What changed in this filing

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Item 1. Financial Statements

2023-03-17 compared with 2022-12-20 · 220 added, 274 removed, 374 unchanged (57% of the section changed)

4 unchanged sentences

(In thousands except par value)

(Revised - See Note C)

Current assets:

1 unchanged sentence

Marketable securities

Accounts receivable, net of allowance for doubtful accounts of $ 111 at October 31, 2022 and April 30, 2022

Accounts receivable, net of allowance for doubtful accounts of $ 111 at

January 31, 2023 and April 30, 2022

Contract assets

19 unchanged sentences

Total liabilities

Commitments and contingencies (Note M)

Commitments and contingencies

Stockholders’ equity:

2 unchanged sentences

Common stock - $ 1.00 par value;

authorized 20,000 shares, 9,334 shares issued and 9,333 shares outstanding at October 31, 2022;

authorized 20,000 shares, 9,354 shares issued and 9,353 shares outstanding at January 31, 2023;

9,298 shares issued and 9,297 shares outstanding at April 30, 2022

1 unchanged sentence

Accumulated deficit

Common stock reacquired and held in treasury - at cost ( 1 share at October 31, 2022 and April 30, 2022)

Common stock reacquired and held in treasury -

at cost ( 1 share at January 31, 2023 and April 30, 2022)

Accumulated other comprehensive income

4 unchanged sentences

and SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands except per share data)

Three Months Ended October 31,

Six Months Ended October 31,

Three Months Ended January 31,

Nine Months Ended January 31,

Condensed Consolidated Statements of Operations

2 unchanged sentences

Research and development expenses

Operating (loss) income

Operating income (loss)

Other income (expense):

Investment (expense) income

Investment (expense) income, net

Interest expense

Other income (expense), net

(Loss) income before provision for income taxes

Loss before provision for income taxes

Provision for income taxes

Net (loss) income

Net (loss) income per common share:

Basic and diluted (loss) income per share

Net loss per common share:

Basic and diluted loss per share

Weighted average shares outstanding:

Condensed Consolidated Statements of Comprehensive (Loss) Income

Net (loss) income

Unrealized loss on marketable securities:

Change in market value of marketable securities before reclassification, net of tax

Reclassification adjustment for realized gains (losses) included in net income, net of tax

Total unrealized loss on marketable securities, net of tax

Comprehensive (loss) income

Basic and diluted

Condensed Consolidated Statements of Comprehensive Income (Loss)

Unrealized gain (loss) on marketable securities:

Change in market value of marketable securities before

reclassification, net of tax

Reclassification adjustment for realized gains

(losses) included in net income, net of tax

Total unrealized gain (loss) on marketable securities, net of tax

Comprehensive income (loss)

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Six Months Ended October 31,

Nine Months Ended January 31,

Cash flows from operating activities:

1 unchanged sentence

Net changes in operating assets and liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Cash flows from investing activities:

1 unchanged sentence

Purchase of marketable securities

Purchase of property, plant, and equipment, and other assets

Net cash used in investing activities

Net (decrease) increase in cash and cash equivalents

Purchase of fixed assets and other assets

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Payment of Dividend

Net cash used in financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

7 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three and Six Months Ended October 31, 2022

Three and Nine Months Ended January 31, 2023

(In thousands except share data)

4 unchanged sentences

Balance at April 30, 2022

Contribution of stock to 401(k) plan

Stock-based compensation expense

Other comprehensive income, net of tax

Contribution of stock to

compensation expense

Other comprehensive

income, net of tax

Balance at July 31, 2022

Contribution of stock to 401(k) plan

Stock-based compensation expense

Other comprehensive loss, net of tax

Contribution of stock to

compensation expense

Exercise of stock options

and stock appreciation

rights - net of shares

tendered for exercise price

Other comprehensive

loss, net of tax

Balance at October 31, 2022

Contribution of stock to

compensation expense

Other comprehensive

income, net of tax

Dividends paid

Balance at January 31, 2023

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three and Six Months Ended October 31, 2021

Three and Nine Months Ended January 31, 2022

(In thousands except share data)

4 unchanged sentences

Balance at April 30, 2021

Contribution of stock to 401(k) plan

Stock-based compensation expense

Other comprehensive income, net of tax

Contribution of stock to

compensation expense

Other comprehensive

income, net of tax

Balance at July 31, 2021

Contribution of stock to 401(k) plan

Stock-based compensation expense

Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price

Other comprehensive loss, net of tax

Contribution of stock to

compensation expense

Exercise of stock options

and stock appreciation

rights - net of shares

tendered for exercise price

Other comprehensive

loss, net of tax

Balance at October 31, 2021

See accompanying notes to condensed consolidated financial statements.

Contribution of stock to

compensation expense

Exercise of stock options

and stock appreciation

rights - net of shares

tendered for exercise price

Other comprehensive

loss, net of tax

Balance at January 31, 2022

FREQUENCY ELECTRONICS, INC.

3 unchanged sentences

In the opinion of management of Frequency Electronics, Inc.

(the “Company”), the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the condensed consolidated financial position of the Company as of October 31, 2022 and the results of its operations, changes in stockholders’ equity for the three and six months ended October 31, 2022 and 2021, and cash flows for the six months ended October 31, 2022 and 2021.

The April 30, 2022 condensed consolidated balance sheet was derived from audited financial statements (see Revision of Previously Issued Financial Statements in Note C below).

(the “Company”), the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the condensed consolidated financial position of the Company as of January 31, 2023 and the results of its operations, changes in stockholders’ equity for the three and nine months ended January 31, 2023 and 2022, and cash flows for the nine months ended January 31, 2023 and 2022.

The April 30, 2022 condensed consolidated balance sheet was derived from audited financial statements.

These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

1 unchanged sentence

GAAP have been condensed or omitted.

These condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2022, filed on July 14, 2022 with the Securities and Exchange Commission (the “Form 10-K”).

These condensed consolidated interim financial statements should be read in conjunction with the annual consolidated financial statements included in the Company’s Annual Report and Amended Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended April 30, 2022, filed on July 14, 2022 and December 20, 2022, respectively, with the Securities and Exchange Commission (the “Form 10-K” and the “Form 10-K/A”).

The results of operations for such interim periods are not necessarily indicative of the operating results for the full fiscal year.

