What changed in this filing

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Item 1. Financial Statements

2026-03-17 compared with 2025-12-15 · 445 added, 436 removed, 332 unchanged (73% of the section changed)

6 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowances of $ 102 at October 31, 2025 and $ 110 at April 30, 2025

Accounts receivable, net of allowances of $ 102 at January 31, 2026 and $ 110 at April 30, 2025

Contract assets

23 unchanged sentences

Common stock - $ 1.00 par value;

authorized 20,000 shares, 9,818 shares issued and 9,773 shares outstanding at October 31, 2025;

authorized 20,000 shares, 9,896 shares issued and 9,840 shares outstanding at January 31, 2026;

9,717 shares issued and 9,704 shares outstanding at April 30, 2025

1 unchanged sentence

Retained earnings

Common stock reacquired and held in treasury - at cost ( 45 shares at October 31, 2025 and 13 shares at April 30, 2025)

Common stock reacquired and held in treasury - at cost ( 56 shares at January 31, 2026 and 13 shares at April 30, 2025)

Total stockholders’ equity

5 unchanged sentences

thousands, except per share data)

Three Months Ended October 31,

Six Months Ended October 31,

Three Months Ended

Nine Months Ended

Condensed Consolidated Statements of Operations

7 unchanged sentences

Other expense, net

Income before (benefit) provision for income taxes

(Benefit) provision for income taxes

Income before benefit for income taxes

Benefit for income taxes

Net income per common share:

Basic and diluted income per share

Basic income per share

Diluted income per share

Weighted average shares outstanding:

Basic and diluted

accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

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 provided by operating activities

Net cash used in operating activities

Cash flows from investing activities:

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Consolidated Statements of Changes in Stockholders’ Equity

and Six Months Ended October 31, 2025

and Nine Months Ended January 31, 2026

thousands, except share data)

Treasury stock

comprehensive

Income (loss)

Balance at April 30, 2025

Contribution of stock to 401(k) plan

Stock-based compensation expense

Shares withheld on employee taxes on vested equity

Balance at July 31, 2025

Contribution of stock to 401(k) plan

Stock-based compensation expense

Shares withheld on employee taxes on vested equity

Balance at October 31, 2025

at April 30, 2025

of stock to 401(k)

compensation expense

withheld on employee

taxes on vested

equity awards

at July 31, 2025

of stock to 401(k)

compensation expense

withheld on employee

taxes on vested

equity awards

at October 31, 2025

of stock to 401(k)

compensation expense

withheld on employee

taxes on vested

equity awards

at January 31, 2026

accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity

and Six Months Ended October 31, 2024

and Nine Months Ended January 31, 2025

thousands, except share data)

Treasury stock

comprehensive

Income (loss)

Balance at April

Contribution of stock to 401(k) plan

Contribution of stock to 401(k)

Stock-based compensation expense

Shares withheld on employee taxes on vested equity

Exercise of stock options and stock appreciation rights - net of shares

tendered for exercise price

Shares withheld on employee

taxes on vested equity awards

Exercise of stock options and

stock appreciation rights - net of shares tendered for exercise price

Dividends payable

Balance at July 31, 2024

Contribution of stock to 401(k) plan

Contribution of stock to 401(k)

Stock-based compensation expense

Shares withheld on employee taxes on vested equity

Shares withheld on employee

taxes on vested equity awards

Dividends payable

1 unchanged sentence

Balance at October 31, 2024

Contribution of stock to 401(k)

Stock-based compensation expense

Shares withheld on employee

taxes on vested equity awards

Exercise of stock options and

stock appreciation rights - net of shares tendered for exercise price

at January 31, 2025

accompanying notes to condensed consolidated financial statements.

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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, 2025 and the results of its operations,

changes in stockholders’ equity for the three and six months ended October 31, 2025 and 2024, and cash flows for the six months

ended October 31, 2025 and 2024.

The April 30, 2025 condensed consolidated balance sheet was derived from audited financial

These financial statements are prepared in conformity with accounting principles generally accepted in the United States

of America (“U.S.

Certain information and footnote disclosures normally included in financial statements

prepared in accordance with U.S.

all material respects, the condensed consolidated financial position of the Company as of January 31, 2026 and the results of its operations,

changes in stockholders’ equity for the three and nine months ended January 31, 2026 and 2025, and cash flows for the nine months

ended January 31, 2026 and 2025.

The April 30, 2025 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.

Certain information and footnote disclosures normally included in financial statements prepared in accordance

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, 2025, filed on July 18, 2025 with the Securities and Exchange Commission (the “Form 10-K”).

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

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, 2025, filed on July 18, 2025 with the Securities and Exchange Commission (the “Form 10-K”).

The results of operations

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

B – EARNINGS PER SHARE

Reconciliation

of the weighted average shares outstanding for basic and diluted earnings per share (“EPS”) for the three and six months

ended October 31, 2025 and 2024, respectively, were as follows:

Periods ended October 31,

of the weighted average shares outstanding for basic and diluted earnings per share (“EPS”) for the three and nine months

ended January 31, 2026 and 2025, respectively, were as follows:

Periods ended January 31,

Weighted average shares outstanding:

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Diluted EPS shares outstanding

the three and six months ended October 31, 2025 there were no shares to exclude from the calculation of dilutive securities.

three and six months ended October 31, 2024 dilutive securities are excluded from the calculation of EPS since the inclusion of such

shares would be antidilutive.

The exercisable shares excluded for the three and six months ended October 31, 2024 were 76,000 shares

in both periods.

the three and nine months ended January 31, 2026, and the three months ended January 31, 2025, there were no shares to exclude from the

calculation of dilutive securities.

The exercisable shares excluded for the nine months ended January 31, 2025 were 66,000 shares as

their effect would be antidilutive.

July 22, 2024, the Company’s Board of Directors declared a special cash dividend of $ 1.00 per share of common stock.

9 unchanged sentences

therefore, revenue has not been recognized.

