freqelec20230731

freqelec20230731_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 July 31, 2023

☐ 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, NY	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 September 11, 2023 – 9,390,046

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

TABLE OF CONTENTS

	Page No.
Part I. Financial Information:

Item 1 - Financial Statements:

Condensed Consolidated Balance Sheets – July 31, 2023 (unaudited) and April 30, 2023	3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) – Three Months Ended July 31, 2023 and 2022 (unaudited)	4

Condensed Consolidated Statements of Cash Flows – Three Months Ended July 31, 2023 and 2022 (unaudited)	5

Condensed Consolidated Statements of Changes in Stockholders’ Equity – Three Months Ended July 31, 2023 and 2022 (unaudited)	6

Notes to Condensed Consolidated Financial Statements (unaudited)	7-12

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	13-17

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	18

Item 4 - Controls and Procedures	18

Part II. Other Information:

Item 1A – Risk Factors	19

Item 6 - Exhibits	19

Signatures	20

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands except par value)

	July 31,			April 30,
	2023			2023
	(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents	$	9,061		$	12,049
Accounts receivable, net of allowance for doubtful accounts of $111 at July 31, 2023 and April 30, 2023		6,385			4,622
Contract assets		11,028			10,009
Inventories		22,604			20,526
Prepaid income taxes		27			30
Prepaid expenses and other		1,158			1,071
Total current assets		50,263			48,307
Property, plant, and equipment, net		6,778			7,093
Goodwill		617			617
Cash surrender value of life insurance		10,375			10,220
Other assets		876			877
Right-of-Use assets – operating leases		7,062			7,382
Total assets	$	75,971		$	74,496

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	1,214		$	1,464
Accrued liabilities		3,967			3,934
Loss provision accrual		1,577			1,544
Operating lease liability – current portion		1,766			1,753
Contract liabilities		18,356			18,586
Total current liabilities		26,880			27,281
Deferred compensation		8,267			8,314
Deferred taxes		8			8
Operating lease liability – non-current portion		5,518			5,883
Other liabilities		129			124
Total liabilities		40,802			41,610

Stockholders’ equity:
Preferred stock - $1.00 par value; authorized 600 shares, no shares issued		-			-
Common stock - $1.00 par value; authorized 20,000 shares, 9,391 shares issued and 9,390 shares outstanding at July 31, 2023; 9,374 shares issued and 9,373 shares outstanding at April 30, 2023		9,391			9,374
Additional paid-in capital		49,360			49,136
Accumulated deficit		(23,579	)		(25,621	)
Common stock reacquired and held in treasury - at cost (1 share at July 31, 2023 and April 30, 2023)		(3	)		(3	)
Total stockholders’ equity		35,169			32,886
Total liabilities and stockholders’ equity	$	75,971		$	74,496

See accompanying notes to condensed consolidated financial statements.

	Three Months Ended July 31,
	2023			2022

Revenues	$	12,408		$	8,204
Cost of revenues		7,540			8,209
Gross margin		4,868			(5	)
Selling and administrative expenses		2,302			1,992
Research and development expenses		506			1,110
Operating income (loss)		2,060			(3,107	)

Other income (expense):
Investment income		20			36
Interest expense		(31	)		(45	)
Income (loss) before provision for income taxes		2,049			(3,116	)
Provision for income taxes		7			1
Net Income (loss)	$	2,042		$	(3,117	)

Net income (loss) per common share:
Basic and diluted income (loss) per share	$	0.22		$	(0.33	)

Weighted average shares outstanding:
Basic and diluted		9,384			9,308


Condensed Consolidated Statements of Comprehensive Income (loss)
Net Income (loss)	$	2,042		$	(3,117	)

Unrealized gain (loss) on marketable securities:
Change in market value of marketable securities before reclassification, net of tax		-			(2	)
Reclassification adjustment for realized gains included in net income, net of tax		-			16
Total unrealized gain on marketable securities, net of tax		-			14