2 unchanged sentences

As such, it is uncertain as to the full magnitude that the pandemic may ultimately have on the Company’s financial condition, liquidity, and future financial results.

For the six months ended October 31, 2022, the Company has been impacted by employee absenteeism related to direct or indirect effects of the COVID-19 pandemic, delays in the receipt of anticipated new contracts from customers administratively affected by the pandemic and limited availability or delivery delays of parts and materials from vendors affected by the pandemic.

FEI-Zyfer’s operations were particularly affected as evidenced by decreases in sales and gross margin during fiscal year 2022, which continued during the six months ended October 31, 2022.

For three and the nine months ended January 31, 2023, the Company has been impacted by employee absenteeism related to direct or indirect effects of the COVID-19 pandemic, delays in the receipt of anticipated new contracts from customers administratively affected by the pandemic and limited availability or delivery delays of parts and materials from vendors affected by the pandemic.

FEI-Zyfer’s operations were particularly affected as evidenced by decreases in sales and gross margin during fiscal year 2022, which continued during the three and nine months ended January 31, 2023.

Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.

1 unchanged sentence

The Company has returned to essentially normal operations at its various locations;

At its locations, the Company continues to follow federal and state guidelines with an emphasis on employee safety.

The Company faces various future COVID-19 related risks, and risks resulting from geopolitical conflicts.

however, the Company continues to follow federal and state guidelines with an emphasis on employee safety.

The Company may continue to face future COVID-19 related risks, and risks resulting from geopolitical conflicts.

The Company is dependent on its workforce to design and manufacture its products.

If significant portions of the Company’s workforce are unable to work effectively, or if the U.S.

Government, state and/or other customers or supplier operations are curtailed due to illness, quarantines, government actions, facility closures, or other restrictions, the Company’s operations may be negatively impacted.

Government, and/or other customers or supplier operations are curtailed due to illness, quarantines, government actions, facility closures, or other restrictions, the Company’s operations may be negatively impacted.

If faced with any of these factors, the Company may be unable to perform fully on its contracts and costs may increase.

7 unchanged sentences

NOTE B – EARNINGS (LOSS) PER SHARE

Reconciliation of the weighted average shares outstanding for basic and diluted earnings (loss) per share for the three and six months ended October 31, 2022 and 2021, respectively, were as follows:

Periods ended October 31,

Reconciliation of the weighted average shares outstanding for basic and diluted earnings (loss) per share (“EPS”) for the three and nine months ended January 31, 2023 and 2022, respectively, were as follows:

Periods ended January 31,

Weighted average shares outstanding:

5 unchanged sentences

Notes to Condensed Consolidated Financial Statements

** For the three months ended October 31, 2022 and six months ended October 31, 2022 and 2021, dilutive securities are excluded from the calculation of earnings per share since the inclusion of such shares would be antidilutive due to the net loss for those periods.

The exercisable shares excluded for the three and six-months ended October 31, 2022 was 243,625 shares, respectively.

The exercisable shares excluded for the three and six-months ended October 31, 2021 were 198,000 and 223,000 shares, respectively.

** For the three and nine months ended January 31, 2023 and 2022, dilutive securities are excluded from the calculation of earnings per share since the inclusion of such shares would be antidilutive due to the net loss for those periods.

The exercisable shares excluded for the three and nine months ended January 31, 2023 was 243,625 options, respectively.

The exercisable shares excluded for the three and nine months ended January 31, 2022 was 223,000 options, respectively.

NOTE C – CONTRACT (LIABILITIES) ASSETS, NET

At October 31, 2022 and April 30, 2022, contract (liabilities) assets, net, consisted of the following:

October 31, 2022

At January 31, 2023 and April 30, 2022, contract (liabilities) assets, net, consisted of the following:

January 31, 2023

April 30, 2022

7 unchanged sentences

Revenue on these long-term contracts are accounted for on the percentage-of-completion (“POC”) basis.

During the three and six months ended October 31, 2022, revenue recognized under POC contracts was approximately $ 8.7 million and $ 16.6 million, respectively.

During the three and six months ended October 31, 2021, revenue recognized under POC contracts was approximately $ 12.2 million and $ 24.6 million, respectively.

During the three and nine months ended January 31, 2023, revenue recognized under POC contracts was approximately $ 10.2 million and $ 26.8 million, respectively.

During the three and nine months ended January 31, 2022, revenue recognized under POC contracts was approximately $ 11.8 million and $ 36.4 million, respectively.

If contract losses are anticipated, a loss provision is recorded for the full amount of such losses when they are determinable.

Contract losses of approximately $ 737,000 and $ 2.0 million were recorded for the three and six months ended October 31, 2022, respectively.

Contract losses of approximately $ 31,000 and $ 47,000 were recorded for the three and six months ended October 31, 2021, respectively.

Revision of Previously Issued Financial Statements

During the preparation of our condensed consolidated financial statements for the second quarter ended October 31, 2022, the Company identified an immaterial error in relation to previously reported amounts in the Form 10-K and in the Quarterly Report on Form 10-Q for the three months ended July 31, 2022, filed on September 14, 2022, with the Securities and Exchange Commission (the “Q1 2023 Form 10-Q”).

As a result, the Company is revising its consolidated financial statements below for the periods impacted.

The table below sets forth the consolidated balance sheets and consolidated statements of cash flows, including the balances originally as filed, adjustments, and the revised balances for each revised period (in thousands):

April 30, 2022

April 30, 2021

July 31, 2022

Consolidated Balance Sheets:

Contract Assets

Total Current Assets

Contract Liabilities

Total Current Liabilities

Total Liabilities

Consolidated Statements of Cash Flows:

Changes in Operating Assets & Liabilities

Contract Assets

Contract Liabilities

Net cash provided by operating activities

* No effect on the Company's quarterly report for the period ended July 31, 2022 as the Statement of Cash Flows are condensed

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

The table below sets forth the disclosures in Note 3 to the consolidated financial statements in the Form 10-K and Note C to the condensed consolidated financial statements in the Q1 2023 Form 10-Q, including the balances originally as filed, adjustments, and the revised balances for each revised period (in thousands):

April 30, 2022

April 30, 2021

July 31, 2022

Contract Assets

Contract Liabilities

Net (liability) asset

The table below sets forth the segment information disclosures in Note 13 to the consolidated financial statements in the Form 10-K and Note G to the condensed consolidated financial statements in the Q1 2023 Form 10-Q, including the balances originally as filed, adjustments, and the revised balances for each revised period (in thousands):

April 30, 2022

April 30, 2021

July 31, 2022

Identifiable assets:

Consolidated identifiable assets

Contract losses of approximately $ 537,000 , offset by a loss reduction of approximately $ 1.0 million, mostly related to additional funding, were recorded for the three months ended January 31, 2023.