During the three and six months ended October 31, 2025, we recognized $ 3.3 million and $ 7.4

During the three and nine months ended January 31, 2026, we recognized $ 1.6 million and $ 9.0

million, respectively, of our contract liabilities at April 30, 2025 as revenue.

During the three and six months ended October 31, 2024,

During the three and nine months ended January 31, 2025,

we recognized $ 10.2 million and $ 26.2 million, respectively, of our contract liabilities at April 30, 2024 as revenue.

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D –EMPLOYEE BENEFIT PLANS

the three and six months ended October 31, 2025, the Company made contributions of 6,768 and 19,173 shares, respectively, of its common

the three and nine months ended January 31, 2026, the Company made contributions of 7,442 and 26,615 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 six

months ended October 31, 2024, the Company made contributions of 17,577 and 44,034 shares, respectively, of its common stock to the Company’s

During the three and nine

months ended January 31, 2025, the Company made contributions of 7,850 and 51,884 shares, respectively, of its common stock to the Company’s

profit-sharing plan and trust under Section 401(k) of the Internal Revenue Code.

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discretionary match of employee voluntary contributions to this plan.

compensation expense charged to selling and administrative expenses during the three and six months ended October 31, 2025, was approximately

compensation expense charged to selling and administrative expenses during the three and nine months ended January 31, 2026, was approximately

$ 131,000 and $ 396,000 , respectively, inclusive of approximately $ 21,000 and 67,000 , respectively, of interest expense.

2 unchanged sentences

Deferred compensation

expense charged to selling and administrative expenses during the three and six months ended October 31, 2024, was approximately $ 140,000

expense charged to selling and administrative expenses during the three and nine months ended January 31, 2025, was approximately $ 142,000

and $ 425,000 , respectively, inclusive of approximately $ 26,000 and $ 79,000 , respectively, of interest expense.

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compensation arrangements following a change of control.

The life insurance policies amounted to $ 7.2 million at October 31, 2025 and

The life insurance policies amounted to $ 7.3 million at January 31, 2026 and

$ 7.0 million at April 30, 2025.

The business account and U.S.debt securities within the trust are valued on a Level 1 basis and amounted

to $ 3.7 million and $ 3.5 million at October 31, 2025 and April 30, 2025, respectively.

The business account and U.S.

debt securities within the trust are valued on a Level 1 basis and amounted

to $ 3.9 million and $ 3.5 million at January 31, 2026 and April 30, 2025, respectively.

The fixed income corporate debt securities within

the trust are valued on a Level 2 basis and amounted to $ 0.5 million at October 31, 2025 and $ 0.4 million at April 30, 2025.

the trust are valued on a Level 2 basis and amounted to $ 0.5 million at January 31, 2026 and $ 0.4 million at April 30, 2025.

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

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in the right-of-use (“ROU”) operating lease asset and liability when it is reasonably certain we will exercise these options.

As of October 31, 2025, lease options were not included in the calculation of the ROU operating lease asset and liability.

As of January 31, 2026, lease options were not included in the calculation of the ROU operating lease asset and liability.

and lease liabilities are recorded based on the present value of future lease payments which will factor in certain qualifying initial

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Total lease liabilities

operating lease expense was $ 0.6 million and $ 1.1 million for the three and six months ended October 31, 2025, respectively, the majority

operating lease expense was $ 0.6 million and $ 1.7 million for the three and nine months ended January 31, 2026, 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 $ 0.5 million and $ 0.9 million for the three and six months ended October

Total operating lease expense was $ 0.4 million and $ 1.4 million for the three and nine months ended January

31, 2025, 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.

During the six months ended October 31, 2025, the Company

During the nine months ended January 31, 2026, the Company

recorded incremental ROU assets and lease liabilities of approximately $ 0.4 million arising from a new lease for FEI-NY, which commenced

1 unchanged sentence

There were no ROU assets or lease liabilities that were recorded for any leases that had not

commenced as of October 31, 2025.

During the six months ended October 31, 2024, the Company did not record any incremental ROU assets

and lease liabilities as there were no leases that commenced during the six months ended October 30, 2024.

maturities of lease liabilities at October 31, 2025 are as follows:

commenced as of January 31, 2026.

During the nine months ended January 31, 2025, the Company did not record any incremental ROU assets

and lease liabilities as there were no leases that commenced during the nine months ended January 31, 2025.

maturities of lease liabilities at January 31, 2026 are as follows:

Fiscal Year Ending April 30,

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Long-term lease obligations

of October 31, 2025 and 2024, the weighted-average remaining lease term for all operating leases was 4.31 years and 4.70 years, respectively.

of January 31, 2026 and 2025, the weighted-average remaining lease term for all operating leases was 4.15 years and 4.54 years, respectively.

The Company does not generally have access to the rate implicit in the leases and therefore selected a rate that is reflective of companies

with similar credit ratings for secured debt as the discount rate.

The weighted average discount rate for operating leases as of October

The weighted average discount rate for operating leases as of January

31, 2026 and 2025, was 7.08 % and 6.40 %, respectively.

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Company operates under two reportable segments based on the geographic locations of its subsidiaries:

(1) FEI-NY – operates out of New York and its operations consist principally of precision time and frequency control products used in three principal markets:

– operates out of New York and its operations consist principally of precision time and frequency control products used in

three principal markets:

communication satellites (both commercial and U.S.

Government-funded);

terrestrial cellular telephone or other ground-based telecommunication stations;

terrestrial cellular telephone or other

ground-based telecommunication stations;

and other components and systems for the U.S.

The FEI-NY segment also includes the operations of the Company’s wholly owned subsidiary, FEI-Elcom.

FEI-Elcom, in addition to its own product line, provides design and technical support for the FEI-NY segment’s communication satellite business.

– operates out of California and its products incorporate Global Positioning System (GPS) technologies into systems and

subsystems for secure communications, both government and commercial, and other locator applications.

This segment also provides

sales and support for the Company’s wireline telecommunications family of products, including US5G, which are sold in the U.S.

The FEI-NY segment also

includes the operations of the Company’s wholly owned subsidiary, FEI-Elcom.

