FREQUENCY ELECTRONICS INC 10-Q

Item 1. Financial Statements FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except par value) January 31, April 30, 2026 2025 (UNAUDITED) ASSETS: Current assets: Cash and cash equivalents $ 86 $ 4,720 Accounts receivable, net of allowances of $ 102 at January 31, 2026 and $ 110 at April 30, 2025 10,723 5,914 Contract assets 14,692 17,914 Inventories 25,834 23,487 Prepaid income taxes 226 - Prepaid expenses and other 993 1,071 Total current assets 52,554 53,106 Property, plant, and equipment, net 6,955 6,188 Deferred taxes 12,280 12,045 Goodwill 617 617 Cash surrender value of life insurance and assets held in trust 11,659 10,882 Right-of-use assets – operating leases 7,860 8,659 Restricted cash 1,392 1,365 Other assets 875 875 Total assets $ 94,192 $ 93,737 LIABILITIES AND STOCKHOLDERS’ EQUITY: Current liabilities: Accounts payable – trade $ 3,260 $ 1,359 Accrued liabilities 4,838 5,899 Loss provision accrual 50 460 Income taxes payable - 103 Operating lease liability - current portion 2,145 2,027 Contract liabilities 9,889 13,607 Total current liabilities 20,182 23,455 Deferred compensation 7,782 7,933 Operating lease liability – non-current portion 5,985 6,729 Total liabilities 33,949 38,117 Stockholders’ equity: Preferred stock - $ 1.00 par value; authorized 600 shares, no shares issued - - Common stock - $ 1.00 par value; 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 9,896 9,717 Additional paid-in capital 44,471 42,475 Retained earnings 7,661 3,659 Common stock reacquired and held in treasury - at cost ( 56 shares at January 31, 2026 and 13 shares at April 30, 2025) ( 1,785 ) ( 231 ) Total stockholders’ equity 60,243 55,620 Total liabilities and stockholders’ equity $ 94,192 $ 93,737 See accompanying notes to condensed consolidated financial statements. 3 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended January 31, Nine Months Ended January 31, 2026 2025 2026 2025 Condensed Consolidated Statements of Operations Revenues $ 16,890 $ 18,927 $ 47,829 $ 49,825 Cost of revenues 10,264 10,642 29,585 27,222 Gross margin 6,626 8,285 18,244 22,603 Selling and administrative expenses 3,593 3,380 10,800 9,614 Research and development expenses 1,763 1,436 4,095 4,536 Operating income 1,270 3,469 3,349 8,453 Other income (expense): Income on investments 191 138 562 564 Interest expense ( 21 ) ( 26 ) ( 67 ) ( 79 ) Other expense, net - - ( 77 ) ( 1 ) Income before benefit for income taxes 1,440 3,581 3,767 8,937 Benefit for income taxes ( 127 ) ( 11,824 ) ( 235 ) ( 11,552 ) Net income $ 1,567 $ 15,405 $ 4,002 $ 20,489 Net income per common share: Basic income per share $ 0.16 $ 1.60 $ 0.41 $ 2.14 Diluted income per share $ 0.16 $ 1.60 $ 0.41 $ 2.14 Weighted average shares outstanding: Basic 9,797 9,632 9,760 9,585 Diluted 9,797 9,632 9,760 9,589 See accompanying notes to condensed consolidated financial statements. 4 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended January 31, 2026 2025 Cash flows from operating activities: Net income $ 4,002 $ 20,489 Non-cash charges to earnings 4,273 ( 7,638 ) Net changes in operating assets and liabilities ( 9,054 ) ( 14,124 ) Net cash used in operating activities ( 779 ) ( 1,273 ) Cash flows from investing activities: Purchase of fixed assets ( 2,254 ) ( 1,177 ) Net cash used in investing activities ( 2,254 ) ( 1,177 ) Cash flows from financing activities: Payment of dividend - ( 9,567 ) Purchase of treasury stock ( 1,574 ) ( 377 ) Net cash used in financing activities ( 1,574 ) ( 9,944 ) Net decrease in cash and cash equivalents and restricted cash ( 4,607 ) ( 12,394 ) Cash and cash equivalents and restricted cash at beginning of period 6,085 19,265 Cash and cash equivalents and restricted cash at end of period $ 1,478 $ 6,871 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 67 $ 79 Income taxes $ 329 310 Non-cash investing and financing activities: Right-of-use assets obtained in exchange for operating lease liabilities $ 438 $ - See accompanying notes to condensed consolidated financial statements. 