Contract losses of approximately $ 1.5 million were recorded for the nine months ended January 31, 2023.

Contract losses of approximately $ 171,000 and $ 218,000 were recorded for the three and nine months ended January 31, 2022, respectively.

NOTE D –STOCK TRANSACTIONS

During the three and six-month periods ended October 31, 2022, the Company made contributions of 18,632 and 35,340 shares, respectively, of its common stock to the Company’s profit-sharing plan and trust under Section 401(k) of the Internal Revenue Code.

During the three and nine-month periods ended January 31, 2023, the Company made contributions of 7,597 and 42,937 shares, respectively, of its common stock to the Company’s profit-sharing plan and trust under Section 401(k) of the Internal Revenue Code.

Such contributions are in accordance with the Company’s discretionary match of employee voluntary contributions to this plan.

On December 20, 2022 , the Board of Directors of the Company declared a special cash dividend of $ 1.00 per share of common stock.

The dividend was paid on January 26, 2023 , to stockholders of record as of the close of business on January 6, 2023 .

The total amount of the special dividend payment was $ 9.4 million.

NOTE E – INVENTORIES, NET

Inventories, which are reported at the lower of cost and net realizable value, consisted of the following:

October 31, 2022

January 31, 2023

April 30, 2022

3 unchanged sentences

Finished goods

Inventory reserves included in inventory were $ 7.8 million and $ 7.5 million as of October 31, 2022 and April 30, 2022, respectively.

Inventory reserves included in inventory were $ 8.0 million and $ 7.5 million as of January 31, 2023 and April 30, 2022, respectively.

Reserve amounts relate to raw materials and component parts and work in progress.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE F – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

2 unchanged sentences

Certain lease agreements contain renewal options, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate.

Right-of-use (“ROU”) assets and lease liabilities are recorded based on the present value of future lease payments which will factor in certain qualifying initial direct costs incurred as well as any lease incentives that may have been received.

Right-of-use (“ROU”) assets and lease liabilities are recorded based on the present

value of future lease payments which will factor in certain qualifying initial direct costs incurred as well as any lease incentives that may have been received.

Lease expenses for operating lease payments are recognized on a straight-line basis over the lease term.

Lease terms may factor in options to extend or terminate the lease.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

The Company elected the practical expedient for short-term leases which allows leases with terms of 12 months or less to be recorded on a straight-line basis over the lease term without being recognized on the consolidated balance sheet.

The table below presents ROU assets and liabilities recorded on the respective consolidated balance sheets as follows:

Classification

October 31, 2022

January 31, 2023

April 30, 2022

(in thousands)

Operating lease ROU assets

5 unchanged sentences

Total lease liabilities

Total operating lease expense was $ 481,000 and $ 962,000 for the three and six months ended October 31, 2022, respectively, the majority of which is included in cost of revenues and the remaining amount in selling and administrative expenses on the unaudited condensed consolidated statements of operations.

Total operating lease expense was $ 500,000 and $ 1.0 million for the three and six months ended October 31, 2021, respectively, the majority of which is included in cost of revenues and the remaining amount in selling and administrative expenses in the condensed consolidated statements of operations.

The table below reconciles the undiscounted cash flows for each of the first four fiscal years and total of the remaining fiscal years to the operating lease liabilities recorded on the unaudited condensed consolidated balance sheet as of October 31, 2022:

Total operating lease expense was $ 472,000 and $ 1.4 million for the three and nine months ended January 31, 2023, respectively, the majority of which is included in cost of revenues and the remaining amount in selling and administrative expenses on the unaudited condensed consolidated statements of operations.

Total operating lease expense was $ 500,000 and $ 1.5 million for the three and nine months ended January 31, 2022, respectively, the majority of which is included in cost of revenues and the remaining amount in selling and administrative expenses in the condensed consolidated statements of operations.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

Fiscal Year Ending April 30,

6 unchanged sentences

Long-term lease obligations

As of October 31, 2022, the weighted-average remaining lease term for all operating leases was 5.97 years.

As of January 31, 2023, the weighted-average remaining lease term for all operating leases was 5.79 years.

The Company does not generally have access to the rate implicit in the leases and therefore utilized the Company’s borrowing rate as the discount rate.

The Company selected a rate that is reflective of companies with similar credit ratings for secured debt.

The weighted average discount rate for operating leases as of October 31, 2022 was 6.19 %.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

The weighted average discount rate for operating leases as of January 31, 2023 was 6.21 %.

NOTE G – SEGMENT INFORMATION

11 unchanged sentences

Consequently, the Company determined that the segments indicated above most appropriately reflect the way the Company’s management views the business.

The accounting policies of the two segments are the same as those described in the “Summary of Accounting Policies” in the fiscal year-end financial statements included in the Form 10-K.

The Company evaluates the performance of its segments and allocates resources to them based on operating profit, which is defined as income before investment income, interest expense and taxes.

The accounting policies of the two segments are the same as those described in the “Summary of Accounting Policies” in the fiscal year-end financial statements included in the Form 10-K/A.

The Company evaluates the performance of its segments and allocates resources to them based on operating profit (loss), which is defined as income before investment (expense) income, interest expense, other income (expense), and taxes.

All acquired assets, including intangible assets, are included in the assets of both reporting segments.

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

The tables below present information about reported segments with reconciliation of segment amounts to consolidated amounts as reported in the consolidated statements of operations or the consolidated balance sheets for each of the periods (in thousands):

Periods ended October 31,

The tables below present information about reported segments with reconciliation of segment amounts to consolidated amounts as reported in the condensed consolidated statements of operations or the consolidated balance sheets for each of the periods (in thousands):

Periods ended January 31,

less intersegment revenues

1 unchanged sentence

Operating income (loss):

less intersegment profit

less intersegment revenues

Consolidated operating income (loss)

October 31, 2022

January 31, 2022

April 30, 2022

(Revised - See Note C)

Identifiable assets:

1 unchanged sentence

Consolidated identifiable assets

Total revenue recognized over time as POC and Passage of Title (“POT”) were approximately $ 8.7 million and $ 0.3 million, respectively, of the $ 9.0 million reported for the three months ended October 31, 2022.

