sullivan, the global RF/microwave test and measurement industry is estimated to reach $4.2 billion in 2016, growing at a compound annual rate of 7% as the increasing complexity of products translates into growth opportunities for RF/microwave test and measurement vendors. Key factors include the growth in wireless and mobile devices, constantly changing wireless standards, and a focus on Multiple Input Multiple Output (“MIMO”) technology using multiple antennas to make use of reflected signals to provide gains in channel quality and improved clarity. As standards continue to evolve and emerge, there is expected to be a greater demand for state of the art vector network and spectrum analyzers and related accessories.

This product line is proprietary and protected by two issued patents and more than 18 patent applications currently in process. The RF/Microwave test and measurement industry is dominated by five major global test equipment manufacturers, including Keysight Technologies (formerly Agilent Technologies), Anritsu, Rohde & Schwarz, Tektronix (a division of Danaher), and National Instruments. These manufacturers offer a range of vector network and spectrum analyzers which are key electronic test and measurement instruments for test and performance characterization of RF and microwave components, devices, and circuits. In addition to these five major test equipment manufacturers, there are several small manufacturers that offer a wide range of test and measurement tools and accessories, many of which are designed and intended to work and/or interface with test instruments manufactured by these five major manufacturers. Our T&M products include tools and solutions that are intended to interface directly with customers’ test instruments purchased from all the five major test equipment manufacturers, as well as to operate independently of these test instruments and, in some cases, compete with these test instruments.

Electronic Filters

An electronic filter provides a fundamental and necessary function in a communication system or device by allowing a band of desired frequencies to pass and attenuating all others. In doing so, the electronic filter eliminates interference and noise to allow communications to take place reliably. Virtually all communications systems, equipment, and devices use electronic filters in one or more places within their network architectures. Electronic filters are vital to the performance and operation of modern commercial, wireless, military and aerospace communications and electronic systems and devices. Electronic filters, which are also widely known

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as RF & Microwave filters, are designed to operate at radio, microwave, and millimeter-wave frequencies and are also used as building blocks for construction of duplexers, triplexers, quadplexers and the like, allowing two or more receivers and/or transmitters to simultaneously operate using a common single antenna.

Microphase has been developing and manufacturing high value, low volume electronic filters for the aerospace and defense market for over 50 years. Recently, the Company has been collaborating with another company to develop a line of filters based on an innovative new technology being jointly developed. This arrangement is expected to be structured as a joint venture, with such new technology to be owned by the joint venture company. These filters will be designed to be a fraction of the size of current filters, and also be a fraction of the cost. The target markets are defense and aerospace, wireless infrastructure, cellular handsets and other markets. Target customers include existing defense and aerospace customers and new commercial customers. The estimated target market size for the filters is expected to be $3.2 billion in 2016.

High Power Amplifiers

Microphase has been developing low power amplifiers for over 50 years and recently has been working with another company towards developing a new series of high power amplifiers based on a new technology developed by such other company. This arrangement is expected to be structured as a joint venture, with such new technology to be owned by such joint venture company. As proposed, the joint venture partner has developed the two patents and would contribute this intellectual property to the joint venture company and Microphase would commercialize the prototypes and take to market, as well as finishing development, marketing, manufacturing and selling the new amplifier product line. The new technology has been designed to generate multi-kilowatt RF/microwave power and operate at the safety of low DC voltage. It will be designed to be powerful, efficient, light-weight, compact, reliable, tunable, and easily serviceable with low manufacturing cost. The dollar per watt cost is competitive with magnetrons, the lowest price and least reliable source of RF power. The new amplifier will be used in RF/microwave amplifier systems for a wide range of military, commercial and industrial applications. The target market for the high power amplifiers is expected to be $1.7 billion in 2016.

Principal Customers; Government Contracts

Virtually all of our revenue in 2013, 2014 and 2015 was derived from sales to major defense contractors of advanced weapons systems to U.S. Government customers, including the DoD and intelligence and civilian agencies, as well as foreign military sales funded through the U.S. Government. Our U.S. Government sales are predominantly derived from contracts with prime military contractors to the U.S. Government for the manufacture of products to specification.

For U.S. Government fixed-price contracts, we agree to perform a specific scope of work for a fixed price and, as a result, may benefit from cost savings and may carry the burden of cost overruns. U.S. Government contracts are terminable at the convenience of the U.S. Government, as well as for default based on performance. Companies supplying goods and services to the U.S. Government are dependent on Congressional appropriations and administrative allotment of funds and may be affected by changes in U.S. Government policies resulting from various military, political, economic and international developments. Long-term U.S. Government contracts and related orders are subject to cancellation if appropriations for subsequent performance periods become unavailable. Under contracts terminable at the convenience of the U.S. Government, a contractor is entitled to receive payments for its allowable costs and, in general, the proportionate share of fees or earnings for the work done. Contracts that are terminable for default generally provide that the U.S. Government pays only for the work it has accepted and may require the contractor to pay for the incremental cost of re-procurement and may hold the contractor liable for damages. In many cases, there is also uncertainty relating to the complexity of designs, necessity for design improvements and difficulty in forecasting costs and schedules when bidding on developmental and highly sophisticated technical work. Under many U.S. Government contracts, we are required to maintain facility and personnel security clearances complying with DoD and other Federal agency requirements.

Competition

We operate in highly competitive markets that are sensitive to technological advances. Many of our competitors in each of our markets are larger than we are and maintain higher levels of expenditures for

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research and development. In each of our markets, we concentrate on the opportunities that our management believes are compatible with our resources, overall technological capabilities and objectives. Principal competitive factors in these markets are: product quality and reliability; technological capabilities; service; past performance; ability to develop and implement complex, integrated solutions; ability to meet delivery schedules; the effectiveness of third-party sales channels in international markets; and cost-effectiveness.

In the RF communications market, principal competitors for our filter components products include K & L Microwave R S Microwave; Lorch Microwave, a member of the Smith Group, a global technology company based in London; and Delta Diversified Products.

For our video amplifier products, principal competitors include American Microwave Corporation, Akon Inc., Planar Monolithics Industries, L-3 Narda- Miteq, a subsidiary of L-3 Communications Inc. and Signal Technology, a subsidiary of Crane Co.

Seasonality

There is no seasonality to the Company’s business.

Research and Development

We believe we have established a leading technology position in our fields through research and development activities. Research and development expenses were $943,084, $717,847, and $681,632 in fiscal year 2015, 2014 and 2013, respectively, representing 11.5%, 10.0% and 12.5% of total consolidated net sales, respectively, for these periods.

Backlog

As of March 31, 2016, our backlog was approximately $4.823 million. This was made up of 50 purchaser orders from 16 customers which are deliverable over the next year beginning April 1. The orders range from $800 to $420,660, with the average order expected to generate $92,000 in revenue, and 39 of the orders are for less than $100,000. The timing of large orders can have an impact on quarterly and annual results.

Government Regulation

The Company’s products are incorporated into wireless communications systems that are subject to regulation domestically by the Federal Communications Commission and internationally by other foreign government agencies. In addition, because of its participation in the defense industry, the Company is subject to audit from time to time for compliance with government contract regulations by various governmental agencies. The Company is also subject to a variety of local, state and federal government regulations relating to environmental laws as they relate to toxic or other hazardous substances used to manufacture the Company’s products. The Company believes that it operates its business in compliance with applicable laws and regulations; however, any failure to comply with existing or future laws or regulations could have a material adverse effect on the Company’s business, financial condition and results of operations.

Intellectual Property

We rely upon trade secrets, technical know-how and continuing technological innovation to develop and maintain our competitive position. The products we sell require significant engineering design and manufacturing expertise. Most of these technological capabilities, however, are not protected by patents or licenses. We rely on the expertise of our employees and our learned experiences in both the design and manufacture of our products and the delivery of our services.

