freqelec20220131

freqelec20220131_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark one)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended January 31, 2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 1-8061

FREQUENCY ELECTRONICS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	11-1986657
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

55 CHARLES LINDBERGH BLVD., MITCHEL FIELD, N.Y.	11553
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 516-794-4500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock (par value $1.00 per share)	FEIM	NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller Reporting Company ☒
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of registrant’s Common Stock, par value $1.00 per share, as of March 11, 2022 – 9,283,652

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

TABLE OF CONTENTS

	Page No.
Part I. Financial Information:

Item 1 - Financial Statements:

Condensed Consolidated Balance Sheets – January 31, 2022 (unaudited) and April 30, 2021	3

Condensed Consolidated Statements of Operations and Comprehensive Loss Three and Nine Months Ended January 31, 2022 and 2021 (unaudited)	4

Condensed Consolidated Statements of Cash Flows Nine Months Ended January 31, 2022 and 2021 (unaudited)	5

Condensed Consolidated Statements of Changes in Stockholders’ Equity Three and Nine Months Ended January 31, 2022 (unaudited)	6

Condensed Consolidated Statements of Changes in Stockholders’ Equity Three and Nine Months Ended January 31, 2021 (unaudited)	7

Notes to Condensed Consolidated Financial Statements (unaudited)	8-16

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	17-23

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	24

Item 4 - Controls and Procedures	24

Part II. Other Information:

Item 6 - Exhibits	25

Signatures	26

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands except par value)

(Unaudited)

	January 31,			April 30,
	2022			2021
	(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents	$	12,136		$	9,807
Marketable securities		10,107			10,313
Accounts receivable, net of allowance for doubtful accounts of $111 at January 31, 2022 and April 30, 2021		6,834			5,515
Costs and estimated earnings in excess of billings, net		-			1,948
Inventories, net		19,710			19,661
Prepaid income taxes		450			444
Prepaid expenses and other		1,155			991
Total current assets		50,392			48,679
Property, plant and equipment, at cost, net of accumulated depreciation and amortization		9,174			9,612
Goodwill		617			617
Cash surrender value of life insurance		10,149			15,396
Other assets		1,735			1,939
Right-of-Use assets – operating leases		9,149			9,773
Total assets	$	81,216		$	86,016

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable – trade	$	1,188		$	1,080
Accrued liabilities		4,163			5,245
Loss provision accrual		236			57
Operating lease liability		1,739			1,715
Billings in excess of costs and estimated earnings, net		3,115			-
Total current liabilities		10,441			8,097
Deferred compensation		9,093			14,017
Deferred taxes		8			8
Operating lease liability – non-current		7,708			8,366
Other liabilities		119			119
Total liabilities		27,369			30,607
Commitments and contingencies
Stockholders’ equity:
Preferred stock - $1.00 par value; authorized 600 shares, no shares issued		-			-
Common stock - $1.00 par value; authorized 20,000 shares, 9,285 shares issued and 9,284 shares outstanding at January 31, 2022; 9,226 shares issued and 9,225 shares outstanding at April 30, 2021		9,285			9,226
Additional paid-in capital		57,834			57,355
Accumulated deficit		(13,270	)		(11,457	)
Common stock reacquired and held in treasury - at cost (1 share at January 31, 2022 and 1 share at April 30, 2021)		(6	)		(6	)
Accumulated other comprehensive income		4			291
Total stockholders’ equity		53,847			55,409
Total liabilities and stockholders’ equity	$	81,216		$	86,016

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands except per share data)

(Unaudited)

	Three Months Ended January 31,						Nine Months Ended January 31,
	2022			2021			2022			2021
Condensed Consolidated Statements of Operations
Revenues	$	12,245		$	11,672		$	38,136		$	38,612
Cost of revenues		9,005			8,868			26,744			26,398
Gross margin		3,240			2,804			11,392			12,214
Selling and administrative expenses		2,832			2,454			9,637			9,805
Research and development expenses		1,129			1,289			3,861			3,466
Operating loss		(721	)		(939	)		(2,106	)		(1,057	)

Other income (expense):
Investment income		4			160			195			316
Interest expense		(19	)		(9	)		(59	)		(84	)
Other income (expense), net		2			-			160			129
Loss before provision for income taxes		(734	)		(788	)		(1,810	)		(696	)
Provision for income taxes		1			12			3			37
Net loss	$	(735	)	$	(800	)	$	(1,813	)	$	(733	)

Net loss per common share:
Basic and diluted loss per share	$	(0.08	)	$	(0.09	)	$	(0.20	)	$	(0.08	)

Weighted average shares outstanding:
Basic and diluted		9,279			9,185			9,257			9,165


Condensed Consolidated Statements of Comprehensive Loss
Net loss	$	(735	)	$	(800	)	$	(1,813	)	$	(733	)

Unrealized loss on marketable securities:
Change in market value of marketable securities before reclassification, net of tax		(211	)		(22	)		(283	)		(18	)
Reclassification adjustment for realized gains included in net income, net of tax		2			(12	)		(4	)		(21	)
Total unrealized loss on marketable securities, net of tax		(209	)		(34	)		(287	)		(39	)

