# Frequency Electronics (FEIM) 10-Q SEC filing - Q3 FY2026

- Filed: Mar 17, 2026, 12:22 PM EDT
- Fiscal quarter: Q3 FY2026
- Calendar quarter: Q1 2026
- Accession: 0001185185-26-000893
- OpenCapital page: https://www.opencapital.sh/filings/0001185185-26-000893
- Markdown URL: https://www.opencapital.sh/filings/0001185185-26-000893.md
- Official SEC filing index: https://www.sec.gov/Archives/edgar/data/39020/000118518526000893/0001185185-26-000893-index.htm

## Filing documents

- [10-Q (feim10q013126.htm)](https://www.sec.gov/Archives/edgar/data/39020/000118518526000893/feim10q013126.htm)

---

## 10-Q

SEC source: [feim10q013126.htm](https://www.sec.gov/Archives/edgar/data/39020/000118518526000893/feim10q013126.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, 2026

**OR**

☐ 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 12, 2026 – 9,841,927

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

**TABLE
OF CONTENTS**

|  | **Page No.** |
| --- | --- |
| **Part I. Financial Information:** |  |
| [Item 1 - Financial Statements:](#a_001) | 3 |
| [Condensed Consolidated Balance Sheets – January 31, 2026 (unaudited) and April 30, 2025](#a_002) | 3 |
| [Condensed Consolidated Statements of Operations – Three and Nine Months Ended January 31, 2026 and 2025 (unaudited)](#a_003) | 4 |
| [Condensed Consolidated Statements of Cash Flows Nine Months Ended January 31, 2026 and 2025 (unaudited)](#a_004) | 5 |
| [Condensed Consolidated Statements of Changes in Stockholders’ Equity – Three and Nine Months Ended January 31, 2026 and 2025 (unaudited)](#a_005) | 6-7 |
| [Notes to Condensed Consolidated Financial Statements (unaudited)](#a_006) | 8-15 |
| [Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations](#a_007) | 16-22 |
| [Item 3 - Quantitative and Qualitative Disclosures About Market Risk](#a_008) | 22 |
| [Item 4 - Controls and Procedures](#a_009) | 22 |
| **Part II. Other Information:** |  |
| [Item 1A - Risk Factors](#a_010) | 23 |
| [Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds](#a_011) | 23 |
| [Item 5 - Other Information](#a_012) | 24 |
| [Item 6 - Exhibits](#a_013) | 24 |
| [Signatures](#a_014) | 25 |

**PART
I. FINANCIAL INFORMATION**

**Item
1. Financial Statements**

**FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES**

### Condensed Consolidated Balance Sheets

_(In thousands, except par value)_

| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
|  | (UNAUDITED) |  |
| ASSETS: |  |  |
| Current assets: |  |  |
| Cash and cash equivalents | $86 | $4,720 |
| Accounts receivable, net of allowances of $102 at January 31, 2026 and $110 at April 30, 2025 | 10,723 | 5,914 |
| Contract assets | 14,692 | 17,914 |
| Inventories | 25,834 | 23,487 |
| Prepaid income taxes | 226 | - |
| Prepaid expenses and other | 993 | 1,071 |
| Total current assets | 52,554 | 53,106 |
| Property, plant, and equipment, net | 6,955 | 6,188 |
| Deferred taxes | 12,280 | 12,045 |
| Goodwill | 617 | 617 |
| Cash surrender value of life insurance and assets held in trust | 11,659 | 10,882 |
| Right-of-use assets – operating leases | 7,860 | 8,659 |
| Restricted cash | 1,392 | 1,365 |
| Other assets | 875 | 875 |
| Total assets | $94,192 | $93,737 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY: |  |  |
| Current liabilities: |  |  |
| Accounts payable – trade | $3,260 | $1,359 |
| Accrued liabilities | 4,838 | 5,899 |
| Loss provision accrual | 50 | 460 |
| Income taxes payable | - | 103 |
| Operating lease liability - current portion | 2,145 | 2,027 |
| Contract liabilities | 9,889 | 13,607 |
| Total current liabilities | 20,182 | 23,455 |
| Deferred compensation | 7,782 | 7,933 |
| Operating lease liability – non-current portion | 5,985 | 6,729 |
| Total liabilities | 33,949 | 38,117 |
| Stockholders’ equity: |  |  |
| Preferred stock - $1.00 par value; authorized 600 shares, no shares issued | - | - |
| Common stock - $1.00 par value; authorized 20,000 shares, 9,896 shares issued and 9,840 shares outstanding at January 31, 2026; 9,717 shares issued and 9,704 shares outstanding at April 30, 2025 | 9,896 | 9,717 |
| Additional paid-in capital | 44,471 | 42,475 |
| Retained earnings | 7,661 | 3,659 |
| Common stock reacquired and held in treasury - at cost (56 shares at January 31, 2026 and 13 shares at April 30, 2025) | (1,785) | (231) |
| Total stockholders’ equity | 60,243 | 55,620 |
| Total liabilities and stockholders’ equity | $94,192 | $93,737 |

See
accompanying notes to condensed consolidated financial statements.

**FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES**

### Condensed Consolidated Statements of Operations

_(In thousands, except per share data) · (Unaudited)_

| Line item | Three Months Ended January 31, 2026 | Three Months Ended January 31, 2025 | Nine Months Ended January 31, 2026 | Nine Months Ended January 31, 2025 |
| --- | --- | --- | --- | --- |
| Condensed Consolidated Statements of Operations |  |  |  |  |
| Revenues | $16,890 | $18,927 | $47,829 | $49,825 |
| Cost of revenues | 10,264 | 10,642 | 29,585 | 27,222 |
| Gross margin | 6,626 | 8,285 | 18,244 | 22,603 |
| Selling and administrative expenses | 3,593 | 3,380 | 10,800 | 9,614 |
| Research and development expenses | 1,763 | 1,436 | 4,095 | 4,536 |
| Operating income | 1,270 | 3,469 | 3,349 | 8,453 |
| Other income (expense): |  |  |  |  |
| Income on investments | 191 | 138 | 562 | 564 |
| Interest expense | (21) | (26) | (67) | (79) |
| Other expense, net | - | - | (77) | (1) |
| Income before benefit for income taxes | 1,440 | 3,581 | 3,767 | 8,937 |
| Benefit for income taxes | (127) | (11,824) | (235) | (11,552) |
| Net income | $1,567 | $15,405 | $4,002 | $20,489 |
| Net income per common share: |  |  |  |  |
| Basic income per share | $0.16 | $1.60 | $0.41 | $2.14 |
| Diluted income per share | $0.16 | $1.60 | $0.41 | $2.14 |
| Weighted average shares outstanding: |  |  |  |  |
| Basic | 9,797 | 9,632 | 9,760 | 9,585 |
| Diluted | 9,797 | 9,632 | 9,760 | 9,589 |

See
accompanying notes to condensed consolidated financial statements.

**FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES**

### Condensed Consolidated Statements of Cash Flows

_(In thousands) · (Unaudited)_

| Line item | Nine Months Ended January 31, 2026 | Nine Months Ended January 31, 2025 |
| --- | --- | --- |
| Cash flows from operating activities: |  |  |
| Net income | $4,002 | $20,489 |
| Non-cash charges to earnings | 4,273 | (7,638) |
| Net changes in operating assets and liabilities | (9,054) | (14,124) |
| Net cash used in operating activities | (779) | (1,273) |
| Cash flows from investing activities: |  |  |
| Purchase of fixed assets | (2,254) | (1,177) |
| Net cash used in investing activities | (2,254) | (1,177) |
| Cash flows from financing activities: |  |  |
| Payment of dividend | - | (9,567) |
| Purchase of treasury stock | (1,574) | (377) |
| Net cash used in financing activities | (1,574) | (9,944) |
| Net decrease in cash and cash equivalents and restricted cash | (4,607) | (12,394) |
| Cash and cash equivalents and restricted cash at beginning of period | 6,085 | 19,265 |
| Cash and cash equivalents and restricted cash at end of period | $1,478 | $6,871 |
| Supplemental disclosures of cash flow information: |  |  |
| Cash paid during the period for: |  |  |
| Interest | $67 | $79 |
| Income taxes | $329 | 310 |
| Non-cash investing and financing activities: |  |  |
| Right-of-use assets obtained in exchange for operating lease liabilities | $438 | - |

See
accompanying notes to condensed consolidated financial statements.

**FREQUENCY
ELECTRONICS, INC. AND SUBSIDIARIES**

Condensed
Consolidated Statements of Changes in Stockholders’ Equity

Three
and Nine Months Ended January 31, 2026

(In
thousands, except share data)

(Unaudited)

| Line item | Common stock / Shares | Common stock / Amount | Additional / paid in / capital | Retained / earnings | Treasury stock / (at cost) / Shares | Treasury stock / (at cost) / Amount | Accumulated other / comprehensive / Income (loss) | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at April 30, 2025 | 9,716,999 | $9,717 | $42,475 | $3,659 | 13,088 | $(231) | - | $55,620 |
| Contribution of stock to 401(k) plan | 12,405 | 12 | 269 | - | - | - | - | 281 |
| Stock-based compensation expense | 54,866 | 55 | 312 | - | - | - | - | 367 |
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | 21,910 | (583) | - | (583) |
| Net income | - | - | - | 634 | - | - | - | 634 |
| Balance at July 31, 2025 | 9,784,270 | $9,784 | $43,056 | $4,293 | 34,998 | $(814) | - | $56,319 |
| Contribution of stock to 401(k) plan | 6,768 | 7 | 223 | - | - | - | - | 230 |
| Stock-based compensation expense | 27,308 | 27 | 453 | - | - | - | - | 480 |
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | 10,219 | (375) | - | (375) |
| Net income | - | - | - | 1,801 | - | - | - | 1,801 |
| Balance at October 31, 2025 | 9,818,346 | $9,818 | $43,732 | $6,094 | 45,217 | $(1,189) | - | $58,455 |
| Contribution of stock to 401(k) plan | 7,442 | 8 | 394 | - | - | - | - | 402 |
| Stock-based compensation expense | 70,567 | 70 | 345 | - | (1,550) | 20 | - | 435 |
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | 12,260 | (616) | - | (616) |
| Net income | - | - | - | 1,567 | - | - | - | 1,567 |
| Balance at January 31, 2026 | 9,896,355 | $9,896 | $44,471 | $7,661 | 55,927 | $(1,785) | - | $60,243 |

See
accompanying notes to condensed consolidated financial statements.

**FREQUENCY
ELECTRONICS, INC. AND SUBSIDIARIES**

Condensed
Consolidated Statements of Changes in Stockholders’ Equity

Three
and Nine Months Ended January 31, 2025

(In
thousands, except share data)

(Unaudited)

| Line item | Common stock / Shares | Common stock / Amount | Additional / paid in / capital | Retained earnings / (Accumulated / deficit) | Treasury stock / (at cost) / Shares | Treasury stock / (at cost) / Amount | Accumulated other / comprehensive / Income (loss) | Total |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance at April 30, 2024 | 9,511,560 | $9,512 | $50,334 | $(20,027) | 741 | $(3) | - | $39,816 |
| Contribution of stock to 401(k) plan | 26,457 | 26 | 215 | - | - | - | - | 241 |
| Stock-based compensation expense | 27,815 | 28 | 316 | - | - | - | - | 344 |
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | 4,569 | (62) | - | (62) |
| Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price | 1,819 | 2 | (2) | - | - | - | - | - |
| Dividends payable | - | - | (9,567) | - | - | - | - | (9,567) |
| Net income | - | - | - | 2,430 | - | - | - | 2,430 |
| Balance at July 31, 2024 | 9,567,651 | $9,568 | $41,296 | $(17,597) | 5,310 | $(65) | - | $33,202 |
| Contribution of stock to 401(k) plan | 17,577 | 17 | 195 | - | - | - | - | 212 |
| Stock-based compensation expense | 32,127 | 32 | 192 | - | - | - | - | 224 |
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | 7,893 | (100) | - | (100) |
| Dividends payable | - | - | 9,567 | - | - | - | - | 9,567 |
| Dividends paid | - | - | (9,567) | - | - | - | - | (9,567) |
| Net income | - | - | - | 2,654 | - | - | - | 2,654 |
| Balance at October 31, 2024 | 9,617,355 | $9,617 | $41,683 | $(14,943) | 13,203 | $(165) | - | $36,192 |
| Contribution of stock to 401(k) plan | 7,850 | 8 | 137 | - | - | - | - | 145 |
| Stock-based compensation expense | 72,003 | 72 | 236 | - | - | - | - | 308 |
| Shares withheld on employee taxes on vested equity awards | - | - | - | - | 11,802 | (215) | - | (215) |
| Exercise of stock options and stock appreciation rights - net of shares tendered for exercise price | - | - | (30) | - | (2,737) | 30 | - | - |
| Net income | - | - | - | 15,405 | - | - | - | 15,405 |
| Balance at January 31, 2025 | 9,697,208 | $9,697 | $42,026 | $462 | 22,268 | $(350) | - | $51,835 |

See
accompanying notes to condensed consolidated financial statements.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

### Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE
A – CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In
the opinion of management of Frequency Electronics, Inc. (the “Company”), the accompanying unaudited condensed consolidated
interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly, in
all material respects, the condensed consolidated financial position of the Company as of January 31, 2026 and the results of its operations,
changes in stockholders’ equity for the three and nine months ended January 31, 2026 and 2025, and cash flows for the nine months
ended January 31, 2026 and 2025. The April 30, 2025 condensed consolidated balance sheet was derived from audited financial statements.
These financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance
with U.S. GAAP have been condensed or omitted. These condensed consolidated interim financial statements should be read in conjunction
with the annual consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended
April 30, 2025, filed on July 18, 2025 with the Securities and Exchange Commission (the “Form 10-K”). The results of operations
for such interim periods are not necessarily indicative of the operating results for the full fiscal year.