FEI-Elcom, in addition to its own product line, provides

design and technical support for the FEI-NY segment’s communication satellite business.

(2) FEI-Zyfer

– operates out of California and its products incorporate Global Positioning System (GPS) technologies into systems and subsystems

for secure communications, both government and commercial, and other locator applications.

This segment also provides sales and support

for the Company’s wireline telecommunications family of products, including US5G, which are sold in the U.S.

Company measures segment performance based on total revenues and profits generated by each geographic location rather than on the specific

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tables below present segment revenues, significant segment expenses, which consist of segment cost of revenues and segment R&D expenses,

and segment operating income for each reportable segment and on a consolidated basis as reported in the consolidated statements of operations

for the three and six months ended October 31, 2025 and 2024 (in thousands):

Periods ended October 31,

and segment operating income for each reportable segment and on a consolidated basis as reported in the condensed consolidated statements

of operations for the three and nine months ended January 31, 2026 and 2025 (in thousands):

Periods ended January 31,

Less intersegment revenues

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in the determination of operating income is selling, general, and administrative expenses of $ 2.5 million and $ 2.6 million for the three

months ended October 31, 2025 and 2024, respectively, for the FEI-NY segment, and $ 0.8 million for both the three months ended October

31, 2025 and 2024, for the FEI-Zyfer segment.

Included in the determination of operating income is selling, general, and administrative

expenses of $ 5.3 million and $ 4.6 million for the six months ended October 31, 2025 and 2024, respectively, for the FEI-NY segment, and

$ 1.6 million and $ 1.3 million for the six months ended October 31, 2025 and 2024, respectively, for the FEI-Zyfer segment.

months ended January 31, 2026 and 2025, respectively, for the FEI-NY segment, and $ 0.9 million and $ 0.6 million for the three months

ended January 31, 2026 and 2025, respectively, for the FEI-Zyfer segment.

Included in the determination of operating income is selling,

general, and administrative expenses of $ 7.8 million and $ 7.2 million for the nine months ended January 31, 2026 and 2025, respectively,

for the FEI-NY segment, and $ 2.5 million and $ 1.9 million for the nine months ended January 31, 2026 and 2025, respectively, for the

FEI-Zyfer segment.

ELECTRONICS, INC.

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tables below present the identifiable assets of each reportable segment and on a consolidated basis as reported in the consolidated balance

sheets as of October 31, 2025 and April 30, 2025 and the depreciation and amortization charges related to these identifiable assets for

the three and six months then ended (in thousands):

sheets as of January 31, 2026 and April 30, 2025 and the depreciation and amortization charges related to these identifiable assets for

the three and nine months then ended (in thousands):

Identifiable assets:

1 unchanged sentence

Consolidated identifiable assets

Periods ended October 31,

Periods ended January 31,

Depreciation and amortization:

1 unchanged sentence

revenue recognized over time as Percentage of Completion (“POC”) and Passage of Title (“POT”) was approximately

$ 14.8 million and $ 2.3 million, respectively, of the $ 17.1 million reported for the three months ended October 31, 2025.

$ 15.7 million and $ 1.2 million, respectively, of the $ 16.9 million reported for the three months ended January 31, 2026.

Total revenue

recognized over time as POC and POT was approximately $ 43.0 million and $ 4.8 million, respectively, of the $ 47.8 million reported for

the six months ended October 31, 2025.

the nine months ended January 31, 2026.

Total revenue recognized over time as POC and POT was approximately $ 17.7 million and $ 1.3 million,

respectively, of the $ 15.8 million reported for the three months ended October 31, 2024.

respectively, of the $ 18.9 million reported for the three months ended January 31, 2025.

Total revenue recognized over time as POC and

POT was approximately $ 29.6 million and $ 1.3 million, respectively, of the $ 30.9 million reported for the six months ended October 31,

POT was approximately $ 47.3 million and $ 2.5 million, respectively, of the $ 49.8 million reported for the nine months ended January 31,

amounts by segment and product line were as follows (in thousands):

Three Months Ended October 31,

Six Months Ended October 31,

Three Months Ended January 31,

Nine Months Ended January 31,

ELECTRONICS, INC.

1 unchanged sentence

to Condensed Consolidated Financial Statements

Periods ended October 31,

Periods ended January 31,

Revenues by product line:

4 unchanged sentences

H – INVESTMENT IN MORION, INC.

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

crystal oscillators.

Company has an investment in Morion, Inc.

(“Morion”), a privately-held Russian company, which manufactures high precision

quartz resonators and crystal oscillators.

The Company has also previously licensed certain technology to Morion.

3 unchanged sentences

off in fiscal year 2022.

Accordingly, the carrying value of this investment was $ 0 as of October 31, 2025 and April 30, 2025.

the three and six months ended October 31, 2025 and 2024, the Company did not acquire any product from Morion.

During the three and six

months ended October 31, 2025 and 2024, the Company did not receive dividends from Morion.

Accordingly, the carrying value of this investment was $ 0 as of January 31, 2026 and April 30, 2025.

the three and nine months ended January 31, 2026 and 2025, the Company did not acquire any product from Morion.

During the three and

nine months ended January 31, 2026 and 2025, the Company did not receive dividends from Morion.

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

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I – RESTRICTED CASH

of October 31, 2025 and April 30, 2025, restricted cash consisted of approximately $ 1.4 million, in both periods, primarily related to

of January 31, 2026 and April 30, 2025, restricted cash consisted of approximately $ 1.4 million, in both periods, primarily related to

a letter of credit required for contractual restrictions during the period of performance for one of the Company’s contracts.

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impact of this update on its consolidated financial statements.

FREQUENCY ELECTRONICS, INC.

ELECTRONICS, INC.

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE K – 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.

On July 4, 2025, President

Trump signed H.R.1, the One Big Beautiful Bill Act (“OBBBA”) into law.

to Condensed Consolidated Financial Statements

November 2024, the FASB issued Accounting Standard Update (ASU) No.

