What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-07-18 compared with 2024-08-02 · 286 added, 161 removed, 21 unchanged (96% of the section changed)

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

“Safe Harbor ” Statement under the Private Securities Litigation Reform Act of 1995:

The statements in this Annual Report on Form 10-K regarding future earnings and operations and other statements relating to the future constitute “forward-looking” statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.

Factors that would cause or contribute to such differences include, but are not limited to, the risks associated with reliance on key customers, including the U.S.

government, the Company’s use of estimates when accounting for contracts, actions by significant customers or competitors, competitive factors, new products and technological changes, continued acceptance of the Company’s products in the marketplace, dependence upon third-party vendors, product prices and raw material costs, the Company’s ability to attract and retain key employees, general domestic and international economic conditions, health epidemics and pandemics, external disruptions to the Company’s facilities or supply chain, the Company’s operations in a highly regulated industry, the outcome of any litigation and arbitration proceedings, cybersecurity attacks, volatility in the Company’s stock price, including due to the relatively low trading volume of its common stock, and failure to maintain an effective system of internal controls over financial reporting.

Harbor ” Statement under the Private Securities Litigation Reform Act of 1995:

statements in this Annual Report on Form 10-K regarding future earnings and operations and other statements relating to the future constitute

“forward-looking” statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking

Factors that would cause or contribute to such differences include, but are not limited to, the risks associated with

reliance on key customers, including the U.S.

government, the Company’s use of estimates when accounting for contracts, actions

by significant customers or competitors, competitive factors, new products and technological changes, continued acceptance of the Company’s

products in the marketplace, dependence upon third-party vendors, product prices and raw material costs, the Company’s ability

to attract and retain key employees, general domestic and international economic conditions, health epidemics and pandemics, external

disruptions to the Company’s facilities or supply chain, the Company’s operations in a highly regulated industry, the outcome

of any litigation and arbitration proceedings, cybersecurity attacks, volatility in the Company’s stock price, including due to

the relatively low trading volume of its common stock, and failure to maintain an effective system of internal controls over financial

The factors listed above are not exhaustive.

Other sections of this Form 10-K 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.

New factors emerge from time to time and it is not possible for management to predict the impact of all these factors on the Company’s business, financial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results.

Any or all of the forward-looking statements contained in this Form 10-K and any other public statement made by the Company or its management may turn out to be incorrect.

The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Critical Accounting Estimates

The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements.

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.

Each of these areas requires the Company to make use of reasonable estimates, including estimating the cost to complete a contract, the realizable value of its inventory or the market value of its products.

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

Revenue Recognition

Revenues for most contracts are reported in operating results over time using the cost-to-cost method.

Under this method, revenue is recorded based upon the ratio that incurred costs bear to total estimated contract costs with related cost of revenues recorded as the costs are incurred.

Each month management reviews estimated contract costs through a process of aggregating actual costs incurred and estimating additional costs to completion based upon the current available information regarding labor, outside services, materials, overhead costs and status of the contract.

The effect of any change in the estimated gross margin rate for a contract is reflected in revenues in the period in which the change is known.

Provisions for the full amount of anticipated losses on contracts are made in the period in which they become determinable.

Significant judgment is used in evaluating the financial information for certain contracts to determine an appropriate budget and estimated cost.

The Company evaluates this information continuously and bases its judgments on historical experience, design specifications, and expected costs for material and labor.

In accordance with industry practice, inventoried costs contain amounts relating to contracts and programs with long production cycles, a portion of which will not be realized within one year.

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.

Our income tax expense, deferred tax asset and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid.

Significant judgments and estimates are required in the determination of the consolidated income tax expense.

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.

In evaluating our ability to recover deferred tax assets in the jurisdiction from which they arise, we consider all positive and negative evidence, including the reversal of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations.

As of April 30, 2024 and 2023, we have a full valuation allowance against our U.S.

deferred tax assets.

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

The Company evaluates the likelihood of realizing its deferred tax assets quarterly.

