What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-07-17 compared with 2025-07-18 · 558 added, 380 removed, 655 unchanged (59% of the section changed)

1 unchanged sentence

of Independent Registered Public Accounting Firm

of Directors and Stockholders

of Directors and Shareholders

Electronics, Inc.

41 unchanged sentences

recognized using the percentage-of-completion cost-to-cost method

described further in Note 1 to the consolidated financial statements, the Company generates a majority of its revenue from contracts

with its customers where revenue is recognized over time using the percentage-of-completion cost-to-cost method.

Under this method, the

Company measures progress towards completion based on the ratio of costs incurred to date to total estimated costs to satisfy the Company’s

performance obligation.

The percentage-of-completion cost-to-cost method requires management to use significant estimates and assumptions

to estimate costs associated with its contracts with customers.

These costs are estimated at contract inception and are monitored and

updated throughout the duration of the contract.

We identified revenue recognized using the percentage-of-completion cost-to-cost method

as a critical audit matter.

As described further in note 1 to the consolidated financial statements,

the Company generates a majority of its revenue from contracts with its customers where revenue is recognized over time using the percentage-of-completion

cost-to-cost method.

Under this method, the Company measures progress towards completion based on the ratio of costs incurred to date

to total estimated costs to satisfy the Company’s performance obligation.

The percentage-of-completion cost-to-cost method requires

management to use significant estimates and assumptions to estimate costs associated with its contracts with customers.

These costs are

estimated at contract inception and are monitored and updated throughout the duration of the contract.

We identified revenue recognized

using the percentage-of-completion cost-to-cost method as a critical audit matter.

principal consideration for our determination that revenue recognized using the percentage-of-completion cost-to-cost method is a critical

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the following, among others:

gained an understanding of the Company’s process to develop the estimates and assumptions

used in determining the total estimated costs at completion.

evaluated the reasonableness of significant estimates and assumptions used by management

to develop its cost estimates through reviewing key terms of the contracts, comparing margin

estimates with actual margins generated by similar contracts that have been completed, evaluating

costs incurred to date relative to the contracts’ remaining tasks and timeline, and

inspecting analyses and documentation used to support the cost estimates, as applicable.

inquired with project management, engineers, and others directly involved with the execution

of contracts to evaluate management’s ability to satisfy the requirements of the contract,

as well as to evaluate project status and challenges which may affect the cost estimates.

evaluated contract activity during the period subsequent to April 30, 2025, but before the

financial statements were issued, to identify changes in conditions or events that may result

in significant changes to the Company’s cost estimates as of April 30, 2025.

evaluated the appropriateness of the timing of the incorporation of changes to cost estimates,

including evaluating the timeline of key events and knowledge points that led to management’s

determination that a change in estimate was necessary.

performed retrospective reviews when evaluating management’s estimation process by

comparing actual outcomes to previous estimates.

recalculated revenue and gross profit recognized during the year based on the Company’s

measurement of its progress towards completion.

gained an understanding of the Company’s process to develop the estimates and assumptions used in determining the total estimated

costs at completion.

evaluated the reasonableness of significant estimates and assumptions used by management to develop its cost estimates through reviewing

key terms of the contracts, comparing margin estimates with actual margins generated by similar contracts that have been completed, evaluating

costs incurred to date relative to the contracts’ remaining tasks and timeline, and inspecting analyses and documentation used

to support the cost estimates, as applicable.

inquired with project management, engineers, and others directly involved with the execution of contracts to evaluate management’s

ability to satisfy the requirements of the contract, as well as to evaluate project status and challenges which may affect the cost estimates.

evaluated contract activity during the period subsequent to April 30, 2026, but before the financial statements were issued, to identify

changes in conditions or events that may result in significant changes to the Company’s cost estimates as of April 30, 2026.

evaluated the appropriateness of the timing of the incorporation of changes to cost estimates, including evaluating the timeline of key

events and knowledge points that led to management’s determination that a change in estimate was necessary.

performed retrospective reviews when evaluating management’s estimation process by comparing actual outcomes to previous estimates.

recalculated revenue and gross profit recognized during the year based on the Company’s measurement of its progress towards completion.

GRANT THORNTON LLP

5 unchanged sentences

Current assets:

Cash and cash

Cash and cash equivalents

Accounts receivable, net of allowances of $ 39 at April 30, 2026 and $ 110 at April 30, 2025

1 unchanged sentence

Prepaid income taxes

expenses and other

Prepaid expenses and other

Total current assets

1 unchanged sentence

Deferred taxes

Cash surrender value of life insurance and assets held

Cash surrender value of life insurance and assets held in trust

Right-of-use assets – operating leases

Restricted cash

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY:

Current liabilities:

Accounts payable –

Accounts payable – trade

Accrued liabilities

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Income taxes payable

Operating lease liability,

current portion

Operating lease liability, current portion

Contract liabilities

Total current liabilities

Deferred compensation

Deferred taxes

Operating lease liability,

non-current portion

Operating lease liability, non-current portion

Other liabilities

Total liabilities

Contingencies (Note 15)

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Additional paid-in capital

Retained earnings (accumulated

Common stock reacquired and held in treasury - at cost ( 13 shares at April 30, 2025 and 1 share at April 30, 2024)

stockholders’ equity

Total liabilities

and stockholders’ equity

Retained earnings

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

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes are an integral part of these consolidated financial statements.

3 unchanged sentences

thousands, except per share data)

Ended April 30,

Consolidated Statements

of Operations

and administrative expenses

and development expenses

income (expense):

on investments

before benefit from income taxes

from income taxes

Net income per common share:

income per share

Weighted average shares

Years Ended April 30,

Consolidated Statements of Operations

Cost of revenues

Selling and administrative expenses

Research and development expenses

Operating (loss) income

Other income (expense):

Income on investments

Interest expense

Other expense, net

(Loss) income before benefit from income taxes

Benefit from income taxes

Net (loss) income

Net (loss) income per common share:

Basic (loss) income per share

Diluted (loss) income per share

Weighted average shares outstanding:

accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

Statements of Cash Flows

Ended April 30,

Years Ended April 30,

Cash flows from operating activities:

Adjustments to reconcile

net income to net cash (used in) provided by operating activities:

Net (loss) income

Adjustments to reconcile net income to net cash (used in) provided by operating activities:

Depreciation and amortization

Non-cash lease expense

Provision for losses on accounts receivable,

other assets and warranty reserve

Amortization of operating leases

(Recovery) provision for losses on accounts receivable, other assets, and warranty reserve

Provision for inventory reserve

Deferred taxes

Loss provision accrual

Loss on sale of fixed and

(Recovery) loss provision accrual

Loss on sale of fixed and other assets

Derecognition of goodwill

Inventory write off due to restructuring

Employee benefit plans expense

Stock-based compensation

Changes in operating assets

and liabilities:

Stock-based compensation expense

Changes in operating assets and liabilities:

Accounts receivable

4 unchanged sentences

Contract liabilities

Operating lease liabilities

Prepaid income taxes

Net cash (used in) provided

by operating activities

Other liabilities

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Net cash used in investing

Capital expenditures

Net cash used in investing activities

Cash flows from financing activities:

Payment of dividend

of treasury stock

Net cash used in financing

Net (decrease) increase in cash and cash equivalents

and restricted cash

Cash and cash equivalents

and restricted cash at beginning of year

Cash and cash equivalents

and restricted cash at end of year

Purchase of treasury stock

Net cash used in financing activities

Net decrease in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of year

Cash and cash equivalents and restricted cash at end of year

accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

Statements of Cash Flows

Ended April 30,

Years Ended April 30,

Supplemental disclosures of cash flow information:

Cash paid during the year for:

Non-cash investing and financing activities:

Right-of-use assets obtained in exchange for operating lease liabilities

accompanying notes are an integral part of these consolidated financial statements.

4 unchanged sentences

thousands, except share data)

Retained earnings

Treasury stock

comprehensive

at April 30, 2023

Contribution of

stock to 401(k) plan

compensation expense

Income (loss)

Balance at April 30, 2024

Exercise of stock

Contribution of

stock to 401(k) plan

withheld on employee taxes on vested equity awards

Exercise of stock options

Contribution of stock to 401(k) plan

Stock-based compensation expense

Shares withheld on employee taxes on vested equity

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 April 30, 2026

accompanying notes are an integral part of these consolidated financial statements.

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of Presentation and Principles of Consolidation :

consolidated financial statements include the accounts of Frequency Electronics, Inc.

and its wholly-owned subsidiaries (the “Company”

or “Registrant”).

References to “FEI” are to the parent company alone and do not refer to any of its subsidiaries.

See Note 13 for information regarding the Company’s business segments:

(1) FEI-NY (which includes the subsidiaries FEI Government

Systems, Inc., FEI Communications, Inc., and FEI-Elcom Tech, Inc.

The consolidated financial statements include the accounts of Frequency

Electronics, Inc.

and its wholly-owned subsidiaries (the “Company” or “Registrant”).

References to “FEI”

are to the parent company alone and do not refer to any of its subsidiaries.

See Note 13 for information regarding the Company’s

business segments:

(1) FEI-NY (which includes the subsidiaries FEI Government Systems, Inc., FEI Communications, Inc., and until April

30, 2026, included FEI-Elcom Tech, Inc.

(“FEI-Elcom”)), and (2) FEI-Zyfer, Inc.

(“FEI-Zyfer”).

Effective as of

April 30, 2026, FEI-Elcom converted into a Delaware limited liability company;

however, the ongoing business operations of FEI-Elcom will

continue under the FEI-NY segment.

For more information regarding the Company’s restructuring, see “Restructuring” below.

Intercompany accounts and transactions are eliminated in consolidation.

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of property, plant and equipment is computed on the straight-line method based upon the estimated useful lives of the assets ( 40 years

for buildings and 3 to 10 years for other depreciable assets).

Leasehold improvements are amortized on the straight-line method over

the lesser of the lease term or the estimated useful life of the asset.

for buildings and 3 to 10 years for machinery, equipment, furniture, and other depreciable assets).

Leasehold improvements are amortized

on the straight-line method over the lesser of the lease term or the estimated useful life of the asset.

ELECTRONICS, INC.

2 unchanged sentences

30, 2026 and 2025

which consist of raw materials, work-in-process and finished goods are accounted for at the lower of cost (specific and average) and

net realizable value.

The cost of work-in-process and finished goods generally include the cost of materials, labor, overhead and other

costs that are directly related to their production.

The Company reviews its inventories quarterly to determine reserves for excess or

obsolete inventory based upon historical sales trends, expected production usage, and other factors.

Changes to inventory are charged

to cost of revenues in the period when such changes are identified.

which consist of raw materials, work-in-process and finished goods are stated at the lower of cost or net realizable value, with cost

determined on the first-in, first-out method.

The cost of work-in-process and finished goods generally include the cost of materials,

labor, overhead and other costs that are directly related to their production.

The Company reviews its inventories quarterly to determine

reserves for excess or obsolete inventory based upon historical sales trends, expected production usage, and other factors.

inventory are charged to cost of revenues in the period when such changes are identified.

represent raw materials, work-in-process, and finished goods that relate to non-customized products sold to customers at a point in time.

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impairment loss will be recognized in an amount equal to that excess.

Management has determined that goodwill was not impaired as of

April 30, 2025 and 2024, based on its qualitative assessment of impairment for each period.

Due to the restructuring of FEI-Elcom at April 30, 2026 goodwill

has been written down in full.

Management has determined that goodwill was not impaired as of April 30, 2025, based on its qualitative

assessment of impairment for the period.

and Cost Recognition:

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the duration of the Company’s contracts is typically one year or less in consideration of the customer’s option to terminate

its’ contract for convince without incurring a substantive termination penalty.

its contract for convenience without incurring a substantive termination penalty.

under long-term contracts may be received before or after revenue is recognized.

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The amounts by segment and product line were as follows:

Year Ended April 30, 2025

Fiscal Year Ended April 30, 2026

(In thousands)

Year Ended April 30, 2024

Fiscal Year Ended April 30, 2025

(In thousands)

Fiscal Years Ended April 30,

(in thousands)

Revenues by Product Line:

1 unchanged sentence

Government non-space revenue

commercial & industrial revenue

Other commercial & industrial revenue

Consolidated revenues

ELECTRONICS, INC.

12 unchanged sentences

Any customer funds received in connection therewith would appear in revenues and the associated expenses are included

in cost of revenues and are included in R&D expenses.

Additionally, some of our programs include engineering and development efforts

which are incorporated in costs to complete the program and are recognized in revenues and costs of goods sold.

in cost of revenues.