5 Table of Contents FREQUENCY ELECTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders’ Equity Three and Nine Months Ended January 31, 2026 (In thousands, except share data) (Unaudited) Additional Treasury stock Accumulated other Common stock paid in Retained (at cost) comprehensive Shares Amount capital earnings Shares Amount Income (loss) Total Balance at April 30, 2025 9,716,999 $ 9,717 $ 42,475 $ 3,659 13,088 $ ( 231 ) $ - $ 55,620 Contribution of stock to 401(k) plan 12,405 12 269 - - - - 281 Stock-based compensation expense 54,866 55 312 - - - - 367 Shares withheld on employee taxes on vested equity awards - - - - 21,910 ( 583 ) - ( 583 ) Net income - - - 634 - - - 634 Balance at July 31, 2025 9,784,270 $ 9,784 $ 43,056 $ 4,293 34,998 $ ( 814 ) $ - $ 56,319 Contribution of stock to 401(k) plan 6,768 7 223 - - - - 230 Stock-based compensation expense 27,308 27 453 - - - - 480 Shares withheld on employee taxes on vested equity awards - - - - 10,219 ( 375 ) - ( 375 ) Net income - - - 1,801 - - - 1,801 Balance at October 31, 2025 9,818,346 $ 9,818 $ 43,732 $ 6,094 45,217 $ ( 1,189 ) $ - $ 58,455 Contribution of stock to 401(k) plan 7,442 8 394 - - - - 402 Stock-based compensation expense 70,567 70 345 - ( 1,550 ) 20 - 435 Shares withheld on employee taxes on vested equity awards - - - - 12,260 ( 616 ) - ( 616 ) Net income - - - 1,567 - - - 1,567 Balance at January 31, 2026 9,896,355 $ 9,896 $ 44,471 $ 7,661 55,927 $ ( 1,785 ) $ - $ 60,243 See accompanying notes to condensed consolidated financial statements. 6 Table of Contents FREQUENCY ELECTRONICS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Changes in Stockholders’ Equity Three and Nine Months Ended January 31, 2025 (In thousands, except share data) (Unaudited) Additional Retained earnings Treasury stock Accumulated other Common stock paid in (Accumulated (at cost) comprehensive Shares Amount capital deficit) Shares Amount Income (loss) Total Balance at April 30, 2024 9,511,560 $ 9,512 $ 50,334 $ ( 20,027 ) 741 $ ( 3 ) $ - $ 39,816 Contribution of stock to 401(k) plan 26,457 26 215 - - - - 241 Stock-based compensation expense 27,815 28 316 - - - - 344 Shares withheld on employee taxes on vested equity awards - - - - 4,569 ( 62 ) - ( 62 ) Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price 1,819 2 ( 2 ) - - - - - Dividends payable - - ( 9,567 ) - - - - ( 9,567 ) Net income - - - 2,430 - - - 2,430 Balance at July 31, 2024 9,567,651 $ 9,568 $ 41,296 $ ( 17,597 ) 5,310 $ ( 65 ) $ - $ 33,202 Contribution of stock to 401(k) plan 17,577 17 195 - - - - 212 Stock-based compensation expense 32,127 32 192 - - - - 224 Shares withheld on employee taxes on vested equity awards - - - - 7,893 ( 100 ) - ( 100 ) Dividends payable - - 9,567 - - - - 9,567 Dividends paid - - ( 9,567 ) - - - - ( 9,567 ) Net income - - - 2,654 - - - 2,654 Balance at October 31, 2024 9,617,355 $ 9,617 $ 41,683 $ ( 14,943 ) 13,203 $ ( 165 ) $ - $ 36,192 Contribution of stock to 401(k) plan 7,850 8 137 - - - - 145 Stock-based compensation expense 72,003 72 236 - - - - 308 Shares withheld on employee taxes on vested equity awards - - - - 11,802 ( 215 ) - ( 215 ) Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price - - ( 30 ) - ( 2,737 ) 30 - - Net income - - - 15,405 - - - 15,405 Balance at January 31, 2025 9,697,208 $ 9,697 $ 42,026 $ 462 22,268 $ ( 350 ) $ - $ 51,835 See accompanying notes to condensed consolidated financial statements. 7 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE A – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management of Frequency Electronics, Inc. (the “Company”), the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the condensed consolidated financial position of the Company as of 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. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. 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. NOTE B – EARNINGS PER SHARE Reconciliation 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, Three months Nine months 2026 2025 2026 2025 Weighted average shares outstanding: Basic EPS shares outstanding (weighted average) 9,797,064 9,632,309 9,759,958 9,585,330 Effect of dilutive securities ** ** ** 3,496 Diluted EPS shares outstanding 9,797,064 9,632,309 9,759,958 9,588,826 ** For 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. On July 22, 2024, the Company’s Board of Directors declared a special cash dividend of $ 1.00 per share of common stock. The special dividend was paid on August 29, 2024, to stockholders of record as of the close of business on August 8, 2024. The total amount of the special dividend payment was approximately $ 9.6 million. NOTE C – CONTRACT ASSETS AND LIABILITIES Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date on contracts with customers. Contract assets are transferred to accounts receivable when the rights become unconditional. Contract liabilities primarily relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been satisfied, and therefore, revenue has not been recognized. 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 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. If contract losses are anticipated, a loss provision is recorded for the full amount of such losses when they are determinable. 