Comprehensive loss	$	(944	)	$	(834	)	$	(2,100	)	$	(772	)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	Nine Months Ended January 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(1,813	)	$	(733	)
Non-cash charges to earnings		2,870			3,411
Net changes in operating assets and liabilities		2,913			6,655
Net cash provided by operating activities		3,970			9,333

Cash flows from investing activities:
Proceeds on redemption of marketable securities		1,739			1,998
Purchase of marketable securities		(1,846	)		(1,948	)
Purchase of fixed assets and other assets		(1,534	)		(971	)
Net cash used in investing activities		(1,641	)		(921	)

Net cash used in financing activities:
Repayment of PPP Loan		-			(4,965	)
Proceeds from UBS line of credit		-			3,000
Repayment of UBS line of credit		-			(3,000	)
Net cash used in financing activities		-			(4,965	)

Net increase in cash and cash equivalents		2,329			3,447

Cash and cash equivalents at beginning of period		9,807			3,808

Cash and cash equivalents at end of period	$	12,136		$	7,255


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	59		$	102
Income taxes	$	15			-

Cash refunded during the period for:
Income taxes	$	-		$	511

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FREQUENCY ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three and Nine Months Ended January 31, 2022

(In thousands except share data)

(Unaudited)

					Additional						Treasury stock					Accumulated other
	Common Stock				paid in			Accumulated			(at cost)					comprehensive
	Shares		Amount		capital			Deficit			Shares		Amount			Income (loss)			Total
Balance at April 30, 2021		9,226,268	$	9,226	$	57,355		$	(11,457	)		1,376	$	(6	)	$	291		$	55,409
Contribution of stock to 401(k) plan		13,251		13		117			-			-		-			-			130
Stock-based compensation expense		7,500		8		61			-			-		-			-			69
Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price		-		-		-			-			-		-			-			-
Other comprehensive income, net of tax		-		-		-			-			-		-			79			79
Net loss		-		-		-			(1,575	)		-		-			-			(1,575	)
Balance at July 31, 2021		9,247,019	$	9,247	$	57,533		$	(13,032	)		1,376	$	(6	)	$	370		$	54,112
Contribution of stock to 401(k) plan		10,779		11		100			-			-		-			-			111
Stock-based compensation expense		250		-		66			-			-		-			-			66
Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price		6,278		6		(6	)		-			-		-			-			-
Other comprehensive loss, net of tax		-		-		-			-			-		-			(157	)		(157	)
Net income		-		-		-			497			-		-			-			497
Balance at October 31, 2021		9,264,326	$	9,264	$	57,693		$	(12,535	)		1,376	$	(6	)	$	213		$	54,629
Contribution of stock to
401(k) plan		7,045		7		63			-			-		-			-			70
Stock-based compensation expense		7,953		8		83			-			-		-			-			91
Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price		5,192		6		(5	)		-			-		-			-			1
Other comprehensive loss, net of tax		-		-		-			-			-		-			(209	)		(209	)
Net loss		-		-		-			(735	)		-		-			-			(735	)
Balance at January 31, 2022		9,284,516	$	9,285	$	57,834		$	(13,270	)		1,376	$	(6	)	$	4		$	53,847

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FREQUENCY ELECTRONICS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

Three and Nine Months Ended January 31, 2021

(In thousands except share data)

(Unaudited)

					Additional						Treasury stock						Accumulated other
	Common Stock				paid in			Accumulated			(at cost)						comprehensive
	Shares		Amount		capital			Deficit			Shares			Amount			Income (loss)			Total
Balance at April 30, 2020		9,163,940	$	9,164	$	56,914		$	(12,137	)		42,696		$	(195	)	$	490		$	54,236
Contribution of stock to 401(k) plan		-		-		68			-			(14,926	)		68			-			136
Stock-based compensation expense		-		-		54			-			-			-			-			54
Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price		-		-		(109	)		-			(23,808	)		109			-			-
Other comprehensive income, net of tax		-		-		-			-			-			-			171			171
Net loss		-		-		-			(262	)		-			-			-			(262	)
Balance at July 31, 2020		9,163,940	$	9,164	$	56,927		$	(12,399	)		3,962		$	(18	)	$	661		$	54,335
Contribution of stock to
401(k) plan		9,496		9		86			-			-			-			-			95
Stock-based compensation expense		-		-		73			-			-			-			-			73
Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price		2,654		3		(15	)		-			(2,586	)		12			-			-
Other comprehensive loss, net of tax		-		-		-			-			-			-			(176	)		(176	)
Net income		-		-		-			329			-			-			-			329
Balance at October 31, 2020		9,176,090	$	9,176	$	57,071		$	(12,070	)		1,376		$	(6	)	$	485		$	54,656
Contribution of stock to 401(k) plan		6,116		6		63			-			-			-			-			69
Stock-based compensation expense		4,200		4		65			-			-			-			-			69
Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price		7,363		8		(7	)		-			-			-			-			1
Other comprehensive loss, net of tax		-		-		-			-			-			-			(34	)		(34	)
Net loss		-		-		-			(800	)		-

SEC Form 10-Q filed by Frequency Electronics Inc.