freqelec20240131

freqelec20240131_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, 2024

☐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 March 18, 2024 – 9,487,342

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

TABLE OF CONTENTS

	Page No.
Part I. Financial Information:

Item 1 - Financial Statements:

Condensed Consolidated Balance Sheets – January 31, 2024 (unaudited) and April 30, 2023	3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) – Three and Nine Months Ended January 31, 2024 and 2023 (unaudited)	4

Condensed Consolidated Statements of Cash Flows Nine months ended January 31, 2024 and 2023 (unaudited)	5

Condensed Consolidated Statements of Changes in Stockholders’ Equity – Three and Nine Months Ended January 31, 2024 (unaudited)	6

Condensed Consolidated Statements of Changes in Stockholders’ Equity – Three and Nine Months Ended January 31, 2023 (unaudited)	7

Notes to Condensed Consolidated Financial Statements (unaudited)	8-14

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations	15-20

Item 3 - Quantitative and Qualitative Disclosures About Market Risk	21

Item 4 - Controls and Procedures	21

Part II. Other Information:

Item 1A – Risk Factors	22

Item 5 – Other Information	22

Item 6 - Exhibits	22

Signatures	23

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except par value)

	January 31,			April 30,
	2024			2023
	(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents	$	11,663		$	12,049
Accounts receivable, net of allowance for doubtful accounts of $111 at January 31, 2024 and April 30, 2023		5,410			4,622
Contract assets		10,572			10,009
Inventories		23,159			20,526
Prepaid income taxes		24			30
Prepaid expenses and other		1,252			1,071
Total current assets		52,080			48,307
Property, plant, and equipment, net		6,232			7,093
Goodwill		617			617
Cash surrender value of life insurance		10,676			10,220
Other assets		875			877
Right-of-use assets – operating leases		6,323			7,382
Restricted cash		941			-
Total assets	$	77,744		$	74,496

LIABILITIES AND STOCKHOLDERS’ EQUITY:
Current liabilities:
Accounts payable	$	1,723		$	1,464
Accrued liabilities		4,528			3,934
Loss provision accrual		1,620			1,544
Operating lease liability - current portion		1,783			1,753
Contract liabilities		18,370			18,586
Total current liabilities		28,024			27,281
Deferred compensation		8,190			8,314
Deferred taxes		8			8
Operating lease liability – non-current portion		4,716			5,883
Other liabilities		133			124
Total liabilities		41,071			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, 9,486 shares issued and 9,485 shares outstanding at January 31, 2024; 9,374 shares issued and 9,373 shares outstanding at April 30, 2023		9,487			9,374
Additional paid-in capital		49,841			49,136
Accumulated deficit		(22,652	)		(25,621	)
Common stock reacquired and held in treasury - at cost (1 share at January 31, 2024 and April 30, 2023)		(3	)		(3	)
Total stockholders’ equity		36,673			32,886
Total liabilities and stockholders’ equity	$	77,744		$	74,496

See accompanying notes to condensed consolidated financial statements.

Table of Contents

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(In thousands, except per share data)

(Unaudited)

	Three Months Ended January 31,						Nine Months Ended January 31,
	2024			2023			2024			2023
Condensed Consolidated Statements of Operations
Revenues	$	13,714		$	10,620		$	39,698		$	27,773
Cost of revenues		10,610			7,155			27,396			23,963
Gross margin		3,104			3,465			12,302			3,810
Selling and administrative expenses		2,619			2,357			7,473			6,383
Research and development expenses		958			783			2,304			2,492
Operating (loss) income		(473	)		325			2,525			(5,065	)

Other income (expense):
Investment income (expense), net		636			(625	)		549			(600	)
Interest expense		(27	)		(18	)		(86	)		(81	)
Other income, net		-			5			-			5
Income (loss) before provision for income taxes		136			(313	)		2,988			(5,741	)
Provision for income taxes		6			3			19			6
Net income (loss)	$	130		$	(316	)	$	2,969		$	(5,747	)

Net income (loss) per common share:
Basic and diluted income (loss) per share	$	0.01		$	(0.03	)	$	0.32		$	(0.62	)

Weighted average shares outstanding:
Basic and diluted		9,440			9,349			9,408			9,328

Condensed Consolidated Statements of Comprehensive Income (Loss)

Net income (loss)	$	130		$	(316	)	$	2,969		$	(5,747	)

Unrealized gain (loss) on marketable securities:
Change in market value of marketable securities before reclassification, net of tax		-			388			-			(179	)
Reclassification adjustment for realized gains included in net income (loss), net of tax		-			603			-			619
Total unrealized gain on marketable securities, net of tax		-			991			-			440

Comprehensive income (loss)	$	130		$	675		$	2,969		$	(5,307	)

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,
	2024			2023
Cash flows from operating activities:
Net income (loss)	$	2,969		$	(5,747	)
Non-cash charges to earnings		3,081			2,667
Net changes in operating assets and liabilities		(4,824	)		5,028
Net cash provided by operating activities		1,226			1,948

Cash flows from investing activities:
Proceeds on redemption of marketable securities		-			10,967
Purchase of marketable securities		-			(1,382	)
Purchase of property, plant, and equipment, and other assets		(671	)		(886	)
Net cash (used in) provided by investing activities		(671	)		8,699


Cash flows from financing activities:
Payment of dividend		-			(9,354	)
Net cash used in financing activities		-			(9,354	)


Net increase in cash and cash equivalents and restricted cash		555			1,293

Cash and cash equivalents and restricted cash at beginning of period		12,049			11,561

Cash and cash equivalents and restricted cash at end of period	$	12,604		$	12,854


Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	88		$	54
Income taxes	$	13			-

Cash refunded during the period for:
Income taxes	$	-		$	176

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, 2024

(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, 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
Contribution of stock to 401(k) plan		5,364		5		55		-			-		-			-		60
Stock-based compensation expense		77,272		77		150		-			-		-			-		227
Other comprehensive income, net of tax																		-
Dividends paid																		-
Net income		-		-		-		130			-		-			-		130
Balance at January 31, 2024		9,487,060	$	9,487	$	49,841	$	(22,652	)		741	$	(3	)	$	-	$	36,673

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, 2023

(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, 2022		9,298,178	$	9,298	$	57,956		$	(20,120	)		1,375	$	(6	)	$	(440	)	$	46,688
Contribution of stock to 401(k) plan		16,708		17		105			-			-		-			-			122
Stock-based compensation expense		-		-		(25	)		-			-		-			-			(25	)
Other comprehensive income, net of tax		-		-		-			-			-		-			14			14
Net loss		-		-		-			(3,117	)		-		-			-			(3,117	)
Balance at July 31, 2022		9,314,886	$	9,315	$	58,036		$	(23,237	)		1,375	$	(6	)	$	(426	)	$	43,682
Contribution of stock to 401(k) plan		18,632		18		89			-			-		-			-			107
Stock-based compensation expense		750		1		28			-			-		-			-			29
Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price		-		-		-			-			-		-			-			-
Other comprehensive loss, net of tax		-		-		-			-			-		-			(565	)		(565	)
Net loss		-		-		-			(2,314	)		-		-			-			(2,314	)
Balance at October 31, 2022		9,334,268	$	9,334	$	58,153		$	(25,551	)		1,375	$	(6	)	$	(991	)	$	40,939
Contribution of stock to 401(k) plan		7,597		8		46			-			-		-			-			54
Stock-based compensation expense		12,076		12		48			-			-		-			-			60
Other comprehensive income, net of tax		-		-		-

SEC Form 10-Q filed by Frequency Electronics Inc.