Additionally, some of our programs include engineering and development efforts which are also incorporated in costs

to complete the program and are recognized in revenues and costs of revenues.

Company recognizes deferred tax liabilities and assets based on the expected future tax consequences of events that have been included

16 unchanged sentences

Diluted earnings

(loss) per share are not computed where the if-converted effect of such items would be anti-dilutive.

(loss) per share excludes the if-converted effect of such items if their inclusion would be anti-dilutive.

Values of Financial Instruments:

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levels of the fair value hierarchy are described below:

Level 1 Inputs

to the valuation methodology are unadjusted quoted prices for identical assets or liabilities.

Level 2 Inputs

to the valuation methodology include:

other than quoted prices that are observable for the asset or liability;

that are derived principally from or corroborated by observable market data by correlation or other means.

-Inputs other than quoted prices that are observable

for the asset or liability;

and -Inputs that are derived principally from or corroborated

by observable market data by correlation or other means.

Level 3 Inputs

to the valuation methodology are unobservable and significant to the fair value measurement.

34 unchanged sentences

The Company does not require customers to post collateral.

Restructuring:

During the fourth quarter of fiscal 2026, the Company approved a plan

to exit its FEI-Elcom business.

Effective as of April 30, 2026, FEI-Elcom, a wholly-owned subsidiary of the Company, was converted into

a Delaware limited liability company and the ongoing business operations, including the net book value of the assets and liabilities at

April 30, 2026, of FEI-Elcom have been transferred to the FEI-NY segment.

As FEI-Elcom was already reported within the FEI-NY segment,

the restructuring did not result in a change in the financial presentation of any segment information.

The remaining workforce will continue

as employees of FEI-NY while remaining in the New Jersey office location.

As a result of the restructuring, the Company recognized approximately

$ 3.8 million of inventory write offs included in cost of revenues, approximately $ 0.4 million of SG&A expense related to severance

and legal costs, and approximately $ 0.4 million of other expense for derecognition of goodwill in the consolidated statement of operations.

All charges noted related to restructuring have been recorded in the FEI-NY segment.

The Company believes that the charges associated

with this restructuring are substantially complete as of April 30, 2026 .

Accounting Pronouncements:

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

2023-07, Segment Reporting (Topic 280):

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

segment information.

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

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

We adopted the new standard effective April 30, 2025.

we have enhanced our segment disclosures to include the presentation of significant segment expenses and the disclosure of our Chief

Operating Decision Maker (“CODM”).

The adoption of this ASU has no material effect on its consolidated financial statements

and only affects our disclosure.

December 2023, the FASB issued ASU No.

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

2023-09, “Income Taxes (Topic 740):

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

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

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

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

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

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

ASU 2023-09 is intended to enhance the transparency and decision

usefulness of income tax disclosures.

The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily

through changes to the rate reconciliation and income taxes paid information.

Early adoption is permitted.

A public entity can apply

the amendments in ASU 2023-09 prospectively or retrospectively to all annual periods beginning after December 15, 2024.

was adopted by the Company prospectively for the year ended April 30, 2026, and the Company, accordingly, made the required changes in

its income tax related disclosure.

See Note 12 for additional information.

The adoption of ASU 2023-09 did not have any material impact

on the Company’s audited consolidated financial statements.

November 2024, the FASB issued 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.

December 2025, the FASB issued ASU No.

2025-11, Interim Reporting (Topic 270):

Narrow Scope Improvements, an amendment of the FASB Accounting

Standards Codification.

The amendments in this ASU primarily provide clarification on interim reporting requirements and enhanced disclosure

requirements.

The amendments also include a disclosure principle to disclose all events since the end of the last annual reporting period

that have a material impact on the Company.

The ASU is effective for fiscal years beginning after December 15, 2027, and all interim

reporting periods within applicable annual periods, with early adoption permitted.

The Company is currently evaluating the effect that

this standard will have on its consolidated financial statements and related disclosures.

Reclassifications:

Certain amounts in prior years have been reclassified

to conform to the current year presentation.

ELECTRONICS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

30, 2026 and 2025

Earnings per Share

2 unchanged sentences

respectively, were as follows:

the Fiscal Years Ended

For the Fiscal Years Ended

Weighted average shares outstanding:

Shares outstanding (weighted average)

of Dilutive Securities

EPS Shares outstanding

** Dilutive securities above exclude any such securities whose affect would be anti-dilutive.

For the fiscal year ended April 30, 2024 all securities would be anti-dilutive because the current stock price is below the exercise price.

Basic EPS Shares outstanding (weighted average)

Effect of Dilutive Securities

Diluted EPS Shares outstanding

** For the fiscal year ended April 30, 2026, there were no shares to exclude from the calculation of dilutive securities.

There were no shares excluded for the fiscal year ended April 30, 2025.

The anti-dilutive shares excluded in the above table for the fiscal year ended April 30, 2024 were 86,000 .

ELECTRONICS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

30, 2025 and 2024

Contract Assets and Liabilities

assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date on contracts

with customers.

April 30, 2026, 2025, and 2024, contract assets, contract liabilities, and accounts receivable, net consisted of the following (in thousands):

Contract Assets

Contract Liabilities

Accounts receivable, net

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.

In fiscal year 2025, we recognized $ 18.3 million of our contract liabilities at April 30,

2024 as revenue.

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.

Contract assets and liabilities arise from timing differences between the satisfaction of performance

obligations which primarily occur over time as costs are incurred on the contract and billing which are dictated by the terms of the contract

with the customer.

Contract assets decreased $ 0.6 million in fiscal year 2026, as a result of reclassifications to accounts receivable

when the right to consideration becomes unconditional, net of additional rights to consideration for work completed but not billed to

customers at the reporting date.

Contract liabilities decreased $ 4.2 million during fiscal year 2026, primarily due to the satisfaction

of the related performance obligations, net of advance payments received where the related performance obligations have not been satisfied

at the reporting date.

In fiscal year 2026, we recognized $ 9.3 million of our contract liabilities at April 30, 2025, as revenue.

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

The liability for

contract losses is presented as loss provision accrual within the consolidated balance sheets.

year 2025, we recognized $ 18.3 million 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.

The liability for contract losses is presented

as loss provision accrual within the consolidated balance sheets.

at April 30, 2026 and 2025, consisted of the following (in thousands):

Raw materials

and component parts

Raw materials and component parts

Work in progress

Finished goods

reserves included in inventory were $ 10.0 million and $ 10.3 million for the fiscal years ended April 30, 2026 and 2025, respectively.