Total revenue recognized over time as POC and POT were approximately $ 16.6 million and $ 0.5 million, respectively, of the $ 17.2 million reported for the six months ended October 31, 2022.

Total revenue recognized over time as POC and POT were approximately $ 12.2 million and $ 0.7 million, respectively, of the $ 12.9 million reported for the three months ended October 31, 2021.

Total revenue recognized over time as POC and POT were approximately $ 24.6 million and $ 1.3 million, respectively, of the $ 25.9 million reported for the six months ended October 31, 2021.

Total revenue recognized over time as POC and Passage of Title (“POT”) was approximately $ 10.2 million and $ 0.4 million, respectively, of the $ 10.6 million reported for the three months ended January 31, 2023.

Total revenue recognized over time as POC and POT was approximately $ 26.8 million and $ 1.0 million, respectively, of the $ 27.8 million reported for the nine months ended January 31, 2023.

Total revenue recognized over time as POC and POT was approximately $ 11.8 million and $ 0.5 million, respectively, of the $ 12.2 million reported for the three months ended January 31, 2022.

Total revenue recognized over time as POC and POT was approximately $ 36.4 million and $ 1.7 million, respectively, of the $ 38.1 million reported for the nine months ended January 31, 2022.

The amounts by segment and product line were as follows:

Three Months Ended October 31,

Three Months Ended January 31,

(In thousands)

3 unchanged sentences

Notes to Condensed Consolidated Financial Statements

Six Months Ended October 31,

Nine Months Ended January 31,

(In thousands)

Periods ended October 31,

Periods ended January 31,

(in thousands)

8 unchanged sentences

The Company has also licensed certain technology to Morion.

During the three and six months ended October 31, 2022, the Company acquired product from Morion in the aggregate amount of approximately $ 31,000 for both periods.

During the three and six months ended October 31, 2021, the Company acquired product from Morion in the aggregate amount of approximately $ 34,000 and $ 120,000 , respectively.

During the six months ended October 31, 2021, the Company received dividends from Morion in the amount of approximately $ 123,000 , which is included in other income, net in the consolidated statements of operations as part of the FEI-NY segment.

During the three and nine months ended January 31, 2023, the Company acquired product from Morion in the aggregate amount of approximately $ 55,000 and $ 86,000 , respectively.

During the three and nine months ended January 31, 2022, the Company acquired product from Morion in the aggregate amount of approximately $ 95,000 and $ 215,000 , respectively.

During the nine months ended January 31, 2022, the Company received dividends from Morion in the amount of approximately $ 123,000 , which is included in other income, net in the condensed consolidated statements of operations as part of the FEI-NY segment.

The Company’s investment consists of 4.6 % of Morion’s outstanding shares, accordingly, the Company accounts for its investment in Morion on the cost basis.

3 unchanged sentences

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

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

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

The impairment of $ 796,000 is included in other income (expense), net, in the consolidated statements of operations for the fiscal year ended April 30, 2022.

The likelihood of future sales to, purchases, and dividend payments from Morion is questionable.

The likelihood of future sales to, purchases from, and dividend payments from Morion is questionable.

FREQUENCY ELECTRONICS, INC.

2 unchanged sentences

NOTE I – FAIR VALUE OF FINANCIAL INSTRUMENTS

The cost, gross unrealized gains, gross unrealized losses, and fair market value of available-for-sale securities at October 31, 2022 and April 30, 2022, respectively, were as follows (in thousands):

October 31, 2022

The cost, gross unrealized gains, gross unrealized losses, and fair market value of available-for-sale securities at January 31, 2023 and April 30, 2022, respectively, were as follows (in thousands):

January 31, 2023

Gross Unrealized Gains

10 unchanged sentences

12 Months or more

October 31, 2022

January 31, 2023

Fixed Income Securities

1 unchanged sentence

Fixed Income Securities

The Company regularly reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment.

The Company does not believe that its investments in marketable securities with unrealized losses at October 31, 2022 were other-than-temporary due to market volatility of the security’s fair value, analysts’ expectations and the Company’s ability to hold the securities for a period of time sufficient to allow for any anticipated recoveries in market value.

During the three and six months ended October 31, 2022, the Company sold or redeemed available-for-sale securities of approximately $ 110,000 and $ 1.1 million, respectively, realizing losses of approximately $ 1,000 and $ 20,000 , respectively, during the same periods ended October 31, 2022.

Maturities of fixed income securities classified as available-for-sale at October 31, 2022 were as follows, at cost (in thousands):

Due after one year through five years

Due after five years

The Company liquidated all holdings related to Marketable Securities during the three months ended January 31, 2023.

During the three and nine months ended January 31, 2023, the Company sold or redeemed available-for-sale securities of approximately $ 9.8 million and $ 11.0 million, respectively, realizing losses of approximately $ 763,000 and $ 784,000 , respectively, during the respective periods ended January 31, 2023.

The fair value accounting framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

14 unchanged sentences

The Company’s money market, business account, and U.S.

securities are valued on a Level 1 basis.

The Company’s fixed income corporate debt securities and certificates of deposit are valued on a Level 2 basis.

securities were valued on a Level 1 basis.

The Company’s fixed income corporate debt securities and certificates of deposit were valued on a Level 2 basis.

Level 2 securities are valued at the closing prices and are consistent with quoted prices of similar assets reported in active markets.

8 unchanged sentences

NOTE K – CREDIT FACILITY

As of October 31, 2022, the Company had available credit with UBS Bank USA at variable terms based on its securities holdings under an advisory arrangement, under which no borrowings have been made.

NOTE L – VALUATION ALLOWANCE ON DEFERRED TAX ASSETS

As of January 31, 2023, the Company retired its credit facility with UBS Bank USA.

The Company is considering a new facility, but has sufficient cash to fund its operations.

NOTE L –DEFERRED INCOME TAXES

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.