8 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE D –EMPLOYEE BENEFIT PLANS During 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 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. Such contributions are in accordance with the Company’s discretionary match of employee voluntary contributions to this plan. Deferred 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. Payments made related to deferred compensation were approximately $ 180,000 and $ 546,000 , respectively, for the same periods. Deferred compensation 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. Payments made related to deferred compensation were approximately $ 183,000 and $ 541,000 , respectively, for the same periods. The whole-life insurance policies on the lives of certain participants covered by deferred compensation agreements have been placed in a trust. Upon the death of any insured participant, cash received from life insurance policies in excess of the Company’s deferred compensation obligations to the estate or beneficiaries of the deceased, are also placed in the trust. These assets belong to the Company until a change of control event, as defined in the trust agreement, should occur. At that time, the Company is required to add sufficient cash to the trust so as to match the deferred compensation liability described above. Such funds will be used to continue the deferred compensation arrangements following a change of control. 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 $ 3.9 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 January 31, 2026 and $ 0.4 million at April 30, 2025. Level 2 securities are valued at the closing prices and are consistent with quoted prices of similar assets reported in active markets. NOTE E – INVENTORIES Inventories, which are reported at the lower of cost or net realizable value, consisted of the following (in thousands): January 31, 2026 April 30, 2025 Raw materials and component parts $ 14,764 $ 14,668 Work in progress 10,392 8,444 Finished goods 678 375 $ 25,834 $ 23,487 NOTE F – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES The Company’s leases primarily represent offices, warehouses, vehicles, manufacturing and research and development (“R&D”) facilities, which expire at various times through 2030 and are operating leases. Contractual arrangements are evaluated at inception to determine if the agreement contains a lease. The leases contain renewal options, early termination, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate. We include options to extend or terminate leases in the right-of-use (“ROU”) operating lease asset and liability when it is reasonably certain we will exercise these options. As of January 31, 2026, lease options were not included in the calculation of the ROU operating lease asset and liability. ROU assets and lease liabilities are recorded based on the present value of future lease payments which will factor in certain qualifying initial direct costs incurred as well as any lease incentives that may have been received. Lease expenses for operating lease payments are recognized on a straight-line basis over the lease term. The Company elected the practical expedient for short-term leases which allows leases with terms of twelve months or less to be recorded on a straight-line basis over the lease term without being recognized on the consolidated balance sheet. The Company has also elected the practical expedient to account for lease and non-lease components as a single component. 9 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) The table below presents ROU assets and liabilities recorded on the respective consolidated balance sheets as follows (in thousands): January 31, 2026 April 30, 2025 Assets Right-of-use assets - operating leases $ 7,860 $ 8,659 Liabilities Operating lease liabilities, current portion 2,145 2,027 Operating lease liabilities, non-current portion 5,985 6,729 Total lease liabilities $ 8,130 $ 8,756 Total 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 $ 0.4 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 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 during the quarter ended October 31, 2025. There were no ROU assets or lease liabilities that were recorded for any leases that had not 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. The maturities of lease liabilities at January 31, 2026 are as follows: Fiscal Year Ending April 30, (in thousands) Remainder of 2026 $ 613 2027 2,063 2028 2,388 2029 2,535 2030 1,658 Thereafter 45 Total lease payments 9,302 Less imputed interest ( 1,172 ) Present value of future lease payments 8,130 Less current obligations under leases ( 2,145 ) Long-term lease obligations $ 5,985 As 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 January 31, 2026 and 2025, was 7.08 % and 6.40 %, respectively. 