What changed in this filing

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Item 1. Financial Statements

2026-09-14 compared with 2026-03-17 · 705 added, 626 removed, 151 unchanged (90% of the section changed)

Financial Statements

ELECTRONICS, INC.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Consolidated Balance Sheets

thousands, except par value)

Condensed Consolidated Balance Sheets

(In thousands, except par value)

Current assets:

Cash and cash equivalents

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

Accounts receivable, net of allowances of $ 39 at July 31, 2026 and at April 30, 2026

Contract assets

12 unchanged sentences

Loss provision accrual

Income taxes payable

Operating lease liability, current portion

3 unchanged sentences

Operating lease liability, non-current portion

Other liabilities

Total liabilities

1 unchanged sentence

Preferred stock - $ 1.00 par value;

authorized 600 shares, no shares issued

authorized 600 shares, no shares issued and outstanding

Common stock - $ 1.00 par value;

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

authorized 20,000 shares, 11,017 shares issued and 10,961 shares outstanding at July 31, 2026;

9,925 shares issued and 9,869 shares outstanding at April 30, 2026

1 unchanged sentence

Retained earnings

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

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

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes to condensed consolidated financial statements.

ELECTRONICS, INC.

See accompanying notes to condensed consolidated

financial statements.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Consolidated Statements of Operations

thousands, except per share data)

Three Months Ended

Nine Months Ended

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

Three Months Ended July 31,

Consolidated Statements of Operations

Cost of revenues

Selling and administrative expenses

Selling, general, and administrative expenses

Research and development expenses

4 unchanged sentences

Other expense, net

Income before benefit for income taxes

Benefit for income taxes

Income before provision (benefit) for income taxes

Provision (benefit) for income taxes

Net income per common share:

Basic income per share

Diluted income per share

Basic and diluted income per share

Weighted average shares outstanding:

accompanying notes to condensed consolidated financial statements.

ELECTRONICS, INC.

Basic and diluted

See accompanying notes to condensed consolidated

financial statements.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Consolidated Statements of Cash Flows

Nine Months Ended January 31,

Condensed Consolidated Statements of Cash Flows

(In thousands)

Three Months Ended

Cash flows from operating activities:

1 unchanged sentence

Net changes in operating assets and liabilities

Net cash used in operating activities

Net cash provided by operating activities

Cash flows from investing activities:

Purchase of fixed assets

Acquisition of equity method investment

Net cash used in investing activities

Cash flows from financing activities:

Payment of dividend

Purchase of treasury stock

Net cash used in financing activities

Net decrease in cash and cash equivalents and restricted cash

Payments for public offering issuance costs

Proceeds from public offering, net

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash at beginning of period

3 unchanged sentences

Non-cash investing and financing activities:

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

accompanying notes to condensed consolidated financial statements.

ELECTRONICS, INC.

AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

and Nine Months Ended January 31, 2026

thousands, except share data)

comprehensive

at April 30, 2025

of stock to 401(k)

compensation expense

withheld on employee

taxes on vested

equity awards

at July 31, 2025

of stock to 401(k)

compensation expense

withheld on employee

taxes on vested

equity awards

at October 31, 2025

of stock to 401(k)

compensation expense

withheld on employee

taxes on vested

equity awards

at January 31, 2026

accompanying notes to condensed consolidated financial statements.

ELECTRONICS, INC.

Acquisition of an equity method investment through the incurrence of a liability

See accompanying notes to condensed consolidated

financial statements.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

and Nine Months Ended January 31, 2025

thousands, except share data)

Condensed Consolidated Statements of Changes in

Stockholders’ Equity

Three Months Ended July 31, 2026 and 2025

(In thousands, except share data)

Treasury stock

Accumulated other

comprehensive

Income (loss)

Balance at April 30, 2026

Contribution of stock to 401(k)

Contribution of stock to 401(k) plan

Stock-based compensation expense

Shares withheld on employee

taxes on vested equity awards

Exercise of stock options and

stock appreciation rights - net of shares tendered for exercise price

Dividends payable

Issuance of common stock from public offering, net

Balance at July 31, 2026

Contribution of stock to 401(k)

Stock-based compensation expense

Shares withheld on employee

taxes on vested equity awards

Dividends payable

Dividends paid

Balance at October 31, 2024

Contribution of stock to 401(k)

Treasury stock

Accumulated other

comprehensive

Income (loss)

Balance at April 30, 2025

Contribution of stock to 401(k) plan

Stock-based compensation expense

Shares withheld on employee

taxes on vested equity awards

Exercise of stock options and

stock appreciation rights - net of shares tendered for exercise price

at January 31, 2025

accompanying notes to condensed consolidated financial statements.