Over the last 20 years we have been issued four U.S. patents, one of which is still in force. Due to our market position, we do not expect that the expiration of this patent will affect our future results.

The Company has acquired two patents in connection with the acquisition of the Test and Measurement product line from Dynamac. Additionally, the Company has plans for filing 18 additional patents to protect such product line acquired from Dynamac.

Employees

As of June 30, 2016, the Company had 62 full-time employees, as well as several part-time employees, paid consultants and contract workers

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Properties

We maintain our current principal office at 100 Trap Falls Road Extension, Shelton, Connecticut 06484. This facility has 23,898 square feet with a base monthly rent of $24,740, for a 7-year term with annual escalations of 3%. The Company also has a 4,000 square foot facility in Folsom, California, with monthly rent of $12,000 which is terminating July 31, 2016.

It is our belief that our current facilities are adequate for our immediate needs. Additional space may be required as we expand our business activities. We do not foresee any significant difficulties in obtaining additional facilities if deemed necessary.

Legal Proceedings

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.

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MANAGEMENT

As of the date of this prospectus, our directors, executive officers and significant employees are as follows:

Name		Age		Positions with the Company
Necdet F. Ergul		92		Chairman, Chief Executive Officer, President
Paul H. DeCoster		82		Director
James Ashman		61		Director and Chief Financial Officer
Michael Ghadaksaz		60		Director and Chief Technology Officer, Chief Marketing Officer
Jeffrey Peterson		58		Director, Chief Administrative Officer, Secretary, Treasurer

Each director serves for a one year term, or until his successor is duly elected and qualified or his earlier resignation, removal or disqualification. The business experience of each of our directors and executive officers for the following:

Necdet F. Ergul, Chairman of the Board of Directors, Chief Executive Officer and President

Mr. Ergul founded Microphase in 1955 and has been its chief executive officer and a director since inception. In addition to his management responsibilities at Microphase, he is active in engineering design and related research and development.

Mr. Ergul holds a Masters Degree in Electrical Engineering from the Polytechnic Institute of Brooklyn, New York and an undergraduate degree from Roberts College in Istanbul, Turkey.

Mr. Paul H. DeCoster, Director

Mr. DeCoster has been a director of Microphase since February 2015. He is a semi-retired corporate lawyer with more than 50 years of experience. Mr. DeCoster was a Partner in Jackson & Nash, LLP, a law firm based in New York, New York, where he worked for over 27 years through 1999. Mr. DeCoster graduated from Yale University in 1955, and graduated from Yale Law School in 1958.

James Ashman, Chief Financial Officer and Director

Mr. Ashman has been Microphase’s Chief Financial Officer since August 2014 and a Director since February 2015. He has more than 20 years of experience as a senior finance executive in the technology, telecommunications, software and advanced materials industries. From 2013 to 2014 he was the Chief Financial Officer of DefenCall Inc., an emergency communication company. From 2009 to 2013, he was the Chief Financial Officer of Axxun Inc., a software development company. From 2001 to 2008 Mr. Ashman was a member of the Board of Directors and Chairman of the finance committee and the compensation committee of Starfire Systems, Inc., a developer and manufacturer of nano-structured ceramic materials and finished products. Prior to that he spent 11 years as an investment banker, primarily at Prudential Securities, where he worked on public offerings of debt and equity securities, private placements and merger and acquisition advisories for companies in a wide range of industries.

He graduated from Columbia University in 1981 and received an MBA from Columbia Business School in 1983.

Michael Ghadaksaz, Chief Technology Officer, Chief Marketing Officer and Director

Mr. Ghadaksaz has been Microphase’s Chief Technology Officer and Chief Operating Officer since April 2014 and a Director since February 2015. Mr. Ghadaksaz has more than 29 years of experience in RF/Microwave, wireless technology, test & measurements, defense, and venture capital industries senior technology and executive management. Previously, he has held multiple executive-level positions at ten companies in various industries, including: RF/Microwave and millimeter-wave products, wireless technology, electronic test & measurements, public safety land mobile radio, telecom, and military communications. He had also served as a senior technology and business consultant to venture capital firms and technology investment banks. From 2010 to 2013, Mr. Ghadaksaz was the President and Chief Technical Officer of AES Technologies, Inc., an electronic test & measurement technology start-up company. From 2008 to 2010, he was Director of North America Technology Planning and Business Strategy for Huawei Technologies, a leading global telecom equipment manufacturer. From 2003 to 2008, he was Vice President of Business development, Corporate

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Officer, and Member of Board of Directors’ Technical Committee of Merrimac Industries (now Crane Aerospace), a leading manufacturer of integrated RF, microwave, and millimeter-wave products and solutions. From 1999 to 2002, he was Director of Technology Strategy of Motorola, the leading global manufacturer of land mobile radio products for Public Safety and Homeland Security markets. From 1995 to 1999, he was Senior Scientist and Director of Applications of Hughes Aircraft Company (now Raytheon), a leading defense and aerospace system manufacturer. Prior to his employment at Hughes Aircraft, Mr. Ghadaksaz held engineering and management positions at GTE Laboratories (now Verizon), General Electric Mobile Communications Business (now Harris), Canadian Marconi Defense Communications Division and Bell Canada Enterprises. Mr. Ghadaksaz holds several patents and was recipient of 2012 Illinois 10^th Congressional District Community Leadership Award for Entrepreneurial Excellence.

He has an undergraduate degree from University of Ottawa and a Master’s degree in Microwave Electronics from Carleton University in Ottawa, Canada.

Jeffrey Peterson, Chief Administrative Officer, Secretary, Treasurer and Director.

Mr. Peterson has over 14 years of accounting department and operations experience with the Company. In September 2014, Mr. Peterson returned from an absence and become the Company’s controller. He also has 14 years of operations experience as assistant vice president with the Industrial Bank of Japan, New York Bank in New York, New York.

He has an undergraduate degree in Asian Studies from Vassar College, 1979, and an MBA from Pace University, 1983, and a bachelors’ degree in accounting from Pace University, 2003. He attained the CPA accreditation in 2005.

Family Relationships

Mr. Ergul is Mr. Peterson’s father-in-law. There are no other family relationships among any of our directors or executive officers.

Board Composition and Director Independence

As of the date of this prospectus, our board of directors consists of five members: Messrs. Ergul, DeCoster, Ashman, Ghadasksaz and Peterson. The directors will serve until our next annual meeting or until their successors are duly elected and qualified.

Our board has determined that none of our current directors is currently qualified as independent. Prior to the effectiveness of the registration statement of which this prospectus is a part, we intend to restructure our Board of Directors in order to comply with the Nasdaq listing requirements and the rules of the Securities and Exchange Commission.

Board Committees

Prior to the effectiveness of the registration statement of which this prospectus is a part, our board of directors will establish an audit committee, a compensation committee and a nominating and corporate governance committee in accordance with Nasdaq and SEC requirements. Each committee will have its own charter, which will be available on our website at www.microphase.com. Information contained on our website is not incorporated herein by reference. As of the date of this prospectus, each of the board committees will have the composition and responsibilities described below.

Audit Committee

Upon the effectiveness of the registration statement of which this prospectus is a part, we will have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Each member of the Audit Committee will be “independent” within the meaning of Rule 10A-3 under the Exchange Act and the Nasdaq requirements, as well as a member who is a “financial expert.”.

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The Audit Committee will oversee our accounting and financial reporting processes and oversee the audit of our financial statements and the effectiveness of our internal control over financial reporting. The specific functions of the Audit Committee include, but are not limited to:

Compensation Committee

Prior to the effectiveness of the registration statement of which this prospectus forms a part, we will have a separately designated Compensation Committee. Each member of the Compensation Committee will be independent, as described above. In addition, each member of our Compensation Committee will qualify as a “non-employee director” under Rule 16b-3 of the Exchange Act. Our Compensation Committee will assist the board of directors in the discharge of its responsibilities relating to the compensation of the board of directors and our executive officers.