2024-03, Income Statement – Reporting Comprehensive Income

– Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

This ASU requires entities

to disclose certain expenses, including purchases of inventory, employee compensation, depreciation, and intangible asset amortization,

Additionally, entities must provide a qualitative description of the amounts remaining in relevant expense captions that

are not separately disaggregated quantitatively.

The amendments are effective for annual reporting periods beginning after December 15,

2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating

the impact this standard will have on the consolidated financial statements.

K – DEFERRED INCOME TAXES

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.

July 4, 2025, President Trump signed H.R.1, the One Big Beautiful Bill Act (“OBBBA”) into law.

In accordance with U.S.

GAAP, the Company accounted

for the tax effects of changes in tax law in the period of enactment during the first quarter of fiscal year 2026.

The OBBBA made changes

the Company accounted for the tax effects of changes in tax law in the period of enactment during the first quarter of fiscal year 2026.

The OBBBA made changes to the U.S.

tax code, including, but not limited to:

(1) allowing taxpayers to fully deduct domestic research expenditures for tax years

beginning after December 31, 2024, (2) provides a catch-up relief provision for taxpayers to accelerate deductions for unamortized domestic

research expenditures, (3) provides a permanent provision for 100 % bonus depreciation deductions for most tangible personal property with

a recovery period of 20 years or less, acquired and placed in service after January 19, 2025, and (4) for tax years beginning after December

31, 2024, restores Adjusted Taxable Income by adding back amortization and depreciation to calculate the limitation on interest deductions

(effectively returning to EBITDA).

As required by the authoritative

guidance on accounting for income taxes, we evaluate the realization of deferred tax assets on a jurisdictional basis at each reporting

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.

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 circumstances where there is

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

the favorable research and expenditure provisions and permanent bonus depreciation provision will allow the Company to accelerate deductions

and reduce cash taxes.

The enactment of the OBBBA did not have a material impact on our provision or effective tax rate as of October

We continue to evaluate the OBBBA and its requirements, as well as its application to our business and its impact on cash taxes

and our effective tax rate.

As of October 31, 2025, the

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

capital losses 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.

If these estimates and assumptions change in the future, the Company may

be required to adjust its existing valuation allowance resulting in a change to deferred income tax expense.

NOTE L – PRODUCT WARRANTIES

The Company generally provides

its customers with a one-year warranty regarding the manufactured quality and functionality of its products.

The Company establishes warranty

reserves based on its product history, current information on repair costs and annual sales levels.

As of October 31, 2025 and April 30,

2025, respectively, changes in the carrying amount of accrued product warranty costs, reported in accrued expenses on the consolidated

balance sheets, were as follows (in thousands):

(1) allowing taxpayers to fully deduct domestic research

expenditures for tax years beginning after December 31, 2024, (2) provides a catch-up relief provision for taxpayers to accelerate deductions

for unamortized domestic research expenditures, (3) provides a permanent provision for 100 % bonus depreciation deductions for most tangible

personal property with a recovery period of 20 years or less, acquired and placed in service after January 19, 2025, and (4) for tax

years beginning after December 31, 2024, restores Adjusted Taxable Income by adding back amortization and depreciation to calculate the

limitation on interest deductions (effectively returning to EBITDA).

required by the authoritative guidance on accounting for income taxes, we evaluate the realization of deferred tax assets on a jurisdictional

basis at each reporting date.

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.

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 circumstances

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

In general, the favorable research and expenditure provisions and permanent bonus depreciation provision will allow the Company

to accelerate deductions and reduce cash taxes.

The enactment of the OBBBA did not have a material impact on our provision or effective

tax rate as of January 31, 2026.

We continue to evaluate the OBBBA and its requirements, as well as its application to our business and

its impact on cash taxes and our effective tax rate.

of January 31, 2026, the Company maintains a valuation allowance of $ 1.3 million primarily against certain deferred tax assets, including

state tax credits and capital losses 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.

If these estimates and assumptions change

in the future, the Company may be required to adjust its existing valuation allowance resulting in a change to deferred income tax expense.

L – PRODUCT WARRANTIES

Company generally provides its customers with a one-year warranty regarding the manufactured quality and functionality of its products.

The Company establishes warranty reserves based on its product history, current information on repair costs and annual sales levels.

As of January 31, 2026 and April 30, 2025, respectively, changes in the carrying amount of accrued product warranty costs, reported in

accrued expenses on the consolidated balance sheets, were as follows (in thousands):

Balance at beginning of year

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Balance at end of year

FREQUENCY ELECTRONICS, INC.

ELECTRONICS, INC.

and SUBSIDIARIES

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 Quarterly

Report on Form 10-Q (“Form 10-Q”) 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, our inability to integrate operations

and personnel, actions by significant customers or competitors, general domestic and international economic conditions, reliance on key

customers, including the U.S government, continued acceptance of the Company’s products in the marketplace, competitive factors,

new products and technological changes, product prices and raw material costs, dependence upon third-party vendors, other supply chain

related issues, increasing costs for materials, operating related expenses, competitive developments, changes in manufacturing and transportation

costs, the availability of capital, the outcome of any litigation and arbitration proceedings, and failure to maintain an effective system

of internal controls over financial reporting.

The factors listed above are not exhaustive.

Other sections of this Form 10-Q and in Part

I, Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2025 (the “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-Q 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 Policies and Estimates

The Company believes its most

critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation of inventory.

of these areas require the Company to make use of reasonable estimates including estimating the cost to complete a contract, the realizable

value of its inventory and the market value of its products.

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, 2025.

Revenue Recognition

Revenues are reported in operating

results predominantly 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.

of any change in the estimated gross margin rate (“GM 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

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 estimates for future

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

FREQUENCY ELECTRONICS, INC.

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

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

statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) 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, our inability to integrate operations and personnel, actions by significant customers or competitors, general domestic

and international economic conditions, reliance on key customers, including the U.S government, continued acceptance of the Company’s

products in the marketplace, competitive factors, new products and technological changes, product prices and raw material costs, dependence

upon third-party vendors, other supply chain related issues, increasing costs for materials, operating related expenses, competitive

developments, changes in manufacturing and transportation costs, the availability of capital, the outcome of any litigation and arbitration

proceedings, and failure to maintain an effective system of internal controls over financial reporting.