Tax benefits are recognized for an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority.

For a tax position that meets the more-likely-than-not recognition threshold, the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority.

The liability associated with unrecognized tax benefits is adjusted periodically due to changing circumstances and when new information becomes available.

Other sections of this Form 10-K 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.

New factors emerge from time to time and it is not possible for

management to predict the impact of all these factors on the Company’s business, financial condition or results of operations or

the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any

forward-looking statements.

Given these risks and uncertainties, investors should not rely on forward-looking statements as a prediction

of actual results.

Any or all of the forward-looking statements contained in this Form 10-K and any other public statement made

by the Company or its management may turn out to be incorrect.

The Company expressly disclaims any obligation to update or revise

any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Accounting Estimates

Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements.

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.

Each of these areas requires the Company to make use of reasonable estimates, including estimating the cost to complete

a contract, the realizable value of its inventory or the market value of its products.

Changes in estimates can have a material impact

on the Company’s financial position and results of operations.

for most contracts are reported in operating results over time using the cost-to-cost method.

Under this method, revenue is recorded

based upon the ratio that incurred costs bear to total estimated contract costs with related cost of revenues recorded as the costs are

Each month management reviews estimated contract costs through a process of aggregating actual costs incurred and estimating

additional costs to completion based upon the current available information regarding labor, outside services, materials, overhead costs

and status of the contract.

The effect of any change in the estimated gross margin rate for a contract is reflected in revenues in the

period in which the change is known.

Provisions for the full amount of anticipated losses on contracts are made in the period in which

they become determinable.

judgment is used in evaluating the financial information for certain contracts to determine an appropriate budget and estimated cost.

The Company evaluates this information continuously and bases its judgments on historical experience, design specifications, and expected

costs for material and labor.

accordance with industry practice, inventoried costs contain amounts relating to contracts and programs with long production cycles,

a portion of which will not be realized within one year.

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.

income tax expense, deferred tax asset and liabilities, and liabilities for unrecognized tax benefits reflect management’s best

estimate of current and future taxes to be paid.

Significant judgments and estimates are required in the determination of the consolidated

income tax expense.

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.

Accounting for income taxes requires that a valuation allowance

be established when it is more likely than not that all or a portion of the deferred tax assets will not be realized.

In evaluating our

ability to recover deferred tax assets in the jurisdiction from which they arise, we consider all positive and negative evidence, including

the reversal of deferred tax liabilities, projected future taxable income, tax planning strategies, and results of recent operations.

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

a valuation allowance.

For the fiscal year ended April 30, 2025, the valuation allowance decreased by approximately $13.9 million from

the prior fiscal year primarily due to releasing the majority of the valuation allowance recorded against the deferred tax asset.

change in estimate occurred in the quarter ended January 31, 2025 because Frequency no longer had cumulative losses in recent years due

to significant earnings in the quarter ended January 31, 2025.

Company maintains a valuation allowance of approximately $1.4 million against certain deferred tax assets including state tax credits

and capital loss carryforwards because the realization of these tax attributes requires sufficient taxable income be sourced to the respective

state jurisdiction and capital gain income is required to utilize capital losses.

The Company will continue to evaluate the realizability

of its deferred tax assets quarterly.

Any further increases or decreases in the valuation allowance could have an unfavorable or favorable

impact on the Company’s income tax provision and net income in the period in which such determination is made.

As of April 30,

2025, the deferred tax asset is recorded at its more-likely-than-not realizable amount.

benefits are recognized for an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position

will be sustained upon examination by a taxing authority.

For a tax position that meets the more-likely-than-not recognition threshold,

the tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate

settlement with a taxing authority.

The liability associated with unrecognized tax benefits is adjusted periodically due to changing

circumstances and when new information becomes available.

Such adjustments are recognized entirely in the period in which they are identified.

The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as considered appropriate by the Company.

While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its liability for unrecognized tax benefits is adequate.