3 unchanged sentences

In circumstances where there is sufficient negative evidence indicating that the deferred tax assets will not be realizable, we establish a valuation allowance.

As of October 31, 2022, and April 30, 2022, the Company maintained a full valuation allowance against its deferred tax assets.

As of January 31, 2023, and April 30, 2022, the Company maintained a full valuation allowance against its deferred tax assets.

If these estimates and assumptions change in the future, the Company may be required to adjust its existing valuation allowance resulting in changes to deferred income tax expense.

1 unchanged sentence

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE M – COMMITMENTS AND CONTINGENCIES

On August 25, 2021, to resolve previously disclosed disputes with Martin B.

Bloch, the former Chief Scientist of the Company and a former member of the Company’s Board of Directors, the Company entered into the Agreement on Material Terms of Settlement (the “Settlement Terms”), dated August 25, 2021, between and among the Company, Jonathan Brolin, Lance W.

Lord, Russell M.

Sarachek, Richard Schwartz, and Stanton D.

Sloane, each in their capacity as members of the Company’s Board of Directors (the “Director Defendants”), and the Compensation Committee of the Company’s Board of Directors, in its capacity as administrator under the deferred compensation agreements, and Mr.

Bloch and certain members of Mr.

Bloch’s family.

Under the Settlement Terms, in full and complete settlement of all claims asserted and all sums sought by Mr.

Bloch in the litigation and arbitration proceedings, the Company agreed to pay Mr.

Bloch $ 6 million on or before September 24, 2021.

Consistent with the Settlement Terms, on September 21, 2021, the Company, the Director of Defendants, the Company’s Compensation Committee and Mr.

Bloch and certain members of Mr.

Bloch’s family entered into a formal written settlement agreement, providing for the Company’s payment of $ 6 million in full and complete settlement of all claims asserted and all sums sought by Mr.

Bloch in the litigation and arbitration proceedings.

This settlement agreement concluded all previously disclosed disputes between Mr.

Bloch and the Company, the Director Defendants and the Company’s Compensation Committee.

Prior to the termination of Mr.

Bloch’s employment and commencement of the litigation and arbitration proceedings, the Company had been regularly accruing amounts pertaining to Mr.

Bloch’s post-employment deferred compensation retirement benefits.

As of July 31, 2021, the Company had accrued $ 6 million for deferred compensation and contingent liability in connection with the settlement with Mr.

The settlement resulted in a net expense of $ 650,000 to the Company and eliminated further legal expenses with respect to the dispute between Mr.

Bloch and the Company.

This net expense for financial statement purposes was recognized in selling and administrative expenses on the condensed consolidated statements of operations during the three months ended July 31, 2021.

NOTE N – SUBSEQUENT EVENT

On December 20, 2022 , the Company’s Board of Directors declared a special cash dividend of $ 1.00 per share of common stock.

The dividend is payable on January 27, 2023 , to stockholders of record as of the close of business on January 6, 2023 .

Based on the current number of shares of common stock outstanding, the total amount of the special dividend payment will be approximately $ 9.3 million.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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The factors listed above are not exhaustive.

Other sections of this Form 10-Q and in Part I, Item 1A (Risk Factors) of the Form 10-K include additional factors that could materially and adversely impact the Company’s business, financial condition and results of operations.

Other sections of this Form 10-Q and in Part I, Item 1A (Risk Factors) of the Form 10-K/A include additional factors that could materially and adversely impact the Company’s business, financial condition and results of operations.

Moreover, the Company operates in a very competitive and rapidly changing environment.

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Critical Accounting Policies and Estimates

The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in the Form 10-K.

The Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts, income taxes, and the valuation of inventory.

1 unchanged sentence

Changes in estimates can have a material impact on the Company’s financial position and results of operations.

The Company’s significant accounting policies did not change during the three and six months ended October 31, 2022.

The Company’s significant accounting policies did not change during the three and nine months ended January 31, 2023.

Revenue Recognition

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These are estimates based on the Company’s best judgement, but because this entails estimations based on products not heretofore developed, there is risk that the estimates may ultimately prove to be incorrect and that costs are impacted.

Contract costs include all direct material, direct labor, manufacturing overhead and other direct costs related to contract performance.

Contract costs include all direct material, direct labor, manufacturing overhead and other direct and indirect costs related to contract performance.

Selling, general and administrative costs are charged to expense as incurred.

1 unchanged sentence

Inventory write downs are established for slow-moving materials based on percentage of usage over a ten-year period, obsolete items on a gradual basis over five years with no usage and costs incurred on programs for which production-level orders cannot be determined as probable.

Such write-downs are based upon management’s experience and expectations for future business.

Any changes arising from revised expectations are reflected in cost of revenues in the period the revision is made.

Such write-downs are based upon management’s experience and estimates for future business.

Any changes arising from revised estimates are reflected in cost of revenues in the period the revision is made.

COVID-19 Pandemic Update, and Other Macroeconomic Factors

The full impact of the COVID-19 pandemic continues to evolve as of the date of this report.

As such, it is uncertain as to the full magnitude that the pandemic may ultimately have on the Company’s financial condition, liquidity, and future financial results.

For the three and six months ended October 31, 2022, the Company had been impacted by employee absenteeism related to direct or indirect effects of the COVID-19 pandemic, delays in the receipt of anticipated new contracts from customers administratively affected by the pandemic, and limited availability or delivery delays of parts and materials from vendors affected by the pandemic.

FEI-Zyfer’s operations were particularly affected, as evidenced by decreases in sales and gross margin during fiscal year 2022, which continued during the three and six months ended October 31, 2022.

Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.

Given the continuing changing dynamics of the COVID-19 pandemic the Company is not able to estimate the potential adverse effects on its operations, financial condition, or liquidity for the remainder of fiscal year 2023.

The Company has returned to essentially normal operations at its various locations.

At its locations, Frequency continues to follow federal and state guidelines with an emphasis on employee safety.

The Company faces various future COVID-19 related risks.

The Company is dependent on its workforce to design and manufacture its products.

If significant portions of the Company’s workforce are unable to work effectively, or if the U.S.

If faced with any of these factors, the Company may be unable to perform fully on its contracts and costs may increase.

These cost increases may not be fully recoverable or adequately covered by insurance.