10 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE G – SEGMENT INFORMATION The 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: communication satellites (both commercial and U.S. Government-funded); terrestrial cellular telephone or other ground-based telecommunication stations; and other components and systems for the U.S. military. 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. market. The Company measures segment performance based on total revenues and profits generated by each geographic location rather than on the specific types of customers or end-users. Consequently, the Company determined that the segments indicated above most appropriately reflect the way the Company’s chief operating decision maker (“CODM”) views the business. The accounting policies of the two segments are the same as those described in “Note 1. Summary of Accounting Policies” to the consolidated financial statements included in the Form 10-K. Our Chief Executive Officer (“CEO”) serves as our CODM who evaluates the segment performance and allocates resources to them based on operating income which is defined as income before investment income, interest expense, other expenses, and income taxes. Operating income by segment is used to monitor segment results compared to prior periods, forecasted results, and the annual plan. 11 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) The 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 condensed consolidated statements of operations for the three and nine months ended January 31, 2026 and 2025 (in thousands): Periods ended January 31, Three months Nine months 2026 2025 2026 2025 Revenues: FEI-NY $ 12,251 $ 14,463 $ 33,399 $ 36,984 FEI-Zyfer 6,975 5,027 17,757 13,858 Less intersegment revenues ( 2,336 ) ( 563 ) ( 3,327 ) ( 1,017 ) Consolidated revenues $ 16,890 $ 18,927 $ 47,829 $ 49,825 Cost of revenues: FEI-NY $ 8,283 $ 7,559 $ 22,149 $ 20,054 FEI-Zyfer 4,007 3,612 10,273 8,300 Less intersegment cost of revenues ( 2,026 ) ( 529 ) ( 2,837 ) ( 1,132 ) Consolidated cost of revenues $ 10,264 $ 10,642 $ 29,585 $ 27,222 Research and development expenses: FEI-NY $ 1,173 $ 732 $ 2,339 $ 2,412 FEI-Zyfer 590 704 1,756 2,124 Consolidated research and development expenses $ 1,763 $ 1,436 $ 4,095 $ 4,536 Operating income (loss): FEI-NY $ 282 $ 3,546 $ 1,143 $ 7,326 FEI-Zyfer 1,445 96 3,218 1,489 Less intersegment operating income ( 309 ) ( 34 ) ( 490 ) 115 Corporate ( 148 ) ( 139 ) ( 522 ) ( 477 ) Consolidated operating income $ 1,270 $ 3,469 $ 3,349 $ 8,453 Included 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 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. 12 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) The tables below present the identifiable assets of each reportable segment and on a consolidated basis as reported in the consolidated balance 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): January 31, 2026 April 30, 2025 Identifiable assets: FEI-NY $ 39,527 $ 39,125 FEI-Zyfer 27,953 23,865 Less intersegment balances ( 629 ) ( 140 ) Corporate 27,341 30,887 Consolidated identifiable assets $ 94,192 $ 93,737 Periods ended January 31, Three months Nine months 2026 2025 2026 2025 Depreciation and amortization: FEI-NY $ 498 $ 430 $ 1,350 $ 1,385 FEI-Zyfer 14 28 64 84 Consolidated depreciation and amortization expense $ 512 $ 458 $ 1,414 $ 1,469 Total revenue recognized over time as Percentage of Completion (“POC”) and Passage of Title (“POT”) was approximately $ 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 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 $ 18.9 million reported for the three months ended January 31, 2025. Total revenue recognized over time as POC and POT was approximately $ 47.3 million and $ 2.5 million, respectively, of the $ 49.8 million reported for the nine months ended January 31, 2025. The amounts by segment and product line were as follows (in thousands): Three Months Ended January 31, 2026 2025 POC Revenue POT Revenue Total Revenue POC Revenue POT Revenue Total Revenue FEI-NY $ 9,481 $ 2,770 $ 12,251 $ 13,596 $ 867 $ 14,463 FEI-Zyfer 6,225 750 6,975 4,055 972 5,027 Less: intersegment - ( 2,336 ) ( 2,336 ) - ( 563 ) ( 563 ) Revenue $ 15,706 $ 1,184 $ 16,890 $ 17,651 $ 1,276 $ 18,927 Nine Months Ended January 31, 2026 2025 POC Revenue POT Revenue Total Revenue POC Revenue POT Revenue Total Revenue FEI-NY $ 28,943 $ 