Results of Operations

Year ended May 31, 2009 ("2009") compared with year ended May 31, 2008 ("2008")

PHAZAR CORP's consolidated sales from operations were $7,310,281 in 2009, compared to consolidated sales from operations of $9,247,245 in 2008. PHAZAR CORP recorded a net loss of $582,195 in 2009, compared to a net profit of $622,904 in 2008. PHAZAR CORP's net income fell $1,205,099 on a 21% decline in sales of both military and commercial product lines, which included a significant reduction in international sales.

Orders decreased by $1,625,006 across all product lines from $8,287,615 in 2008 compared to $6,662,609 in 2009. Backlog was down $802,818 from $2,544,564 at the end of 2008 compared to $1,741,746 as of May 31, 2009 due to the reduction in orders received and contracts being completed and shipped prior to year end. A slow-down in government and government related contracting activity was a contributing factor in lower orders and revenues for the year ended May 31, 2009.

Cost of sales and contracts and gross profit for fiscal year 2009, were $4,910,677 and $2,399,604. For the same period in 2008, costs of sales and contracts and gross profit were $5,866,837 and $3,380,408, respectively. The gross profit margin for the operations for fiscal year 2009 was 32.8% compared to 36.6% in 2008. The decrease in gross profit margin is attributed to increases in commodity prices and inefficiencies associated with low production levels.

Sales and administration expenses were $3,649,155 in 2009, compared to $2,676,614 in 2008. The $972,541 increase in sales and administration expense is due to higher compensation costs associated with newly hired employees for the mesh radio product line and executive group, incremental research and

development for continued development of our mesh radio wireless network product line and legal fees associated with the FINRA arbitration claim against UBS Financial Services.

The Company had an operating loss of $1,249,551 for the year ending May 31, 2009, compared to an operating profit of $703,794 for the same period in prior year as a result of lower orders and sales along with the increase in sales and administration expense.

Discretionary product development and bid/proposal spending totaled $1,093,462 or 15% of sales in fiscal year end 2009 compared to $814,462, or 9% for the same period in 2008.

The income (loss) from operations before income taxes was a loss of $1,052,784 in 2009 compared to an income of $871,815 in 2008.

Product Warranties

PHAZAR CORP's  management  estimates  accrued warranty expense based on warranty
work received but not performed and on analysis of historical  trends  including
actual expense as a percent of sales.

Changes  in  accrued  warranty  liability  for the years  ended  May 31,  are as
follows:

                                                          2009         2008
                                                      ------------ ------------
        Beginning balance                             $   122,376  $    68,376
        Cost incurred for rework                         (145,708)    (150,652)
        Accrual for current year estimate                 138,702      122,376
        Change in accrued estimate                         23,332       82,276
                                                      -----------  -----------
        Ending balance                                $   138,702  $   122,376
                                                      ===========  ===========

Liquidity and Capital Resources

Sources of Liquidity

Funds generated from operations are the major internal sources of liquidity and are supplemented by funds derived from capital markets, principally bank facilities. The Company's operating subsidiary has a $2,000,000 revolving note facility with a bank collateralized by the subsidiary's inventory and accounts with PHAZAR CORP, the parent company, signing as the guarantor. The amount available under the revolving note facility at May 31, 2009 was $2,000,000. At May 31, 2009, the Company had a tangible net worth of $7,547,967 and had working capital of $6,290,829. As of May 31, 2009, Antenna Products Corporation had drawn $0 of the $2,000,000 line of credit with $2,000,000 of the borrowing base available and unused. PHAZAR CORP believes that its cash and the credit available at May 31, 2009, is sufficient to fund the Company's operations for at least twelve months.

Interest is payable monthly at the prime rate (3.25% at May 31, 2009 and 5% at May 31, 2008) until October 2, 2009, when any unpaid principal and interest shall be due. Under the agreement, the Company must maintain a minimum working

capital of $2,500,000, tangible net worth of $4,000,000 and debt service ratio of 1.25 and a maximum debt worth no greater than .5:1.

Capital Requirements

Management of the operating subsidiaries evaluates the facilities and review equipment requirements for existing and projected contracts on a regular basis. An annual capital plan is generated by management and submitted to the Board of Directors for review and approval. In fiscal year 2009 there were $316,911 in capital expenditures for new and replacement equipment. The Company intends to limit the 2010 capital program to less than $100,000 for improvements and new equipment.

At May 31, 2009, PHAZAR CORP had cash and cash equivalents of $3,320,647. Deferred revenue at May 31, 2009, is $16,884.

Cash Flows

Operating Activities

The increase in cash and cash equivalents of $874,084 is primarily due to the redemption of $2,650,000 in auction rate securities offset by a negative $1,340,678 of cash flow from operations. In October, 2008, the Company announced that all $2,650,000 of its auction rate securities had been redeemed at the par value of $2,650,000 plus accrued interest by the issuer, the Massachusetts Education Financing Authority. As of May 31, 2009, the Company has no monies invested in auction rate securities.

The negative $1,340,678 of cash flow from operations consists of a $754,481 increase in inventory, a $ 582,195 net loss, a $298,770 decline in deferred revenues offset by a $323,759 reduction in accounts receivable. The $754,481, or 43% increase in inventory levels for fiscal year 2009 versus fiscal year 2008 represents a decision by management to take advantage of lower material costs and increase stock levels in certain finished goods products. The net loss of $582,195 in fiscal year 2009 represents a 21% drop in revenues associated with a slow-down in government and government related contracting activity along with 36% increase in sales and administrative expenses. Higher compensation costs associated with newly hired employees for the mesh radio product line and executive group, incremental research and development costs for continued development of our mesh radio wireless network product line and legal fees associated with the FINRA arbitration claim against UBS Financial Services are all contributing factors to the increase in sales and administrative expenses. The $298,770 decline in deferred revenues for fiscal year 2009 compared to fiscal year 2008 is simply a function of customer contracts that are required to provide prepayments prior to production of the order, often a requirement for international customers. The decrease in accounts receivable from $987,258 at May 31, 2008 to $663,499 represents a $323,759 source of operating cash flows and reflects the decreased level of business volume in fiscal year 2009.

Investing Activities

Cash of $2,127,478 was provided by investing activities during the fiscal year ending May 31, 2009, which consists of the $2,650,000 of redemption of auction rate securities less capital expenditures of $316,911 and $205,611 for the purchase of treasury stock. Cash was not used in investing activities during the

year ended May 31, 2008, however, $2,650,000 of marketable securities were transferred to long term marketable securities during the year.

Financing Activities

There were no financing activities requiring cash during the fiscal year ending May 31, 2009. The financing activities incurred in prior year ending May 31, 2008 consisted primarily of proceeds from the exercise of stock options and the federal income tax benefit resulting from the exercise of stock options. At May 31, 2009 and 2008, PHAZAR CORP had no long-term debt outstanding.