For example, in the latter part of fiscal year 2021, the Company experienced some operational disruptions due to the need to vacate certain areas of the facilities for cleaning and disinfecting resulting from employees being potentially exposed to COVID-19 or following positive COVID-19 test results.

Also, certain Company vendors have been unable to deliver materials on time due to COVID-19 related impacts to their workforces or their supply chains.

These delays impacted the Company’s production costs and schedules.

Vendor delivery performance is being closely monitored and alternate sources of supply are generally available and, in some cases, are being established.

In addition to the impacts of the COVID-19 pandemic, the Company’s financial condition, liquidity, and future financial results may also be affected by other macroeconomic factors.

For example, due to continuing geopolitical circumstances resulting in increased inflation, energy and commodity prices may continue escalating which may adversely affect the Company’s financial results.

Refer to Footnote A in the accompanying financial statements.

FREQUENCY ELECTRONICS, INC.

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RESULTS OF OPERATIONS

The table below sets forth for the three and six months ended October 31, 2022 and 2021, respectively, the percentage of consolidated revenues represented by certain items in the Company’s condensed consolidated statements of operations or notes to the condensed consolidated financial statements:

Periods ended October 31,

The table below sets forth for the three and nine months ended January 31, 2023 and 2022, respectively, the percentage of consolidated revenues represented by certain items in the Company’s condensed consolidated statements of operations or notes to the condensed consolidated financial statements:

Periods ended January 31,

Less intersegment revenues

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Provision for income taxes

Net income (loss)

Periods ended October 31,

Periods ended January 31,

(in thousands)

Intersegment revenues

For the three months ended October 31, 2022 revenues from commercial and U.S.

For the three months ended January 31, 2023 revenues from commercial and U.S.

Government communication satellite programs accounted for approximately 47% of consolidated revenues compared to approximately 62% of consolidated revenues during this same period in the prior fiscal year.

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Revenues from non-space U.S.

Government/Department of Defense (“DOD”) customers, which are recorded in both the FEI-NY and FEI-Zyfer segments, accounted for approximately 44% of consolidated revenues for the three months ended October, 31, 2022 compared to approximately 39% of consolidated revenue during the same period in the prior fiscal year.

Other commercial and industrial revenues for the three months ended October 31, 2022 accounted for approximately 8% of consolidated revenue compared to 10% in the same period of the prior fiscal year.

The decrease in revenue for this quarter was due to delays in contract awards, delays in meeting program milestones, and minor technical challenges that have been, or will be, resolved reasonably quickly.

It is believed that these issues are only temporary timing issues and we expect revenue to increase in the future.

Government/Department of Defense (“DOD”) customers, which are recorded in both the FEI-NY and FEI-Zyfer segments, accounted for approximately 47% of consolidated revenues for the three months ended January, 31, 2023 compared to approximately 35% of consolidated revenue during the same period in the prior fiscal year.

Other commercial and industrial revenues for the three months ended January 31, 2023 accounted for approximately 6% of consolidated revenue compared to 3% in the same period of the prior fiscal year.

The decrease in revenue for the three months ended January 31, 2023 was mainly due to timing of the various production phases for products in the satellite market.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

For the six months ended October 31, 2022 revenues from commercial and U.S.

For the nine months ended January 31, 2023 revenues from commercial and U.S.

Government communication satellite programs accounted for approximately 46% of consolidated revenues compared to approximately 55% of consolidated revenues during this same period in the prior fiscal year.

Revenues from non-space U.S.

Government/DOD customers accounted for approximately 47% of consolidated revenues for the six months ended October, 31, 2022 compared to approximately 41% of consolidated revenue during the same period in the prior fiscal year.

Other commercial and industrial revenues for the six months ended October 31, 2022 and 2021 accounted for approximately 8% of consolidated revenue.

The decrease in revenue for the six months ended October 31, 2022 was due to delays in contract awards, delays in meeting program milestones, minor technical challenges that have been, or will be, resolved reasonably quickly, and funding limitations.

It is believed that these issues are only temporary timing issues and we expect revenue to increase in the future.

Periods ended October 31,

Government/DOD customers accounted for approximately 47% of consolidated revenues for the nine months ended January 31, 2023 compared to approximately 39% of consolidated revenue during the same period of fiscal year 2022.

Other commercial and industrial revenues for the nine months ended January 31, 2023 accounted for approximately 7% of consolidated revenue compared to approximately 6% for the nine months ended January 31, 2022.

The decrease in revenue for the nine months ended January 31, 2023 was predominately in the satellite market, however, the decline in revenue from non-space U.S.

Government/DOD customers also contributed to the decrease in revenue.

The decrease is partly due to timing of awards of contracts as well as technical difficulties that were reported at the end of our prior fiscal year, which have been mostly resolved.

Periods ended January 31,

(in thousands)

For the three-month and six-month periods ended October 31, 2022, gross margin and GM Rate decreased compared to the same respective periods in the prior fiscal year.

The decrease in gross margin and GM Rate was due to increased engineering costs on development phase programs that experienced particularly complex technical challenges that have since been resolved, minor technical challenges that have been, or will be, resolved reasonably quickly, and the negative cost impacts on some programs due to supply chain delays.

Gross margin was also affected by under absorption of costs due to the decrease in sales during the three-month and six-month periods ended October 31, 2022.

Selling and Administrative Expenses

Periods ended October 31,

For the three months ended January 31, 2023, gross margin and GM Rate increased compared to the same respective periods in the prior fiscal year.

The increase in the gross margin and GM Rate was due to higher engineering costs associated with programs in their development phase in the prior year period versus their production phase during the current year period.

For the nine months ended January 31, 2023, gross margin and GM Rate decreased compared to the same period in the prior fiscal year.

Gross margin was also negatively affected by under absorption of costs due to the decrease in sales during the three month and nine month periods ended January 31, 2023.

Selling, General, and Administrative Expenses

Periods ended January 31,

(in thousands)

For the three months ended October 31, 2022 and 2021, selling, and administrative (“SG&A”) expenses were approximately 23% and 19%, respectively, of consolidated revenues.

The decrease in SG&A expenses for the three months ended October 31, 2022 as compared to the prior year period was largely due to a decrease in professional fees and deferred compensation, partially offset by a one-time expense related to severance packages relating to the previously announced labor reduction.