ELECTRONICS, INC.

Shares withheld on employee taxes on vested equity

Balance at July 31, 2025

See accompanying notes to condensed consolidated

financial statements.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

to Condensed Consolidated Financial Statements

A – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

Notes to Condensed Consolidated Financial Statements

NOTE A – CONDENSED CONSOLIDATED FINANCIAL

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 July 31, 2026 and the results of its operations, changes in stockholders’ equity

for the three months ended July 31, 2026 and 2025, and cash flows for the three months ended July 31, 2026 and 2025.

The April 30,

2026 condensed consolidated balance sheet was derived from audited financial statements.

These financial statements are prepared in conformity

with accounting principles generally accepted in the United States of America (“U.S.

Certain information

and footnote disclosures normally included in financial statements prepared in accordance 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.

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,

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, 2026, filed on July 17, 2026 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.

Reclassifications

Certain amounts in prior years

have been reclassified to conform to the current year presentation.

NOTE B – EARNINGS PER SHARE

Weighted Average Shares Outstanding

Reconciliation of the weighted

average shares outstanding for basic and diluted earnings per share (“EPS”) for the three months ended July 31, 2026 and 2025,

respectively, were as follows:

Three months ended July 31,

Weighted average shares outstanding:

Basic EPS shares outstanding (weighted average)

1 unchanged sentence

Diluted EPS shares outstanding

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

calculation of dilutive securities.

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

their effect would be antidilutive.

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

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.

C – 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.

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.

ELECTRONICS, INC.

** For the three months ended July 31, 2026 and 2025, there were

no shares to exclude from the calculation of dilutive securities.

Public Offering

On July 30, 2026, the Company

completed a public offering (the “Offering”) of 1,739,131 shares of the Company’s common stock, par value $ 1.00 per

share (“common stock”).

The Company offered and sold 1,086,957 shares of common stock, and certain selling stockholders offered

and sold a total of 652,174 shares of common stock.

The shares were sold to investors at $ 57.50 per share.

The gross proceeds to the Company

from the Offering were approximately $ 62.5 million.

Net of underwriting discounts and commissions of approximately $ 3.8 million and offering

expenses of approximately $ 0.6 million, the total proceeds received were approximately $ 58.1 million.

The Company did not receive any

proceeds from the sale of the shares by the selling stockholders.

In addition, the Company granted

the underwriters to the Offering an option, exercisable for 30 days, to purchase up to 260,869 shares of common stock from the Company

on the same terms (the “Option Shares”).

On August 3, 2026, the underwriters exercised their option in full and on August

5, 2026, purchased the Option Shares from the Company.

The gross proceeds to the Company from the sale of the Option Shares were approximately

$ 15 million.

Net of underwriting discounts and commissions of approximately $ 0.9 million, the total proceeds received were approximately

$ 14.1 million in the second quarter of fiscal year 2027.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

to Condensed Consolidated Financial Statements

D –EMPLOYEE BENEFIT PLANS

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.

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.

whole-life insurance policies on the lives of certain participants covered by deferred compensation agreements have been placed in a

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.

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

E – INVENTORIES

which are reported at the lower of cost or net realizable value, consisted of the following (in thousands):

Notes to Condensed Consolidated Financial Statements

NOTE C – CONTRACT ASSETS AND LIABILITIES

At July 31, 2026, April 30,

2026, and April 30, 2025, 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.

During the three months ended July 31, 2026, we recognized $ 4.0 million of our contract liabilities at

April 30, 2026 as revenue.

During the three months ended July 31, 2025, we recognized $ 4.1 million of our contract liabilities at April

30, 2025 as revenue.

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

determinable.

NOTE D –EMPLOYEE BENEFIT PLANS

During the three months ended

July 31, 2026, the Company made contributions of 5,303 shares 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 months ended July 31, 2025, the Company made contributions of 12,405

shares of its common stock to the Company’s profit-sharing plan and trust under Section 401(k) of the Internal Revenue Code.