RESULTS OF OPERATIONS

Consolidated Results

The table below sets forth for the fiscal years ended April 30, 2024 and 2023, the percentage of consolidated net sales represented by certain items in the Company’s consolidated statements of operations:

Fiscal Years Ended April 30,

The effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as

considered appropriate by the Company.

While it is often difficult to predict the final outcome or the timing of resolution of any particular

tax matter, the Company believes its liability for unrecognized tax benefits is adequate.

OF OPERATIONS

table below sets forth for the fiscal years ended April 30, 2025 and 2024, the percentage of consolidated net sales represented by certain

items in the Company’s consolidated statements of operations:

Less intersegment revenues

2 unchanged sentences

Research and development expenses

Operating income (loss)

Other (expense) income, net

(Benefit) Provision from income taxes

Net income (loss)

Fiscal Years Ended April 30,

(in thousands)

Operating income

Other income, net

Benefit from income taxes

Ended April 30,

Intersegment revenues

For the fiscal year ended April 30, 2024 revenue increased by approximately $14.5 million, or 36% compared to the prior fiscal year.

The Company is encouraged by the significant revenue growth in both segments compared to the prior fiscal year.

In fiscal year 2024, revenues from satellite programs, one of the Company’s largest business areas, increased by $5.3 million, or 30%, compared to the prior fiscal year.

Satellite program revenues for government end-use were 40% and 43% of total revenues for fiscal years 2024 and 2023, respectively.

Satellite program revenues for commercial end-use were 2% and 1% of total revenue for fiscal years 2024 and 2023, respectively.

Revenues on satellite program contracts are recorded in the FEI-NY segment and are recognized primarily under the percentage-of-completion (“POC”) method.

the fiscal year ended April 30, 2025 revenue increased by approximately $14.5 million, or 26%, compared to the prior fiscal year.

Company is encouraged by the significant revenue growth compared to the prior fiscal year.

The majority of the increase in revenue for

fiscal year 2025, as compared to fiscal year 2024, was as a result of an increase in sales in the U.S.

Government/DOD Satellite market.

In fiscal year 2025, revenues from satellite programs, one of the Company’s largest business areas, increased by $17.7 million,

or 76%, compared to the prior fiscal year.

The increase was due mainly to adjustments in total estimated costs in the current period

resulting from efficiencies realized.

Satellite program revenues for Government end-use were 53% and 40% of total revenues for fiscal

years 2025 and 2024, respectively.

Satellite program revenues for commercial end-use were 6% and 2% of total revenue for fiscal years

2025 and 2024, respectively.

on satellite program contracts are recorded in the FEI-NY segment and are recognized primarily under the percentage-of-completion (“POC”)

Revenues from non-space U.S.

Government/DOD customers increased by approximately $8.7 million, or 43%, in fiscal year 2024 compared to fiscal year 2023.

These revenues are recorded in both the FEI-NY and FEI-Zyfer segments and accounted for approximately 52% and 50% of consolidated revenues for fiscal years 2024 and 2023, respectively.

Other commercial and industrial sales accounted for approximately 6% of consolidated revenues for both fiscal years 2024 and 2023.

Sales in the other commercial and industrial sales area were $3.1 million and $2.6 million for the fiscal year ended April 30, 2024 and the fiscal year ended April 30, 2023, respectively.

The majority of the increase in revenue for fiscal year 2024, as compared to fiscal year 2023, was as a result of an increase in sales in the non-space U.S.

Government/DOD market.

Fiscal Years Ended April 30,

(in thousands)

Government/DOD customers decreased by approximately $2.4 million, or 8%, in fiscal year 2025 compared

to fiscal year 2024.

These revenues are recorded in both the FEI-NY and FEI-Zyfer segments and accounted for approximately 38% and 52%

of consolidated revenues for fiscal years 2025 and 2024, respectively.

Other commercial and industrial sales accounted for approximately

3% and 6% of consolidated revenues for fiscal years 2025 and 2024, respectively.