For the six months ended October 31, 2022 and 2021, SG&A expenses were approximately 23% and 26%, respectively, of consolidated revenues.

The decrease in SG&A expenses for the six months ended October 31, 2022 as compared to the prior year period was largely due to decrease in professional fees, as well as a one-time reduction to stock option expense related to forfeitures and deferred compensation expense.

For the three months ended January 31, 2023 and 2022, selling, general, and administrative (“SG&A”) expenses were approximately 22% and 23%, respectively, of consolidated revenues.

The decrease in SG&A expenses for the three months ended January 31, 2023 as compared to the prior year period was largely due to a decrease in payroll and associated costs related to the previously announced workforce reduction.

For the nine months ended January 31, 2023 and 2022, SG&A expenses were approximately 23% and 25%, respectively, of consolidated revenues.

The decrease in SG&A expenses for the nine months ended January 31, 2023 as compared to the prior year period was largely due to decrease in professional fees, as well as a one-time reduction to deferred compensation expense.

The Company continues to monitor expenses looking for additional cost-effective reductions going forward.

Research and Development Expenses

Periods ended October 31,

(in thousands)

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Research and Development Expenses

Periods ended January 31,

(in thousands)

R&D expenditures represent investments intended to keep the Company’s products at the leading edge of time and frequency technology and enhance future competitiveness.

The R&D rate for the three-month period ended October 31, 2022 was 7% of sales compared to 11% of sales for the same period of the prior fiscal year.

The R&D rate for the six-month period ended October 31, 2022 was 10% of sales compared to 11% of sales for the same period of the prior fiscal year.

R&D decreases for both periods of fiscal year 2023 were primarily due to the resolution in fiscal 2022 of technical challenges of projects now in the production phase.

The R&D rate for the three-month period ended January 31, 2023 was 7% of sales compared to 9% of sales for the same period of the prior fiscal year.

The R&D rate for the nine-month period ended January 31, 2023 was 9% of sales compared to 10% of sales for the same period of the prior fiscal year.

The decrease in R&D expenditures for both periods of fiscal year 2023 was primarily due to the resolution of fiscal 2022 technical challenges to projects that are now in the production phase.

The Company plans to continue to invest in R&D in the future to keep its products at the state of the art.

Operating (Loss) Income

Periods ended October 31,

Operating Income (Loss)

Periods ended January 31,

(in thousands)

During the three-month and six-month periods ended October 31, 2022, operating losses resulted largely from the decrease in revenue coupled with the additional costs mentioned above in the “Gross Margin” section.

For the three months ended January 31, 2023, operating income increased due to a combination of increased gross margin, and the effects of the changes management has instituted.

For the nine months ended January 31, 2023, operating income decreased due to the previously disclosed decrease in sales and gross margin in the first two quarters of the current fiscal year.

Other Income (Expense), net

Periods ended October 31,

Periods ended January 31,

(in thousands)

Investment (expense) income

Investment (expense) income, net

Interest expense

Other income (expense), net

Investment (expense) income is derived primarily from the Company’s holdings of marketable securities.

Earnings on securities may vary based on fluctuating interest rates, dividend payout levels, and the timing of purchases, sales, redemptions, or maturities of securities.

Investment (expense) income is derived primarily from the Company’s holdings and sale of marketable securities.

During the three months ended January 31, 2023, the Company liquidated its holdings and as a result there was an approximate $784,000 loss recognized.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Income Tax Provision

Periods ended October 31,

Periods ended January 31,

(in thousands)

Periods ended October 31,

Effective tax rate on pre-tax book income (loss):

Periods ended January 31,

Effective tax rate on pre-tax book loss:

The estimated annual effective tax rate for the fiscal year ending April 30, 2023 is 0.01%.

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The Company maintains a full valuation allowance against its deferred tax assets.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

For the three months ended October 31, 2022, the Company recorded a discrete income tax provision of $1,000 related to an accrual of interest for unrecognized tax benefits.

For the three months ended October 31, 2021, the Company recorded an income tax provision of $1,504.

For the six months ended October 31, 2022, the Company recorded a discrete income tax provision of $2,000 related to an accrual of interest for unrecognized tax benefits.

For the six months ended October 31, 2021, the Company recorded an income tax provision of $2,250.

The effective tax rate for the three months ended October 31, 2022 was an income tax provision of 0.0% on pretax loss of $2.3 million compared to an income tax provision of 0.4% on pretax income of $499,000 in the comparable prior fiscal year period.

The effective tax rate for the three months ended October 31, 2022 differs from the U.S.

For the three months ended January 31, 2023, the Company recorded a discrete income tax provision of $3,345 primarily related to an accrual of interest for unrecognized tax benefits.

For the three months ended January 31, 2022, the Company recorded an income tax provision of $894.

For the nine months ended January 31, 2023, the Company recorded a discrete income tax provision of $5,812 primarily related to an accrual of interest for unrecognized tax benefits.

For the nine months ended January 31, 2022, the Company recorded an income tax provision of $3,144.

The effective tax rate for the three months ended January 31, 2023 was an income tax provision of (1.1)% on pretax loss of $313,000 compared to an income tax provision of (0.1)% on pretax loss of $734,000 in the comparable prior fiscal year period.

The effective tax rate for the three months ended January 31, 2023 differs from the U.S.

federal statutory rate of 21% primarily due to domestic losses for which the Company is not recognizing an income tax benefit.

The effective tax rate for the six months ended October 31, 2022 was an income tax provision of 0.0% on pretax loss of $5.4 million compared to an income tax provision of (0.2)% on pretax loss of $1.1 million in the comparable prior fiscal year period.

The effective tax rate for the six months ended October 31, 2022 differs from the U.S.

The effective tax rate for the nine months ended January 31, 2023 was an income tax provision of (0.1)% on pretax loss of $5.7 million compared to an income tax provision of (0.2)% on pretax loss of $1.8 million in the comparable prior fiscal year period.

The effective tax rate for the nine months ended January 31, 2023 differs from the U.S.

federal statutory rate of 21% primarily due to domestic losses for which the Company is not recognizing an income tax benefit.

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LIQUIDITY AND CAPITAL RESOURCES

The Company’s consolidated balance sheet continues to reflect a strong working capital position of approximately $28.4 million at October 31, 2022 and $34.2 million at April 30, 2022.