The Compensation Committee’s compensation-related responsibilities include, but are not limited to:

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Nominating and Corporate Governance Committee

Prior to the effectiveness of the registration statement of which this prospectus is a part, we will have a separately designated Nominating and Corporate Governance Committee. Each member of the Nominating and Corporate Governance Committee will be independent as described above. The purpose of the Nominating and Corporate Governance Committee is to recommend to the board nominees for election as directors and persons to be elected to fill any vacancies on the board, develop and recommend a set of corporate governance principles and oversee the performance of the board.

The Committee’s responsibilities will include:

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EXECUTIVE COMPENSATION

The following table provides each element of compensation paid or granted to each executive officer and director for services rendered during the fiscal years ended June 30, 2015, 2014 and 2013.

Summary Compensation Table

		Year				Salary ($)				Bonus ($)				Option Awards ($)				All Other Compensation ($)*				Total ($)
Necdet F. Ergul –  Chairman of the Board, Chief Executive Officer			June 30, 2015			$	239,904			$	—			$	—			$	—			$	239,904
			June 30, 2014			$	250,000			$	—			$	—			$	—			$	250,000
			June 30, 2013			$	250,000			$	—			$	—			$	—			$	250,000
Ronald A. Durando –  Strategic Advisor (2015); Chief Operating Officer, Director (2014)(1)			June 30, 2015			$	240,865			$	25,000			$	—			$	—			$	265,865
			June 30, 2014			$	250,000			$	26,900			$	—			$	—			$	276,900
			June 30, 2013			$	250,000			$	23,750			$	—			$	—			$	273,750
Brian Kelly –  Consultant/General Manager(2)			June 30, 2015			$	—			$	—			$	—			$	195,692			$	195,692
			June 30, 2014			$	—			$	—			$	—			$	199,038			$	199,038
			June 30, 2013			$	—			$	—			$	—			$	160,353			$	166,353
Michael Ghadaksaz, Chief Marketing and Technical Officer – 2015			June 30, 2015			$	131,827			$	—			$	—			$	—			$	131,827
James Ashman, Chief Financial Officer and Director – 2015			June 30, 2015			$	99,499			$	—			$	—			$	—			$	99,499
Jeffrey Peterson, Secretary and Director – 2015			June 30, 2015			$	77,114			$	—			$	—			$	—			$	77,114

Currently, the Company has employment agreements with Messrs. Ergul, Ashman, Ghadaksaz and Mr. Durando.

Mr. Ergul, Chief Executive Officer, is presently compensated at an annualized rate of approximately $225,000.

Mr. Ronald Durando rejoined the company in February of 2015 as an employee in the role of strategic advisor and is presently compensated at an annualized rate of approximately $225,000.

Mr. Brian Kelly, General Manager, entered into a consulting agreement with the Company in June 2008, and is presently compensated at an annualized rate of $192,000.

Mr. James Ashman, Chief Financial Officer and Director, joined the Company in August 2014 and is presently compensated at an annualized rate of approximately $165,000.

Mr. Michael Ghadaksaz, Chief Marketing and Technical Officer and Director, joined the Company in April 2014 and is presently compensated at an annualized rate of approximately $175,000.

Mr. Jeffrey Peterson, Chief Administrative Officer, Secretary and Treasurer, re-joined the Company in July 2014 and is presently compensated at an annualized rate of approximately $100,000.

Compensation Process and the Role of Our Compensation Committee

During 2015, our board of directors was responsible for overseeing our executive compensation program, establishing our executive compensation philosophy and programs, and determining specific executive compensation, including cash and equity. Upon effectiveness of the registration statement of which this

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prospectus forms a part, we intend to establish a compensation committee. Unless otherwise stated, the discussion and analysis below is based on decisions by the board of directors.

During 2015, our board of directors considered one or more of the following factors when setting executive compensation, as further explained in the discussions of each compensation element below:

With our transition to being a company listed on Nasdaq, our compensation program following this offering may, over time, vary significantly from our historical practices. For example, we expect that following this offering, in setting executive compensation, the Compensation Committee may review and consider, in addition to the items above, factors such as the achievement of predefined milestones, tax deductibility of compensation, the total compensation that may become payable to executive officers in various hypothetical scenarios, the performance of our common stock and compensation levels at public peer companies.

Executive Compensation Program Components

Base Salary

We provide base salary as a fixed source of compensation for our executive officers, providing them a degree of certainty in addition to having a meaningful portion of their compensation “at risk” in the form of equity awards. The board of directors recognizes the importance of base salaries as an element of compensation that helps to attract highly qualified executive talent.

Base salaries for our executive officers were established primarily based on individual negotiations with the executive officers when they joined us and reflect the scope of their anticipated responsibilities, the individual experience they bring, the board members’ experiences and knowledge in compensating similarly situated individuals at other companies, our cash constraints at the time we entered into an employment contract with each executive officer, and a general sense of internal pay equity among our executive officers. The board does not apply specific formulas in determining base salary increases.

Outstanding Equity Awards at June 30, 2015

The following table summarizes the outstanding equity award holdings held by our named executive officers at June 30, 2015.

Name		Number of Securities Underlying Unexercised Options Exercisable				Number of Securities Underlying Unexercised Options Unexercisable				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options				Weighted Average Exercise Price				Expiration Date				Number of Shares or Units of Stock That Have Not Vested				Market Value of Shares or Units of Stock That Have Not Vested				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Necdet Ergul			0				0				0			$	0				0				0				0				0				0
Michael Ghadaksaz			0				0				0			$	0				0				0				0				0				0
James Ashman			25,000				50,000				0			$	2.00				9/30/22				0				0				0				0

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Director Compensation

The following table provides information regarding the compensation of the Company’s non-employee directors for the year ended June 30, 2015:

Name Current Directors		Fees Earned or Paid in Cash				Stock Awards				Option Awards				Non-Equity Incentive Plan Compensation				Non-qualified Deferred Compensation Earnings				All Other Compensation				Total
Paul DeCoster		$	0			$	0			$	0			$	0			$	0			$	0			$	0

Potential Payments upon Termination or Change in Control

Messrs. Ergul, Ashman, Ghadaksaz and Durando are each covered by an employment agreement that calls for potential payments upon termination or change in control, as summarized below.

Employment Agreements

The Company has entered into employment contracts with Messrs. Ergul, Ashman and Ghadaksaz.

Mr. Ergul entered into an employment agreement with the Company dated as of February 6, 2015 (the “Ergul Agreement”), pursuant to which Mr. Ergul will receive $225,000 per year in base compensation, in addition to certain benefits, for serving as the Company’s Chief Executive Officer. The term of the Ergul Agreement shall continue through February 1, 2018, and Mr. Ergul may receive severance for terminations under circumstances other than for Cause (as such term is defined therein). The Ergul Agreement contains provisions regarding indemnification, confidentiality and non-competition, among others.

Mr. Ashman entered into an employment agreement with the Company dated as of February 6, 2015, which was subsequently revised as of July 1, 2016 (the “Ashman Agreement”), pursuant to which Mr. Ashman will receive $165,000 per year in base compensation, in addition to certain benefits, for serving as the Company’s Chief Financial Officer. Mr. Ashman’s employment is “at will,” but Mr. Ashman would receive twelve months’ severance upon termination, subject to compliance with obligations thereunder. The Ashman Agreement contains provisions regarding indemnification, confidentiality and non-competition, among others.