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

Deferred compensation expense

charged to selling, general and administrative expenses during the three months ended July 31, 2026, was approximately $ 138,000 , inclusive

of approximately $ 19,000 of interest expense.

Payments made related to deferred compensation were approximately $ 178,000 for the same

Deferred compensation expense charged to selling, general and administrative expenses during the three months ended July 31, 2025,

was approximately $ 133,000 , inclusive of approximately $ 23,000 of interest expense.

Payments made related to deferred compensation were

approximately $ 183,000 for the same period.

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 July 31, 2026 and at April 30, 2026.

The business account

debt securities within the trust are valued on a Level 1 basis and amounted to $ 4.0 million at July 31, 2026 and April 30, 2026.

The fixed income corporate debt securities within the trust are valued on a Level 2 basis and amounted to $ 0.5 million at July 31, 2026

and $ 0.4 million at April 30, 2026.

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):

Raw materials and component parts

1 unchanged sentence

Finished goods

F – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

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.

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.

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.

ELECTRONICS, INC.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

to Condensed Consolidated Financial Statements

table below presents ROU assets and liabilities recorded on the respective consolidated balance sheets as follows (in thousands):

Notes to Condensed Consolidated Financial Statements

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 fiscal year 2031 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 July 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.

The table below presents ROU

assets and liabilities recorded on the respective consolidated balance sheets as follows (in thousands):

Right-of-use assets - operating leases

2 unchanged sentences

Total lease liabilities

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.

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

Total operating lease expense

was $ 0.6 million for both the three months ended July 31, 2026 and 2025, the majority of which is included in cost of revenues and the

remaining amount in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations.

the three months ended July 31, 2026 and 2025, the Company did not record any incremental ROU assets and lease liabilities as there were

no leases that commenced during these periods.

The maturities of lease liabilities

at July 31, 2026 are as follows:

Fiscal Year Ending April 30,

6 unchanged sentences

Long-term lease obligations

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.

ELECTRONICS, INC.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

to Condensed Consolidated Financial Statements

G – SEGMENT INFORMATION

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

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

three principal markets:

Notes to Condensed Consolidated Financial Statements

As of July 31, 2026 and 2025,

the weighted-average remaining lease term for all operating leases was 3.57 years and 4.30 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 July 31, 2026 and 2025, was 7.09 %

and 6.86 %, respectively.

The Company has future operating

lease payments of approximately $ 0.8 million related to a lease that has not yet commenced and was entered into as of July 20, 2026.

lease payments are not included in the table above or the Company’s condensed consolidated financial position as operating lease

ROU assets and operating lease liabilities.

The operating lease payments are anticipated to commence in the second quarter of 2027 and

continue for approximately 7 years.

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;

terrestrial cellular telephone or other ground-based telecommunication stations;

and other components and systems for the U.S.

The FEI-NY segment also

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

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

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

(2) FEI-Zyfer

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

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

This segment also provides sales and support

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

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

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.

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.

ELECTRONICS, INC.

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

FEI-Elcom, in addition to its own product line, provided design and technical support for the FEI-NY segment’s communication 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 remained within the FEI-NY reporting segment.

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.

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

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.

Additionally, operating income by segment is used to determine areas of business process improvement and potential

profitable market opportunities.

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

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

to Condensed Consolidated Financial Statements

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,

Notes to Condensed Consolidated Financial Statements

The tables below present segment

revenues, significant segment expenses, which consist of segment cost of revenues and segment R&D costs, 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

months ended July 31, 2026 and 2025 (in thousands):

Three Months Ended

Less intersegment revenues

5 unchanged sentences

Consolidated research and development expenses

Operating income (loss):

Less intersegment operating income

Operating income:

Less intersegment margin

Consolidated operating income

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.

ELECTRONICS, INC.