NOTE
B – EARNINGS PER SHARE

Reconciliation
of the weighted average shares outstanding for basic and diluted earnings per share (“EPS”) for the three and nine months
ended January 31, 2026 and 2025, respectively, were as follows:

| Line item | Periods ended January 31, / Three months / 2026 | Periods ended January 31, / Three months / 2025 | Periods ended January 31, / Nine months / 2026 | Periods ended January 31, / Nine months / 2025 |
| --- | --- | --- | --- | --- |
| Weighted average shares outstanding: |  |  |  |  |
| Basic EPS shares outstanding (weighted average) | 9,797,064 | 9,632,309 | 9,759,958 | 9,585,330 |
| Effect of dilutive securities | ** | ** | ** | 3,496 |
| Diluted EPS shares outstanding | 9,797,064 | 9,632,309 | 9,759,958 | 9,588,826 |

\*\* For the three and nine months ended January 31, 2026, and the three months ended January 31, 2025, there were no shares to exclude from the calculation of dilutive securities. The exercisable shares excluded for the nine months ended January 31, 2025 were 66,000 shares as their effect would be antidilutive.

On
July 22, 2024, the Company’s Board of Directors declared a special cash dividend of $1.00 per share of common stock. The special
dividend was paid on August 29, 2024, to stockholders of record as of the close of business on August 8, 2024. The total amount of the
special dividend payment was approximately $9.6 million.

NOTE
C – CONTRACT ASSETS AND LIABILITIES

Contract
assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date on contracts
with customers. Contract assets are transferred to accounts receivable when the rights become unconditional. Contract liabilities primarily
relate to contracts where advance payments or deposits have been received, but performance obligations have not yet been satisfied, and
therefore, revenue has not been recognized. During the three and nine months ended January 31, 2026, we recognized $1.6 million and $9.0
million, respectively, of our contract liabilities at April 30, 2025 as revenue. During the three and nine months ended January 31, 2025,
we recognized $10.2 million and $26.2 million, respectively, of our contract liabilities at April 30, 2024 as revenue. If contract losses
are anticipated, a loss provision is recorded for the full amount of such losses when they are determinable.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

NOTE
D –EMPLOYEE BENEFIT PLANS

During
the three and nine months ended January 31, 2026, the Company made contributions of 7,442 and 26,615 shares, respectively, of its common
stock to the Company’s profit-sharing plan and trust under Section 401(k) of the Internal Revenue Code. During the three and nine
months ended January 31, 2025, the Company made contributions of 7,850 and 51,884 shares, respectively, of its common stock to the Company’s
profit-sharing plan and trust under Section 401(k) of the Internal Revenue Code. Such contributions are in accordance with the Company’s
discretionary match of employee voluntary contributions to this plan.

Deferred
compensation expense charged to selling and administrative expenses during the three and nine months ended January 31, 2026, was approximately
$131,000 and $396,000, respectively, inclusive of approximately $21,000 and 67,000, respectively, of interest expense. Payments made
related to deferred compensation were approximately $180,000 and $546,000, respectively, for the same periods. Deferred compensation
expense charged to selling and administrative expenses during the three and nine months ended January 31, 2025, was approximately $142,000
and $425,000, respectively, inclusive of approximately $26,000 and $79,000, respectively, of interest expense. Payments made related
to deferred compensation were approximately $183,000 and $541,000, respectively, for the same periods.

The
whole-life insurance policies on the lives of certain participants covered by deferred compensation agreements have been placed in a
trust. Upon the death of any insured participant, cash received from life insurance policies in excess of the Company’s deferred
compensation obligations to the estate or beneficiaries of the deceased, are also placed in the trust. These assets belong to the Company
until a change of control event, as defined in the trust agreement, should occur. At that time, the Company is required to add sufficient
cash to the trust so as to match the deferred compensation liability described above. Such funds will be used to continue the deferred
compensation arrangements following a change of control. The life insurance policies amounted to $7.3 million at January 31, 2026 and
$7.0 million at April 30, 2025. The business account and U.S. debt securities within the trust are valued on a Level 1 basis and amounted
to $3.9 million and $3.5 million at January 31, 2026 and April 30, 2025, respectively. The fixed income corporate debt securities within
the trust are valued on a Level 2 basis and amounted to $0.5 million at January 31, 2026 and $0.4 million at April 30, 2025. Level 2
securities are valued at the closing prices and are consistent with quoted prices of similar assets reported in active markets.

NOTE
E – INVENTORIES

Inventories,
which are reported at the lower of cost or net realizable value, consisted of the following (in thousands):

| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Raw materials and component parts | $14,764 | $14,668 |
| Work in progress | 10,392 | 8,444 |
| Finished goods | 678 | 375 |
|  | $25,834 | $23,487 |

NOTE
F – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

The
Company’s 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 January 31, 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.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

The
table below presents ROU assets and liabilities recorded on the respective consolidated balance sheets as follows (in thousands):

| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Assets |  |  |
| Right-of-use assets - operating leases | $7,860 | $8,659 |
| Liabilities |  |  |
| Operating lease liabilities, current portion | 2,145 | 2,027 |
| Operating lease liabilities, non-current portion | 5,985 | 6,729 |
| Total lease liabilities | $8,130 | $8,756 |

Total
operating lease expense was $0.6 million and $1.7 million for the three and nine months ended January 31, 2026, respectively, the majority
of which is included in cost of revenues and the remaining amount in selling and administrative expenses on the unaudited condensed consolidated
statements of operations. Total operating lease expense was $0.4 million and $1.4 million for the three and nine months ended January
31, 2025, respectively, the majority of which is included in cost of revenues and the remaining amount in selling and administrative
expenses on the unaudited condensed consolidated statements of operations. During the nine months ended January 31, 2026, the Company
recorded incremental ROU assets and lease liabilities of approximately $0.4 million arising from a new lease for FEI-NY, which commenced
during the quarter ended October 31, 2025. There were no ROU assets or lease liabilities that were recorded for any leases that had not
commenced as of January 31, 2026. During the nine months ended January 31, 2025, the Company did not record any incremental ROU assets
and lease liabilities as there were no leases that commenced during the nine months ended January 31, 2025.

The
maturities of lease liabilities at January 31, 2026 are as follows:

**Fiscal Year Ending April 30,**

_(in thousands)_

|  |  |
| --- | --- |
| Remainder of 2026 | $613 |
| 2027 | 2,063 |
| 2028 | 2,388 |
| 2029 | 2,535 |
| 2030 | 1,658 |
| Thereafter | 45 |
| Total lease payments | 9,302 |
| Less imputed interest | (1,172) |
| Present value of future lease payments | 8,130 |
| Less current obligations under leases | (2,145) |
| Long-term lease obligations | $5,985 |

As
of January 31, 2026 and 2025, the weighted-average remaining lease term for all operating leases was 4.15 years and 4.54 years, respectively.
The Company does not generally have access to the rate implicit in the leases and therefore selected a rate that is reflective of companies
with similar credit ratings for secured debt as the discount rate. The weighted average discount rate for operating leases as of January
31, 2026 and 2025, was 7.08% and 6.40%, respectively.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

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 Company’s wholly owned subsidiary, FEI-Elcom. FEI-Elcom, in addition to its own product line, provides
design and technical support for the FEI-NY segment’s 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 Company’s 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 Company’s chief operating decision maker (“CODM”) views the business.