Sales in the other commercial and industrial sales area

were $2.4 million and $3.1 million for the fiscal year ended April 30, 2025 and the fiscal year ended April 30, 2024, respectively.

Ended April 30,

Gross Profit Percentage

For the fiscal year ended April 30, 2024, the gross profit and gross profit percentage increased as a result of several factors.

The increase in gross profit dollars was directly related to the significant increase in revenues over the prior fiscal year period as well as the increase in gross margin.

The majority of the increase in the gross profit percentage, as compared to the prior fiscal year, was in the FEI-NY segment and was attributed to the Company resolving technical issues on some developmental programs from the prior two fiscal years.

The Company does not foresee significant additional technical issues regarding these programs as most of these programs have been completed.

In addition, the Company has new programs that are progressing well, and the Company anticipates that they will add to the generation of additional revenue and profit.

Selling and Administrative Expenses

Fiscal Years Ended April 30,

(in thousands)

In fiscal years ended April 30, 2024 and 2023, selling and administrative expenses (“SG&A”) were 18% and 23% of consolidated revenues, respectively.

While total SG&A expenses increased in fiscal year 2024, as compared to the prior fiscal year, SG&A expenses decreased as a percentage of revenue in fiscal year 2024, due to increased revenue as well as the Company successfully monitoring costs given the current economic conditions.

Research and Development Expenses

Fiscal Years Ended April 30,

(in thousands)

As a percentage of consolidated revenue, R&D expense for the fiscal years ended April 30, 2024 and 2023 were 6% and 8%, respectively.

The Company funded R&D amount was slightly higher in fiscal year 2024 as compared to the previous fiscal year, reflecting the Company’s commitment to maintaining its technical excellence.

The Company expects future R&D investment to be in line with, or even potentially above historical commitments.

The funds received in connection with customer funded R&D appears in revenues and the associated expenses are included in cost of revenues and are not included in the table above.

The Company believes that internally generated cash and cash reserves are adequate to fund its future R&D activity.

Operating Income (Loss)

Fiscal Years Ended April 30,

(in thousands)

For the fiscal year ended April 30, 2024, the Company recorded operating income of $5.0 million compared to an operating loss of $4.7 million in the prior fiscal year.

The change from an operating loss to operating income, year over year, is attributable to the Company’s significant increase in revenue and margin during fiscal year 2024, along with the positive effects of cost cutting measures instituted by management.

Other Income (Expense), net

Fiscal Years Ended April 30,

(in thousands)

Income (loss) on investments

the fiscal year ended April 30, 2025, the gross profit and gross profit percentage increased as a result of several factors.

in gross profit dollars was directly related to the significant increase in revenues over the prior fiscal year period as well as the

increase in gross margin.

The majority of the increase in the gross profit percentage, as compared to the prior fiscal year, was in the

FEI-NY segment and was attributed to the Company’s performance on several traditional space programs at higher margins, due to

favorable cumulative catch-up adjustments, and those programs progressing ahead of schedule.

In addition, the Company has new programs

that are progressing well, and the Company anticipates that they will generate additional revenue and profit.

and Administrative Expenses

Ended April 30,

fiscal years ended April 30, 2025 and 2024, selling and administrative expenses (“SG&A”) were 18% of consolidated revenues

in both periods.

While total SG&A expenses increased in fiscal year 2025, as compared to the prior fiscal year, SG&A expenses

remained consistent as a percentage of revenue in fiscal year 2025.

The approximately $2.1 million dollar increase is made up of mainly

payroll related items such as, 401K expense, stock option expense, and bonus accrual.

In addition to these expenses, trade show and related

costs also increased during fiscal year 2025 as well.

and Development Expenses

Ended April 30,

a percentage of consolidated revenue, R&D expense for the fiscal years ended April 30, 2025 and 2024 were 9% and 6%, respectively.

The Company funded R&D amount was higher in fiscal year 2025 as compared to the previous fiscal year, partially because the previous

fiscal year R&D expenditures was lower than planned and some of the expenses were subsequently captured in fiscal year 2025.

increase in R&D expense also reflects the Company’s commitment to maintaining its technical excellence.