Included in the determination

of operating income is selling, general, and administrative expenses of $ 2.9 million and $ 2.7 million for the three months ended July

31, 2026 and 2025, respectively, for the FEI-NY segment, and $ 1.0 million and $ 0.7 million for the three months ended July 31, 2026 and

2025, respectively, for the FEI-Zyfer segment.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

to Condensed Consolidated Financial Statements

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):

Notes to Condensed Consolidated Financial Statements

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 July 31,

2026 and April 30, 2026 and the depreciation and amortization charges related to these identifiable assets for the three months then ended

(in thousands):

Identifiable assets:

1 unchanged sentence

Consolidated identifiable assets

Periods ended January 31,

Three Months Ended

Depreciation and amortization:

Consolidated depreciation and amortization expense

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.

revenue recognized over time as Percentage of Completion (“POC”) and at a point in time as Passage of Title (“POT”)

was approximately $ 22.4 million and $ 1.0 million, respectively, of the $ 23.5 million reported for the three months ended July 31, 2026.

Total revenue recognized over time as POC and at a point in time as POT

was approximately $ 12.4 million and $ 1.4 million, respectively, of the $ 13.8 million reported for the three months ended July 31, 2025.

The amounts by segment and

product line were as follows (in thousands):

Three Months Ended July 31,

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,

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

Three Months Ended January 31,

Nine Months Ended January 31,

ELECTRONICS, INC.

and SUBSIDIARIES

to Condensed Consolidated Financial Statements

Periods ended January 31,

Three Months Ended

Revenues by product line:

3 unchanged sentences

Consolidated revenues

H – INVESTMENT IN MORION, INC.

Company has an investment in Morion, Inc.

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

quartz resonators and crystal oscillators.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

NOTE H – INVESTMENTS

The Company has an investment

in Morion, Inc.

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

The Company has also previously licensed certain technology to Morion.

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.

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

During the three and

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

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

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.

I – RESTRICTED CASH

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.

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):

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 July 31, 2026 and April 30, 2026.

During the three months ended

July 31, 2026 and 2025, the Company did not acquire any product from Morion.

During the three months ended July 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.

Temporis Solutio

Temporis Solutio (“Temporis”)

is a company that has the sole commercialization license to a patented digital signal processing measurement technique to remove systematic

electronics noise from precision timing measurements.

On July 1, 2026 the Company

acquired a 25 % minority interest in Temporis for $ 0.5 million.

The Company accounted for this transaction as an equity method investment

under ASC 323.

The Company may be required to purchase additional interest in Temporis upon capital call notices from the investee.

were no capital call notices received from the investee during the three months ended July 31, 2026.

NOTE I – RESTRICTED CASH

As of July 31, 2026 and April

30, 2026, restricted cash consisted of approximately $ 1.3 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):

Cash and cash equivalents

1 unchanged sentence

Total cash and cash equivalents and restricted cash

J – RECENT ACCOUNTING PRONOUNCEMENTS

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.

ELECTRONICS, INC.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

to Condensed Consolidated Financial Statements

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

2024-03, Income Statement – Reporting Comprehensive Income

– Expense Disaggregation Disclosures (Subtopic 220-40):

Notes to Condensed Consolidated Financial Statements

NOTE J – RECENT ACCOUNTING PRONOUNCEMENTS

In November 2024, the Financial

Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.

2024-03, Income Statement –

Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

This ASU requires entities

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

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

are not separately disaggregated quantitatively.

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

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

The Company is currently evaluating

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

K – DEFERRED INCOME TAXES

income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial

statements, which will result in taxable or deductible amounts in the future.

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

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.

In 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.

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.

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.

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.

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

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).

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

basis at each reporting date.

We consider all positive and negative evidence, including the reversal of deferred tax liabilities, projected

future taxable income, tax planning strategies, and results of recent operations.

Accounting for income taxes requires that a valuation

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

In circumstances

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

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

to accelerate deductions and reduce cash taxes.

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

tax rate as of January 31, 2026.

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

its impact on cash taxes and our effective tax rate.

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

state tax credits and capital losses because the realization of these tax attributes requires sufficient taxable income be sourced to

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

If these estimates and assumptions change

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

L – PRODUCT WARRANTIES

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

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

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

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

Balance at beginning of year

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

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

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

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

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

(effectively returning to EBITDA).

As required by the authoritative

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

We consider all positive and negative evidence, including the reversal of deferred tax liabilities, projected future taxable income,

tax planning strategies, and results of recent operations.

Accounting for income taxes requires that a valuation allowance be established

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

In circumstances where there is

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

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

and reduce cash taxes.

The enactment of the OBBBA did not have a material impact on our provision or effective tax rate as of July 31,

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 July 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.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

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 July 31, 2026 and April 30,

2026, 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):

Three months ended

Fiscal year ended

Balance at beginning of period

Warranty costs incurred

Product warranty accrual

Balance at end of year

ELECTRONICS, INC.

