What changed in this filing

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Item 1. Business

2022-07-14 compared with 2021-06-30 · 36 added, 52 removed, 212 unchanged (29% of the section changed)

1 unchanged sentence

Frequency Electronics, Inc.

(sometimes referred to as “Registrant”, “Frequency Electronics” or the “Company”) is a world leader in precision time and frequency generation technology, which is employed in commercial and Government Satellite Payload systems, Secure Communications, Command, Control, Communication, Computer, Intelligence, Security and Reconnaissance (“C4ISR”), and Electronic Warfare (“EW”) systems.

(sometimes referred to as “Registrant”, “FEI”, “Frequency Electronics” or the “Company”) is a world leader in precision time and frequency generation technology, which is incorporated into commercial and Government Satellites, Command, Control, Communication, Computer, Intelligence, Surveillance and Reconnaissance (“C4ISR”), and Electronic Warfare (“EW”) systems.

Its technology is used for a wide range of space and non-space applications.

12 unchanged sentences

Government end-use.

Currently, there are approximately 3,400 satellites with varying remaining useful lives operating in Geostationary, Medium and Low Earth Orbits.

government operates approximately 1,900 of these.

Currently, there are approximately 3,000 U.S.

satellites with varying remaining useful lives operating in Geostationary, Medium and Low Earth Orbits.

The number of operational satellites with emphasis on high-throughput is expected to continue to grow over the next ten years as demand for higher bandwidths and improved anti-jam-anti-spoofing increases.

22 unchanged sentences

FEI-Zyfer - Precision time references for terrestrial secure communications and command and control, and frequency products that incorporate GPS technology are manufactured by the Company’s subsidiary, FEI-Zyfer.

FEI-Zyfer’s GPS capability complements the Company’s existing technologies and permits the combined entities to provide a broader range of embedded systems for a variety of timing functions and anti-spoofing (“SAASM”) applications.

For additional information about these reportable segments, see Item 1.

4 unchanged sentences

The Company’s relationship with Morion, which includes ownership of 4.6% of the outstanding shares of Morion’s common stock, permits the Company to secure a cost-effective source for high precision quartz resonators and crystal oscillators.

The Morion investment is accounted for under the cost method.

The Morion investment was accounted for under the cost method.

Due to the current Russian-Ukraine conflict and resulting sanctions, the future status of FEI’s equity investment in Morion is uncertain.

In response to these conditions, in connection with the preparation of the audited financial statements included in this annual report on Form 10-K, the Company impaired its investment in Morion in full.

For more information regarding the Company’s investment in Morion, see Note 10 to the Consolidated Financial Statements.

14 unchanged sentences

During fiscal years 2022 and 2021, approximately 85% and 78%, respectively, of the Company’s consolidated revenues were from products sold by the FEI-NY segment.

In fiscal years 2021 and 2020, sales for the FEI-Zyfer segment were 26% of consolidated revenues.

In fiscal years 2022 and 2021, sales for the FEI-Zyfer segment were 16% and 26% of consolidated revenues.

(The sum of annual sales percentages exceeds 100% due to intersegment sales.)

6 unchanged sentences

Revenues from satellite payloads, both for commercial and U.S.

Government applications, have become the Company’s largest business area while the portion of network infrastructure sales has declined relatively.

Government applications, have become the Company’s largest business area while the portion of commercial network infrastructure sales has declined relatively.

The Company expects to continue to generate substantial revenues from deployment of new and replacement satellites and other U.S.

48 unchanged sentences

Government agencies that require government certified accounting systems.

Government end-use contracts are subject to termination by the purchaser for convenience or default, as well as various other Federal Acquisition Regulations (“FAR”) provisions.

Government end-use contracts are subject to termination by the purchaser for convenience or default, as well as various other Federal Acquisition Regulations provisions.

In the event of a termination for convenience, the Company is entitled to receive compensation as provided under the specific terms of such contracts.

1 unchanged sentence

FEI-Zyfer Segment:

FEI-Zyfer designs, develops and manufactures products which provide Precision Navigation and Timing (PNT), primarily incorporating Global Navigation Satellite System(s) technology.

FEI-Zyfer designs, develops and manufactures products which provide PNT, primarily incorporating Global Navigation Satellite System(s) technology.