The factors listed above are

not exhaustive.

Other sections of this Form 10-Q and in Part I, Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K

for the fiscal year ended April 30, 2025 (the “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.

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-Q 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 Policies and Estimates

Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation

of inventory.

Both of these areas require the Company to make use of reasonable estimates including estimating the cost to complete

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

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 nine months ended January 31, 2026.

are reported in operating results predominantly 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 (“GM 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 estimates for future business.

Any changes arising from revised estimates are reflected in cost of revenues in the

period the revision is made.

ELECTRONICS, INC.

and SUBSIDIARIES

We are subject to income taxes

and significant judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities

and any valuation allowance recorded against our net deferred tax assets that are not more likely than not to be realized.

the realizability of our deferred tax assets taking into account all relevant factors at each reporting period.

In completing our assessment

of realizability of our deferred tax assets, we consider our history of income (loss) measured at pre-tax income (loss) adjusted for permanent

book-tax differences on a jurisdictional basis, volatility in actual earnings, excess tax benefits related to stock-based compensation

in recent prior years and impacts of the timing of reversal of existing temporary differences.

We also rely on our assessment of the Company’s

projected future results of business operations, including uncertainty in future operating results relative to historical results, volatility

in the market price of our common stock and its performance over time, variable macroeconomic conditions impacting our ability to forecast

future taxable income, and changes in business that may affect the existence and magnitude of future taxable income.

Our valuation allowance

assessment is based on our best estimate of future results considering all available information.

Our provision for or benefit

from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items, if

any, that are taken into account in the relevant period.

Each quarter, we update our estimate of the annual effective tax rate, and if

our estimated tax rate changes, we make a cumulative adjustment.

RESULTS OF OPERATIONS

The table below sets forth

for the three and six months ended October 31, 2025 and 2024, 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,

are subject to income taxes in the U.S.

and significant judgment is required in determining our provision for income taxes, our deferred

tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets that are not more likely than not

to be realized.

We monitor the realizability of our deferred tax assets taking into account all relevant factors at each reporting period.

In completing our assessment of realizability of our deferred tax assets, we consider our history of income (loss) measured at pre-tax

income (loss) adjusted for permanent book-tax differences on a jurisdictional basis, volatility in actual earnings, excess tax benefits

related to stock-based compensation in recent prior years and impacts of the timing of reversal of existing temporary differences.

also rely on our assessment of the Company’s projected future results of business operations, including uncertainty in future operating

results relative to historical results, volatility in the market price of our common stock and its performance over time, variable macroeconomic

conditions impacting our ability to forecast future taxable income, and changes in business that may affect the existence and magnitude

of future taxable income.

Our valuation allowance assessment is based on our best estimate of future results considering all available

provision for or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted

for discrete items, if any, that are taken into account in the relevant period.

Each quarter, we update our estimate of the annual effective

tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

OF OPERATIONS

table below sets forth for the three and nine months ended January 31, 2026 and 2025, 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

4 unchanged sentences

Other income, net

(Benefit) provision for income taxes

FREQUENCY ELECTRONICS, INC.

Benefit for income taxes

ELECTRONICS, INC.

and SUBSIDIARIES

Periods ended October 31,

Periods ended January 31,

(in thousands)

Intersegment revenues

For the three months ended

October 31, 2025, revenues from commercial and U.S.

Government communication satellite programs accounted for approximately 27% of consolidated

revenues compared to approximately 59% of consolidated revenues during this same period in the prior fiscal year.

Revenues are recognized

primarily over time under the percentage-of-completion (“POC”) method.

Revenues from the satellite market are recorded in

the FEI-NY segment.

the three months ended January 31, 2026, revenues from commercial and U.S.

Government communication satellite programs accounted for

approximately 25% of consolidated revenues compared to approximately 59% of consolidated revenues during this same period in the prior

Revenues are recognized primarily over time under the percentage-of-completion (“POC”) method.

Revenues from

the satellite market are recorded in the FEI-NY segment.

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 70% of consolidated revenues for the three months ended October, 31,

2025 compared to approximately 37% of consolidated revenue during the same period in the prior fiscal year.

Other commercial and industrial

revenues for the three months ended October 31, 2025 accounted for approximately 3% of consolidated revenue compared to 4% in the same

period of the prior fiscal year.

The revenue for the three

months ended October, 31, 2025 was higher than revenues in the prior period due to an increase in non-space DOD products, in the FEI-Zyfer

This increase was in both shipment-based products as well as products accounted for under the POC method.

For the six months ended October

31, 2025, revenues from commercial and U.S.

Government communication satellite programs accounted for approximately 36% of consolidated

revenues compared to approximately 57% of consolidated revenues during this same period in the prior fiscal year.

Revenues from non-space

Government/DOD customers accounted for approximately 61% of consolidated revenues for the six months ended October, 31, 2025 compared

to approximately 39% of consolidated revenue during the same period in the prior fiscal year.

Other commercial and industrial revenues

for the six months ended October 31, 2025 accounted for approximately 3% of consolidated revenue compared to 4% in the same period of

the prior fiscal year.

The slight increase in revenue for this six month period, compared to the same period in the previous fiscal year,

was attributable to the FEI-Zyfer segment and the increased demand for non-space DOD products.

Periods ended October 31,

Government/Department of Defense (“DOD”)

customers, which are recorded in both the FEI-NY and FEI-Zyfer segments, accounted for approximately 74% of consolidated revenues for

the three months ended January 31, 2026 compared to approximately 39% of consolidated revenue during the same period in the prior fiscal

Other commercial and industrial revenues for the three months ended January 31, 2026, accounted for approximately 1% of consolidated

revenue compared to 2% in the same period of the prior fiscal year.

revenue for the three months ended January 31, 2026 were lower than the revenues in the prior period partly as a result of certain space

programs in the FEI-NY segment during the prior fiscal year that were expedited during that period due to very aggressive schedules.