Balance at end of period

NOTE M – DEBT OBLIGATIONS

As of July 31, 2026, the Company had available

credit with JPMorgan Chase Bank, N.A under which no borrowings had been made.

On 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 $ 10.0 million, of which up to $ 5.0 million is available for the issuance of letters

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 $ 10.0 million, subject to certain customary conditions and on the terms set forth in the Credit Agreement.

be no assurance that additional funding will become available.

Commitments 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, Inc., a wholly-owned subsidiary of the Company.

The revolving credit facility matures

on June 12, 2029.

For more information regarding the Credit Agreement, see Note 7 to the Consolidated Financial Statements in the Form

The agreement contains customary

affirmative and negative covenants, including requirements that the Company maintain a total Leverage Ratio greater than 2.25 to 1.00

and a Fixed Charge Coverage Ratio greater than 1.25 to 1.00.

As of July 31, 2026, the Company was in compliance with all covenants.

NOTE N – SUBSEQUENT EVENTS

On August 3, 2026, the underwriters to the Offering

exercised their option in full to purchase the Option Shares and on August 5, 2026, the underwriters purchased the Option Shares.

gross proceeds to the Company from the sale of the Option Shares were approximately $ 15 million.

Net of underwriting discounts and commissions

of approximately $ 0.9 million, the total proceeds received were approximately $ 14.1 million in the second quarter of fiscal year 2027.

See Note B above for additional information.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

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

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

statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) regarding future earnings and operations and other statements

relating to the future constitute “forward-looking” statements pursuant to the safe harbor provisions of the Private Securities

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.

1 unchanged sentence

to differ materially from the forward-looking statements.

Factors that would cause or contribute to such differences include but are

not limited to, our inability to integrate operations and personnel, actions by significant customers or competitors, general domestic

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

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

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

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

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

The factors listed above are

not exhaustive.

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

for the fiscal year ended April 30, 2025 (the “Form 10-K”) include additional factors that could materially and adversely

impact the Company’s business, financial condition and results of operations.

Moreover, the Company operates in a very competitive

and rapidly changing environment.

New factors emerge from time to time and it is not possible for management to predict the impact of

all these factors on the Company’s business, financial condition or results of operations or the extent to which any factor, or

combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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

Any or all of the

forward-looking statements contained in this Form 10-Q and any other public statement made by the Company or its management may turn

out to be incorrect.

The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a

result of new information, future events or otherwise, except as required by law.

Accounting Policies and Estimates

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

of inventory.

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

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

Changes in estimates can have a material

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

The Company’s significant accounting policies did not

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

are reported in operating results predominantly over time using the cost-to-cost method.

Under this method, revenue is recorded based

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

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

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

of the contract.

The effect of any change in the estimated gross margin rate (“GM Rate”) for a contract is reflected in revenues

in the period in which the change is known.

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

in which they become determinable.

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

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

costs for material and labor.

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

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

Inventory write downs are established for slow-moving materials based

on percentage of usage over a ten-year period, obsolete items on a gradual basis over five years with no usage and costs incurred on

programs for which production-level orders cannot be determined as probable.

Such write-downs are based upon management’s

experience and estimates for future business.

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

period the revision is made.

ELECTRONICS, INC.

and SUBSIDIARIES

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.

Factors that would cause or contribute to such differences include, but

are not limited to, the risks associated with reliance on key customers, including the U.S.

Government, the Company’s use of

estimates when accounting for contracts, actions by significant customers or competitors, competitive factors, new products and

technological changes, continued acceptance of the Company’s products in the marketplace, dependence upon third-party vendors,

product prices and raw material costs, the Company’s ability to attract and retain key employees, general domestic and

international economic conditions, health epidemics and pandemics, external disruptions to the Company’s facilities or supply

chain, the Company’s operations in a highly regulated industry, the outcome of any litigation and arbitration proceedings,

cybersecurity attacks, noncompliance with any of the covenants in the Company’s senior, secured revolving credit facility with

JPMorgan Chase Bank, N.A., as the lender, volatility in the Company’s stock price, including due to the relatively low trading

volume of its common stock, and failure to maintain an effective system of internal controls over financial reporting.