FEI-Zyfer’s products make use of both “in-the-clear” civil and “crypto-secured” military signals for GPS.

5 unchanged sentences

More than 78% of FEI-Zyfer’s revenues are derived from sales where the end user is the U.S.

As of April 30, 2021, the Company’s consolidated backlog amounted to approximately $40 million compared to approximately $36 million at the end of the prior fiscal year.

As of April 30, 2022, the Company’s consolidated backlog amounted to approximately $40 million, the same as at the end of the prior fiscal year.

Approximately 83% of the current backlog is expected to be filled during the Company’s fiscal year ending April 30, 2023.

13 unchanged sentences

Government end-use.

During fiscal year 2021, Northrop Grumman Company (“Northrop Grumman”) and Lockheed Martin Corporation (“Lockheed Martin”) each accounted for more than 10% of the Company’s consolidated revenues.

During fiscal year 2020, Lockheed Martin, Northrop Grumman, BAE Systems and L3Harris Technologies, Inc.

each accounted for more than 10% of the Company’s consolidated revenues.

During fiscal year 2022, Northrop Grumman Company (“Northrop Grumman”), Lockheed Martin Corporation (“Lockheed Martin”) and BAE Systems each accounted for more than 10% of the Company’s consolidated revenues.

During fiscal year 2021, Northrop Grumman and Lockheed Martin each accounted for more than 10% of the Company’s consolidated revenues.

The loss by the Company of any one of these customers could have a material adverse effect on the Company’s business.

5 unchanged sentences

The Company has found its suppliers generally reliable and price-competitive;

however, recent quotes for various parts and materials reflect significantly increased delivery schedules and price increases.

Where supply chain issues have been encountered, the Company has responded by changing the source of supply or redesigning products and replacing unavailable parts and materials with alternates wherever possible.

FEI is dependent on a limited number of suppliers for space qualified parts.

If these suppliers were unable to deliver in reasonable time frames, then prompt qualification of alternate suppliers may not be feasible or cost effective.

Consequently, the Company could experience delays in delivery of its end products or costs in excess of what was originally quoted.

RESEARCH AND DEVELOPMENT

6 unchanged sentences

Additionally, the Company receives customer funding for specific R&D projects and anticipates additional funding from customers for future R&D initiatives.

Although funding is obtained from customers, the Company retains the rights to any products developed.

During fiscal years 2022 and 2021, some of the Company’s development resources were applied to the design-stage of fixed-price satellite payload sub-system programs.

For fiscal year 2022, the resources to be allocated to R&D will depend on market conditions and identification of new opportunities, as was the case in fiscal 2021.

For fiscal year 2023, the resources to be allocated to R&D will depend on market conditions and identification of new opportunities, as was the case in fiscal year 2022.

PATENTS AND LICENSES

11 unchanged sentences

The Company competes primarily on the basis of the accuracy, performance and reliability of its products, the ability of its products to function under severe conditions, such as in space or in other extremely hostile environments, and the Company’s track record of prompt and responsive contract performance and technical competence.

The Company has unique and broad capabilities which include quartz, rubidium and cesium-based timing references and specialized RF microwave technology.

The Company has unique and broad capabilities which include quartz and rubidium based timing references and specialized RF microwave technology.

With respect to very high precision products, the Company encounters fewer competitors than it does for lower precision products for which there are a significant number of suppliers.

5 unchanged sentences

Due to the specialized nature of our business, our performance depends on identifying, attracting, developing, motivating, and retaining a highly skilled workforce in multiple areas, including engineering, science, manufacturing, information technology, cybersecurity and business development.

The Company develops its workforce using a fair recruiting process to select talented individuals that include competitive compensation and benefits.

The Company currently employs approximately 240 employees worldwide.

The Company develops its workforce using a broad-based recruiting process to select talented individuals and by offering competitive compensation and benefits.

The Company currently employs approximately 197 employees, all based in the U.S.

No employees are represented by labor unions.

3 unchanged sentences

Employee health and safety is a top priority.

The Company has provided all employees with detailed health and safety literature on COVID-19 and had implemented work from home policies at all locations for a period of time at the beginning of the pandemic for positions that were conducive to work from home in order to minimalize the manufacturing staff that remained in the buildings.