The
accounting policies of the two segments are the same as those described in “Note 1. Summary of Accounting Policies” to the
consolidated financial statements included in the Form 10-K. Our Chief Executive Officer (“CEO”) serves as our CODM who evaluates
the segment performance and allocates resources to them based on operating income which is defined as income before investment income,
interest expense, other expenses, and income taxes. Operating income by segment is used to monitor segment results compared to prior
periods, forecasted results, and the annual plan.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

The
tables below present segment revenues, significant segment expenses, which consist of segment cost of revenues and segment R&D expenses,
and segment operating income for each reportable segment and on a consolidated basis as reported in the condensed consolidated statements
of operations for the three and nine months ended January 31, 2026 and 2025 (in thousands):

| Line item | Periods ended January 31, / Three months / 2026 | Periods ended January 31, / Three months / 2025 | Periods ended January 31, / Nine months / 2026 | Periods ended January 31, / Nine months / 2025 |
| --- | --- | --- | --- | --- |
| Revenues: |  |  |  |  |
| FEI-NY | $12,251 | $14,463 | $33,399 | $36,984 |
| FEI-Zyfer | 6,975 | 5,027 | 17,757 | 13,858 |
| Less intersegment revenues | (2,336) | (563) | (3,327) | (1,017) |
| Consolidated revenues | $16,890 | $18,927 | $47,829 | $49,825 |

| Cost of revenues: |  |  |  |  |
| --- | --- | --- | --- | --- |
| FEI-NY | $$8,283 | $7,559 | $22,149 | 20,054 |
| FEI-Zyfer | 4,007 | 3,612 | 10,273 | 8,300 |
| Less intersegment cost of revenues | (2,026) | (529) | (2,837) | (1,132) |
| Consolidated cost of revenues | $$10,264 | $10,642 | $29,585 | 27,222 |

| Research and development expenses: |  |  |  |  |
| --- | --- | --- | --- | --- |
| FEI-NY | $$1,173 | $732 | $2,339 | 2,412 |
| FEI-Zyfer | 590 | 704 | 1,756 | 2,124 |
| Consolidated research and development expenses | $$1,763 | $1,436 | $4,095 | 4,536 |

| Operating income (loss): |  |  |  |  |
| --- | --- | --- | --- | --- |
| FEI-NY | $$282 | $3,546 | $1,143 | 7,326 |
| FEI-Zyfer | 1,445 | 96 | 3,218 | 1,489 |
| Less intersegment operating income | (309) | (34) | (490) | 115 |
| Corporate | (148) | (139) | (522) | (477) |
| Consolidated operating income | $$1,270 | $3,469 | $3,349 | 8,453 |

Included
in the determination of operating income is selling, general, and administrative expenses of $2.5 million and $2.6 million for the three
months ended January 31, 2026 and 2025, respectively, for the FEI-NY segment, and $0.9 million and $0.6 million for the three months
ended January 31, 2026 and 2025, respectively, for the FEI-Zyfer segment. Included in the determination of operating income is selling,
general, and administrative expenses of $7.8 million and $7.2 million for the nine months ended January 31, 2026 and 2025, respectively,
for the FEI-NY segment, and $2.5 million and $1.9 million for the nine months ended January 31, 2026 and 2025, respectively, for the
FEI-Zyfer segment.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

The
tables below present the identifiable assets of each reportable segment and on a consolidated basis as reported in the consolidated balance
sheets as of January 31, 2026 and April 30, 2025 and the depreciation and amortization charges related to these identifiable assets for
the three and nine months then ended (in thousands):

| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Identifiable assets: |  |  |
| FEI-NY | $39,527 | $39,125 |
| FEI-Zyfer | 27,953 | 23,865 |
| Less intersegment balances | (629) | (140) |
| Corporate | 27,341 | 30,887 |
| Consolidated identifiable assets | $94,192 | $93,737 |

| Line item | Periods ended January 31, / Three months / 2026 | Periods ended January 31, / Three months / 2025 | Periods ended January 31, / Nine months / 2026 | Periods ended January 31, / Nine months / 2025 |
| --- | --- | --- | --- | --- |
| Depreciation and amortization: |  |  |  |  |
| FEI-NY | $498 | $430 | $1,350 | $1,385 |
| FEI-Zyfer | 14 | 28 | 64 | 84 |
| Consolidated depreciation and amortization expense | $512 | $458 | $1,414 | $1,469 |

Total
revenue recognized over time as Percentage of Completion (“POC”) and Passage of Title (“POT”) was approximately
$15.7 million and $1.2 million, respectively, of the $16.9 million reported for the three months ended January 31, 2026. Total revenue
recognized over time as POC and POT was approximately $43.0 million and $4.8 million, respectively, of the $47.8 million reported for
the nine months ended January 31, 2026. Total revenue recognized over time as POC and POT was approximately $17.7 million and $1.3 million,
respectively, of the $18.9 million reported for the three months ended January 31, 2025. Total revenue recognized over time as POC and
POT was approximately $47.3 million and $2.5 million, respectively, of the $49.8 million reported for the nine months ended January 31,
2025.

The
amounts by segment and product line were as follows (in thousands):

| Line item | Three Months Ended January 31, 2026 / POC Revenue | Three Months Ended January 31, 2026 / POT Revenue | Three Months Ended January 31, 2026 / Total Revenue | Three Months Ended January 31, 2025 / POC Revenue | Three Months Ended January 31, 2025 / POT Revenue | Three Months Ended January 31, 2025 / Total Revenue |
| --- | --- | --- | --- | --- | --- | --- |
| FEI-NY | $9,481 | $2,770 | $12,251 | $13,596 | $867 | $14,463 |
| FEI-Zyfer | 6,225 | 750 | 6,975 | 4,055 | 972 | 5,027 |
| Less: intersegment | - | (2,336) | (2,336) | - | (563) | (563) |
| Revenue | $15,706 | $1,184 | $16,890 | $17,651 | $1,276 | $18,927 |

| Line item | Nine Months Ended January 31, 2026 / POC Revenue | Nine Months Ended January 31, 2026 / POT Revenue | Nine Months Ended January 31, 2026 / Total Revenue | Nine Months Ended January 31, 2025 / POC Revenue | Nine Months Ended January 31, 2025 / POT Revenue | Nine Months Ended January 31, 2025 / Total Revenue |
| --- | --- | --- | --- | --- | --- | --- |
| FEI-NY | $28,943 | $4,456 | $33,399 | $34,945 | $2,039 | $36,984 |
| FEI-Zyfer | 14,028 | 3,729 | 17,757 | 12,338 | 1,520 | 13,858 |
| Less: intersegment | - | (3,327) | (3,327) | - | (1,017) | (1,017) |
| Revenue | $42,971 | $4,858 | $47,829 | $47,283 | $2,542 | $49,825 |

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

| Line item | Periods ended January 31, / Three months / 2026 | Periods ended January 31, / Three months / 2025 | Periods ended January 31, / Nine months / 2026 | Periods ended January 31, / Nine months / 2025 |
| --- | --- | --- | --- | --- |
| Revenues by product line: |  |  |  |  |
| Satellite revenue | $4,232 | $11,190 | $15,419 | $28,843 |
| Government non-space revenue | 12,478 | 7,370 | 31,230 | 19,507 |
| Other commercial & industrial revenue | 180 | 367 | 1,180 | 1,475 |
| Consolidated revenues | $16,890 | $18,927 | $47,829 | $49,825 |

NOTE
H – INVESTMENT IN MORION, INC.