Mr. Ghadaksaz entered into an employment agreement with the Company dated as of February 6, 2015 which was subsequently revised as of July 1, 2016 (the “Ghadaksaz Agreement”), pursuant to which Mr. Ghadaksaz will receive $175,000 per year in base compensation, in addition to certain benefits, for serving as the Company’s Chief Technology Officer and Chief Marketing Officer. Mr. Ghadaksaz’s employment is “at will,” but Mr. Ghadaksaz would receive twelve months’ severance upon termination, subject to compliance with obligations thereunder. The Ghadaksaz Agreement contains provisions regarding indemnification, confidentiality and non-competition, among others.

Mr. Durando entered into an employment agreement with the Company dated as of February 6, 2015 (the “Durando Agreement”), pursuant to which Mr. Durando will receive $225,000 per year in base compensation, in addition to certain benefits, for serving as the Company’s Strategic Advisor. The term of the Durando Agreement shall continue through February 1, 2018 and Mr. Durando may receive twelve months’ severance for terminations under circumstances other than for Cause (as such term is defined therein). The Durando Agreement contains provisions regarding indemnification, confidentiality and non-competition, among others.

The Company owed as of June 30, 2015, 2014 and 2013, respectively, $252,815, $332,815 and $223,894 to Mr. Ergul, and $80,000, $170,656 and $191,658 to Mr. Durando.

Equity Compensation Plan Information

The Board approved the implementation of a stock option plan in January 2015, reserving 250,000 shares of common stock for this plan; however, such plan has not yet been set forth in a formal document adopted by the Board. The Board will seek shareholder approval prior to making any grants under such plan.

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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

Assuming completion of our re-incorporation in the State of Delaware, our authorized capital stock will consist of 110,000,000 shares, of which 100,000,000 are for shares of common stock, $0.0001 par value per share, 200,000 are for shares of preferred stock, par value $100 per share, all of which have been designated as Series A Convertible Preferred Stock and 9,800,000 are for shares of “blank check” preferred stock, having such designations, rights and preferences as the Board of Directors may determine, in its sole discretion, from time to time. Our authorized capital stock currently consists of 8,000,000 shares, of which 7,800,000 are for shares of common stock, no par value per share, and 200,000 are for shares of preferred stock, par value $100 per share, all of which have been designated as Series A Convertible Preferred Stock. As of July 25, 2016, there were 6,200,789 shares of our common stock issued and outstanding, all of which were fully paid, non-assessable and entitled to vote. Each share of our common stock entitles its holder to one vote on each matter submitted to the stockholders. There are 15,382 shares of Series A Convertible Preferred Stock issued and outstanding, which are convertible into 1,025,467 shares of Common Stock at $1.50 per share.

The following table sets forth information as of June 30, 2016, with respect to the beneficial ownership of our common stock by (i) each of our officers and directors, (ii) our officers and directors as a group and (iii) each person known by us to beneficially own five percent (5%) or more of our outstanding common stock. Unless otherwise specified, the address of each of the persons set forth below is in care of Microphase Corp., 100 Trap Falls Road Extension, Shelton, Connecticut 06484. The securities “beneficially owned” by a person are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the SEC and accordingly, may include securities owned by or for, among others, the spouse, children or certain other relatives of such person, as well as other securities over which the person has or shares voting or investment power or securities which the person has the right to acquire within 60 days.

AFFILIATES(1)(2)		Shares				Warrants/ Conversion Rights				Total				Percent of Common Stock
Microphase Holding Company LLC(3)			1,833,702				791,734				2,625,436				37.55	%
RCKJ Trust(4)(5)			2,034,656				395,867				2,430,523				36.84	%
Necdet Ergul(5)(6)			1,133,169				585,867				1,719,036				25.33	%
James Ashman(7)			110,000				25,000				135,000				2.17	%
Michael Ghadaksaz(8)			140,000				—				140,000				2.26	%
Jeffrey Peterson			10,000				—				10,000				0.16	%
Brian Kelly			198,000				—				198,000				3.19	%
Total Affiliates			3,625,825				1,006,734				4,632,559				69.96	%

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Related Party Transactions

The Company had activities with related parties during the fiscal years 2015, 2014, 2013 and 2012 as follows:

Effective March 6, 2013, the Company received title to its former corporate headquarters and production facility in Norwalk, Connecticut from Microphase Holding Company, LLC, (“MHC”), an 82% shareholder of the Company at the time, in an exchange transaction intended to be tax free under §351 of the Code. Title to the building had originally been held by Edson Realty, Inc. (“Edson”), a related party that had previously transferred the building to MHC, together with 2,532 shares of Series A Convertible Preferred Stock of the Company and 1,280,543 shares of common stock of the Company, on March 6, 2013 in exchange for the assumption of $2,268,975 of mortgage and mortgage related obligations by MHC. The Company issued 10,000 shares of Series A Convertible Preferred Stock to MHC to complete the transaction. MHC is owned 50% by Mr. Ergul and 50% by the RCJK Trust, of which Mr. Ronald Durando, our former chief operating officer, is grantor. The historical carrying value of the building and underlying land as held by Edson and then MHC, $500,247, was recorded as the historical cost on the Company’s books as of March 6, 2013. The Company recorded liabilities in excess of basis of $2,268,729 in connection with this transfer treated for accounting purposes as a contribution of property, which is shown as a reduction of equity in the Statement of Changes in Stockholders’ Deficit during the fiscal year ended June 30, 2013.

Prior to March 6, 2013 the Company was a guarantor of the mortgage note made by Edson in favor of Capital One Bank as part of the terms of its former lease to Edson. The balance of this note at June 30, 2012 was $2,289,268 plus any adjustments for swap differences. The Company assumed this mortgage in connection with the transfer of the building to the Company, which was treated for accounting purposes as a contribution of property (as discussed above), and the balance at June 30, 2013 was $2,270,187. On November 22, 2013 this mortgage note and all mortgage related obligations, including adjustments for swap differences, were satisfied when the building was sold to an unrelated third party. Amortization of deferred finance costs included in interest expense for this mortgage was $20,192 and $1,524 in 2014 and 2013, respectively.

The Company has some common management and common significant shareholders with mPhase Technologies, Inc. (“mPhase”), and had owned a total of 42,793,354 shares of common stock of mPhase, a publicly traded company. Mr. Ergul had been the Chairman of the Board of mPhase from 1997 through 1999. Mr. Durando is the Chief Operating Officer and a Director of mPhase and has held those positions since 1997. The mPhase shares owned by the Company were valued at $38,514 as of June 30, 2012, and the same shares were valued at $55,632 as of June 30, 2013. Effective June 30, 2014, the mPhase shares were transferred by the Company to Mr. Ergul and Mr. Durando as partial repayment of loans extended by them to the Company. The transfer was valued at $34,235 based upon the closing trading price for the mPhase shares on that date. The Company realized a $60,033 loss on the disposition of these shares, $38,636 of which had previously been reserved for market value declines through June 30, 2013 and $21,397 of which was attributable to the

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year ended June 30, 2014. The amounts outstanding under loans from officers to the Company are included in the financial statements under the caption — Notes Payable — Related Parties. See also Note 8 — Notes Payable — Related Parties.

The Company sublet office space to mPhase from October 2, 1996 until March 31, 2015 and leased a vehicle to mPhase in fiscal 2015. In fiscal 2015 the rent recorded for the office space was $13,500 and the vehicle was leased for $9,000. In fiscal 2014 the rent received for the office space was $20,090. As of June 30, 2015 and 2014, mPhase owed the Company $28,045 and $16,183, respectively.

Policy on Future Related Party Transactions

All future transactions between us and our officers, directors, principal stockholders and their affiliates will be approved by the audit committee, or a similar committee consisting of entirely independent directors, according to the terms of our Code of Business Conduct and our Related Party Transaction Policies and Procedures.