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, 2026 (the “Form 10-K”) include additional factors that

could materially and adversely impact the Company’s business, financial condition and results of operations.

Moreover, the

Company operates in a very competitive and rapidly changing environment.

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

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

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

contained in any forward-looking statements.

Given these risks and uncertainties, investors should not rely on forward-looking

statements as a prediction of actual results.

Any or all of the forward-looking statements contained in this Form 10-Q and any other

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

The Company expressly disclaims any obligation

to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as

required by law.

Critical Accounting Policies and Estimates

The Company believes its most

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

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

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

Changes in estimates can have a material impact on the Company’s

financial position and results of operations.

The Company’s significant accounting policies did not change during the three months

ended July 31, 2026.

Revenue Recognition

Revenues for most contracts

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

Under this method, revenue is recorded based upon the ratio

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

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.

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

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

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

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

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

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

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

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

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

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

of future taxable income.

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

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

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

Each quarter, we update our estimate of the annual effective

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

OF OPERATIONS

table below sets forth for the three and nine months ended January 31, 2026 and 2025, respectively, the percentage of consolidated revenues

represented by certain items in the Company’s condensed consolidated statements of operations or notes to the condensed consolidated

financial statements:

Periods ended January 31,

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

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.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

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 months ended July 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 ended July 31,

Less intersegment revenues

Cost of revenues

Selling and administrative expenses

Selling, general and administrative expenses

Research and development expenses

1 unchanged sentence

Other income, net

Benefit for income taxes

ELECTRONICS, INC.

and SUBSIDIARIES

Periods ended January 31,

Provision (benefit) for income taxes

Three months ended July 31,

(in thousands)

Intersegment revenues

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

Government communication satellite programs accounted for

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

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

Revenues from

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

Revenues from non-space U.S.

Government/Department of Defense (“DOD”)

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

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

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

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

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

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

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

in fourth quarter of fiscal 2026.

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

Government communication satellite programs accounted for approximately

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

For the three months ended

July 31, 2026, revenues from commercial and U.S.

Government communication satellite programs accounted for approximately 50% of consolidated

revenues compared to approximately 47% of consolidated revenues during this same period in the prior fiscal year.

Revenues are recognized

primarily over time under the Percentage of Completion method.

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

Revenues from non-space U.S.

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

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

Other commercial

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

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

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

Periods ended January 31,

(in thousands)

Gross margin rate

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

periods in the prior fiscal year.

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

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

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

ELECTRONICS, INC.

Government/Department of War (“DOW”) customers, which are recorded in both the FEI-NY and FEI-Zyfer

segments, accounted for approximately 47% of consolidated revenues for the three months ended July 31, 2026 compared to approximately

50% of consolidated revenue during the same period in the prior fiscal year.

Other commercial and industrial revenues for the three months

ended July 31, 2026 and 2025, accounted for approximately 3% of consolidated revenue in both periods.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

General, and Administrative Expenses

Periods ended January 31,

Revenue for the three months

ended July 31, 2026, increased by over 69%, or $9.6 million, as compared to the same quarter of the prior fiscal year.

This increase was

due to significantly higher revenue in both segments.

Revenue from commercial and U.S.

Government communication satellite programs increased

over 80%, or 5.2 million, and revenues from non-space U.S.

Government/DOW customers increased over 61%, or $4.2 million, over the same

period in the prior fiscal year.

Three Months ended July 31,

(in thousands)

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

21% and 18%, respectively of consolidated revenues.

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

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

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

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

For the nine months ended January 31, 2026 an increase

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

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

These increased SG&A

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

and Development Expenses

Periods ended January 31,

For the three months ended

July 31, 2026, both gross margin (“GM”) and GM Rate increased compared to the same period in the prior fiscal year.

in GM was attributable to the $9.6 million increase in revenue compared to the same period in the prior fiscal year.

The 9% improvement

in GM Rate was attributable in part to product mix with the majority of programs running at targeted margins, and partially due to efficiencies

recognized as programs mature.

Selling, General, and Administrative Expenses

Three Months ended July 31,

(in thousands)

and Development (“R&D”) expenditures represent investments intended to keep the Company’s products at the leading

edge of time and frequency technology and enhance future competitiveness.

Fluctuations in R&D expenditures will occur in some periods

due to current operational needs supporting ongoing programs.