Included in working capital at October 31, 2022 and April 30, 2022 was $19.7 million and $21.5 million, respectively, consisting of cash, cash equivalents, and marketable securities.

The Company’s current ratio at October 31, 2022 was 2.1 to 1 compared to 2.5 to 1 as of April 30, 2022.

Net cash used in operating activities for the six-month period ended October 31, 2022 was approximately $466,000 and net cash provided by operating activities for the six-month period ended October 31, 2021 was approximately $1.7 million.

The decrease in cash flow in the first six months of fiscal 2023 was mainly due to an increase in net loss and contract liabilities, partially offset by a decrease in non-cash adjustments, contract assets, and inventory.

For the six-month periods ended October 31, 2022 and 2021, the Company incurred approximately $1.2 million and $1.8 million, respectively, of non-cash operating expenses including ROU assets and liabilities for leases, loss provision accrual, depreciation and amortization, inventory reserve adjustments, deferred compensation, and accruals for employee benefit programs.

Net cash used in investing activities for the six-month periods ended October 31, 2022 and 2021 was approximately $975,000 and $845,000, respectively.

During the six months ended October 31, 2022 marketable securities were sold or redeemed in the amount of $1.1 million compared to $1.4 million for the same period of fiscal year 2022.

During the six months ended October 31, 2022 approximately $1.4 million of marketable securities were purchased compared to $1.2 million for the same period of fiscal year 2022.

The Company acquired property, plant, and equipment in the amount of approximately $729,000 and $1.1 million for the six-month periods ended October 31, 2022 and 2021, respectively.

The Company may continue to invest in cash equivalents as dictated by its investment strategy.

There was no cash used in or provided by financing activities for the six months ended October 31, 2022 and 2021.

The Company has been authorized by its Board of Directors to repurchase up to $5 million worth of shares of its common stock when appropriate opportunities arise.

As of October 31, 2022, the Company has repurchased approximately $4 million of its common stock out of the $5 million authorization.

For the six months ended October 31, 2022 and 2021 there were no repurchases of shares.

The Company’s consolidated balance sheets continue to reflect a strong working capital position of approximately $20.0 million at January 31, 2023 and $34.2 million at April 30, 2022.

Included in working capital at January 31, 2023 and April 30, 2022 was $12.9 million and $21.5 million, respectively, consisting of cash, cash equivalents, and marketable securities.

The Company’s current ratio at January 31, 2023 was 1.7 to 1 compared to 2.6 to 1 as of April 30, 2022.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

The Company will continue to expend resources to develop, improve and acquire products for space applications, guidance and targeting systems, and communication systems which management believes will result in future growth and profitability.

Net cash provided by operating activities for the nine-month period ended January 31, 2023 was approximately $1.9 million and net cash provided by operating activities for the nine-month period ended January 31, 2022 was approximately $4.0 million.

The decrease in operating cash flow in the first nine months of fiscal 2023 was mainly due to an increase in net loss and contract liabilities, partially offset by a decrease in non-cash adjustments and contract assets.

For the nine-month periods ended January 31, 2023 and 2022, the Company incurred approximately $2.7 million and $2.9 million, respectively, of non-cash operating expenses including ROU assets and liabilities for leases, loss provision accrual, depreciation and amortization, inventory reserve adjustments, deferred compensation, and accruals for employee benefit programs.

Net cash provided by investing activities for the nine-month period ended January 31, 2023 was approximately $8.7 million compared to net cash used in investing activities of approximately $1.6 million for the nine-month period ended January 31, 2022.

During the nine months ended January 31, 2023, marketable securities were sold or redeemed in the amount of $11.0 million compared to $1.7 million for the same period of fiscal year 2022.

During the nine months ended January 31, 2023 approximately $1.4 million of marketable securities were purchased compared to $1.9 million for the same period of fiscal year 2022.

The Company acquired property, plant, and equipment in the amount of approximately $886,000 and $1.5 million for the nine-month periods ended January 31, 2023 and 2022, respectively.

Net cash used in financing activities for the nine months ended January 31, 2023 was approximately $9.4 million related to a dividend payout.

There was no cash used in or provided by financing activities for the nine months ended January 31, 2022.

The Company has been authorized by its Board of Directors to repurchase up to $5 million worth of shares of its common stock when appropriate opportunities arise.

As of January 31, 2023, the Company has repurchased approximately $4 million of its common stock out of the $5 million authorization.

For the nine months ended January 31, 2023 and 2022 there were no repurchases of shares.

The Company will continue to expend resources for research and development to develop, improve and acquire products for space applications, guidance and targeting systems, and communication systems which management believes will result in future growth and profitability.

The Company anticipates securing additional customer funding for a portion of its R&D activities and will allocate internal funds depending on market conditions and identification of new opportunities.

1 unchanged sentence

The Company may also pursue acquisitions to expand its range of products and may use internally generated cash and external funding in connection with such acquisitions.

As of October 31, 2022, the Company’s consolidated funded backlog was approximately $56 million compared to $40 million at April 30, 2022, the end of fiscal year 2022.

As of January 31, 2023, the Company’s consolidated funded backlog was approximately $54 million compared to $40 million at April 30, 2022, the end of fiscal year 2022.

Approximately 82% of this backlog is expected to be realized in the next twelve months.

As of October 31, 2022, there were no amounts included in backlog under cost-plus fixed-fee contracts that have not been funded.

As of January 31, 2023, there were no amounts included in backlog under cost-plus fixed-fee contracts that have not been funded.

The Company excludes from backlog any contracts or awards for which it has not received authorization to proceed.

2 unchanged sentences

The backlog is subject to change for various reasons, including possible cancellation of orders, change orders, terms of the contracts and other factors beyond the Company’s control.

Accordingly, the backlog is not necessarily indicative of the revenues or profits (losses) which may be realized when the results of such contracts are reported.

The Company believes that its liquidity is adequate to meet its operating and investment needs through at least December 20, 2023 and the foreseeable future.

Accordingly, the backlog is not necessarily indicative of future revenues or profits (losses) which may be realized when the results of such contracts are reported.

The Company believes that its liquidity is adequate to meet its operating and investment needs through at least March 17, 2024 and the foreseeable future.

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

4 unchanged sentences

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-Q

Item 1. Financial Statements