Financial Analysis

15. Contingencies In the normal course of its business, the Company may be involved in various claims, negotiations and legal actions. As of April 30, 2026, the Company was not a party to any litigation in which an unfavorable outcome or material claim is probable or in which losses associated with the litigation can be reasonably estimated.

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11. Employee Benefit Plans Profit Sharing Plan: The Company provides its U.S.-based employees with a profit-sharing plan and trust under 401(k) of the Internal Revenue Code. This plan allows all eligible employees to defer a portion of their income through voluntary contributions to the plan. In accordance with the provisions of the plan, the Company can make discretionary matching contributions in the form of cash or common stock. For the fiscal years ended April 30, 2026 and 2025, the Company contributed 36,067 and 70,100 shares of common stock, respectively. The approximate value of these shares at the date of contribution was $1.3 million and $0.9 million in fiscal years 2026 and 2025, respectively. Contributed shares are drawn from the Companys common stock and during fiscal years 2026 and 2025, such transactions increased additional paid in capital by $1.3 million and $0.8 million, respectively. As of April 30, 2026, the plan held a total of 440,546 shares, which were allocated to the accounts of the individual participants. As of April 30, 2025, the plan held a total of 504,734 shares, which were allocated to the accounts of the individual participants. Income Incentive Pool: The Company maintains incentive bonus programs for certain employees that are based on operating profits of the individual subsidiaries to which the employees are assigned. The Company also adopted a plan for the President and Chief Executive Officer of the Company for which the formula is based o …

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7. Debt Obligations As of April 30, 2026 and 2025, the Company had no debt obligations nor any borrowing capacity pursuant to a credit facility. 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 $10,000,000, of which up to $5,000,000 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 $10,000,000, 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 Companys obligations under the Credit Agreement are guaranteed by FEI-Zyfer (the Subsidiary Guarantor). The revolving credit facility matures on June 12, 2029. The Company and the Subsidiary Guarantor also entered into a separate pledge and security agreement (the Security Agreement) with JPMorgan Chase Bank, N.A., as lender, pursuant to which the Company and the Subsidiary Guarantor each pledged all or substantially all of its assets, including equity in its domestic subsidiaries, in favor of the lender as collateral …

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The amounts by segment and product line were as follows: Fiscal Year Ended April 30, 2026 (In thousands) POC Revenue POT Revenue Total Revenue FEI-NY $ 40,263 $ 5,388 $ 45,651 FEI-Zyfer 17,421 4,310 21,731 Intersegment - (4,155 ) (4,155 ) Revenue $ 57,684 $ 5,543 $ 63,227 Fiscal Year Ended April 30, 2025 (In thousands) POC Revenue POT Revenue Total Revenue FEI-NY $ 49,585 $ 3,684 $ 53,269 FEI-Zyfer 16,206 2,454 18,660 Intersegment - (2,118 ) (2,118 ) Revenue $ 65,791 $ 4,020 $ 69,811

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12. Income Taxes On July 4, 2025, President Trump signed H.R.1, the One Big Beautiful Bill Act (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. 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) 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). The enactment of the OBBBA did not have a material impact on our provision or effective tax rate as of April 30, 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. For financial reporting purposes, (Loss) income before benefit for income taxes, includes the following components (in thousands): Fiscal Year Ended April 30, 2026 2025 Domestic operations $ ( …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

6. Right-of-Use Assets and Lease Liabilities The Companys leases primarily represent offices, warehouses, vehicles, manufacturing and 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 April 30, 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 belo …

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New Accounting Pronouncements: In December 2023, the Financial Accounting Standards Board (the FASB) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity can apply the amendments in ASU 2023-09 prospectively or retrospectively to all annual periods beginning after December 15, 2024. The guidance was adopted by the Company prospectively for the year ended April 30, 2026, and the Company, accordingly, made the required changes in its income tax related disclosure. See Note 12 for additional information. The adoption of ASU 2023-09 did not have any material impact on the Companys audited consolidated financial statements. In November 2024, the FASB issued 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, by caption. Additionally, entities must provide a qualitative description of the amounts remaining in relevant expense captions that …

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13. 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; and other components and systems for the U.S. military. The FEI-NY segment also includes the operations of the Companys wholly-owned subsidiary, FEI-Elcom. FEI-Elcom, in addition to its own product line, provides design and technical support for the FEI-NY segments 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 will remain within the FEI-NY reporting segment. (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 Companys wireline telecommunications family of products, including US5G, which are sold in the U.S. market. The Company measures segment performance based on the operating income generated by the geographic location of its subsidiaries rather than on the specific types of customers or end-user …