The
Company has an investment in Morion, Inc. (“Morion”), a privately-held Russian company, which manufactures high precision
quartz resonators and crystal oscillators. The Company has also previously licensed certain technology to Morion.

The
Company’s investment consists of 4.6% of Morion’s outstanding shares. However, due to the Russia-Ukraine conflict and resulting
sanctions, the future status of FEI’s investment in Morion became uncertain and accordingly, such investment was entirely written
off in fiscal year 2022. Accordingly, the carrying value of this investment was $0 as of January 31, 2026 and April 30, 2025.

During
the three and nine months ended January 31, 2026 and 2025, the Company did not acquire any product from Morion. During the three and
nine months ended January 31, 2026 and 2025, the Company did not receive dividends from Morion.

Prior
purchases of materials from Morion consisted primarily of quartz crystal blanks, which were used in the fabrication of quartz resonators.
However, on October 30, 2024, the U.S. Department of Treasury’s Office of Foreign Assets Control designated Morion as a Specially
Designated National, resulting in the blocking of all Morion property and property interests. As a result, the Company has terminated
all commercial relationships with Morion, including the licensing of technology to Morion and the purchase of any products from Morion.
The Company has established alternate sources of supply with respect to items previously acquired from Morion. The Company is also capable
of fabricating the crystal blanks in-house.

NOTE
I – RESTRICTED CASH

As
of January 31, 2026 and April 30, 2025, restricted cash consisted of approximately $1.4 million, in both periods, primarily related to
a letter of credit required for contractual restrictions during the period of performance for one of the Company’s contracts. Restricted
cash is classified as current or non-current based on the remaining performance period of the contract.

A
reconciliation of cash and cash equivalents and restricted cash from the condensed consolidated balance sheets to the condensed consolidated
statements of cash flows is shown below (in thousands):

| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Cash and cash equivalents | $86 | $4,720 |
| Restricted cash | 1,392 | 1,365 |
| Total cash and cash equivalents and restricted cash | $1,478 | $6,085 |

NOTE
J – RECENT ACCOUNTING PRONOUNCEMENTS

In
December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The amendments in ASU 2023-09
aim to enhance the transparency and decision usefulness of income tax disclosures. ASU 2023-09 will be effective for the Company’s
Annual Report on Form 10-K for the year ending April 30, 2026, with early adoption permitted. The Company is currently evaluating the
impact of this update on its consolidated financial statements.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

Notes
to Condensed Consolidated Financial Statements

(Unaudited)

In
November 2024, the FASB issued Accounting Standard Update (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
are not separately disaggregated quantitatively. The amendments are effective for annual reporting periods beginning after December 15,
2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating
the impact this standard will have on the consolidated financial statements.

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, including the reversal of deferred tax liabilities, projected
future taxable income, tax planning strategies, and results of recent operations. Accounting for income taxes requires that a valuation
allowance be established when it is more likely than not that all or a portion of the deferred tax assets will not be realized. In circumstances
where there is sufficient negative evidence indicating that the deferred tax assets will not be realizable, we establish a valuation
allowance. In general, the favorable research and expenditure provisions and permanent bonus depreciation provision will allow the Company
to accelerate deductions and reduce cash taxes. The enactment of the OBBBA did not have a material impact on our provision or effective
tax rate as of January 31, 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.

As
of January 31, 2026, the Company maintains a valuation allowance of $1.3 million primarily against certain deferred tax assets, including
state tax credits and capital losses because the realization of these tax attributes requires sufficient taxable income be sourced to
the respective state jurisdiction and capital gain income is required to utilize capital losses. If these estimates and assumptions change
in the future, the Company may be required to adjust its existing valuation allowance resulting in a change to deferred income tax expense.

NOTE
L – PRODUCT WARRANTIES

The
Company generally provides its customers with a one-year warranty regarding the manufactured quality and functionality of its products.
The Company establishes warranty reserves based on its product history, current information on repair costs and annual sales levels. As of January 31, 2026 and April 30, 2025, respectively, changes in the carrying amount of accrued product warranty costs, reported in
accrued expenses on the consolidated balance sheets, were as follows (in thousands):

| Line item | January 31, 2026 | April 30, 2025 |
| --- | --- | --- |
| Balance at beginning of year | $567 | $542 |
| Warranty costs incurred | (234) | (253) |
| Product warranty accrual | 211 | 278 |
| Balance at end of year | $544 | $567 |

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

**Item
2. Management**’**s Discussion and Analysis of Financial Condition and Results of Operations**

*“Safe
Harbor*” *Statement under the Private Securities Litigation Reform Act of 1995*:

The
statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) regarding future earnings and operations and other statements
relating to the future constitute “forward-looking” statements pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results
to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include but are
not limited to, our inability to integrate operations and personnel, actions by significant customers or competitors, general domestic
and international economic conditions, reliance on key customers, including the U.S government, continued acceptance of the Company’s
products in the marketplace, competitive factors, new products and technological changes, product prices and raw material costs, dependence
upon third-party vendors, other supply chain related issues, increasing costs for materials, operating related expenses, competitive
developments, changes in manufacturing and transportation costs, the availability of capital, the outcome of any litigation and arbitration
proceedings, and failure to maintain an effective system of internal controls over financial reporting. The factors listed above are
not exhaustive. Other sections of this Form 10-Q and in Part I, Item 1A (Risk Factors) of the Company’s Annual Report on Form 10-K
for the fiscal year ended April 30, 2025 (the “Form 10-K”) include additional factors that could materially and adversely
impact the Company’s business, financial condition and results of operations. Moreover, the Company operates in a very competitive
and rapidly changing environment. New factors emerge from time to time and it is not possible for management to predict the impact of
all these factors on the Company’s business, financial condition or results of operations or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these
risks and uncertainties, investors should not rely on forward-looking statements as a prediction of actual results. Any or all of the
forward-looking statements contained in this Form 10-Q and any other public statement made by the Company or its management may turn
out to be incorrect. The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as required by law.

**Critical
Accounting Policies and Estimates**

The
Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation
of inventory. Both of these areas require the Company to make use of reasonable estimates including estimating the cost to complete
a contract, the realizable value of its inventory and the market value of its products. Changes in estimates can have a material
impact on the Company’s financial position and results of operations. The Company’s significant accounting policies did not
change during the three and nine months ended January 31, 2026.

Revenue
Recognition

Revenues
are reported in operating results predominantly over time using the cost-to-cost method. Under this method, revenue is recorded based
upon the ratio that incurred costs bear to total estimated contract costs with related cost of revenues recorded as the costs are incurred.
Each month management reviews estimated contract costs through a process of aggregating actual costs incurred and estimating additional
costs to completion based upon the current available information regarding labor, outside services, materials, overhead costs, and status
of the contract. The effect of any change in the estimated gross margin rate (“GM Rate”) for a contract is reflected in revenues
in the period in which the change is known. Provisions for the full amount of anticipated losses on contracts are made in the period
in which they become determinable.