ELECTRONICS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

30, 2026 and 2025

Property, Plant and Equipment, net

plant and equipment, net, at April 30, 2026 and 2025, consisted of the following (in thousands):

Buildings and

building improvements

equipment and furniture

accumulated depreciation

and amortization expense were $ 2.1 million for both the fiscal years ended April 30, 2025 and 2024.

Buildings and building improvements

Machinery, equipment and furniture

Less accumulated depreciation

and amortization expense were $ 1.9 million and $ 2.1 million for the fiscal years ended April 30, 2026 and 2025, respectively.

During the second quarter of fiscal year 2026, the Company completed

a comprehensive review of its fully depreciated fixed assets.

As a result, the Company identified certain machinery, equipment, and computer

hardware that was no longer in use or obsolete.

The Company wrote off $ 28.9 million of gross fixed assets that had a net book value of

Right-of-Use Assets and Lease Liabilities

12 unchanged sentences

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

ELECTRONICS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

30, 2025 and 2024

Company elected the practical expedient for short-term leases which allows leases with terms of twelve months or less to be recorded

5 unchanged sentences

(In thousands)

assets - operating leases

assets leases

lease liabilities, current portion

liability, current

lease liabilities, non-current portion

liability, non-current

lease liabilities

operating lease expense was approximately $ 1.9 million, of which approximately $ 0.4 million was attributable to variable lease expenses,

for fiscal year ended April 30, 2025, the majority of which is included in cost of revenues and the remaining amount in selling and administrative

expenses on the consolidated statements of operations.

Total operating lease expense was approximately $ 1.9 million, of which approximately

$ 0.4 million was attributable to variable lease expenses, for fiscal year ended April 30, 2024, the majority of which is included in

cost of revenues and the remaining amount in selling and administrative expenses on the consolidated statements of operations.

the Company made cash payments of $ 1.9 million and $ 1.8 million for operating leases during the fiscal years ended April 30, 2025 and

2024, respectively, which are included in cash flows from operating activities in our consolidated statements of cash flows.

year ended April 30, 2025, the Company recorded incremental ROU assets and lease liabilities of approximately $ 4.1 million arising from

the third amendment to the FEI-Zyfer lease, which commenced in fiscal year 2025.

During the year ended April 30, 2024, the Company did

not record any incremental ROU assets and lease liabilities as there were no leases that commenced during the fiscal year ended April

There were no ROU assets or lease liabilities that were recorded for any leases that had not commenced as of April 30, 2025.

Right-of-use assets - operating leases

Right-of-use assets leases

Operating lease liabilities, current portion

Lease liability, current

Operating lease liabilities, non-current portion

Lease liability, non-current

Total lease liabilities

ELECTRONICS, INC.

2 unchanged sentences

30, 2026 and 2025

operating lease expense was approximately $ 2.5 million, of which approximately $ 0.5 million was attributable to variable lease

expenses, for fiscal year ended April 30, 2026, the majority of which is included in cost of revenues and the remaining amount in

selling and administrative expenses on the consolidated statements of operations.

Total operating lease expense was approximately

$ 1.9 million, of which approximately $ 0.4 million was attributable to variable lease expenses, for fiscal year ended April 30, 2025,

the majority of which is included in cost of revenues and the remaining amount in selling and administrative expenses on the

consolidated statements of operations.

In addition, the Company made cash payments of $ 2.3 million and $ 1.9 million for operating

leases during the fiscal years ended April 30, 2026 and 2025, respectively, which are included in cash flows from operating

activities in our consolidated statements of cash flows.

During the year ended April 30, 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.

During the year ended April 30, 2025, the Company recorded incremental ROU assets and lease liabilities of

approximately $ 4.1 million arising from the third amendment to the FEI-Zyfer lease, which commenced in fiscal year 2025.

no ROU assets or lease liabilities that were recorded for any leases that had not commenced as of April 30, 2026.

table below reconciles the undiscounted cash flows for each of the next five fiscal years and total of the remaining fiscal years to

the operating lease liabilities recorded on the consolidated balance sheet as of April 30, 2026:

Ending April 30,

Fiscal Year Ending April 30,

(in thousands)

Total lease payments

imputed interest

Present value of future

lease payments

current obligations under leases

lease obligations

Less imputed interest

Present value of future lease payments

Less current obligations under leases

Long-term lease obligations

of April 30, 2026 and 2025, the weighted-average remaining lease term for all operating leases was 3.9 years and 4.5 years, respectively.

4 unchanged sentences

Debt Obligations

of April 30, 2025 and 2024, the Company neither had any borrowings nor any borrowing capacity pursuant to a credit facility.

As of April 30, 2026 and 2025,

the Company had no debt obligations nor any borrowing capacity pursuant to a credit facility.

June 12, 2026, the Company entered into a senior, secured revolving credit facility with JPMorgan Chase Bank, N.A., as the lender (the

“Credit Agreement”).

The Credit Agreement provides for a three-year revolving credit facility of $ 10,000,000 , of which up

to $ 5,000,000 is available for the issuance of letters of credit.

The Credit Agreement provides that the Company may, at its option,

increase the aggregate amount of the revolving credit facility in an amount up to $ 10,000,000 , subject to certain customary conditions

and on the terms set forth in the Credit Agreement.

There can be no assurance that additional funding will become available.

under the revolving credit facility are subject to a commitment fee of 0.35 % per annum on the daily amount of the undrawn portion of

the revolving credit facility.

The Company’s obligations under the Credit Agreement are guaranteed by FEI-Zyfer (the “Subsidiary

The revolving credit facility matures on June 12, 2029.

Company and the Subsidiary Guarantor also entered into a separate pledge and security agreement (the “Security Agreement”)

with JPMorgan Chase Bank, N.A., as lender, pursuant to which the Company and the Subsidiary Guarantor each pledged all or substantially

all of its assets, including equity in its domestic subsidiaries, in favor of the lender as collateral for the obligations under the

Credit Agreement and the other loan documents.

ELECTRONICS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

30, 2026 and 2025

designated by the Company at the time of borrowing as “CBFR Borrowings” that are outstanding under the Credit Agreement bear

interest at a rate per annum equal to (i) the greater of (a) the Prime Rate (as defined in the Credit Agreement) in effect on such day

or (b) 2.50 %;

plus (ii) 2.50 %.