The Company expects

future R&D investment to be in line with, or even potentially above, historical spending.

funds received in connection with customer funded R&D appears in revenues and the associated expenses are included in cost of revenues

and are not included in the table above.

The Company believes that internally generated cash and cash reserves are adequate to fund its

future R&D activity.

Ended April 30,

the fiscal year ended April 30, 2025, the Company recorded operating income of $11.7 million compared to an operating income of $5.0

million in the prior fiscal year.

The increase is mainly attributable to the Company’s significant increase in revenue and gross

margin during fiscal year 2025, as noted above, from traditional space programs that have been executed ahead of schedule, well within

budgets, and performed well technologically.

The positive effects of cost cutting measures instituted by management have also contributed

to the increase.

Ended April 30,

Income on investments

Interest expense

Other income (expense), net

The change from the prior fiscal year was mainly caused by a loss on the sale of the Company’s available-for sale marketable securities in the previous fiscal year.

Additionally, interest expense was approximately 30% lower in fiscal year 2024, as compared to the prior fiscal year.

Income Tax (Benefit) Provision

Fiscal Years Ended April 30,

(in thousands)

Fiscal Years Ended April 30,

(in thousands)

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

For the fiscal year ended April 30, 2024, the Company recorded an income tax benefit of $130,000.

For the fiscal year ended April 30, 2023, the Company recorded an income tax provision of $74,000.

The Company’s effective tax rate of (2.4)% for fiscal year 2024 differs from the U.S.

federal statutory rate of 21% primarily due to state taxes, an income tax benefit for a reduction in the uncertain tax position liability in connection with the expiration of the statute of limitations, and the reduction in the valuation allowance due to a decrease in the deferred tax asset for which no tax benefit was provided.

(See Note 13 to the Consolidated Financial Statements for a reconciliation of the actual tax benefit to the expected tax provision at the federal statutory rate.)

As of April 30, 2024, the Company has U.S.

federal net operating losses of $24.2 million of which $8.5 million begins to expire in fiscal year 2025 through fiscal year 2038, including $2.0 million which is subject to annual limitation under Internal Revenue Code Section 382.

Other expense, net

change from the prior fiscal year was relatively minimal.

All three categories presented were slightly lower in fiscal year 2025 compared

to the prior fiscal year.

Tax (Benefit) Provision

Ended April 30,

Effective tax rate on pre-tax book

income (loss):

the fiscal year ended April 30, 2025, the Company recorded an income tax benefit of $11.5 million.

For the fiscal year ended April 30,

2024, the Company recorded an income tax benefit of $0.1 million.

Company’s effective tax rate of (95.0)% for fiscal year 2025 differs from the U.S.

federal statutory rate of 21% primarily due

to a reduction of the valuation allowance.

(See Note 13 to the Consolidated Financial Statements for a reconciliation of the actual tax

benefit to the expected tax provision at the federal statutory rate.)

of April 30, 2025, the Company has U.S.

federal net operating losses of $5 million of which $1.7 million begins to expire in fiscal year

2026 through fiscal year 2031.

federal net operating losses of $5 million includes $1.7 million which is subject to an annual

limitation under Internal Revenue Code Section 382.

The remaining U.S.

federal net operating losses of $15.7 million have an indefinite carry-forward period.

federal capital loss carry-forward of $0.8 million expires in fiscal years 2025 and 2028.

federal R&D credits of $1.0 million begin to expire in fiscal year 2036 through fiscal year 2040.

The Company also has state net operating loss carryforwards, and state tax credits that expire in various years and amounts.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operations was $8.7 million in fiscal year 2024 compared to cash provided by operations of $1.2 million in fiscal year 2023.

The Company’s balance sheet continues to reflect a highly liquid position with working capital of $27.3 million at April 30, 2024 as compared to $21.0 million at April 30, 2023.