In addition, several new space bookings anticipated for the three months ended January 31, 2026 have been delayed and are now anticipated

in fourth quarter of fiscal 2026.

the nine months ended January 31, 2026, revenues from commercial and U.S.

Government communication satellite programs accounted for approximately

32% of consolidated revenues compared to approximately 58% of consolidated revenues during this same period in the prior fiscal year.

Revenues from non-space U.S.

Government/DOD customers accounted for approximately 65% of consolidated revenues for the nine months ended

January 31, 2026 compared to approximately 39% of consolidated revenue during the same period in the prior fiscal year.

Other commercial

and industrial revenues for the nine months ended January 31, 2026 and 2025 accounted for approximately 3% of consolidated revenue.

change in revenue for the nine months ended January 31, 2026 compared to the same period in the last fiscal year was driven by the changes

noted above for the three months ended January 31, 2026.

Periods ended January 31,

(in thousands)

Gross margin rate

For the three months and six

months ended October 31, 2025, both gross margin (“GM”) and GM Rate decreased compared to the same periods in the prior fiscal

The decrease in GM and GM Rate were attributable to a change in the mix of high margin production satellite programs in the prior

year periods versus lower margin programs with significant non-recurring engineering (“NRE”) effort during the three and six

months ended October 31, 2025.

FREQUENCY ELECTRONICS, INC.

the three months and nine months ended January 31, 2026, both gross margin (“GM”) and GM Rate decreased compared to the same

periods in the prior fiscal year.

The decrease in GM and GM Rate were attributable to a change in the mix of high margin production satellite

programs in the prior year periods versus lower margin programs with significant non-recurring engineering (“NRE”) effort

during the three and nine months ended January 31, 2026.

ELECTRONICS, INC.

and SUBSIDIARIES

Selling, General, and Administrative Expenses

Periods ended October 31,

General, and Administrative Expenses

Periods ended January 31,

(in thousands)

For the three months ended

October 31, 2025 and 2024, selling, general, and administrative (“SG&A”) expenses were approximately 21% of consolidated

revenues in both periods.

For the six months ended October 31, 2025 and 2024, SG&A expenses were approximately 23% and 20%, respectively,

of consolidated revenues.

The increase in SG&A expenses during the three months ended October 31, 2025 was due to fluctuations in

the various expense accounts that make up SG&A.

For the six months ended October 31, 2025 an increase in payroll related expenses,

including stock-based compensation, and investments in the future growth of the Company, including expansion into Colorado and Quantum

sensing, resulted in increased SG&A expenses.

These increased SG&A expenses are expected to continue through the remainder of

fiscal year 2026.

Research and Development Expenses

Periods ended October 31,

the three months ended January 31, 2026 and 2025, selling, general, and administrative (“SG&A”) expenses were approximately

21% and 18%, respectively of consolidated revenues.

For the nine months ended January 31, 2026 and 2025, SG&A expenses were approximately

23% and 19%, respectively, of consolidated revenues.

The increase in SG&A expenses during the three months ended January 31, 2026

was due to fluctuations in the various expense accounts that make up SG&A.

For the nine months ended January 31, 2026 an increase

in payroll related expenses, including stock-based compensation, and investments in the future growth of the Company, including expansion

into Quantum sensing, including the opening of a Colorado facility, resulted in increased SG&A expenses.

These increased SG&A

expenses are expected to continue through the remainder of fiscal year 2026.

and Development Expenses

Periods ended January 31,

(in thousands)

Research and Development (“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.

Fluctuations in R&D expenditures will occur in some periods due to current operational needs supporting

ongoing programs.

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

Operating Income

Periods ended October 31,

and Development (“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.

Fluctuations in R&D expenditures will occur in some periods

due to current operational needs supporting ongoing programs.

The Company plans to continue to invest in R&D in the future to keep

its products at the state of the art.

Periods ended January 31,

(in thousands)

For the three and six months

ended October 31, 2025, operating income decreased due to lower gross margin and increased SG&A as described above.

FREQUENCY ELECTRONICS, INC.

the three and nine months ended January 31, 2026, operating income decreased compared to the prior fiscal year periods due to lower revenue,

gross margin and increased SG&A as described above.

ELECTRONICS, INC.

and SUBSIDIARIES

Other Income (Expense), net

Periods ended October 31,

Income (Expense), net

Periods ended January 31,

(in thousands)

2 unchanged sentences

Other expense, net

Other income (expense), net

is derived from various sources.

The other income (expense), net can come from reclaiming of metal, refunds, interest on deferred trust

assets, or the sale of a fixed asset.

Interest expense is related to the deferred compensation payments made to retired employees.

majority of the approximately $0.2 million and $0.4 million of investment income for the three and six months ended October 31, 2025,

income (expense), net is derived from various sources.

The other income (expense), net can come from reclaiming of metal, refunds, interest

on deferred trust assets, or the sale of a fixed asset.

Interest expense is related to the deferred compensation payments made to retired

The majority of the approximately $0.2 million and $0.6 million of investment income for the three and nine months ended January

31, 2026, respectively, was from interest income and unrealized gains on assets held in the Frequency Electronics, Inc.

Deferred Compensation Trust.

(Benefit) Provision for Income Tax

Periods ended October 31,

Deferred Compensation

for Income Tax

Periods ended January 31,

(in thousands)

Periods ended October 31,

Periods ended January 31,

Effective tax rate on pre-tax book income:

On July 4, 2025, President

Trump signed the OBBBA into law.

July 4, 2025, President Trump signed the OBBBA into law.

In accordance with U.S.

GAAP, the Company accounted for the tax effects of changes in tax law in the

period of enactment during the first quarter of fiscal year 2026.

GAAP, the Company accounted for the tax effects of changes

in tax law in the period of enactment during the first quarter of fiscal year 2026.