Significant
judgment is used in evaluating the financial information for certain contracts to determine an appropriate budget and estimated cost.
The Company evaluates this information continuously and bases its judgments on historical experience, design specifications, and expected
costs for material and labor.

Inventories

In
accordance with industry practice, inventoried costs contain amounts relating to contracts and programs with long production cycles,
a portion of which will not be realized within one year. Inventory write downs are established for slow-moving materials based
on percentage of usage over a ten-year period, obsolete items on a gradual basis over five years with no usage and costs incurred on
programs for which production-level orders cannot be determined as probable. Such write-downs are based upon management’s
experience and estimates for future business. Any changes arising from revised estimates are reflected in cost of revenues in the
period the revision is made.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

(Continued)

Income
Taxes

We
are subject to income taxes in the U.S. and significant judgment is required in determining our provision for income taxes, our deferred
tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets that are not more likely than not
to be realized. We monitor the realizability of our deferred tax assets taking into account all relevant factors at each reporting period.
In completing our assessment of realizability of our deferred tax assets, we consider our history of income (loss) measured at pre-tax
income (loss) adjusted for permanent book-tax differences on a jurisdictional basis, volatility in actual earnings, excess tax benefits
related to stock-based compensation in recent prior years and impacts of the timing of reversal of existing temporary differences. We
also rely on our assessment of the Company’s projected future results of business operations, including uncertainty in future operating
results relative to historical results, volatility in the market price of our common stock and its performance over time, variable macroeconomic
conditions impacting our ability to forecast future taxable income, and changes in business that may affect the existence and magnitude
of future taxable income. Our valuation allowance assessment is based on our best estimate of future results considering all available
information.

Our
provision for or benefit from income taxes for interim periods is determined using an estimate of our annual effective tax rate, adjusted
for discrete items, if any, that are taken into account in the relevant period. Each quarter, we update our estimate of the annual effective
tax rate, and if our estimated tax rate changes, we make a cumulative adjustment.

**RESULTS
OF OPERATIONS**

The
table below sets forth for the three and nine months ended January 31, 2026 and 2025, respectively, the percentage of consolidated revenues
represented by certain items in the Company’s condensed consolidated statements of operations or notes to the condensed consolidated
financial statements:

| Line item | Three months / Periods ended January 31, 2026 | Three months / Periods ended January 31, 2025 | Nine months / Periods ended January 31, 2026 | Nine months / Periods ended January 31, 2025 |
| --- | --- | --- | --- | --- |
| Revenues |  |  |  |  |
| FEI-NY | 72.5% | 76.4% | 69.8% | 74.2% |
| FEI-Zyfer | 41.3 | 26.6 | 37.1 | 27.8 |
| Less intersegment revenues | (13.8) | (3.0) | (6.9) | (2.0) |
|  | 100.0 | 100.0 | 100.0 | 100.0 |
| Cost of revenues | 60.8 | 56.2 | 61.9 | 54.6 |
| Gross margin | 39.2 | 43.8 | 38.1 | 45.4 |
| Selling and administrative expenses | 21.3 | 17.9 | 22.6 | 19.3 |
| Research and development expenses | 10.4 | 7.6 | 8.5 | 9.1 |
| Operating income | 7.5 | 18.3 | 7.0 | 17.0 |
| Other income, net | 1.0 | 0.6 | 0.9 | 0.9 |
| Benefit for income taxes | (0.8) | (62.5) | (0.5) | (23.2) |
| Net income | 9.3% | 81.4% | 8.4% | 41.1% |

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

(Continued)

**Revenues**

_(in thousands)_

| Segment | Three months / Periods ended January 31, 2026 | Three months / Periods ended January 31, 2025 | Three months / Periods ended January 31, / Change | Nine months / Periods ended January 31, 2026 | Nine months / Periods ended January 31, 2025 | Nine months / Periods ended January 31, / Change |
| --- | --- | --- | --- | --- | --- | --- |
| FEI-NY | $12,251 | $14,463 | $(15.3) | $33,399 | $36,984 | $(9.7) |
| FEI-Zyfer | 6,975 | 5,027 | 38.8 | 17,757 | 13,858 | 28.1 |
| Intersegment revenues | (2,336) | (563) | 314.9) | (3,327) | (1,017) | 227.1) |
|  | $16,890 | $18,927 | $(10.8) | $47,829 | $49,825 | $(4.0) |

For
the three months ended January 31, 2026, revenues from commercial and U.S. Government communication satellite programs accounted for
approximately 25% of consolidated revenues compared to approximately 59% of consolidated revenues during this same period in the prior
fiscal year. Revenues are recognized primarily over time under the percentage-of-completion (“POC”) method. Revenues from
the satellite market are recorded in the FEI-NY segment. Revenues from non-space U.S. Government/Department of Defense (“DOD”)
customers, which are recorded in both the FEI-NY and FEI-Zyfer segments, accounted for approximately 74% of consolidated revenues for
the three months ended January 31, 2026 compared to approximately 39% of consolidated revenue during the same period in the prior fiscal
year. Other commercial and industrial revenues for the three months ended January 31, 2026, accounted for approximately 1% of consolidated
revenue compared to 2% in the same period of the prior fiscal year.

The
revenue for the three months ended January 31, 2026 were lower than the revenues in the prior period partly as a result of certain space
programs in the FEI-NY segment during the prior fiscal year that were expedited during that period due to very aggressive schedules.
In addition, several new space bookings anticipated for the three months ended January 31, 2026 have been delayed and are now anticipated
in fourth quarter of fiscal 2026.

For
the nine months ended January 31, 2026, revenues from commercial and U.S. Government communication satellite programs accounted for approximately
32% of consolidated revenues compared to approximately 58% of consolidated revenues during this same period in the prior fiscal year.
Revenues from non-space U.S. Government/DOD customers accounted for approximately 65% of consolidated revenues for the nine months ended
January 31, 2026 compared to approximately 39% of consolidated revenue during the same period in the prior fiscal year. Other commercial
and industrial revenues for the nine months ended January 31, 2026 and 2025 accounted for approximately 3% of consolidated revenue. The
change in revenue for the nine months ended January 31, 2026 compared to the same period in the last fiscal year was driven by the changes
noted above for the three months ended January 31, 2026.