Comprehensive income (loss)	$	2,042		$	(3,103	)

					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, 2023		9,373,776	$	9,374	$	49,136	$	(25,621	)		741	$	(3	)	$	-	$	32,886
Contribution of stock to 401(k) plan		17,013		17		96		-			-		-			-		113
Stock-based compensation expense		-		-		128		-			-		-			-		128
Net income		-		-		-		2,042			-		-			-		2,042
Balance at July 31, 2023		9,390,789	$	9,391	$	49,360	$	(23,579	)		741	$	(3	)	$	-	$	35,169

	July 31, 2023			April 30, 2023

Contract assets	$	11,028		$	10,009
Contract liabilities		(18,356	)		(18,586	)

	July 31, 2023		April 30, 2023
Raw Materials and Component Parts	$	14,173	$	12,460
Work in Progress		7,914		7,547
Finished Goods		517		519
	$	22,604	$	20,526

	Classification	July 31, 2023		April 30, 2023
Assets
Operating lease ROU assets	ROU assets - operating leases	$	7,062	$	7,382

Liabilities
Operating lease liabilities (short-term)	Operating lease liability - current portion		1,766		1,753
Operating lease liabilities (long-term)	Operating lease liability - non-current portion		5,518		5,883
Total lease liabilities		$	7,284	$	7,636

Fiscal Year Ending April 30,
(in thousands)

Remainder of 2024	$	1,317
2025		1,844
2026		1,328
2027		937
2028		1,262
Thereafter		1,976
Total lease payments		8,664
Less imputed interest		(1,380	)
Present value of future lease payments		7,284
Less current obligations under leases		(1,766	)
Long-term lease obligations		5,518

Operating income (loss):
FEI-NY	$	1,481		$	(2,589	)
FEI-Zyfer		678			(438	)
less intersegment margin		(61	)		-
Corporate		(38	)		(80	)
Consolidated operating income (loss)	$	2,060		$	(3,107	)

	July 31, 2023			April 30, 2023
Identifiable assets:
FEI-NY	$	40,371		$	39,005
FEI-Zyfer		12,288			10,699
less intersegment balances		(119	)		(58	)
Corporate		23,431			24,850
Consolidated identifiable assets	$	75,971		$	74,496

	Three months ended July 31,
	(in thousands)
Segment	2023			2022			Change
FEI-NY	$	9,490		$	6,854		$	2,636	38.5	%
FEI-Zyfer		3,267			1,732			1,535	88.6
Intersegment revenues		(349	)		(382	)		33	(8.6	)
	$	12,408		$	8,204		$	4,204	51.2	%

31.1 -	Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 -	Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 -	Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101-	The following materials from the Frequency Electronics, Inc. Quarterly Report on Form 10-Q for the quarter ended July 31, 2023 formatted in eXtensible Business Reporting Language (XBRL): (i) Cover Page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Operations and Comprehensive Loss, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Changes in Stockholders’ Equity and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within Inline XBRL document.

104-	Cover Page Interaction Data File (formatted as inline XBRL and contained in Exhibit 101).

	Three Months Ended July 31,
	2023								2022
	POC		POT			Total			POC		POT			Total
	Revenue		Revenue			Revenue			Revenue		Revenue			Revenue
FEI-NY	$	8,675	$	815		$	9,490		$	6,278	$	576		$	6,854
FEI-Zyfer		3,047		220			3,267			1,674		58			1,732
Intersegment		-		(349	)		(349	)		-		(382	)		(382	)
Revenue	$	11,722	$	686		$	12,408		$	7,952	$	252		$	8,204

	Three Months Ended July 31,
	2023		2022
Revenues by product line:
Satellite revenue	$	4,858	$	3,476
Government non-space revenue		6,878		4,064
Other commercial & industrial revenue		672		664
Consolidated revenues	$	12,408	$	8,204

SEC Form 10-Q filed by Frequency Electronics Inc.