Included in working capital at April 30, 2024 was $18.3 million consisting of cash and cash equivalents.

The Company’s current ratio at April 30, 2024 was 1.9 to 1 compared to 1.8 to 1, at the end of prior fiscal year.

During fiscal years 2024 and 2023, the Company incurred $4.4 million and $5.0 million, respectively, in non-cash charges to earnings, including adjustments relating to net assets and liabilities for operating leases, loss provision accrual, provision for a note receivable, depreciation and amortization expense, inventory adjustments, warranty and accounts receivable reserves and certain employee benefit plan expenses, including accounting for stock-based compensation.

During fiscal year 2024, operating cash was increased as a result of decreases in loss on provision accrual and other liabilities and increases in contract assets and inventory, partially offset by an increase in contract liabilities and net income.

During fiscal year 2023, operating cash was increased by decreases in loss on provision accrual and other liabilities and increases in contract assets and inventory, partially offset by an increase in contract liabilities.

Net cash used in investing activities for the fiscal year ended April 30, 2024 was $1.5 million compared to $8.7 million provided by investing activities for the fiscal year ended April 30, 2023.

In fiscal year 2024, there were no investing activities related to sales of marketable securities net of the purchases of marketable securities and there were purchases of capital expenditures of $1.5 million.

In fiscal year 2023, investing activities included the proceeds related to sales of marketable securities net of the purchases of marketable securities of $9.6 million and purchases of capital expenditures of $0.9 million.

There was no cash used in financing activities for the fiscal year ended April 30, 2024.

Net cash used in financing activities for the fiscal year ended April 30, 2023 was approximately $9.4 million related to a special dividend payout.

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

During fiscal year 2024, the Company secured partial customer funding for a portion of its R&D efforts.

The customer funds received in connection therewith appear in revenues and are not included in R&D expenses.

For fiscal year 2025, 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 as in fiscal 2024.

The Company expects internally generated cash will be adequate to fund these future R&D efforts.

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.

During fiscal year 2024, as in fiscal year 2023, the impact of inflation on the Company’s business was due to increases in costs for materials and services.

federal net operating losses of $3.4 million have an indefinite

carry-forward period.

federal capital loss carry-forward of $0.8 million expires in fiscal years 2028.

credits of $0.7 million begin to expire in fiscal year 2038 through fiscal year 2045.

The Company also has state net operating loss carryforwards,

and state tax credits that expire in various years and amounts.

July 4, 2025, President Trump signed H.R.

1, the “One Big Beautiful Bill Act”, into law.

In accordance with U.S.

the Company will account for the tax effects of changes in tax law in the period of enactment which is Q1 of fiscal year 2026.

is currently in the process of analyzing the tax impacts of the law change, but we do not expect a material impact on our financial statements.

AND CAPITAL RESOURCES

cash used in operations was $1.4 million in fiscal year 2025 compared to net cash provided by operations of $8.7 million in fiscal year

The Company’s balance sheet continues to reflect a highly liquid position with working capital of $29.7 million at April

30, 2025 as compared to $27.3 million at April 30, 2024.

Included in working capital at April 30, 2025 was $4.7 million consisting

of cash and cash equivalents.

The Company’s current ratio at April 30, 2025 was 2.3 to 1, compared to 1.9 to 1 at April 30,

fiscal years 2025 and 2024, the Company incurred $5.9 million and $4.4 million, respectively, in non-cash charges to earnings, including

adjustments relating to net assets and liabilities for operating leases, loss provision accrual, deferred tax assets, depreciation and

amortization expense, inventory adjustments, warranty and accounts receivable reserves and certain employee benefit plan expenses, including

accounting for stock-based compensation.

During fiscal year 2025, cash provided by operations was mainly due to increases in net income,

mainly in the U.S.

Government/DOD Satellite market, and deferred tax assets primarily due to the reduction of the valuation allowance,

and partially offset by a decrease in contract liabilities and contract assets.