The Company has since reverted to almost normal operations.

The Company has provided all employees with detailed health and safety literature on COVID-19 and had implemented work from home policies at all locations for a period of time at the beginning of the pandemic for positions that were conducive to work from home in order to minimalize risk to the manufacturing staff that continued to work in the Company’s facilities.

The Company has since returned to essentially normal operations.

OTHER ASPECTS

3 unchanged sentences

The names of all executive officers of the Company and all positions and offices with the Company which they presently hold are as follows:

President and Chief Executive Officer

Thomas McClelland

Interim President and Chief Executive Officer and Chief Scientist

Oleandro Mancini

Senior Vice President, Business Development

Steven Strang

President, FEI-Zyfer

Thomas McClelland

Senior Vice President and Chief Scientist

Adrian Lalicata

1 unchanged sentence

Chief Financial Officer and Secretary and Treasurer

Sloane, age 70, has served as a Director of the Company since August 2016.

On May 1, 2018, Dr.

Sloane was named President and Chief Executive Officer of the Company.

Prior to being named President and Chief Executive Officer, Dr.

Sloane had served as the Chief Operating Officer of the Company since September 2017.

Sloane was President and Chief Executive Officer of Comtech Telecommunications Corp.

CMTL) from January 2015 until September 2016 and a director of Comtech from January 2012 until September 2016.

Prior to joining Comtech, Dr.

Sloane was President and Chief Executive Officer and a Director of Decision Sciences International Corporation, a privately-held advanced security and detection systems company, from August 2011 through January 2015.

Prior to that, he served as President and Chief Executive Officer and a Director of SRA International, Inc.

(“SRA”), an information solutions company.

He served as President and Chief Executive Officer of SRA from April 2007 through July 2011, during which time he helped lead the sale of SRA to a private equity firm.

Prior to joining SRA, he was Executive Vice President of Lockheed Martin's Integrated Systems & Solutions from June 2004 until April 2007.

He began his business career with General Electric Aerospace in 1984 and progressed through engineering, program management, and business development assignments in a variety of General Electric Aerospace and subsequently Lockheed Martin businesses.

He also served as an officer in the U.S.

Navy from 1976 until 1981.

Sloane holds a bachelor's degree in Professional Studies (Aeronautics) from Barry University, a master's degree in Human Resources Management from Pepperdine University, and a Doctor of Management degree from the Weatherhead Business School at Case Western Reserve University.

Thomas McClelland, age 67, joined the Company as an engineer in 1984 and was elected Vice President, Commercial Products in March 1999.

In fiscal year 2011, Dr.

McClelland’s title was modified to Vice President Advanced Development to describe his expanded role in the Company.

In January 2020 Dr.

McClelland’s title was modified to Senior Vice President and Chief Scientist.

On July 8, 2022, Dr.

McClelland was appointed the Company’s Interim President and Chief Executive Officer, in addition to his existing positions and responsibilities with the Company, following the resignation of Dr.

Sloane, the Company’s former President and Chief Executive Officer, on July 8, 2022.

Oleandro Mancini, age 73, joined the Company in August 2000 as Vice President, Business Development and was promoted to Senior Vice President in 2010.

3 unchanged sentences

From 1987 to 1995, he held the position of Vice President, Engineering at Cardion, Inc.

Steven Strang, age 57, was named President of FEI-Zyfer, Inc., effective May 1, 2005.

Previously, Mr.

Strang was Executive Vice President of this subsidiary and its predecessor companies where he has served for 21 years in various technical and management positions.

Thomas McClelland, age 66, joined the Company as an engineer in 1984 and was elected Vice President, Commercial Products in March 1999.

In fiscal year 2011, Mr.

McClelland’s title was modified to Vice President Advanced Development to describe his expanded role in the Company.

In January 2020 Mr.

McClelland’s title was modified to Senior Vice President and Chief Scientist.

Adrian Lalicata, age 75, joined the Company in 2006 as Vice President, RF & Microwave Systems.

9 unchanged sentences

Bernstein worked in the North America accounting group of Arrow Electronics, a Fortune 500 electronics distributor.

This item is not required for smaller reporting companies.

Unresolved Staff Comments

Not Applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business