DESCRIPTION OF CAPITAL STOCK

Common and Preferred Stock

Pursuant to the Company’s proposed reincorporation in the State of Delaware, assuming the effectiveness thereof, the Company will be authorized by its Certificate of Incorporation to issue an aggregate of 110,000,000 shares, of which 100,000,000 are for shares of common stock, $0.0001 par value per share, 200,000 are for shares of preferred stock, par value $100 per share, all of which have been designated as Series A Convertible Preferred Stock and 9,800,000 are for shares of “blank check” preferred stock, having such designations, rights and preferences as the Board of Directors may determine, in its sole discretion, from time to time. The Company is authorized by its Certificate of Incorporation and Certificate of Designation to issue an aggregate of 8,000,000 shares of capital stock, of which 7,800,000 are shares of common stock, no par value per share, and 200,000 are shares of Series A Convertible Preferred Stock, par value $100.00 per share. As of June 30, 2016, 6, 200,789 shares of Common Stock and 15,382 shares of Preferred Stock were issued and outstanding, respectively.

Common Stock

The holders of our common stock (i) have equal ratable rights to dividends from funds legally available therefore, when, as and if declared by our Board of Directors; (ii) are entitled to share ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs; (iii) do not have pre-emptive, subscription or conversion rights (and there are no redemption or sinking fund provisions or rights); and (iv) are entitled to one non-cumulative vote per share on all matters on which shareholders may vote.

The shares of our common stock are not subject to any future call or assessment and all have equal voting rights. There are no special rights or restrictions of any nature attached to any of the shares of our common stock and they all rank at equal rate or “pari passu,” each with the other, as to all benefits, which might accrue to the holders of the shares of our common stock. All registered shareholders are entitled to receive a notice of any general annual meeting to be convened.

At any general meeting, subject to the restrictions on joint registered owners of shares of our common stock, on a showing of hands every shareholder who is present in person and entitled to vote has one vote, and on a poll every shareholder has one vote for each share of our common stock of which he is the registered owner and may exercise such vote either in person or by proxy. Holders of shares of our common stock do not have cumulative voting rights, which means that the holders of more than 50% of the outstanding shares of common stock, voting for the election of directors, can elect all of the directors to be elected, if they so choose, and, in such event, the holders of the remaining shares of common stock will not be able to elect any of our directors.

Series A Convertible Preferred Stock

As of June 30, 2016, 200,000 shares of our Series A Convertible Preferred Stock (“Preferred Stock”) shares are authorized of which 15,382 were issued and outstanding, held by six shareholders.

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Dividends.  The Preferred Stock, with respect to dividends, ranks senior to our common stock. Holders of Preferred Stock are entitled to receive, when and as declared by the Board of Directors, dividends at the annual rate of 6% of the stated par value, or $100 per share. Dividends are cumulative and accrue from the effective date of issuance of the Preferred Stock until declared.

Liquidation.  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the holders Preferred Stock shall be entitled to be paid the full par value of such Preferred Stock, plus the dividends accumulated thereon up to the date of such liquidation, dissolution, or winding up of the Company (whether or not the Company shall have a surplus or earnings available for dividends), and no more. After payment to the holders of the Preferred Stock of the full amount payable to them as aforesaid, the remaining assets of the Company shall be payable to and distributed pro rata among the holders of record of our common stock. For these purposes, the consolidation or merger of the Company with or into another corporation or entity shall not constitute, nor shall the sale, lease or conveyance of all or substantially all of the assets of the Company as an entity in and of itself, constitute, a liquidation, dissolution or winding up of affairs of the Company.

Conversion.  The Preferred Stock is convertible into shares of the Company’s common stock at any time at the option of the holders the preferred shares, on notice to the Company. The conversion price is to be agreed upon by the board of directors and the holder at the time of each conversion. 2,850 of the presently issued and outstanding 15,382 preferred shares were convertible into common stock at $1.50 per share until the earlier of October 4, 2015 or the date the Company’s common stock become quoted in an established public trading market. On February 11, 2016, the Board voted to make all of the then outstanding Preferred Stock convertible into common stock at $1.50 per share until the date the Company’s common stock is quoted on an established public trading platform.

Voting Rights.  The holders Preferred Stock, voting together with the holders of Common Stock, have one vote per share for the election of directors and on all other matters.

Anti-Takeover Effects of Provisions of the DGCL and our Certificate of Incorporation and Bylaws

Assuming completion of our reincorporation in Delaware, provisions of the Delaware General Corporations Law (“DGCL”) and our certificate of incorporation and bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and takeover bids that our board of directors may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in improved terms for our stockholders.

Delaware Anti-Takeover Statute.  Assuming completion of our reincorporation in Delaware, we are, subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, unless the business combination or the acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status did own) 15% or more of a corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of Common Stock held by stockholders.

Assuming completion of our reincorporation in Delaware, as of July 25, 2016, we would not be subject to Section 203 of the DGCL because we do not have a class of voting stock that is listed on a national securities exchange or held of record by more than 2,000 stockholders and we have not elected by a provision in our original certificate of incorporation to be governed by Section 203. Unless we adopt an amendment of our certificate of incorporation by action of our stockholders expressly electing not to be governed by Section 203,

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we would generally become subject to Section 203 of the DGCL at such time that we have a class of voting stock that is either listed on a national securities exchange or held of record by more than 2,000 stockholders, except that the restrictions contained in Section 203 would not apply if the business combination is with an interested stockholder who became an interested stockholder before the time that we have a class of voting stock that is either listed on a national securities exchange or held of record by more than 2,000 stockholders.

Amendments to Our Certificate of Incorporation.  Under the DGCL, the affirmative vote of a majority of the outstanding shares entitled to vote thereon and a majority of the outstanding stock of each class entitled to vote thereon is required to amend a corporation’s certificate of incorporation. Under the DGCL, the holders of the outstanding shares of a class of our capital stock shall be entitled to vote as a class upon a proposed amendment, whether or not entitled to vote thereon by the certificate of incorporation, if the amendment would:

If any proposed amendment would alter or change the powers, preferences or special rights of one or more series of any class of our capital stock so as to affect them adversely, but shall not so affect the entire class, then only the shares of the series so affected by the amendment shall be considered a separate class for the purposes of this provision.

Vacancies in the Board of Directors.  Assuming completion of our reincorporation in Delaware, our certificate of incorporation and bylaws will provide that, subject to limitations, any vacancy occurring in our board of directors for any reason may be filled by a majority of the remaining members of our board of directors then in office, even if such majority is less than a quorum. Each director so elected shall hold office until the expiration of the term of the other directors. Each such directors shall hold office until his or her successor is elected and qualified, or until the earlier of his or her death, resignation or removal.

Special Meetings of Stockholders.  Assuming completion of our reincorporation in Delaware, under our bylaws, special meetings of stockholders may be called by a majority of the directors or by the President or upon written request of the holders of 10% of the outstanding shares entitled to vote. Under the DGCL, written notice of any special meeting must be given not less than 10 nor more than 60 days before the date of the special meeting to each stockholder entitled to vote at such meeting.

No Cumulative Voting.  The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise. Our certificate of incorporation does not provide for cumulative voting.

Authorized but Unissued Shares

Our authorized but unissued shares of common stock and Preferred Stock will be available for future issuance without shareholder approval, except as may be required under the listing rules of any stock exchange on which our common stock is then listed. We may use additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Limitation on Directors’ Liability

Delaware law authorizes Delaware corporations to limit or eliminate the personal liability of their directors to them and their stockholders for monetary damages for breach of a director’s fiduciary duty of care. The duty of care requires that, when acting on behalf of the corporation, directors must exercise an informed business judgment based on all material information reasonably available to them. Absent the limitations Delaware law authorizes, directors of Delaware corporations are accountable to those corporations and their stockholders for monetary damages for conduct constituting gross negligence in the exercise of their duty of care. Delaware

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law enables Delaware corporations to limit available relief to equitable remedies such as injunction or rescission. Our certificate of incorporation limits the liability of our directors to us and our stockholders to the fullest extent Delaware law permits. Specifically, no director will be personally liable for monetary damages for any breach of the director’s fiduciary duty as a director, except for liability:

Assuming completion of our reincorporation in Delaware, this provision could have the effect of reducing the likelihood of derivative litigation against our directors and may discourage or deter our stockholders or management from bringing a lawsuit against our directors for breach of their duty of care, even though such an action, if successful, might otherwise have benefited us and our stockholders. Our bylaws will provide indemnification to our officers and directors and other specified persons with respect to their conduct in various capacities.