The OBBBA made changes to the U.S.

tax code, including, but not limited

(1) allowing taxpayers to fully deduct domestic research expenditures for tax years beginning after December 31, 2024, (2) provides

a catch-up relief provision for taxpayers to accelerate deductions for unamortized domestic research expenditures, (3) a permanent provision

for 100% bonus depreciation deductions for most tangible personal property with a recovery period of 20 years or less, acquired and placed

in service after January 19, 2025, and (4) for tax years beginning after December 31, 2024, restores Adjusted Taxable Income by adding

back amortization and depreciation to calculate the limitation on interest deductions (effectively returning to EBITDA).

The estimated annual effective

tax rate for the fiscal year ending April 30, 2026 is 21.69%.

This calculation reflects an estimated income tax expense based on our current

fiscal year annual pretax income forecast which includes non-deductible expenses, estimated research and development credits, and state

income taxes.

The estimate of the annual effective tax rate is based on evaluations of possible future events and may be subject to revision

in future reporting periods.

For the three months ending

October 31, 2025, the Company recorded an income tax benefit of $30,644 which includes a discrete income tax benefit of $418,766.

discrete income tax benefit is primarily due to stock compensation windfall deductions and a remeasurement of the net deferred tax asset

due to a new state filing.

The calculation of the overall income tax provision consists of current U.S.

federal and state income taxes.

For the three months ending October 31, 2024, the Company recorded an income tax provision of $138,592 which included a discrete tax income

tax code, including,

but not limited to:

(1) allowing taxpayers to fully deduct domestic research expenditures for tax years beginning after December 31,

2024, (2) provides a catch-up relief provision for taxpayers to accelerate deductions for unamortized domestic research expenditures,

(3) includes a permanent provision for 100% bonus depreciation deductions for most tangible personal property with a recovery period

of 20 years or less, acquired and placed in service after January 19, 2025, and (4) for tax years beginning after December 31, 2024,

restores Adjusted Taxable Income by adding back amortization and depreciation to calculate the limitation on interest deductions (effectively

returning to EBITDA).

estimated annual effective tax rate for the fiscal year ending April 30, 2026 is 25.10%.

This calculation reflects an estimated income

tax expense based on our current fiscal year annual pretax income forecast which includes non-deductible expenses, estimated research

and development credits, and state income taxes.

The estimate of the annual effective tax rate is based on evaluations of possible future

events and may be subject to revision in future reporting periods.

the three months ending January 31, 2026, the Company recorded an income tax benefit of $127,246 which includes a discrete income tax

benefit of $568,117.

For the six months ended October

31, 2025, the Company recorded an income tax benefit of $107,915 which includes a discrete tax benefit of $612,685.

The discrete income

tax benefit is primarily due to stock compensation windfall deductions and a remeasurement of the net deferred tax asset due to a new

state filing.

The calculation of the overall income tax provision consists of current U.S.

The discrete income tax benefit is primarily due to stock compensation windfall deductions.

The calculation of the

overall income tax provision consists of current U.S.

federal and state income taxes.

months ended October 31, 2024, the Company recorded an income tax provision of $271,522 which includes a discrete tax benefit of $4,222.

FREQUENCY ELECTRONICS, INC.

For the three months ended January 31, 2025, the

Company recorded an income tax benefit of $11.8 million which included a discrete income tax benefit of $11.9 million.

The discrete income

tax benefit in the comparable period is primarily due to the release of the valuation allowance.

ELECTRONICS, INC.

and SUBSIDIARIES

The effective tax rate for

the three months ended October 31, 2025 was an income tax benefit of 1.73% on pretax income of $1.8 million compared to an income tax

provision of 4.96% on pretax income of $2.8 million in the comparable prior fiscal year period.

The effective tax rate for the three months

ended October 31, 2025 differs from the U.S.

federal statutory rate of 21% primarily due to non-deductible expenses, state income taxes,

R&D credits and discrete items.

the nine months ended January 31, 2026, the Company recorded an income tax benefit of $235,161 which includes a discrete tax benefit

of $1,180,802.

The discrete income tax benefit is primarily due to stock compensation windfall deductions and a remeasurement of the

net deferred tax asset due to a new state filing.

The calculation of the overall income tax provision consists of current U.S.

and state income taxes.

For the nine months ended January 31, 2025, the Company recorded an income tax benefit of $11.6 million which

includes a discrete tax income benefit of $11.9 million.

The discrete income tax benefit in the comparable period is primarily due to

the release of the valuation allowance.

effective tax rate for the three months ended January 31, 2026 was an income tax benefit of 8.84% on pretax income of $1.4 million compared

to an income tax benefit of 330.2% on pretax income of $3.6 million in the comparable prior fiscal year period.

The effective tax rate

for the three months ended January 31, 2026 differs from the U.S.

federal statutory rate of 21% primarily due to non-deductible expenses,

state income taxes, R&D credits and discrete items.

effective tax rate for the nine months ended January 31, 2026 was an income tax benefit of 6.24% on pretax income of $3.8 million compared

to an income benefit of 129.3% on pretax income of $8.9 million in the comparable prior fiscal year period.

The effective tax rate for

the six months ended October 31, 2025 was an income tax benefit of 4.64% on pretax income of $2.3 million compared to an income tax provision

of 5.07% on pretax income of $5.4 million in the comparable prior fiscal year period.

The effective tax rate for the six months ended

October 31, 2025 differs from the U.S.

federal statutory rate of 21% primarily due to non-deductible expenses, state income taxes, R&D

credits and discrete items.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s consolidated

balance sheets continue to reflect a strong working capital position of approximately $31.3 million at October 31, 2025 and approximately

$29.7 million at April 30, 2025.

Included in working capital at October 31, 2025 and April 30, 2025 was $3.0 million and $4.7

million, respectively, of cash and cash equivalents.

The Company’s current ratio was 2.6 to 1 at October 31, 2025 compared

to 2.3 to 1 as of April 30, 2025.

Net cash provided by operating

activities for the six months ended October 31, 2025 and 2024 was approximately $0.6 million and $2.4 million, respectively.

decrease in net cash provided by operating activities in the first six months of fiscal 2026 as compared to the prior fiscal year period

was primarily due to timing of billings and cash collections and a decrease in net income.