During fiscal year 2024, cash flows relating to operating

activities increased as a result of decreases in the loss provision accrual and other liabilities and increases in contract assets and

inventory, partially offset by an increase in contract liabilities and net income.

cash used in investing activities for the fiscal year ended April 30, 2025 was $1.8 million compared to $1.5 million used in investing

activities for the fiscal year ended April 30, 2024 all relating to purchases of capital expenditures .

cash used in financing activities for the fiscal year ended April 30, 2025 was $9.9 million, of which $9.6 million was related to a special

cash dividend payment of $1.00 per share of common stock paid on August 29, 2024.

There was no cash used in financing activities for

the fiscal year ended April 30, 2024.

Company will continue to expend resources for R&D to develop, improve and acquire products for space applications, guidance and targeting

systems, and communication systems that 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.

The Company expects internally generated cash will be adequate to fund these R&D efforts.

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 .

fiscal year 2025, as in fiscal year 2024, the impact of inflation on the Company’s business was an increases in costs for materials

and services.

The Company believes this may continue to impact expenses in fiscal year 2026 and future years.

As of April 30, 2024, the Company had an accumulated deficit of $20.0 million.

The Company believes that its cash, as of April 30, 2024, and cash flows from operations will provide sufficient liquidity to meet its operating needs in the normal course of business in both the short-term (next twelve months from the date of issuance of these consolidated financial statements) and in the long-term (beyond the next twelve months).

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

of April 30, 2025, the Company had retained earnings of $3.7 million.

The Company believes that its cash, as of April 30, 2025, and cash

flows from operations will provide sufficient liquidity to meet its operating needs in the normal course of business in both the short-term

(next twelve months from the date of issuance of these consolidated financial statements) and in the long-term (beyond the next twelve

ACCOUNTING PRONOUNCEMENTS

November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which expands on the required disclosure of incremental segment information.

The new guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is evaluating the effect on its consolidated financial statements when adopted in fiscal year 2025 but does not expect the effect to be material.

In December 2023, the FASB issued ASU No.

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which expands on the required disclosure of incremental

segment information.

The new guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal

years beginning after December 15, 2024, with early adoption permitted.

We adopted the new standard effective April 30, 2025.

we have enhanced our segment disclosures to include the presentation of cost of revenues by segment and the disclosure of our Chief Operating

Decision Maker (“CODM”).

The adoption of this ASU has no material effect on the consolidated financial statements and only

affects our disclosure.

December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires companies to annually disclose categories in the effective tax rate reconciliation and additional information about income taxes paid.

The new guidance is effective for annual periods beginning after December 15, 2024, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is in the process of evaluating the impact that the adoption of ASU No.

Improvements to Income Tax Disclosures (“ASU 2023-09”),

which requires companies to annually disclose categories in the effective tax rate reconciliation and additional information about income

The new guidance is effective for annual periods beginning after December 15, 2024, and interim periods within fiscal years

beginning after December 15, 2024, with early adoption permitted.

The Company is in the process of evaluating the impact that the adoption

2023-09 will have to the financial statements and related disclosures.

OTHER MATTERS

The financial information reported herein is not necessarily indicative of future operating results or of the future financial condition of the Company.

The Company has an investment in Morion, a privately-held Russian company, which manufactures high precision quartz resonators and crystal oscillators.

financial information reported herein is not necessarily indicative of future operating results or of the future financial condition

of the Company.

Company has an investment in Morion, a privately-held Russian company, which manufactures high precision quartz resonators and crystal

The Company has also licensed certain technology to Morion.

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.

During the fiscal years ended April 30, 2024 and 2023, the Company acquired product from Morion in the aggregate amount of approximately $89,000 and $196,000, respectively.

During the fiscal years ended April 30, 2024 and 2023, the Company sold no product and no training services to Morion, and the Company received no dividends from Morion.

Purchases of materials from Morion consist mainly of quartz crystal blanks which are used in the fabrication of quartz resonators.

In the event that these items become unavailable from Morion, the Company is in the process of establishing alternate sources of supply.