Assuming completion of our reincorporation in Delaware, our certificate of incorporation will also provide that if Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

Assuming completion of our reincorporation in Delaware, our certificate of incorporation will also provide that we shall have the power to indemnify our employees and agents to the fullest extent permitted by law and also permits us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in this capacity, regardless of whether our amended and restated bylaws would permit indemnification. We renewed our directors’ and officers’ liability insurance, effective July 1, 2016.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or person controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

Limitations on Liability and Indemnification of Directors and Officers

Our directors and officers are indemnified as provided by the Connecticut corporate law. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

We have been advised that in the opinion of the SEC indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our

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legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.

Transfer Agent and Registrar

The transfer agent and registrar for our Common Stock is Jersey Stock Transfer, LLC.

UNDERWRITING

Joseph Gunnar & Co., LLC is acting as representative of the underwriters (the “Representative”). We have entered into an underwriting agreement dated         , 2016 with the Representative. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of shares of common stock and warrants listed next to its name in the following table:

Name of Underwriter		Number of Shares				Number of Warrants
Joseph Gunnar & Co., LLC
Total

The underwriters are committed to purchase all the shares of common stock and warrants offered by us other than those covered by the option to purchase additional shares and warrants described below, if they purchase any shares. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.

We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.

The underwriters are offering the shares and warrants, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.

We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the date of this prospectus, permits the underwriters to purchase a maximum of        additional shares and/or        warrants (15% of the shares and warrants sold in this offering) from us to cover over-allotments, if any. If the underwriters exercise all or part of this option, they will purchase such shares and warrants covered by the option at the public offering price that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total price to the public will be $11,500,000 and the total net proceeds, before expenses, to us will be $         .

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Discounts

The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.

Per Share

Per Warrant

Total Without Over-Allotment Option

Total With Full Over-Allotment Option

Public offering price

$

$

$

$

Underwriting discount (7%)

$

$

$

$

Non-accountable expense allowance (1%)

$

$

$

$

Proceeds, before expenses, to us

$

$

$

$

The underwriters propose to offer the shares and warrants offered by us to the public at the public offering price set forth on the cover of this prospectus. In addition, the underwriters may offer some of the shares and warrants to other securities dealers at such price less a concession of $          per share. If all of the shares and warrants offered by us are not sold at the public offering price, the Representative may change the offering price and other selling terms by means of a supplement to this prospectus.

We have agreed to pay the Representative a non-accountable expense allowance of 1% of the public offering price at the closing, excluding the over-allotment option. We have paid an expense deposit of $12,500 to the Representative, which will be applied against such non-accountable expense allowance.

We have also agreed to pay the following expenses of the Representative relating to the offering: (a) all fees, expenses and disbursements relating to background checks of our officers and directors in an amount not to exceed $5,000 per individual and $15,000 in the aggregate; (b) all filing fees and communication expenses associated with the review of this offering by FINRA; (c) all fees, expenses and disbursements relating to the registration, qualification or exemption of securities offered under the securities laws of foreign jurisdictions designated by the Representative, including the reasonable fees and expenses of the Representative’s blue sky counsel up to $5,000; (d) $29,500 for the underwriters’ use of Ipreo’s book-building, prospectus tracking and compliance software for this offering; (e) $20,000 of the Representative’s actual accountable road show expenses for the offering; (f) the costs associated with receiving commemorative mementos and lucite tombstones; and (g) fees for underwriters’ counsel, not to exceed $75,000.

We estimate that the total expenses of the offering payable by us, excluding the total underwriting discount, will be approximately $          cash and           in shares of our common stock.

Discretionary Accounts

The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.

Lock-Up Agreements

Pursuant to “lock-up” agreements, we, our executive officers and directors, and certain of our stockholders, have agreed, subject to limited exceptions, without the prior written consent of the Representative not to directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) any shares of our common stock, enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common stock, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities of the Company or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, for a period of 180 days from the date of this prospectus, in the case of our directors and officers, and 90 days from the date of this prospectus, in the case of us and our principal stockholders.

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Representative’s Warrants

We have agreed to issue to the Representative warrants to purchase up to a total of           shares of common stock (5% of the shares of common stock sold in this offering, excluding the over-allotment option). The warrants will be exercisable at any time, and from time to time, in whole or in part, during the four-year period commencing one year from the effective date of the offering, which period shall not extend further than five years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G). The warrants are exercisable at a per share price equal to 150% of the public offering price per share in the offering. The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or permitted assignees under Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the date of this prospectus.

The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.

Right of First Refusal

Until 18 months after the closing date of the offering, the Representative will have a right of first refusal to act as lead underwriter for any future public or private equity (a “Subject Transaction”) offering during such 18-month period.

Electronic Offer, Sale and Distribution of Shares

A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters or selling group members. The Representative may agree to allocate a number of shares to underwriters and selling group members for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us, and should not be relied upon by investors.

Determination of the Initial Public Offering Price

Prior to this offering, there has been no public market for our common stock. The initial public offering price was determined through negotiations between us and the Representative. In addition to prevailing market conditions, the factors considered in determining the initial public offering price included the following:

An active trading market for our common stock may not develop. It is also possible that, after the offering, the shares will not trade in the public market at or above the initial public offering price.

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Stabilization

In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our shares of common stock or preventing or retarding a decline in the market price of our shares of common stock. As a result, the price of our common stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may be effected on the NASDAQ Capital Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.

Passive Market Making

In connection with this offering, underwriters and selling group members may engage in passive market making transactions in our common stock on the NASDAQ Capital Market or on the OTCQB in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.

Restriction on Continuous Offerings

The Company, without the prior written consent of the Representative, will not for a period of 12 months after the date of the underwriting agreement, directly or indirectly, consummate or enter into any agreement for any “at-the-market” or continuous equity transaction.

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Other Relationships

Certain of the underwriters and their affiliates may in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they may in the future receive customary fees.

Offer Restrictions Outside the United States

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Australia

This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.

Canada

The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

China

The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (the “PRC”) (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”

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European Economic Area — Belgium, Germany, Luxembourg and Netherlands

The information in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Directive”), as implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.

An offer to the public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:

France

This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code monétaire et financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.

This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.

Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1 and D.764-1 of the French Monetary and Financial Code and any implementing regulation.

Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.

Ireland

The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified investors.

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Israel

The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the “ISA”), nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.

Italy

The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Societ — $$ — Aga e la Borsa, “CONSOB”) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:

Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:

Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.

Japan

The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”), pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.

Portugal

This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities

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have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.

Sweden

This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.

Switzerland

The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority.

This document is personal to the recipient only and not for general circulation in Switzerland.

United Arab Emirates

Neither this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor has the Company received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such shares, may be rendered within the United Arab Emirates by the Company.

No offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.

United Kingdom

Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.

Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated or caused to be

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communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to the Company.

In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

LEGAL MATTERS

The validity of the securities offered hereby has been passed upon for us by Lucosky Brookman LLP. Certain legal matters in connection with this offering have been passed upon for the underwriters by Sullivan & Worcester LLP, Boston, Massachusetts.