Loans designated by the Company at the time of borrowing as “SOFR Borrowings” that are outstanding

under the Credit Agreement bear interest at a rate per annum equal to the Adjusted Term SOFR Rate (as defined in the Credit Agreement)

for the interest period in effect for such borrowing plus 2.50 %.

Under the terms of the Credit Agreement, accrued interest on each loan

is payable in arrears on the applicable interest payment date for each loan.

The loans under the Credit Agreement may be prepaid at any

time without premium or penalty (other than any accrued interest or breakage costs, if applicable).

The Company expects that the proceeds

from the Credit Agreement will be used for general corporate purposes and to provide general working capital.

Credit Agreement contains customary affirmative and negative covenants, including limitations on mergers, consolidations and sales of

assets, limitations on indebtedness, liens and sales and leasebacks, limitations on transactions with affiliates, limitations on investments,

limitations on dividends and distributions and limitations on swap agreements, as well as other customary terms and provisions.

the Credit Agreement contains financial covenants specifying that, as of the end of each fiscal quarter commencing with the fiscal quarter

ended July 31, 2026, (i) the total leverage ratio will not exceed 2.25 to 1.00 and (ii) the fixed charge coverage ratio will not be less

than 1.25 to 1.00.

The Credit Agreement also contains events of default customary for such financings, the occurrence of which would

permit the lenders to accelerate the amount due thereunder.

Such events of default include failure to pay principal, failure to pay interest

and other amounts within three days of the due date, failure to comply with a covenant beyond any applicable grace period, material misrepresentations,

default beyond the applicable grace period on other material indebtedness, certain events of bankruptcy or insolvency of the Company

and its subsidiaries, guarantor defaults, judgment defaults and change of control, among others.

Accrued Liabilities

5 unchanged sentences

Deferred compensation payable

ELECTRONICS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

30, 2025 and 2024

Investment in Morion, Inc.

6 unchanged sentences

The carrying value of this investment is $ 0 as of April 30, 2026 and 2025.

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

During the fiscal year ended April 30, 2024, the Company

acquired product from Morion in the aggregate amount of approximately $ 89,000 .

During the fiscal years ended April 30, 2025 and 2024,

the Company sold no product and no training devices to Morion, and the Company received no dividends from Morion.

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

the fiscal years ended April 30, 2026 and 2025, the Company did not acquire any product from Morion.

During the fiscal years ended April

30, 2026 and 2025, the Company sold no product and no training devices to Morion, and the Company received no dividends from Morion.

Prior purchases of materials from Morion consisted mainly of quartz

crystal blanks, which were used in the fabrication of quartz resonators.

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

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

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

As a result, the Company has terminated

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

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

The Company is also capable

of fabricating the crystal blanks in-house.

Restricted Cash

of April 30, 2025 and 2024, restricted cash consisted of approximately $ 1.4 million and $ 0.9 million, respectively, related to a letter

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

cash is classified as current or non-current based on the remaining performance period of the contract.

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):

and cash equivalents

cash and cash equivalents and restricted cash

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 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.

ELECTRONICS, INC.

2 unchanged sentences

30, 2026 and 2025

Restricted Cash

of April 30, 2026 and 2025, restricted cash consisted of approximately $ 1.3 million and $ 1.4 million, respectively, related to a letter

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

cash is classified as current or non-current based on the remaining performance period of the contract.

reconciliation of cash and cash equivalents and restricted cash from the consolidated balance sheets to the consolidated statements of

cash flows is shown below (in thousands):

Cash and cash equivalents

Restricted cash

Total cash and cash equivalents and restricted cash

Employee Benefit Plans

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The approximate

value of these shares at the date of contribution was $ 901,000 and $ 514,000 in fiscal years 2025 and 2024, respectively.

value of these shares at the date of contribution was $ 1.3 million and $ 0.9 million in fiscal years 2026 and 2025, respectively.

shares are drawn from the Company’s common stock and during fiscal years 2026 and 2025, such transactions increased additional

paid in capital by $ 831,000 and $ 455,000 , respectively.

As of April 30, 2025, the plan held a total of 504,734 shares, which were allocated

to the accounts of the individual participants.

As of April 30, 2024, the plan held a total of 495,395 shares, which were allocated to

the accounts of the individual participants.

paid in capital by $ 1.3 million and $ 0.8 million, respectively.

As of April 30, 2026, the plan held a total of 440,546 shares, which

were allocated to the accounts of the individual participants.

As of April 30, 2025, the plan held a total of 504,734 shares, which were

allocated to the accounts of the individual participants.

Incentive Pool:

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The incentive bonus recorded for the fiscal year ended April

30, 2025 was $ 1.8 million.

The incentive bonus recorded for the fiscal year ended April 30, 2024 was $ 489,000 .

October 11, 2024 the Company adopted the 2025 Stock Award Plan (“2025 Plan”), which replaced the 2005 Stock Award Plan.

2025 Plan incorporates all previous grants under the previous plan, without changes to the original terms of the grants, and, additionally,

adds an additional 700,000 shares for future grants which was approved by stockholder vote at the Company’s annual meeting.

2025 Plan is for key management employees, including officers and directors who are employees, certain consultants and independent members

of the Board of Directors.

Under the 2025 Plan equity compensation, such as nonqualified stock options, incentive stock options, stock

appreciation rights (“SAR”), performance stock units (“PSU”) and restricted stock units (“RSU”),

are granted at the discretion of the Compensation Committee of the Board of Directors at an exercise price not less than the fair market

value of the Company’s common stock on the date of grant.

30, 2026 and April 30, 2025 was $ 0.2 million and $ 1.8 million, respectively.

August 27, 2024, the Board of Directors, subject to stockholder approval, adopted the 2025 Stock Award Plan (“2025 Plan”),

which replaced the 2005 Stock Award Plan.

The 2025 Plan incorporates all previous grants under the previous plan, without changes to

the original terms of the grants, and adds 700,000 shares for future grants.

The 2025 Plan was approved by stockholder vote at the Company’s

annual meeting of stockholders held on October 8, 2024.

The 2025 Plan is for key management employees, including officers and directors

who are employees, certain consultants and independent members of the Board of Directors.

