freqelec20231031

freqelec20231031_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 October 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 December 11, 2023 – 9,415,417

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

TABLE OF CONTENTS

	Page No.
Part I. Financial Information:

Item 1 - Financial Statements:

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

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

Condensed Consolidated Statements of Cash Flows Six Months Ended October 31, 2023 and 2022 (unaudited)	5

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

Notes to Condensed Consolidated Financial Statements (unaudited)	7-13

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	14-19

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	20

Item 4 - Controls and Procedures	20

Part II. Other Information:

Item 1A – Risk Factors	21

Item 6 - Exhibits	21

Signatures	22

	October 31,			April 30,
	2023			2023
	(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents	$	8,708		$	12,049
Accounts receivable, net of allowance for doubtful accounts of $111 at October 31, 2023 and April 30, 2023		3,781			4,622
Contract assets		12,474			10,009
Inventories		23,071			20,526
Prepaid income taxes		30			30
Prepaid expenses and other		1,639			1,071
Total current assets		49,703			48,307
Property, plant, and equipment, net		6,436			7,093
Goodwill		617			617
Cash surrender value of life insurance		10,404			10,220
Other assets		876			877
Right-of-use assets – operating leases		6,693			7,382
Total assets	$	74,729		$	74,496

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	1,245		$	1,464
Accrued liabilities		4,049			3,934
Loss provision accrual		1,481			1,544
Operating lease liability - current portion		1,769			1,753
Contract liabilities		16,435			18,586
Total current liabilities		24,979			27,281
Deferred compensation		8,229			8,314
Deferred taxes		8			8
Operating lease liability – non-current portion		5,126			5,883
Other liabilities		131			124
Total liabilities		38,473			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, 9,404 shares issued and 9,403 shares outstanding at October 31, 2023; 9,374 shares issued and 9,373 shares outstanding at April 30, 2023		9,405			9,374
Additional paid-in capital		49,636			49,136
Accumulated deficit		(22,782	)		(25,621	)
Common stock reacquired and held in treasury - at cost (1 share at October 31, 2023 and April 30, 2023)		(3	)		(3	)
Accumulated other comprehensive income		-			-
Total stockholders’ equity		36,256			32,886
Total liabilities and stockholders’ equity	$	74,729		$	74,496

	Three Months Ended October 31,						Six Months Ended October 31,
	2023			2022			2023			2022
Condensed Consolidated Statements of Operations
Revenues	$	13,575		$	8,949		$	25,984		$	17,153
Cost of revenues		9,245			8,599			16,786			16,808
Gross margin		4,330			350			9,198			345
Selling and administrative expenses		2,552			2,034			4,853			4,026
Research and development expenses		840			599			1,347			1,709
Operating income (loss)		938			(2,283	)		2,998			(5,390	)

Other income (expense):
Investment (expense) income		(106	)		(12	)		(86	)		24
Interest expense		(29	)		(18	)		(60	)		(63	)
Income (loss) before provision for income taxes		803			(2,313	)		2,852			(5,429	)
Provision for income taxes		6			1			13			2
Net income (loss)	$	797		$	(2,314	)	$	2,839		$	(5,431	)

Net income (loss) per common share:
Basic and diluted income (loss) per share	$	0.08		$	(0.25	)	$	0.30		$	(0.58	)

Weighted average shares outstanding:
Basic and diluted		9,399			9,326			9,392			9,317


Condensed Consolidated Statements of Comprehensive Income (Loss)
Net income (loss)	$	797		$	(2,314	)	$	2,839		$	(5,431	)

Unrealized loss on marketable securities:
Change in market value of marketable securities before reclassification, net of tax		-			(581	)		-			(552	)
Reclassification adjustment for realized gains included in net income (loss), net of tax		-			16			-			1
Total unrealized loss on marketable securities, net of tax		-			(565	)		-			(551	)

Comprehensive income (loss)	$	797		$	(2,879	)	$	2,839		$	(5,982	)

					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
Contribution of stock to 401(k) plan		12,885		13		75		-			-		-			-		88
Stock-based compensation expense		750		1		201		-			-		-			-		202
Net income		-		-		-		797			-		-			-		797
Balance at October 31, 2023		9,404,424	$	9,405	$	49,636	$	(22,782	)		741	$	(3	)	$	-	$	36,256