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

its products at the state of the art.

Periods ended January 31,

For the three months ended

July 31, 2026 and 2025, selling, general, and administrative (“SG&A”) expenses were approximately 18% and 26%, respectively,

of consolidated revenues.

While SG&A expenses as a percentage of consolidated revenues decreased approximately 8% versus the prior

year period, the actual expenditures increased by $0.5 million.

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

2026 related mostly to compensation expenses.

See Note B to the Condensed Consolidated Financial Statements in this Form 10-Q.

as a percentage of revenue decreased 8% versus the same period of the prior year demonstrating positive operating leverage as a result

of strategic headcount additions and process optimizations implemented over the prior year.

Research and Development Expenses

Three Months ended July 31,

(in thousands)

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

gross margin and increased SG&A as described above.

ELECTRONICS, INC.

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 to enhance future competitiveness.

Fluctuations in R&D expenditures will occur in some periods due to 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.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

Income (Expense), net

Periods ended January 31,

Operating Income

Three Months ended July 31,

(in thousands)

For the three months ended

July 31, 2026, operating income increased significantly compared to the prior fiscal year period due to higher revenue, gross margin and

operational efficiencies as described above.

Other Income (Expense), net

Three Months ended July 31,

(in thousands)

Investment income, net

1 unchanged sentence

Other expense, net

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

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

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

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

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

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

Deferred Compensation

for Income Tax

Periods ended January 31,

Other income (expense), net

is derived from various sources.

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

assets, or the sale of a fixed asset.

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

majority of the approximately $0.1 million of investment income for the three months ended July 31, 2026, was from interest income and

unrealized gains on assets held in the Frequency Electronics, Inc.

Deferred Compensation Trust.

Provision (benefit) for Income Tax

Three Months ended July 31,

(in thousands)

Periods ended January 31,

Three Months ended

Effective tax rate on pre-tax book income:

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

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

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.

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

period of enactment – 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).

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

This calculation reflects an estimated income

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

and development credits, and state income taxes.

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

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

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

benefit of $568,117.

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.

ELECTRONICS, INC.

and SUBSIDIARIES

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

of $1,180,802.

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

net deferred tax asset due to a new state filing.

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

and state income taxes.

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

includes a discrete tax income benefit of $11.9 million.

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

the release of the valuation allowance.

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

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

The effective tax rate

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

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

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

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

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

tax code, including, but not limited

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

a catch-up relief provision for taxpayers to accelerate deductions for unamortized domestic research expenditures, (3) 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, 2027 is 24.90%.

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

fiscal year annual pretax income forecast which includes non-deductible expenses, estimated R&D credits, and state income taxes.

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

For the three months ending

July 31, 2026, the Company recorded an income tax provision of $1 million which includes a discrete income tax benefit of $0.3 million.

The discrete income tax benefit was 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 offset by a discrete tax benefit.

For the three months ended July 31,

2025, the Company recorded an income tax benefit of $0.8 million which included a discrete income tax benefit of $0.2 million.

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.

AND CAPITAL RESOURCES

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

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

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

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

The Company’s current ratio was 2.6 to

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

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

million, respectively.

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

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

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

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

and accruals for employee benefit programs.

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

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

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

respectively, all relating to purchases of capital expenditures.

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

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

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

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

the three months ended July 31, 2026 was an income tax provision of 19.58% on pretax income of $5.2 million compared to an income tax

benefit of 13.89% on pretax income of $0.6 million in the comparable prior fiscal year period.

The effective tax rate for the three months

ended July 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 $90.2 million at July 31, 2026 and approximately

$27.0 million at April 30, 2026.

Included in working capital at July 31, 2026 and April 30, 2026 was $61.4 million and $1.6

million, respectively, of cash and cash equivalents.

The Company’s current ratio was 5.3 to 1 at July 31, 2026 compared to

2.3 to 1 as of April 30, 2026.

Net cash provided by operating

activities for the three months ended July 31, 2026 and 2025 was approximately $2.6 million and $1.2 million, respectively.

in net cash provided by operating activities in the first three months of fiscal 2027 as compared to the prior fiscal year period was

primarily due to timing of billings and cash collections and an increase in net income.

For the three months ended July 31, 2026

and 2025, the Company incurred approximately $2.5 million and $1.8 million, respectively, of non-cash charges to earnings including amortization

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

benefit programs.