Under the 2025 Plan equity compensation, such

as nonqualified stock options, incentive stock options, stock appreciation rights (“SAR”), performance stock units (“PSU”)

and restricted stock units (“RSU”), are granted at the discretion of the Compensation Committee of the Board of Directors

at an exercise price not less than the fair market value of the Company’s common stock on the date of grant.

options and SARs vest over a four-year period from the date of grant.

3 unchanged sentences

Under the 2025 Plan, instruments

granted which expire, are canceled, or are tendered in the exercise of such instruments, increased the shares available for future grants

granted which expire, are canceled, or are tendered in the exercise of such instruments, increase the shares available for future grants

under the 2025 Plan.

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market value of the shares will be returned to the pool of available shares for future grant under the 2025 Plan.

During the fiscal year ended

April 30, 2025, employees exercised 20,000 SARs and were granted 4,556 shares of the Company’s common stock.

During the fiscal year

ended April 30, 2025, employees exercised 20,000 SARs and were granted 4,556 shares of the Company’s common stock.

There were 15,444

1 unchanged sentence

Forfeitures are recorded as they occur.

excess of the consideration received over the par value of the common stock or cost of treasury stock issued under both types of option

plans is recognized as an increase in additional paid-in capital.

following table summarizes information about stock option and SARs activity for the years ended April 30, 2025 and 2024:

There were no options or SARs granted, exercised,

canceled or expired during the fiscal year ended April 30, 2026.

The following table summarizes information about stock option and SARs

activity for the fiscal years ended April 30, 2026 and 2025:

Stock Options and Stock Appreciation Rights

Average Grant Date Weighted

Average Weighted

Remaining Aggregate

Shares Exercise

Value Contractual

Term Intrinsic

Outstanding – April 30, 2023 243,625 $ 10.77 $ 2,624,779 0.8 years $ 1,592,089

Granted - - -

Exercised - - -

Expired or canceled ( 157,625 ) 9.56 ( 1,506,139 )

Exercise Grant Date Contractual Intrinsic

Shares Price Fair Value Term Value

Outstanding – April 30, 2024 86,000 $ 13.01 $ 1,118,640 0.9 years $ -

2 unchanged sentences

Expired or canceled ( 66,000 ) 13.24 ( 873,840 )

Outstanding – April 30, 2025 - $ - $ - 0 years $ -

Outstanding – April 30, 2025 - $ - $ - $ -

Available for future grants 1,269,186

23 unchanged sentences

year 2029, the remaining represent awards that cliff vest in fiscal year 2029.

the fiscal year ended April 30, 2025 and 2024, the Company issued 1,550 shares of common stock and 3,300 shares of common stock, respectively,

to select employees for milestone years of service to the Company.

These shares were issued under the 2025 Stock Award Plan, are shares

of the Company’s common stock, and are fully vested at time of issuance.

fiscal year 2021 the Company elected to issue PSUs.

The fair value of these awards is equivalent to the market value of the Company’s

common stock on the grant date and requires an assessment of the probability that the specified performance criteria will be achieved,

which is updated at each reporting date.

PSUs are not shares of the Company’s common stock and do not have any rights or privileges

thereof, including voting or dividend rights.

On the applicable vesting date, subject to the attainment of the specified performance

criteria, the holder of a PSU becomes entitled to a share of the Company’s common stock.

PSUs are subject to certain restrictions

and forfeiture provisions, in addition to performance vesting conditions, prior to vesting, and are evaluated as of each reporting date

to determine if performance criteria will be met.

The PSUs awarded will vest, subject to specified performance criteria, annually until

fiscal year 2029.

compensation costs, related to RSUs and PSUs, included in the cost of revenues of programs on which the Company recognizes revenue under

the POC method were approximately $ 357,000 and $ 487,000 for the fiscal years ended April 30, 2025 and 2024, respectively.

compensation expense, for RSUs and PSUs, included in selling and administrative expenses was approximately $ 776,000 and $ 301,000 for

the fiscal years ended April 30, 2025 and 2024, respectively.

Unrecognized stock compensation was $ 4.2 million and $ 2.9 million for the

the fiscal year ended April 30, 2026, there were no shares of common stock issued to employees for milestone years of service to the

During the fiscal year ended April 30, 2025, the Company issued 1,550 shares of common stock to select employees for milestone

years of service to the Company.

These shares were issued under the 2025 Stock Award Plan, are shares of the Company’s common stock,

and are fully vested at time of issuance.

In fiscal year 2021 the Company

elected to issue PSUs.

The fair value of these awards is equivalent to the market value of the Company’s common stock on the grant

date and requires an assessment of the probability that the specified performance conditions will be achieved, which is updated at each

reporting date.

PSUs are not shares of the Company’s common stock and do not have any rights or privileges thereof, including voting

or dividend rights.

On the applicable vesting date, subject to the attainment of the specified performance conditions, the holder of a

PSU becomes entitled to a share of the Company’s common stock.

PSUs are subject to certain restrictions and forfeiture provisions,

in addition to the specified performance conditions.

The PSUs awarded will vest, subject to achieving these performance conditions, annually

until fiscal year 2029.

Stock-based compensation costs,

related to RSUs and PSUs, included in the cost of revenues of programs on which the Company recognizes revenue under the POC method were

approximately $ 699,000 and $ 357,000 for the fiscal years ended April 30, 2026 and 2025, respectively.

Stock-based compensation expense,

for RSUs and PSUs, included in selling and administrative expenses was approximately $ 1.2 million and $ 776,000 for the fiscal years ended

April 30, 2026 and 2025, respectively.

Unrecognized stock compensation was $ 7.7 million and $ 4.2 million for the fiscal years ended April

30, 2026 and 2025, respectively.

The grant date fair value of vested RSUs and PSUs was approximately $ 1.5 million and $ 918,000 for the

fiscal years ended April 30, 2026 and 2025, respectively.

The grant date fair value of vested RSUs and PSUs was approximately $ 918,000

and $ 521,000 for the fiscal years ended April 30, 2025 and 2024, respectively.

following table summarizes activity for the RSUs and PSUs awards that reduce available capacity under the 2005 Stock Award Plan for the

fiscal years ended April 30, 2025 and 2024:

following table summarizes activity for the RSUs and PSUs awards that reduce available capacity under the 2025 Plan for the fiscal years

ended April 30, 2026 and 2025:

Balance – April 30, 2024

5 unchanged sentences

Compensation Agreements:

Company has a series of agreements with key employees providing for the payment of benefits upon retirement or death.