**Gross
Margin**

| Line item | Three months / Periods ended January 31, / (in thousands) / 2026 | Three months / Periods ended January 31, / (in thousands) / 2025 | Periods ended January 31, / (in thousands) | Nine months / Periods ended January 31, / (in thousands) / 2026 | Nine months / Periods ended January 31, / (in thousands) / 2025 |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | $6,626 | $8,285 | )% | $18,244 | $22,603 | )% |
| Gross margin rate | 39.2% | 43.8% |  | 38.1% | 45.4% |  |

For
the three months and nine months ended January 31, 2026, both gross margin (“GM”) and GM Rate decreased compared to the same
periods in the prior fiscal year. The decrease in GM and GM Rate were attributable to a change in the mix of high margin production satellite
programs in the prior year periods versus lower margin programs with significant non-recurring engineering (“NRE”) effort
during the three and nine months ended January 31, 2026.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

(Continued)

**Selling,
General, and Administrative Expenses**

_(in thousands)_

| Three months / Periods ended January 31, 2026 | Three months / Periods ended January 31, 2025 | Three months / Periods ended January 31, / Change | Nine months / Periods ended January 31, 2026 | Nine months / Periods ended January 31, 2025 | Nine months / Periods ended January 31, / Change |
| --- | --- | --- | --- | --- | --- |
| $3,593 | $$3,380 | $6.3% | $10,800 | $9,614 | $12.3% |

For
the three months ended January 31, 2026 and 2025, selling, general, and administrative (“SG&A”) expenses were approximately
21% and 18%, respectively of consolidated revenues. For the nine months ended January 31, 2026 and 2025, SG&A expenses were approximately
23% and 19%, respectively, of consolidated revenues. The increase in SG&A expenses during the three months ended January 31, 2026
was due to fluctuations in the various expense accounts that make up SG&A. For the nine months ended January 31, 2026 an increase
in payroll related expenses, including stock-based compensation, and investments in the future growth of the Company, including expansion
into Quantum sensing, including the opening of a Colorado facility, resulted in increased SG&A expenses. These increased SG&A
expenses are expected to continue through the remainder of fiscal year 2026.

**Research
and Development Expenses**

| Three months / Periods ended January 31, / (in thousands) / 2026 | Three months / Periods ended January 31, / (in thousands) / 2025 | Three months / Periods ended January 31, / (in thousands) / Change | Nine months / Periods ended January 31, / (in thousands) / 2026 | Nine months / Periods ended January 31, / (in thousands) / 2025 |  |
| --- | --- | --- | --- | --- | --- |
| $1,763 | $$1,436 | $22.8% | $4,095 | $4,536 | )% |

Research
and Development (“R&D”) expenditures represent investments intended to keep the Company’s products at the leading
edge of time and frequency technology and enhance future competitiveness. Fluctuations in R&D expenditures will occur in some periods
due to current operational needs supporting ongoing programs. The Company plans to continue to invest in R&D in the future to keep
its products at the state of the art.

**Operating
Income**

_(in thousands)_

| Three months / Periods ended January 31, 2026 | Three months / Periods ended January 31, 2025 | Periods ended January 31, | Nine months / Periods ended January 31, 2026 | Nine months / Periods ended January 31, 2025 | Nine months / Periods ended January 31, / Change |
| --- | --- | --- | --- | --- | --- |
| $1,270 | $$3,469 | )% | $3,349 | $8,453 | $60.4)% |

For
the three and nine months ended January 31, 2026, operating income decreased compared to the prior fiscal year periods due to lower revenue,
gross margin and increased SG&A as described above.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

(Continued)

**Other
Income (Expense), net**

_(in thousands)_

| Line item | Three months / Periods ended January 31, 2026 | Three months / Periods ended January 31, 2025 | Three months / Periods ended January 31, / Change | Nine months / Periods ended January 31, 2026 | Nine months / Periods ended January 31, 2025 | Nine months / Periods ended January 31, / Change |
| --- | --- | --- | --- | --- | --- | --- |
| Investment income, net | $191 | $138 | $(38.4 | $562 | $564 | $0.4)% |
| Interest expense | (21) | (26) | (19.2 | (67) | (79) | (15.2 |
| Other expense, net | - | - | - | (77) | (1) | 7,600.0)% |
|  | $170 | $112 | $51.8% | $418 | $484 | $(13.6) |

Other
income (expense), net is derived from various sources. The other income (expense), net can come from reclaiming of metal, refunds, interest
on deferred trust assets, or the sale of a fixed asset. Interest expense is related to the deferred compensation payments made to retired
employees. The majority of the approximately $0.2 million and $0.6 million of investment income for the three and nine months ended January
31, 2026, respectively, was from interest income and unrealized gains on assets held in the Frequency Electronics, Inc. Deferred Compensation
Trust.

**Benefit
for Income Tax**

| Three months / Periods ended January 31, / (in thousands) / 2026 | Three months / Periods ended January 31, / (in thousands) / 2025 | Periods ended January 31, / (in thousands) | Nine months / Periods ended January 31, / (in thousands) / 2026 | Nine months / Periods ended January 31, / (in thousands) / 2025 |  |
| --- | --- | --- | --- | --- | --- |
| $(127) | $$(11,824) | )% | $(235) | $(11,552) | )% |

| Line item | Three months / Periods ended January 31, | Periods ended January 31, | Nine months / Periods ended January 31, |  |
| --- | --- | --- | --- | --- |
| Effective tax rate on pre-tax book income: | )% | )% | )% | )% |

On
July 4, 2025, President Trump signed the 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) includes 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
estimated annual effective tax rate for the fiscal year ending April 30, 2026 is 25.10%. This calculation reflects an estimated income
tax expense based on our current fiscal year annual pretax income forecast which includes non-deductible expenses, estimated research
and development credits, and state income taxes. The estimate of the annual effective tax rate is based on evaluations of possible future
events and may be subject to revision in future reporting periods.

For
the three months ending January 31, 2026, the Company recorded an income tax benefit of $127,246 which includes a discrete income tax
benefit of $568,117. The discrete income tax benefit is primarily due to stock compensation windfall deductions. The calculation of the
overall income tax provision consists of current U.S. federal and state income taxes. For the three months ended January 31, 2025, the
Company recorded an income tax benefit of $11.8 million which included a discrete income tax benefit of $11.9 million. The discrete income
tax benefit in the comparable period is primarily due to the release of the valuation allowance.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

(Continued)

For
the nine months ended January 31, 2026, the Company recorded an income tax benefit of $235,161 which includes a discrete tax benefit
of $1,180,802. The discrete income tax benefit is primarily due to stock compensation windfall deductions and a remeasurement of the
net deferred tax asset due to a new state filing. The calculation of the overall income tax provision consists of current U.S. federal
and state income taxes. For the nine months ended January 31, 2025, the Company recorded an income tax benefit of $11.6 million which
includes a discrete tax income benefit of $11.9 million. The discrete income tax benefit in the comparable period is primarily due to
the release of the valuation allowance.

The
effective tax rate for the three months ended January 31, 2026 was an income tax benefit of 8.84% on pretax income of $1.4 million compared
to an income tax benefit of 330.2% on pretax income of $3.6 million in the comparable prior fiscal year period. The effective tax rate
for the three months ended January 31, 2026 differs from the U.S. federal statutory rate of 21% primarily due to non-deductible expenses,
state income taxes, R&D credits and discrete items.

The
effective tax rate for the nine months ended January 31, 2026 was an income tax benefit of 6.24% on pretax income of $3.8 million compared
to an income benefit of 129.3% on pretax income of $8.9 million in the comparable prior fiscal year period. The effective tax rate for
the nine months ended January 31, 2026 differs from the U.S. federal statutory rate of 21% primarily due to non-deductible expenses,
state income taxes, R&D credits and discrete items.