EXPERTS

Our consolidated balance sheet as of June 30, 2015 and June 30, 2014, respectively, and the related consolidated statements of operations, comprehensive loss, statements of stockholders’ equity (deficit), and statements of cash flows for the periods ended June 30, 2015 and June 30, 2014, respectively, have been audited by Rosenberg Rich Baker Berman & Company, an independent registered public accounting firm, as set forth in its report appearing herein and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration statement and the exhibits of the registration statement. For further information with respect to us and the securities being offered under this prospectus, we refer you to the registration statement, including the exhibits and schedules thereto.

You may read and copy the registration statement of which this prospectus is a part at the SEC’s Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of the registration statement by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the SEC’s Public Reference Room. In addition, the SEC maintains an Internet web site, which is located at www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access the registration statement of which this prospectus is a part at the SEC’s Internet website. We are subject to the information reporting requirements of the Exchange Act, and we will file reports, proxy statements and other information with the SEC.

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MICROPHASE CORPORATION
 
INDEX TO FINANCIAL STATEMENTS

		Page
Report of Independent Registered Certified Public Accounting Firm on the Consolidated Financial Statements			F-2
Consolidated Balance Sheets — June 30, 2015 and June 30, 2014, and March 31, 2016 (unaudited)			F-3
Consolidated Statements of Operations — Fiscal Years ended June 30, 2015 and June 30, 2014, and the Nine Months Ended March 31, 2016 and 2015 (unaudited)			F-4
Consolidated Statements of Comprehensive Income (Loss) — Fiscal Years ended June 30, 2015 and June 30, 2014, and the Nine Months Ended March 31, 2016 and 2015 (unaudited)			F-5
Consolidated Statements of Stockholders’ Deficit — Fiscal Years ended June 30, 2015 and June 30, 2014			F-6
Consolidated Statements of Stockholders’ Deficit — The Nine Months Ended March 31, 2016 (unaudited)			F-7
Consolidated Statements of Cash Flows — Fiscal Years ended June 30, 2015 and June 30, 2014, and the Nine Months Ended March 31, 2016 and 2015 (unaudited)			F-8
Notes to Consolidated Financial Statements			F-9

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors and
Stockholders of Microphase Corporation

We have audited the accompanying consolidated balance sheets of Microphase Corporation as of June 30, 2015 and 2014, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the two year period ended June 30, 2015. Microphase Corporation’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Microphase Corporation as of June 30, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the two year period ended June 30, 2015, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that Microphase Corporation will continue as a going concern. As more fully described in the notes to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficit as of June 30, 2015. These conditions raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Rosenberg Rich Baker Berman & Company
Somerset, New Jersey
September 28, 2015

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MICROPHASE CORPORATION
 
Consolidated Balance Sheets

		March 31, 2016				June 30, 2015				June 30, 2014
		(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	73,669			$	127,093			$	445,080
Accounts receivable, net of allowance of $5,000 on March 31, 2016 and June 30, 2015, and $20,000 on June 30,2014			670,510				881,221				888,200
Inventory			773,444				852,015				772,682
Due from related parties			33,295				28,045				25,039
Prepaid and other current assets			55,952				38,906				144,833
TOTAL CURRENT ASSETS			1,606,870				1,927,280				2,275,834
Property and equipment, net			182,841				194,160				254,456
OTHER ASSETS
Cash – restricted			100,000				100,000				100,000
Intangible assets			2,642,074				474,255				139,766
Investments			200,000				200,000				—
Other assets			43,479				43,479				—
TOTAL OTHER ASSETS			2,985,553				817,734				239,766
TOTAL ASSETS		$	4,775,264			$	2,939,174			$	2,770,056
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Credit Facility – Revolving Loan		$	1,177,010			$	1,013,406			$	925,304
Accounts payable			563,185				421,915				307,052
Accrued expenses			938,283				1,105,943				1,086,399
Deferred Revenue & Customer Deposits			18,300				—				113,910
Notes Payable – Related Parties, current portion			159,095				169,447				194,723
Asset Acquisition Note Payable-current portion			975,345				300,000				360,000
Equity Lines of Credit-current portion			37,960				351,997				374,841
Other termed debts – current portion			14,417				32,654				41,559
TOTAL CURRENT LIABILITIES			3,883,595				3,395,362				3,403,788
Other termed debts, net of current portion			30,924				40,689				65,802
Notes Payable – Related Parties, net of current portion			241,153				290,799				825,750
Asset Acquisition Note Payable, net of current portion			1,045,080				—				—
Equity Lines of Credit, net of current portion			286,458				—				—
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ DEFICIT
6% cumulative preferred stock, $100 par value, 200,000 shares authorized, 15,382, 26,943 and 23,543 shares issued and outstanding on March 31, 2016 and June 30, 2015 and 2014, respectively			1,538,200				2,694,300				2,354,300
Common stock, no par value 7,800,000 shares authorized, 5,980,789, 4,775,306 and 3,475,366 shares issued and outstanding at March 31, 2016 and June 30, 2015 and 2014, respectively			9,002,133				6,976,533				4,553,168
Additional Paid In Capital			2,432,111				2,396,711				2,284,511
Accumulated Deficit			(13,684,390	)			(12,855,220	)			(10,717,263	)
TOTAL STOCKHOLDERS’ DEFICIT			(711,946	)			(787,676	)			(1,525,284	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	4,775,264			$	2,939,174			$	2,770,056

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MICROPHASE CORPORATION
 
Consolidated Statements of Operations

		For The Nine Months Ended March 31,								For the Fiscal Year Ended June 30,
		2016				2015				2015				2014
		(unaudited)				(unaudited)
Revenues		$	7,002,891			$	6,084,743			$	8,176,352			$	7,198,816
Cost of Sales			4,136,725				3,489,355				4,557,285				4,285,313
Gross Profit			2,866,166				2,595,388				3,619,067				2,913,503
Selling, General and Administrative Expenses (including non-cash stock related charges of $790,000 and $450,000 in Fiscal 2015 & 2014, and $475,400 and $730,000 for the Nine Months Ended March 31, 2016 & 2015)			2,596,430				2,753,061				3,678,133				2,573,984
Engineering and Research expenses (including non-cash stock related charges of $80,000 in Fiscal 2015, and $0 and $80,000 for the Nine Months Ended March 31, 2016 and 2015)			725,874				724,193				943,084				717,847
Other Income (Loss)			(3,250	)			(1,947	)			19,023				2,279
Interest (Expense and Credit costs) net			(216,290	)			(179,117	)			(264,015	)			(421,597	)
Loss From Operations			(675,678	)			(1,062,930	)			(1,247,142	)			(797,646	)
(Loss) on Settlement of Liabilities (including $218,836, loss on settlement of liabilities with related parties in Fiscal 2015, and $107,375 and $218,836 for the nine months ended March 31, 2016 and 2015)			(107,375	)			(223,866	)			(223,866	)			—
Realized Gain on Sale of Building			—				—				—				2,355,904
Realized (Loss) on Securities			—				—				—				(60,033	)
Net Income (Loss) before Income Taxes			(783,053	)			(1,286,796	)			(1,471,008	)			1,498,225
Income Taxes			(46,117	)			(6,250	)			(7,300	)			(2,100	)
Net Income (Loss)		$	(829,170	)		$	(1,293,046	)		$	(1,478,308	)		$	1,496,125
Preferred dividends declared and settled in common stock, including $164,913 loss on settlement of dividend payable			—				(659,649	)			(659,649	)			—
Net Income (Loss) available to common shareholders		$	(829,170	)		$	(1,952,695	)		$	(2,137,957	)		$	1,496,125
Basic & Diluted Net income (loss) per share:		$	(0.16	)		$	(0.49	)		$	(0.51	)		$	0.53
Weighted Average Number of Shares Outstanding:
Basic & Diluted			5,132,942				3,953,208				4,233,158				2,844,806