Annual amounts

relating to these plans are recorded based on actuarial projections, which include various actuarial assumptions, including discount

rates, mortality rates, assumed rates of return compensation increases, and turnover rates.

The actuarial assumptions used to determine

deferred compensation liabilities and expense are reviewed annually and modified based on current economic conditions and trends.

discount rate used to measure obligations is based on a corporate bond rate yield curve that matches projected future benefit payments.

The Company has a series of

agreements with key employees providing for the payment of benefits upon retirement or death.

Annual amounts relating to these plans are

recorded based on actuarial projections, which include various actuarial assumptions, including discount rates, mortality rates, assumed

rates of return, and turnover rates.

The actuarial assumptions used to determine deferred compensation liabilities and expense are reviewed

annually and modified based on current economic conditions and trends.

The discount rate used to measure obligations is based on the Company’s

bond rate yield curve.

ELECTRONICS, INC.

29 unchanged sentences

The fixed income corporate debt securities within the trust

are valued on a Level 2 basis and amounted to $ 0.4 million and $ 0.9 million at April 30, 2025 and 2024, respectively.

Level 2 securities

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

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

Level 2 securities are valued at the closing prices

and are consistent with quoted prices of similar assets reported in active markets.

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

In accordance with U.S.

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).

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

provision or effective tax rate as of April 30, 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.

financial reporting purposes, (Loss) income before benefit for income taxes, includes the following components (in thousands):

Fiscal Year Ended

Domestic operations

(Loss) income before income taxes

benefit from income taxes consisted of the following (in thousands):

provision (benefit)

Fiscal Year Ended

Current provision

Deferred tax benefit

Total benefit

ELECTRONICS, INC.

2 unchanged sentences

30, 2026 and 2025

following table reconciles the reported income tax provision with the amount computed using the federal statutory income tax rate (in

difference between the federal statutory rate of 21 % and the Company’s effective tax rate after the adoption of ASU 2023-09 is

summarized as follows (in thousands):

Fiscal Year Ended

April 30, 2026

Income tax at statutory federal tax rate

State and local income tax, net of federal income tax effect

Changes in valuation allowances

Nontaxable or nondeductible items:

Stock Based Compensation

Non-deductible officer’s compensation

Goodwill Write-off

Other nontaxable or nondeductible items

Research and Development Tax credits

Changes in unrecognized tax benefits

Total benefit

the fiscal year ended April 30, 2026, state and local income taxes in California comprise the majority of the state and local income

taxes, net of the federal income tax effect category.

difference between the federal statutory rate of 21 % and the Company’s effective tax rate before the adoption of ASU 2023-09 is

summarized as follows:

Fiscal Year Ended

Statutory rate

2 unchanged sentences

Nondeductible expenses

Uncertain tax positions

Nontaxable life insurance cash value increase

Taxable life insurance gain

Stock compensation

1 unchanged sentence

Total benefit

ELECTRONICS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

30, 2026 and 2025

components of deferred taxes are as follows (in thousands):

Fiscal Year Ended

Deferred tax assets:

loss carry-forward

& development

operating loss carryforwards

deferred tax asset

tax liabilities:

plant and equipment

state income tax

deferred tax asset

deferred tax asset (liability)

Employee benefits

Accounts receivable

Property, plant and equipment

Deferred costs

Lease liability

Capital loss carry-forward

Research & development

Net operating loss carryforwards

Total deferred tax asset

Deferred tax liabilities:

Property, plant and equipment

Right of use asset

Other liabilities

Deferred state income tax

Net deferred tax asset

Valuation allowance

Net deferred tax asset

assessing the potential for realization of deferred tax assets, the Company considers whether it is more-likely-than-not that some portion

4 unchanged sentences

those periods in which temporary differences become deductible and/or net operating loss carryforwards can be utilized.

all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized.

We assess all

positive and negative evidence when determining the amount of the net deferred tax assets that are more-likely-than-not to be realized.

This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning

3 unchanged sentences

in recent years.

required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets

in the “Change in valuation allowances” line of the rate reconciliation.

The following table presents a reconciliation of

the total change in the valuation allowance.

Fiscal Year Ended

Balance at the beginning of the fiscal year

Changed charged to income tax expense

Balance at the end of the fiscal year

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

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

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

The Company will continue to

evaluate the realizability of its deferred tax assets quarterly.

Any further increases or decreases in the valuation allowance could

have an unfavorable or favorable impact on the Company’s income tax provision and net income in the period in which such

determination is made.

As of April 30, 2026, the deferred tax asset is recorded at its more-likely-than-not realizable

ELECTRONICS, INC.

2 unchanged sentences

30, 2026 and 2025

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

due to releasing the majority of the valuation allowance recorded against the deferred tax asset.

The change in estimate occurred in

the third quarter of fiscal year 2025 because Frequency no longer had cumulative losses in recent years due to significant earnings in

the third quarter of fiscal year 2025.

The positive evidence that led to the release of the valuation allowance in the third quarter

included (i) objectively verifiable cumulative earnings as of January 31, 2025, (ii) utilization of net operating loss carryforwards

and a reduction of the net deferred tax asset, (iii) a backlog of $ 73 million, and (iv) sufficient projections of future taxable income

that supported the more-likely-than-not realization of the existing deferred tax asset and the remaining net operating loss carryforward.

The projections of future taxable income were considered objectively verifiable positive evidence because the Company demonstrated a

sustained return to profitability as of the third quarter of fiscal year 2025.

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

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

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

The Company will continue to evaluate the realizability

of its deferred tax assets quarterly.

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

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

As of April 30,

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

of April 30, 2026, the Company has U.S.

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

2026 through fiscal year 2031.

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

limitation under Internal Revenue Code Section 382.

federal net operating losses of $ 10.9 million of which $ 1.7 million begins to expire in fiscal

year 2027 through fiscal year 2031.

federal net operating losses of $ 10.9 million includes $ 1.7 million which is subject to

an annual limitation under Internal Revenue Code Section 382.

The remaining U.S.

federal net operating losses of $ 3.3 million have an indefinite

carry-forward period.

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

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

The Company also has state net operating loss carryforwards,

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

federal net operating losses of $ 9.2 million have an

indefinite carry-forward period.

federal capital loss carry-forward of $ 0.7 million expires in fiscal year 2028.

R&D credits of $ 0.8 million begin to expire in fiscal year 2038 through fiscal year 2046.