Net cash used in investing

activities for the three months ended July 31, 2026 and 2025 was approximately $0.9 million and $0.8 million, respectively, relating to

purchases of capital expenditures and the purchase of investment.

Net cash provided by financing

activities for the three months ended July 31, 2026 was $58.1 million, all related to the Company’s public offering of its common

stock in July 2026.

On July 30, 2026, the Company completed a public offering (the “Offering”) of 1,739,131 shares of its

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.

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

share price of $50.22 per share.

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

granted RSU awards.

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

million authorized under the new share repurchase authorization.

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

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

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

systems, and communication systems that management believes will result in future growth and profitability.

The Company anticipates securing

additional customer funding for a portion of its R&D activities and will allocate internal funds depending on market conditions and

identification of new opportunities.

The Company offered and sold 1,086,957 shares of common stock, and certain selling stockholders offered and sold a total

of 652,174 shares of common stock.

The shares were sold to investors at $57.50 per share.

The gross proceeds to the Company from the Offering,

before deducting the underwriting discounts and commissions and offering expenses, were approximately $62.5 million.

Net of underwriting

discounts and commissions of approximately $3.8 million and offering expenses of approximately $0.6 million, the total proceeds received

were approximately $58.1 million.

The Company did not receive any proceeds from the sale of the shares by the selling stockholders.

Company intends to use the proceeds for general corporate purposes and investments in the Company’s future growth.

Net cash used

in financing activities for the three months ended July 31, 2025 was $0.6 million, all related to purchase of treasury stock.

In addition, the Company granted

the underwriters to the Offering an option, exercisable for 30 days, to purchase up to 260,869 shares of common stock from the Company

on the same terms (the “Option Shares”).

On August 3, 2026, the underwriters exercised their option in full and on August

5, 2026, purchased the Option Shares from the Company.

The gross proceeds to the Company from the sale of the Option Shares, before deducting

the underwriting discounts and commissions and offering expenses, were approximately $15 million.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

On September 9, 2025,

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

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

time, subject to general business and market conditions, other investment opportunities and compliance with the covenants under the

Credit Agreement (as defined below), through open market purchases, privately negotiated transactions or other means.

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

The share repurchase authorization replaced the

Company’s prior $5.0 million share repurchase authorization, which was initially authorized in March 2005, under which

approximately $0.6 million remained.

The current share repurchase authorization does not have an expiration date.

During the three months ended

July 31, 2026, the Company did not acquire any shares of the Company’s common stock.

As of July 31, 2026, the Company had repurchased

approximately $1.0 million of its common stock out of the $20.0 million authorized under the current share repurchase authorization.

the three months ended July 31, 2025, the Company repurchased 21,910 shares of the Company’s outstanding common stock at a weighted

average share price of $26.60 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.

ELECTRONICS, INC.

may also pursue acquisitions to expand its range of products and may use internally generated cash and external funding in connection

with such acquisitions.

As of July 31, 2026,

the Company’s consolidated funded backlog was approximately $129 million compared to approximately $111 million at April 30, 2026.

Approximately

67% of the backlog, as of July 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

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

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.

On 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 $10.0 million, of which up to $5.0 million 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 $10.0 million, 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.

Commitments 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, Inc., a wholly-owned subsidiary of the Company.

The revolving credit facility matures on June 12, 2029.

For more information regarding the Credit Agreement, see Note 7 to the Consolidated

Financial Statements in the Form 10-K.

The Company believes that

its liquidity is adequate to meet its short-term operating and investment needs through at least September 14, 2027 and its long-term

operation and investment needs for the foreseeable future thereafter.

FREQUENCY ELECTRONICS, INC.

and SUBSIDIARIES

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

at April 30, 2025.

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

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

price contracts, the Company excludes any unfunded portion.

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

will add the additional funding to its backlog.

The backlog is subject to change for various reasons, including possible cancellation

of orders, change orders, terms of the contracts and other factors beyond the Company’s control.

Accordingly, the backlog is not

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

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

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

Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the

Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources

that is material to investors.

Quantitative and Qualitative Disclosures about Market Risk

applicable to smaller reporting companies.

Quantitative and Qualitative

Disclosures about Market Risk

Not applicable to smaller

reporting companies.

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

What changed 10-Q

Item 1. Financial Statements