4,456 $ 33,399 $ 34,945 $ 2,039 $ 36,984 FEI-Zyfer 14,028 3,729 17,757 12,338 1,520 13,858 Less: intersegment - ( 3,327 ) ( 3,327 ) - ( 1,017 ) ( 1,017 ) Revenue $ 42,971 $ 4,858 $ 47,829 $ 47,283 $ 2,542 $ 49,825 13 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) Periods ended January 31, Three months Nine months 2026 2025 2026 2025 Revenues by product line: Satellite revenue $ 4,232 $ 11,190 $ 15,419 $ 28,843 Government non-space revenue 12,478 7,370 31,230 19,507 Other commercial & industrial revenue 180 367 1,180 1,475 Consolidated revenues $ 16,890 $ 18,927 $ 47,829 $ 49,825 NOTE H – INVESTMENT IN MORION, INC. The 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. The Company’s investment consists of 4.6 % of Morion’s outstanding shares. However, due to the Russia-Ukraine conflict and resulting sanctions, the future status of FEI’s investment in Morion became uncertain and accordingly, such investment was entirely written off in fiscal year 2022. Accordingly, the carrying value of this investment was $ 0 as of January 31, 2026 and April 30, 2025. During 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. Prior purchases of materials from Morion consisted primarily 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. NOTE I – RESTRICTED CASH As 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. Restricted cash is classified as current or non-current based on the remaining performance period of the contract. A reconciliation of cash and cash equivalents and restricted cash from the condensed consolidated balance sheets to the condensed consolidated statements of cash flows is shown below (in thousands): January 31, 2026 April 30, 2025 Cash and cash equivalents $ 86 $ 4,720 Restricted cash 1,392 1,365 Total cash and cash equivalents and restricted cash $ 1,478 $ 6,085 NOTE J – RECENT ACCOUNTING PRONOUNCEMENTS In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments in ASU 2023-09 aim to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 will be effective for the Company’s Annual Report on Form 10-K for the year ending April 30, 2026, with early adoption permitted. The Company is currently evaluating the impact of this update on its consolidated financial statements. 14 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) In 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, by caption. 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. 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. 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 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 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 allowance. 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. As 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. 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 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): January 31, 2026 April 30, 2025 Balance at beginning of year $ 567 $ 542 Warranty costs incurred ( 234 ) ( 253 ) Product warranty accrual 211 278 Balance at end of year $ 544 $ 567 15 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Item 2. 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 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. 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. 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. 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. 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. 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. Inventories 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 business. Any changes arising from revised estimates are reflected in cost of revenues in the period the revision is made. 16 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES (Continued) Income Taxes We 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. 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 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: Three months Nine months Periods ended January 31, 2026 2025 2026 2025 Revenues FEI-NY 72.5 % 76.4 % 69.8 % 74.2 % FEI-Zyfer 41.3 26.6 37.1 27.8 Less intersegment revenues (13.8 ) (3.0 ) (6.9 ) (2.0 ) 100.0 100.0 100.0 100.0 Cost of revenues 60.8 56.2 61.9 54.6 Gross margin 39.2 43.8 38.1 45.4 Selling and administrative expenses 21.3 17.9 22.6 19.3 Research and development expenses 10.4 7.6 8.5 9.1 Operating income 7.5 18.3 7.0 17.0 Other income, net 1.0 0.6 0.9 0.9 Benefit for income taxes (0.8 ) (62.5 ) (0.5 ) (23.2 ) Net income 9.3 % 81.4 % 8.4 % 41.1 % 17 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES (Continued) Revenues Three months Nine months Periods ended January 31, (in thousands) Segment 2026 2025 Change 2026 2025 Change FEI-NY $ 12,251 $ 14,463 $ (2,212 ) (15.3 )% $ 33,399 $ 36,984 $ (3,585 ) (9.7 )% FEI-Zyfer 6,975 5,027 1,948 38.8 17,757 13,858 3,899 28.1 Intersegment revenues (2,336 ) (563 ) (1,773 ) 314.9 (3,327 ) (1,017 ) (2,310 ) 227.1 $ 16,890 $ 18,927 $ (2,037 ) (10.8 )% $ 47,829 $ 49,825 $ (1,996 ) (4.0 )% For 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 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. 