The Company also has state net operating

loss carryforwards, and state tax credits that expire in various years and amounts.

reconciliation of the beginning and ending amounts of unrecognized tax benefits, is as follows (in thousands):

Balance at the beginning of the

Additions based on positions taken in the current

Additions based on positions taken in prior

Decreases based on positions taken in prior

Balance at the beginning of the fiscal year

Additions based on positions taken in the current year

Additions based on positions taken in prior years

Decreases based on positions taken in prior years

Lapse in statute of limitations

Balance at the end of

the fiscal year

Balance at the end of the fiscal year

entire amount reflected in the above table at April 30, 2026, if recognized, would reduce our effective tax rate.

As of April 30, 2026

and 2024, the Company had $ 0 , in both periods, accrued for the payment of interest and penalties.

For the fiscal years ended April 30,

2025 and 2024, the Company recognized interest of $( 0 ) and $( 8,325 ), respectively.

Although it is difficult to predict or estimate the

change in the Company’s unrecognized tax benefits over the next twelve months, the Company believes $ 0 will be recognized in the

next twelve months.

and 2025, the Company did not recognize or accrue for the payment of interest or penalties.

Company is subject to taxation in the U.S.

4 unchanged sentences

attributes generated in closed years and utilized in open years are subject to adjustment by the tax authorities.

taxes paid were as follows (in thousands):

State and local

taxes paid (net of refunds) exceeded 5% of total income taxes paid (net of refunds) in the following jurisdictions:

State and local

ELECTRONICS, INC.

10 unchanged sentences

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

Effective as of April 30, 2026, FEI-Elcom was converted into a Delaware limited liability company.

The ongoing business operations of FEI-Elcom will remain within the FEI-NY reporting segment.

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

6 unchanged sentences

reflect the way the Company’s management views the business.

accounting policies of the two segments are the same as those described in Note 1.

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.

All acquired assets, including intangible assets, are included

in the assets of both reporting segments.

The accounting policies of

the two segments are the same as those described in Note 1.

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

to determine areas of business process improvements, profitable market opportunities, forecasted results, and the annual plan.

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

ELECTRONICS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

30, 2026 and 2025

tables below present segment revenue, significant segment expenses which consist of segment cost of revenue and segment research and

development costs, and segment operating income for each reportable segment and on a consolidated basis as reported in the consolidated

development costs, and segment operating (loss) income for each reportable segment and on a consolidated basis as reported in the consolidated

statements of operations for the fiscal years ended April 30, 2026 and 2025 (in thousands):

the Fiscal Years Ended

intersegment revenues

Cost of revenues:

intersegment cost of revenues

For the Fiscal Years Ended April 30,

Less intersegment revenues

Consolidated revenues

Cost of revenues:

Research and development expenses:

Less intersegment cost of revenues

Consolidated cost of revenues

Research and development expenses:

Operating income:

Consolidated research and development expenses

Operating (loss) income:

Less intersegment

operating income

segment items included in the determination of operating income includes SG&A of $ 9.1 million and $ 8.0 million for the fiscal years

ended April 30, 2025 and 2024, respectively, for the FEI-NY segment, and $ 2.6 million and $ 1.7 million for the fiscal years ended April

30, 2025 and 2024, respectively, for the FEI-Zyfer segment.

Consolidated operating (loss) income

segment items included in the determination of operating (loss) income includes SG&A of $ 11.5 million and $ 9.1 million for the fiscal

years ended April 30, 2026 and 2025, respectively, for the FEI-NY segment, and $ 3.2 million and $ 2.6 million for the fiscal years ended

April 30, 2026 and 2025, respectively, for the FEI-Zyfer segment.

ELECTRONICS, INC.

4 unchanged sentences

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

years ended then ended (in thousands):

years then ended (in thousands):

Identifiable assets:

less intersegment balances

identifiable assets

the Fiscal Years Ended

Consolidated identifiable assets

For the Fiscal Years Ended

Depreciation and amortization:

depreciation and amortization expense

Consolidated depreciation and amortization expense

Company’s products are sold to both commercial and governmental customers.

3 unchanged sentences

Government end-use.

the fiscal year ended April 30, 2025, revenues from one customer of the FEI-NY segment, which accounted for more than 10% of that segment’s

revenues, was $ 26.9 million.

In the fiscal year ended April 30, 2024, revenues from four customers of the FEI-NY segment, which each

accounted for more than 10% of that segment’s revenues, were $ 7.5 million, $ 10.9 million, $ 4.7 million, and $ 4.5 million.

FEI-Zyfer segment, two customers, which each accounted for more than 10% of that segment’s revenues, were $ 2.9 million and $ 3.4

million in the fiscal year ended April 30, 2025.

In the FEI-Zyfer segment, two customers, which each accounted for more than 10% of that

segment’s revenues, were $ 4.2 million and $ 5.2 million in the fiscal year ended April 30, 2024.

the fiscal year ended April 30, 2026, revenues from four customers of the FEI-NY segment, which each accounted for more than 10% of that

segment’s revenues, were $ 7.0 million, $ 5.5 million, $ 5.3 million, and $ 5.1 million.

In the fiscal year ended April 30, 2025, revenues

from one customer of the FEI-NY segment, which accounted for more than 10% of that segment’s revenues, was $ 26.9 million.

FEI-Zyfer segment, revenues from one customer, which accounted for more than 10% of that segment’s revenues, was $ 8.1 million in

the fiscal year ended April 30, 2026.

In the FEI-Zyfer segment, revenues from two customers, which each accounted for more than 10% of

that segment’s revenues, were $ 2.9 million and $ 3.4 million in the fiscal year ended April 30, 2025.

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

11 unchanged sentences

(in thousands):

the Fiscal Years Ended

For the Fiscal Years Ended

the fiscal year ended April 30, 2026, material foreign sales to one Asian country amounted to approximately $ 3.8 million.

fiscal year ended April 30, 2024, there were no material foreign sales to one specific foreign country.

fiscal year ended April 30, 2025, material foreign sales to one Asian country amounted to approximately $ 3.5 million.

Product Warranties

12 unchanged sentences

with the litigation can be reasonably estimated.

Subsequent events

On July 1, 2026, the Company acquired a 20 % minority

interest in an LLC for $ 0.5 million.

Pursuant to the transaction, the Company may be required to purchase up to an additional 25 % interest

subsequent to the closing of the initial agreement.

The Company is currently in the process of evaluating the accounting treatment for

this transaction.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data