For the six months ended October 31,

2025 and 2024, the Company incurred approximately $2.7 million and $2.5 million, respectively, of non-cash operating expenses including

amortization of ROU assets, depreciation and amortization, inventory net realizable value adjustments, deferred compensation, and accruals

for employee benefit programs.

Net cash used in investing

activities for the six months ended October 31, 2025 and 2024 was approximately $1.4 million and $0.8 million, respectively, all relating

to purchases of capital expenditures.

Net cash used in financing

activities for the six months ended October 31, 2025 was $1.0 million, all related to purchase of treasury stock.

Net cash used in financing

activities for the six months ended October 31, 2024 was $9.7 million, of which $9.6 million was related to the payout of a special cash

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

In March 2005, the Company’s

Board of Directors authorized the repurchase of up to $5.0 million worth of shares of the Company’s common stock.

On September 9,

2025, the Company’s Board of Directors approved a new share repurchase authorization in the amount of $20.0 million.

new share repurchase authorization, the Company’s shares of common stock may be purchased on a discretionary basis from time to

time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated

transactions or other means.

the nine months ended January 31, 2026 differs from the U.S.

federal statutory rate of 21% primarily due to non-deductible expenses,

state income taxes, R&D credits and discrete items.

AND CAPITAL RESOURCES

Company’s consolidated balance sheets continue to reflect a strong working capital position of approximately $32.4 million at January

31, 2026 and approximately $29.7 million at April 30, 2025.

Included in working capital at January 31, 2026 and April 30,

2025 was $0.1 million and $4.7 million, respectively, of cash and cash equivalents.

The Company’s current ratio was 2.6 to

1 at January 31, 2026 compared to 2.3 to 1 as of April 30, 2025.

cash used in operating activities for the nine months ended January 31, 2026 and 2025 was approximately $0.8 million and net and $1.3

million, respectively.

The increase in net cash used in operating activities in the first nine months of fiscal 2026 as compared to the

prior fiscal year period was primarily due to timing of billings and cash collections and a decrease in net income.

months ended January 31, 2026 and 2025, the Company incurred approximately $4.3 million and $4.2 million, respectively, of non-cash operating

expenses including amortization of ROU assets, depreciation and amortization, inventory net realizable value adjustments, deferred compensation,

and accruals for employee benefit programs.

For the nine months ended January 31, 2026 and 2025, the non-cash operating expenses does

not include amounts related to the deferred tax assets which are approximately $0.2 million and $11.8 million, respectively.

cash used in investing activities for the nine months ended January 31, 2026 and 2025 was approximately $2.3 million and $1.2 million,

respectively, all relating to purchases of capital expenditures.

cash used in financing activities for the nine months ended January 31, 2026 was $1.6 million, all related to purchase of treasury stock.

Net cash used in financing activities for the nine months ended January 31, 2025 was $9.9 million, of which $9.6 million was related

to the payout of a special cash dividend of $1.00 per share of common stock paid on August 29, 2024.

March 2005, the Company’s Board of Directors authorized the repurchase of up to $5.0 million worth of shares of the Company’s

common stock.

On September 9, 2025, the Company’s Board of Directors approved a new share repurchase authorization in the amount

of $20.0 million.

Under this new share repurchase authorization, the Company’s shares of common stock may be purchased on a discretionary

basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases,

privately negotiated transactions or other means.

This repurchase program may be suspended or discontinued at any time without notice.

The new share repurchase

authorization replaced the Company’s existing share repurchase authorization under which approximately $0.6 million remained.

new share repurchase authorization does not have an expiration date.

During the three months ended

October 31, 2025, the Company acquired 10,219 shares at a weighted average share price of $36.72 per share.

The Company acquired these

shares to satisfy tax withholding requirements upon the vesting of previously granted RSU awards.

As of October 31, 2025, the Company

had repurchased approximately $0.4 million of its common stock out of the $20.0 million authorized under the new share repurchase authorization.

During the three months ended October 31, 2024, the Company repurchased 7,893 shares of outstanding common stock at $12.62 per share,

respectively.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

The 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 new share repurchase authorization replaced the Company’s existing share repurchase authorization under which approximately

$0.6 million remained.

This new share repurchase authorization does not have an expiration date.

the three months ended January 31, 2026, the Company acquired 12,260 shares of the Company’s common stock at a weighted average

share price of $50.22 per share.

The Company acquired these shares to satisfy tax withholding requirements upon the vesting of previously

granted RSU awards.

As of January 31, 2026, the Company had repurchased approximately $1.0 million of its common stock out of the $20.0

million authorized under the new share repurchase authorization.

During the three months ended January 31, 2025, the Company repurchased

11,802 shares of the Company’s outstanding common stock at a weighted average share price of $18.26 per share.

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.

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, 2025, the

Company’s consolidated funded backlog was approximately $82 million compared to approximately $70 million at April 30, 2025.

Approximately

69% of the backlog, as of October 31, 2025, is expected to be realized in the next twelve months.

The Company excludes from

backlog any contracts or awards for which it has not received authorization to proceed.

On fixed price contracts, the Company excludes

any unfunded portion.

Over time, as partially funded contracts become fully funded, the Company will add the additional funding to its

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 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 short-term operating and investment needs through at least December 12,

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.

ELECTRONICS, INC.

and SUBSIDIARIES

of January 31, 2026, the Company’s consolidated funded backlog was approximately $83 million compared to approximately $70 million

at April 30, 2025.

Approximately 69% of the backlog, as of January 31, 2026, is expected to be realized in the next twelve

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

price contracts, the Company excludes any unfunded portion.

Over time, as partially funded contracts become fully funded, the Company

will add the additional funding to its backlog.

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 future revenues or profits (losses) which may be realized when the results of such contracts are reported.

Company believes that its liquidity is adequate to meet its short-term operating and investment needs through at least March 17, 2027

and its long-term operation and investment needs for the foreseeable future thereafter.

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.

Quantitative and Qualitative

Disclosures about Market Risk

Not applicable to smaller

reporting companies.

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.

Quantitative and Qualitative Disclosures about Market Risk

applicable to smaller reporting companies.

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