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MICROPHASE CORPORATION
 
Consolidated Statements of Comprehensive Income (Loss)

		For The Nine Months Ended March 31,								Fiscal Years Ended June 30,
		2016				2015				2015				2014
		(unaudited)				(unaudited)
Net income (loss)			(829,170	)		$	(1,293,046	)		$	(1,478,308	)		$	1,496,125
Other comprehensive income (loss):
Net unrealized gain (loss) on securities available-for-sale, net of income taxes			—				—				—				(21,397	)
Total comprehensive income (loss)		$	(829,170	)		$	(1,293,046	)		$	(1,478,308	)		$	1,474,728

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MICROPHASE CORPORATION
 
Consolidated Statement of Changes in Stockholders’ Deficit
For the Two Years Ended June 30, 2015 & for the Nine Months Ended March 31, 2016 (unaudited)

		Preferred Stock								Common Stock								Additional Paid In Capital				Accumulated Other Comprehensive Loss				Accumulated Deficit				Amount
		Shares				Amount				Shares				Amount
Balance, June 30, 2013			23,543			$	2,354,300				2,493,641			$	3,083,617			$	2,284,511			$	(38,636	)		$	(12,213,388	)		$	(4,529,596	)
Unrealized investment loss during the fiscal year																							(21,397	)							(21,397	)
Transfer realized loss during the fiscal year																							60,033								60,033
Issuance of Common Stock in Private Placements, including 196,725 of finder shares and net of $102,750 costs											756,725				1,019,551																1,019,551
Issuance of Common Stock for Services											225,000				450,000
Net Income For the Year Ended June 30, 2014																															1,496,125
Balance, June 30, 2014			23,543			$	2,354,300				3,475,366			$	4,553,168			$	2,284,511			$	—			$	(10,717,263	)		$	(1,525,284	)
Issuance of Common Stock in Private Placements, including 68,782 of finder shares and net of $31,450 costs											311,782				447,050																447,050
Conversion of strategic payables into common stock including loss on settlement of liabilities of $5,000											10,000				20,000																20,000
Conversion of related party loans into common stock including loss on settlement of liabilities of $106,666											213,333				426,666																426,666
Conversion of related party loans into preferred stock including loss on settlement of liabilities of $59,400			1,800				180,000												59,400												239,400
Conversion of unpaid compensation into preferred stock including loss on settlement of liabilities of $52,800			1,600				160,000												52,800												212,800
Issuance of Common Stock for Services											435,000				870,000																870,000
Preferred stock dividend declared on preferred shares held through September 30, 2014 paid in common stock including loss on settlement of dividend payable of $164,913											329,825				659,649												(659,649	)			—
Net (Loss) For the Year Ended June 30, 2015																											(1,478,308	)			(1,478,308	)
Balance, June 30, 2015			26,943			$	2,694,300				4,775,306			$	6,976,533			$	2,396,711			$	—			$	(12,855,220	)		$	(787,676	)

 
 
The accompanying notes are an integral part of these consolidated financial statements.

TABLE OF CONTENTS

MICROPHASE CORPORATION
 
Consolidated Statement of Changes in Stockholders’ Deficit – (continued)
For the Two Years Ended June 30, 2015 & for the Nine Months Ended March 31, 2016 (unaudited)

		Preferred Stock								Common Stock								Additional Paid In Capital				Accumulated Other Comprehensive Loss				Accumulated Deficit				Amount
		Shares				Amount				Shares				Amount
Conversion of preferred stock into Common Stock			(11,561	)			(1,156,100	)			770,733				1,156,100																—
Issuance of common stock and options for services											220,000				440,000				35,400												475,400
Conversion of loans and unpaid compensation to president into common stock including loss on settlement of liabilities with related party of $107,375											214,750				429,500																429,500
Net (Loss) For the Nine Months Ended March 31, 2016																											(829,170	)			(829,170	)
Balance, March 31, 2016 (unaudited)			15,382			$	1,538,200				5,980,789			$	9,002,133			$	2,432,111			$	—			$	(13,684,390	)		$	(711,946	)

 
 
The accompanying notes are an integral part of these consolidated financial statements.

TABLE OF CONTENTS

MICROPHASE CORPORATION
 
Consolidated Statements of Cash Flows

		For The Nine Months Ended March 31,								For The Years Ended June 30,
		2016				2015				2015				2014
		(unaudited)				(unaudited)
Cash Flow Provided By (Used In) Operating Activities:
Net Income (Loss) From Operations		$	(829,170	)		$	(1,293,046	)		$	(1,478,308	)		$	1,496,125
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization			70,154				67,305				89,977				109,855
Realized loss on securities			—				—				—				60,033
Realized gain (loss) from sale of building & fixed assets			—				(8,656	)			(11,010	)			(2,355,904	)
Non-cash charges relating to issuance of common stock for services			475,400				810,000				870,000				450,000
Increase (decrease) in allowance for doubtful accounts and inventory reserve			—				(15,000	)			—				(13,000	)
Write-off of deferred finance charges			—				—				—				20,192
Loss on Settlement of Liabilities			107,375				223,866				223,866
Changes in assets and liabilities:
Accounts receivable			210,711	)			(74,453	)			21,979				(437,861	)
Inventories			78,571				36,886				(94,333	)			155,444
Other current assets			(17,047	)			29,845				105,927				(109,715	)
Other assets-lease deposit			—				(43,479	)			(43,479	)			—
Cash Overdraft			—				—				—				(129,353	)
Accounts payable			141,270				(15,004	)			(2,343	)			(247,215	)
Accrued Expenses			96,788				252,564				347,515				86,964
Customer deposits			18,300				(113,910	)			(113,910	)			(84,681	)
Due to/from related parties mPhase & Edson Realty			(5,250	)			(2,112	)			(3,006	)			16,356
Officers wages			—				9,450				—				174,286
Net cash provided by (used in) operating activities		$	347,102			$	(135,744	)		$	(87,125	)		$	(808,474	)
Cash Flow provided by (used in) Investing Activities:
Proceeds from surrender of insurance contract			—				—				—				—
Investments in common stock			—				(200,000	)			(200,000	)			—
Purchase of intangible assets			(459,027	)			(50,000	)			(50,000	)			—
(Purchase of) proceeds from-fixed assets			(47,202	)			366				(14,170	)			—
Proceeds from sale of building			—				2,275				11,010				2,967,064
Net Cash provided by (used in) investing activities		$	(506,229	)		$	(249,634	)		$	(253,160	)		$	2,967,064
Cash Flow provided by (used in) Financing Activities:
Proceeds from issuance of common stock			—				—				447,050				1,019,551
Proceeds from revolving credit facility (net)			163,604				447,050				88,102				(246,555	)
Payments of mortgage			—				96,549				—				(2,275,982	)
Payments of equity lines of credit			27,579				(12,683	)			(22,844	)			—
Payments of long-term debt			(11,329	)			(7,292	)			(9,191	)			(17,665	)
Payments on acquisition notes			—				(360,000	)			(360,000	)			(165,000	)
Payments of capital lease obligations			(10,695	)			(11,112	)			(17,245	)			(13,432	)
Payments to related parties			(27,320	)			(97,512	)			(95,992	)			(67,188	)
Advances from related parties			25,000				—				—				60,760
Payments of extended term arrangement			(5,978	)			(5,690	)			(7,582	)			(7,999	)
Net cash provided by (used in) financing activities		$	105,703			$	(253,890	)		$	22,298			$	(1,713,510	)
Net increase (decrease) in cash		$	(53,424	)		$	(396,919	)		$	(317,987	)		$	445,080
CASH AND CASH EQUIVALENTS, beginning of period		$	127,093			$	445,080			$	445,080			$	—
CASH AND CASH EQUIVALENTS, end of period		$	73,669			$	48,161			$	127,093			$	445,080