**LIQUIDITY
AND CAPITAL RESOURCES**

The
Company’s consolidated balance sheets continue to reflect a strong working capital position of approximately $32.4 million at January
31, 2026 and approximately $29.7 million at April 30, 2025. Included in working capital at January 31, 2026 and April 30,
2025 was $0.1 million and $4.7 million, respectively, of cash and cash equivalents. The Company’s current ratio was 2.6 to
1 at January 31, 2026 compared to 2.3 to 1 as of April 30, 2025.

Net
cash used in operating activities for the nine months ended January 31, 2026 and 2025 was approximately $0.8 million and net and $1.3
million, respectively. The increase in net cash used in operating activities in the first nine months of fiscal 2026 as compared to the
prior fiscal year period was primarily due to timing of billings and cash collections and a decrease in net income. For the nine
months ended January 31, 2026 and 2025, the Company incurred approximately $4.3 million and $4.2 million, respectively, of non-cash operating
expenses including amortization of ROU assets, depreciation and amortization, inventory net realizable value adjustments, deferred compensation,
and accruals for employee benefit programs. For the nine months ended January 31, 2026 and 2025, the non-cash operating expenses does
not include amounts related to the deferred tax assets which are approximately $0.2 million and $11.8 million, respectively.

Net
cash used in investing activities for the nine months ended January 31, 2026 and 2025 was approximately $2.3 million and $1.2 million,
respectively, all relating to purchases of capital expenditures.

Net
cash used in financing activities for the nine months ended January 31, 2026 was $1.6 million, all related to purchase of treasury stock.
Net cash used in financing activities for the nine months ended January 31, 2025 was $9.9 million, of which $9.6 million was related
to the payout of a special cash dividend of $1.00 per share of common stock paid on August 29, 2024.

In
March 2005, the Company’s Board of Directors authorized the repurchase of up to $5.0 million worth of shares of the Company’s
common stock. On September 9, 2025, the Company’s Board of Directors approved a new share repurchase authorization in the amount
of $20.0 million. Under this new share repurchase authorization, the Company’s shares of common stock may be purchased on a discretionary
basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases,
privately negotiated transactions or other means. This repurchase program may be suspended or discontinued at any time without notice.
The new share repurchase authorization replaced the Company’s existing share repurchase authorization under which approximately
$0.6 million remained. This new share repurchase authorization does not have an expiration date.

During
the three months ended January 31, 2026, the Company acquired 12,260 shares of the Company’s common stock at a weighted average
share price of $50.22 per share. The Company acquired these shares to satisfy tax withholding requirements upon the vesting of previously
granted RSU awards. As of January 31, 2026, the Company had repurchased approximately $1.0 million of its common stock out of the $20.0
million authorized under the new share repurchase authorization. During the three months ended January 31, 2025, the Company repurchased
11,802 shares of the Company’s outstanding common stock at a weighted average share price of $18.26 per share.

The
Company will continue to expend resources for R&D to develop, improve and acquire products for space applications, guidance and targeting
systems, and communication systems that management believes will result in future growth and profitability. The Company anticipates securing
additional customer funding for a portion of its R&D activities and will allocate internal funds depending on market conditions and
identification of new opportunities. The Company expects internally generated cash will be adequate to fund these R&D efforts.
The Company may also pursue acquisitions to expand its range of products and may use internally generated cash and external funding in
connection with such acquisitions.

**FREQUENCY
ELECTRONICS, INC. and SUBSIDIARIES**

(Continued)

As
of January 31, 2026, the Company’s consolidated funded backlog was approximately $83 million compared to approximately $70 million
at April 30, 2025. Approximately 69% of the backlog, as of January 31, 2026, is expected to be realized in the next twelve
months. The Company excludes from backlog any contracts or awards for which it has not received authorization to proceed. On fixed
price contracts, the Company excludes any unfunded portion. Over time, as partially funded contracts become fully funded, the Company
will add the additional funding to its backlog. The backlog is subject to change for various reasons, including possible cancellation
of orders, change orders, terms of the contracts and other factors beyond the Company’s control. Accordingly, the backlog is not
necessarily indicative of future revenues or profits (losses) which may be realized when the results of such contracts are reported.

The
Company believes that its liquidity is adequate to meet its short-term operating and investment needs through at least March 17, 2027
and its long-term operation and investment needs for the foreseeable future thereafter.

The
Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the
Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources
that is material to investors.

**Item
3. Quantitative and Qualitative Disclosures about Market Risk**

Not
applicable to smaller reporting companies.

**Item
4. Controls and Procedures**

Evaluation
of Disclosure Controls and Procedures

The
Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.
Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of January
31, 2026, the Company’s disclosure controls and procedures were effective at a reasonable assurance level.

There
are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human
error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures
can only provide reasonable assurance of achieving their control objectives.

Changes
in Internal Control Over Financial Reporting

There
have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fiscal quarter ended January 31, 2026 that has materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial reporting.

**PART
II. OTHER INFORMATION**

**Item
1A. Risk Factors**

As
disclosed in “Item 1A. Risk Factors” in the Form 10-K, there are a number of risks and uncertainties that could have a material
adverse effect on the Company’s business, financial position, results of operations and/or cash flows. There are no material updates
or changes to the Company’s risk factors since the filing of the Form 10-K.

**Item
2. Unregistered Sales of Equity Securities and Use of Proceeds**

**Share
Repurchases**

The
following table presents the share repurchase activity for the quarter ended January 31, 2026:

| Period | Total number of shares purchased (1) (2) | Average price paid per share | Total number of shares purchased as part of the publicly announced plan or program | Approximate dollar value of shares that may yet be purchased under the plan or program |
| --- | --- | --- | --- | --- |
| November 1 - 30, 2025 | 290 | $36.72 | 290 | $19,614,110 |
| December 1 - 31, 2025 | - | - | - | $19,614,110 |
| January 1 - 31, 2026 | 11,970 | $50.55 | 11,970 | $19,009,026 |
| Total | 12,260 |  | 12,260 | $19,009,026 |

(1) On September 9, 2025, the Company’s Board of Directors approved a new share repurchase authorization in the amount of $20.0 million. Under this new share repurchase authorization, the Company’s shares of common stock may be purchased on a discretionary basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. This repurchase program may be suspended or discontinued at any time without notice. The new share repurchase authorization replaced the Company’s prior share repurchase authorization under which approximately $0.6 million remained. This new share repurchase authorization does not have an expiration date.

(2) Represents shares withheld with respect to stock-based awards to satisfy required tax withholding obligations for the months of November 2025 and January 2026. There were no shares withheld or otherwise repurchased during the month of December 2025.

**Item
5. Other Information**

During
the three months ended January 31, 2026, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement”
or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

**Item
6. Exhibits**

| 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 January 31, 2026 formatted in eXtensible Business Reporting Language (XBRL): (i) Cover Page, (ii) Condensed Consolidated Balance Sheets, (iii) Condensed Consolidated Statements of Operations and Comprehensive Income (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). |

**SIGNATURES**

Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

**FREQUENCY ELECTRONICS,  INC.**

Dated: March 17,  2026 By: /s/ Thomas McClelland

Thomas McClelland

President and Chief Executive  Officer

(Principal Executive Officer)

By: /s/ Steven L. Bernstein

Steven L. Bernstein

Chief Financial Officer, Secretary  and Treasurer

(Principal Financial and Accounting  Officer)

25