The Company is also capable of fabricating the crystal blanks in-house.

Morion is a less than wholly-owned subsidiary of Gazprombank, a state-owned Russian bank.

Ukraine-related sanctions regime has since 2014 included a list of sectoral sanctions identifications (“SSI”) pursuant to Executive Order 13662, which prohibits certain transactions, including certain extensions of credit, with an entity designated as an SSI or certain affiliates of an entity designated as an SSI.

Company’s investment consists of 4.6% of Morion’s outstanding shares, accordingly, the Company accounts for its investment

in Morion on a cost basis.

During the fiscal year ended April 30, 2025, the Company acquired no product from Morion.

During the fiscal

year ended April 30, 2024, the Company acquired product from Morion in the aggregate amount of approximately $89,000.

During the fiscal

years ended April 30, 2025 and 2024, the Company sold no product and no training services to Morion, and the Company received no dividends

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

response to these conditions, in connection with the preparation of the audited financial statements included in the 2022 Form 10-K,

the Company impaired its investment in Morion in full.

purchases of materials from Morion consisted mainly of quartz crystal blanks, which were used in the fabrication of quartz resonators.

However, on October 30, 2024, the U.S.

Department of Treasury’s Office of Foreign Assets Control designated Morion as a Specially

Designated National, resulting in the blocking of all Morion property and property interests.

As a result, the Company has terminated

all commercial relationships with Morion, including the licensing of technology to Morion and the purchase of any products from Morion.

The Company has established alternate sources of supply with respect to items previously acquired from Morion.

The Company is also capable

of fabricating the crystal blanks in-house.

is a less than wholly-owned subsidiary of Gazprombank, a state-owned Russian bank.

Ukraine-related sanctions regime has since

2014 included a list of sectoral sanctions identifications (“SSI”) pursuant to Executive Order 13662, which prohibits certain

transactions, including certain extensions of credit, with an entity designated as an SSI or certain affiliates of an entity designated

On July 16, 2014, after the Company’s investment in Morion, Gazprombank was designated as an SSI.

As previously disclosed, in light of Morion’s relationship with Gazprombank, in 2020, the Company evaluated, with the assistance of external legal counsel, certain sales to Morion and the timing of payments by Morion to the Company in connection with those sales to determine whether payments by Morion may have inadvertently constituted extensions of credit in violation of Directive 1 under Executive Order 13662.

The Company determined that certain payments by Morion – the majority of which occurred more than five years ago – were not timely.

Following the evaluation, on May 7, 2020, the Company voluntarily disclosed its findings to the Office of Foreign Assets Control (“OFAC”).

The Company’s voluntary disclosure to OFAC related solely to delays in collection of accounts receivable that exceeded then-applicable payment windows set forth in sanctions regulations and did not relate to any other type of payment or transaction.

previously disclosed, in light of Morion’s relationship with Gazprombank, in 2020, the Company evaluated, with the assistance of

external legal counsel, certain sales to Morion and the timing of payments by Morion to the Company in connection with those sales to

determine whether payments by Morion may have inadvertently constituted extensions of credit in violation of Directive 1 under Executive

The Company determined that certain payments by Morion – the majority of which occurred more than five years ago –

were not timely.

Following the evaluation, on May 7, 2020, the Company voluntarily disclosed its findings to the Office of Foreign Assets

Control (“OFAC”).

The Company’s voluntary disclosure to OFAC related solely to delays in collection of accounts receivable

that exceeded then-applicable payment windows set forth in sanctions regulations and did not relate to any other type of payment or transaction.

On February 17, 2021, the Company received a Cautionary Letter from OFAC indicating that OFAC has completed its review of the matter.

According to OFAC, the Cautionary Letter was issued instead of pursuing a civil monetary penalty or taking other enforcement action.

Due to the Russia-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 the 2022 Form 10-K, the Company impaired its investment in Morion in full.

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

Quantitative and Qualitative Disclosure about Market Risk

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 7. Management’s Discussion and Analysis