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 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 year. 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. The 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. For 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. The 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. Gross Margin Three months Nine months Periods ended January 31, (in thousands) 2026 2025 Change 2026 2025 Change $ 6,626 $ 8,285 $ (1,659 ) (20.0 )% $ 18,244 $ 22,603 $ (4,359 ) (19.3 )% Gross margin rate 39.2 % 43.8 % 38.1 % 45.4 % For 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. 18 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES (Continued) Selling, General, and Administrative Expenses Three months Nine months Periods ended January 31, (in thousands) 2026 2025 Change 2026 2025 Change $ 3,593 $ 3,380 $ 213 6.3 % $ 10,800 $ 9,614 $ 1,186 12.3 % For 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. Research and Development Expenses Three months Nine months Periods ended January 31, (in thousands) 2026 2025 Change 2026 2025 Change $ 1,763 $ 1,436 $ 327 22.8 % $ 4,095 $ 4,536 $ (441 ) (9.7 )% 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 Three months Nine months Periods ended January 31, (in thousands) 2026 2025 Change 2026 2025 Change $ 1,270 $ 3,469 $ (2,199 ) (63.4 )% $ 3,349 $ 8,453 $ (5,104 ) 60.4 % For 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. 19 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES (Continued) Other Income (Expense), net Three months Nine months Periods ended January 31, (in thousands) 2026 2025 Change 2026 2025 Change Investment income, net $ 191 $ 138 $ 53 (38.4 )% $ 562 $ 564 $ (2 ) 0.4 % Interest expense (21 ) (26 ) 5 (19.2 )% (67 ) (79 ) 12 (15.2 )% Other expense, net - - - - % (77 ) (1 ) (76 ) 7,600.0 % $ 170 $ 112 $ 58 51.8 % $ 418 $ 484 $ (66 ) (13.6 )% 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. 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 for Income Tax Three months Nine months Periods ended January 31, (in thousands) 2026 2025 Change 2026 2025 Change $ (127 ) $ (11,824 ) $ 11,697 (98.9 )% $ (235 ) $ (11,552 ) $ 11,317 (98.0 )% Three months Nine months Periods ended January 31, 2026 2025 2026 2025 Effective tax rate on pre-tax book income: (8.8 )% (330.2 )% (6.2 )% (129.3 )% On 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. 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) 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). The 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. For 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. 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. 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. 20 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES (Continued) For 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. federal 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. The 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. The 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 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. LIQUIDITY AND CAPITAL RESOURCES The 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. Net 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. For the nine 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. Net 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. Net 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. 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. 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. This new share repurchase authorization does not have an expiration date. During 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. 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 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. 21 Table of Contents FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES (Continued) As 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 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 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. The 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. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable to smaller reporting companies.