	October 31, 2023			April 30, 2023

Contract assets	$	12,474		$	10,009
Contract liabilities		(16,435	)		(18,586	)

	October 31, 2023		April 30, 2023
Raw materials and component parts	$	14,193	$	12,460
Work in progress		8,336		7,547
Finished goods		542		519
	$	23,071	$	20,526

	Classification	October 31, 2023		April 30, 2023
Assets
Operating lease ROU assets	ROU assets - operating leases	$	6,693	$	7,382

Liabilities
Operating lease liabilities (short-term)	Operating lease liability - current portion		1,769		1,753
Operating lease liabilities (long-term)	Operating lease liability - non-current portion		5,126		5,883
Total lease liabilities		$	6,895	$	7,636

Fiscal Year Ending April 30,
(in thousands)

Remainder of 2024	$	815
2025		1,844
2026		1,328
2027		937
2028		1,262
Thereafter		1,976
Total lease payments		8,162
Less imputed interest		(1,267	)
Present value of future lease payments		6,895
Less current obligations under leases		(1,769	)
Long-term lease obligations		5,126

	Periods ended October 31,
	Three months						Six months
	2023			2022			2023			2022
Revenues:
FEI-NY	$	9,271		$	7,680		$	18,762		$	14,534
FEI-Zyfer		4,756			1,561			8,023			3,292
less intersegment revenues		(452	)		(292	)		(801	)		(673	)
Consolidated revenues	$	13,575		$	8,949		$	25,984		$	17,153

Operating income (loss):
FEI-NY	$	(231	)	$	(1,389	)	$	1,249		$	(3,978	)
FEI-Zyfer		1,484			(792	)		2,163			(1,230	)
less intersegment profit		(79	)		-			(140	)		-
Corporate		(236	)		(102	)		(274	)		(182	)
Consolidated operating income (loss)	$	938		$	(2,283	)	$	2,998		$	(5,390	)

	October 31, 2023			April 30, 2023
Identifiable assets:
FEI-NY	$	37,315		$	39,005
FEI-Zyfer		13,369			10,699
less intersegment balances		(198	)		(58	)
Corporate		24,243			24,850
Consolidated identifiable assets	$	74,729		$	74,496

	Six Months Ended October 31,
	2023								2022
	POC		POT			Total			POC		POT			Total
	Revenue		Revenue			Revenue			Revenue		Revenue			Revenue
FEI-NY	$	16,569	$	2,193		$	18,762		$	13,451	$	1,083		$	14,534
FEI-Zyfer		7,449		574			8,023			3,156		136			3,292
Intersegment		-		(801	)		(801	)		-		(673	)		(673	)
Revenues	$	24,018	$	1,966		$	25,984		$	16,607	$	546		$	17,153

	Periods ended October 31,
	Three months				Six months
	2023		2022		2023		2022
Revenues by product line:
Satellite revenue	$	4,664	$	4,333	$	9,522	$	7,808
Government non-space revenue		8,201		3,918		15,080		7,983
Other commercial & industrial revenue		710		698		1,382		1,362
Consolidated revenues	$	13,575	$	8,949	$	25,984	$	17,153

	Three months						Six months
	Periods ended October 31,
	2023			2022			2023			2022
Revenues
FEI-NY		68.3	%		85.8	%		72.2	%		84.7	%
FEI-Zyfer		35.0			17.4			30.9			19.2
Less intersegment revenues		(3.3	)		(3.2	)		(3.1	)		(3.9	)
		100.0			100.0			100.0			100.0
Cost of revenues		68.1			96.1			64.6			98.0
Gross margin		31.9			3.9			35.4			2.0
Selling and administrative expenses		18.8			22.7			18.7			23.4
Research and development expenses		6.2			6.7			5.2			10.0
Operating income (loss)		6.9			(25.5	)		11.5			(31.4	)
Other loss, net		(1.0	)		(0.4	)		(0.7	)		(0.3	)
Provision for income taxes		-			-			0.1			-
Net income (loss)		5.9	%		(25.9	)%		10.9	%		(31.7	)%

SEC Form 10-Q filed by Frequency Electronics Inc.