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1. Summary of Accounting Policies Organization The Company is principally engaged in the design, development and manufacture of precision time and frequency control products and components for microwave integrated circuit applications. Basis of Presentation and Principles of Consolidation : The consolidated financial statements include the accounts of Frequency Electronics, Inc. and its wholly-owned subsidiaries (the Company or Registrant). References to FEI are to the parent company alone and do not refer to any of its subsidiaries. See Note 13 for information regarding the Companys business segments: (1) FEI-NY (which includes the subsidiaries FEI Government Systems, Inc., FEI Communications, Inc., and until April 30, 2026, included FEI-Elcom Tech, Inc. (FEI-Elcom)), and (2) FEI-Zyfer, Inc. (FEI-Zyfer). Effective as of April 30, 2026, FEI-Elcom converted into a Delaware limited liability company; however, the ongoing business operations of FEI-Elcom will continue under the FEI-NY segment. For more information regarding the Companys restructuring, see Restructuring below. Intercompany accounts and transactions are eliminated in consolidation. Use of Estimates: These consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (U.S. GAAP) and require management to make estimates and assumptions that affect amounts reported and disclosed in the consolidated financial statements and related notes. Actual results …

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16. Subsequent events On July 1, 2026, the Company acquired a 20% minority interest in an LLC for $0.5 million. Pursuant to the transaction, the Company may be required to purchase up to an additional 25% interest subsequent to the closing of the initial agreement. The Company is currently in the process of evaluating the accounting treatment for this transaction.

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NOTE D EMPLOYEE BENEFIT PLANS During the three and six months ended October 31, 2025, the Company made contributions of 6,768 and 19,173 shares, respectively, of its common stock to the Companys profit-sharing plan and trust under Section 401(k) of the Internal Revenue Code. During the three and six months ended October 31, 2024, the Company made contributions of 17,577 and 44,034 shares, respectively, of its common stock to the Companys profit-sharing plan and trust under Section 401(k) of the Internal Revenue Code. Such contributions are in accordance with the Companys discretionary match of employee voluntary contributions to this plan. Deferred compensation expense charged to selling and administrative expenses during the three and six months ended October 31, 2025, was approximately $131,000 and $264,000, respectively, inclusive of approximately $22,000 and 46,000, respectively, of interest expense. Payments made related to deferred compensation were approximately $183,000 and $366,000, respectively, for the same periods. Deferred compensation expense charged to selling and administrative expenses during the three and six months ended October 31, 2024, was approximately $140,000 and $283,000, respectively, inclusive of approximately $26,000 and $53,000, respectively, of interest expense. Payments made related to deferred compensation were approximately $179,000 and $358,000, respectively, for the same periods. The whole-life insurance policies on the lives of certain par …

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The amounts by segment and product line were as follows (in thousands): Three Months Ended October 31, 2025 2024 POC Revenue POT Revenue Total Revenue POC Revenue POT Revenue Total Revenue FEI-NY $ 9,713 $ 1,081 $ 10,794 $ 10,842 $ 676 $ 11,518 FEI-Zyfer 5,123 1,942 7,065 4,282 277 4,559 Less: intersegment - (732 ) (732 ) - (257 ) (257 ) Revenue $ 14,836 $ 2,291 $ 17,127 $ 15,124 $ 696 $ 15,820 Six Months Ended October 31, 2025 2024 POC Revenue POT Revenue Total Revenue POC Revenue POT Revenue Total Revenue FEI-NY $ 19,462 $ 1,686 $ 21,148 $ 21,349 $ 1,145 $ 22,494 FEI-Zyfer 7,804 2,979 10,783 8,283 548 8,831 Less: intersegment - (992 ) (992 ) - (427 ) (427 ) Revenue $ 27,266 $ 3,673 $ 30,939 $ 29,632 $ 1,266 $ 30,898

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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. 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 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) 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 date. We consider all positive and negative evidence, includi …

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NOTE F RIGHT-OF-USE ASSETS AND LEASE LIABILITIES The Companys 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 October 31, 2025, 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 …

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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; and other components and systems for the U.S. military. The FEI-NY segment also includes the operations of the Companys wholly owned subsidiary, FEI-Elcom. FEI-Elcom, in addition to its own product line, provides design and technical support for the FEI-NY segments 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 Companys wireline telecommunications family of products, including US5G, which are sold in the U.S. market. 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 end-users. Consequently, the Company determined that the segments indicated above most appropriately reflect the way the Companys chief operating decision maker (CODM) views the business. The accoun …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing