# Frequency Electronics Inc: Form 10-Q for the period ended Jan 31, 2025

- Company: [Frequency Electronics Inc](/companies/feim.md) (CIK 39020)
- Form: 10-Q
- Filed: 2025-03-17
- Accepted by EDGAR: Mar 17, 2025, 16:26 ET
- Period: 2025-01-31
- Accession: 0001185185-25-000189
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/39020/000118518525000189/feim10q013125.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/39020/000118518525000189/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-01-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-11-01 to 2025-01-31 | $18.9m | us-gaap:Revenues |
| Revenue | 9 months, 2024-05-01 to 2025-01-31 | $49.8m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2024-11-01 to 2025-01-31 | $10.6m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-05-01 to 2025-01-31 | $27.2m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2024-11-01 to 2025-01-31 | $8.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-05-01 to 2025-01-31 | $22.6m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-11-01 to 2025-01-31 | $1.4m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-05-01 to 2025-01-31 | $4.5m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2024-11-01 to 2025-01-31 | $3.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-05-01 to 2025-01-31 | $9.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-11-01 to 2025-01-31 | $3.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-05-01 to 2025-01-31 | $8.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-11-01 to 2025-01-31 | $26.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2024-05-01 to 2025-01-31 | $79.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-11-01 to 2025-01-31 | −$11.8m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-05-01 to 2025-01-31 | −$11.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-11-01 to 2025-01-31 | $15.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-05-01 to 2025-01-31 | $20.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-11-01 to 2025-01-31 | $1.60 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-05-01 to 2025-01-31 | $2.14 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-11-01 to 2025-01-31 | $1.60 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-05-01 to 2025-01-31 | $2.14 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-11-01 to 2025-01-31 | 9,632,309 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-05-01 to 2025-01-31 | 9,588,826 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-05-01 to 2025-01-31 | −$1.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-05-01 to 2025-01-31 | $1.2m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-05-01 to 2025-01-31 | $9.6m | us-gaap:PaymentsOfDividends |
| Share repurchases | 9 months, 2024-05-01 to 2025-01-31 | $377.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-01-31 | $5.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-01-31 | $50.1m | us-gaap:AssetsCurrent |
| Total assets | at 2025-01-31 | $86.4m | us-gaap:Assets |
| Current liabilities | at 2025-01-31 | $22.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-01-31 | $34.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-01-31 | $51.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 26,770 characters.

*“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, 2024 (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, 2025.

#### 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.

#### 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, 2025 and 2024, 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:

| Revenues | Three months Periods ended January 31, 2025 | 2024 | Nine months 2025 | 2024 |
| --- | ---: | ---: | ---: | ---: |
| FEI-NY | 76.4% | 84.7% | 74.2% | 76.5% |
| FEI-Zyfer | 26.6 | 24.8 | 27.8 | 28.8 |
| Less intersegment revenues | (3.0) | (9.5) | (2.0) | (5.3) |
|  | 100.0 | 100.0 | 100.0 | 100.0 |
| Cost of revenues | 56.2 | 77.4 | 54.6 | 69.0 |
| Gross margin | 43.8 | 22.6 | 45.4 | 31.0 |
| Selling and administrative expenses | 17.9 | 19.1 | 19.3 | 18.8 |
| Research and development expenses | 7.6 | 7.0 | 9.1 | 5.8 |
| Operating income (loss) | 18.3 | (3.5) | 17.0 | 6.4 |
| Other income, net | 0.6 | 4.4 | 0.9 | 1.2 |
| (Benefit) provision for income taxes | (62.5) | - | (23.2) | - |
| Net income | 81.4% | 0.9% | 41.1% | 7.6% |

### Revenues

*(in thousands)*

| Segment | Three months Periods ended January 31, 2025 | 2024 | Change |  | Nine months 2025 | 2024 | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| FEI-NY | $14,463 | $11,610 | $2,853 | 24.6% | $36,984 | $30,372 | $6,612 | 21.8% |
| FEI-Zyfer | 5,027 | 3,403 | 1,624 | 47.7 | 13,858 | 11,426 | 2,432 | 21.3 |
| Intersegment revenues | (563) | (1,299) | 736 | (56.7) | (1,017) | (2,100) | 1,083 | (51.6) |
|  | $18,927 | $13,714 | $5,213 | 38.0% | $49,825 | $39,698 | $10,127 | 25.5% |

For the three months ended January 31, 2025, revenues from commercial and U.S. Government communication satellite programs accounted for approximately 59% of consolidated revenues compared to approximately 50% 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 39% of consolidated revenues for the three months ended January, 31, 2025 compared to approximately 44% of consolidated revenue during the same period in the prior fiscal year. Other commercial and industrial revenues for the three months ended January 31, 2025 accounted for approximately 2% of consolidated revenue compared to 7% in the same period of the prior fiscal year. The significant increase in revenue for the quarter ended January 31, 2025, compared to the same quarter in the previous fiscal year, was reflected in both the FEI-NY and FEI-Zyfer segments and was related to an increase of approximately $4.4 million in sales to U.S. Government space customers and an increase of approximately $1.4 million in sales to Government non-space customers, partially offset by a decrease of approximately $0.6 million in other commercial and industrial revenues.

For the nine months ended January 31, 2025, revenues from commercial and U.S. Government communication satellite programs accounted for approximately 58% of consolidated revenues compared to approximately 41% of consolidated revenues during this same period in the prior fiscal year. Revenues from non-space U.S. Government/DOD customers accounted for approximately 39% of consolidated revenues for the nine months ended January, 31, 2025 compared to approximately 53% of consolidated revenue during the same period in the prior fiscal year. Other commercial and industrial revenues for the nine months ended January 31, 2025 accounted for approximately 3% of consolidated revenue compared to 6% in the same period of the prior fiscal year. The significant increase in revenue for the nine month period ended January 31, 2025, compared to the same period in the previous fiscal year, and was reflected predominately in U.S. Government satellite programs.

### Gross Margin

*(in thousands)*

|  | Three months Periods ended January 31, 2025 | 2024 | Change |  | Nine months 2025 | 2024 | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
|  | $8,285 | $3,104 | $5,181 | 166.9% | $22,603 | $12,302 | $10,301 | 83.7% |
| Gross margin rate | 43.8% | 22.6% |  |  | 45.4% | 31.0% |  |  |

For the three months ended January 31, 2025, both gross margin (“GM”) and GM rate increased compared to the same period in the prior fiscal year. The increase in GM was mainly due to an increase in revenue and the GM rate increase was mainly attributable to a large space program that completed a major milestone in its production. The completed milestone, and related mitigation of risk, resulted in a higher GM on this program for the quarter. For the nine months ended January 31, 2025, both GM and GM Rate increased compared to the same period in the prior fiscal year. This is partially due to the large space program mentioned above that completed major milestones during the nine months ended January 31, 2025.

### Selling, General, and Administrative Expenses

*Periods ended January 31,*

*(in thousands)*

| Three months 2025 | 2024 | Change |  | Nine months 2025 | 2024 | Change |  |
| ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| $3,380 | $2,619 | $761 | 29.1% | $9,614 | $7,473 | $2,141 | 28.6% |

For the three months ended January 31, 2025 and 2024, selling, general, and administrative (“SG&A”) expenses were approximately 18% and 19%, respectively, of consolidated revenues. For the nine months ended January 31, 2025 and 2024, SG&A expenses were approximately 19%, of consolidated revenues in both periods. The increase in SG&A expense during the three and nine months ended January 31, 2025, was mainly related to an increase in payroll related expenses including stock compensation and incentive accruals based upon Company performance, costs from the re-alignment of employees from overhead to SG&A, and costs related to Frequency Electronics’ first Quantum Summit in October 2024. The Company believes the costs related to SG&A will remain fairly consistent throughout the remainder of fiscal year 2025.

### Research and Development Expenses

*Periods ended January 31,*

*(in thousands)*

| Three months 2025 | 2024 | Change |  | Nine months 2025 | 2024 | Change |  |
| ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| $1,436 | $958 | $478 | 49.9% | $4,536 | $2,304 | $2,232 | 96.9% |

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. The change in R&D expenditures for the three and nine months ended January 31, 2025, as compared to the prior year periods, was primarily due to a focus on advances and modernization of products. The Company plans to continue to invest in R&D in the future to keep its products at the state of the art, however, we expect the actual quarterly spend to vary.

### Operating Income (Loss)

*Periods ended January 31,*

*(in thousands)*

| Three months 2025 | 2024 | Change |  | Nine months 2025 | 2024 | Change |  |
| ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| $3,469 | $(473) | $3,942 | (833.4)% | $8,453 | $2,525 | $5,928 | (234.8)% |

For the three and nine months ended January 31, 2025, operating income increased due to higher revenue and GM percentage, partially offset by higher R&D expenses. The increase is partially due to a large space program that completed major milestones in its production during the nine months ended January 31, 2025, as discussed above, however, the increase is also the result of the successful efforts of the Company to complete complex programs and to work more efficiently in bidding, building and testing our products. The Company believes the improved operating income results for the first nine months of this fiscal year are a tangible outcome of these efforts. The Company seeks to continue to implement changes to further improve its performance.

### Other Income (Expense), net

*(in thousands)*

|  | Three months Periods ended January 31, 2025 | 2024 | Change |  | Nine months 2025 | 2024 | Change |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Investment income, net | $138 | $636 | $(498) | 78.3% | $564 | $549 | $15 | (2.7)% |
| Interest expense | (26) | (27) | 1 | (3.7)% | (79) | (86) | 7 | (8.1)% |
| Other expense, net | - | - | - | -% | (1) | - | (1) | 100.0% |
|  | $112 | $609 | $(497) | (81.6)% | $484 | $463 | $21 | 4.5% |

Other income (expense), net is derived from various sources. The income 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 $0.1 million and $0.6 million of investment income for the three and nine months ended January 31, 2025, respectively, was from interest income and unrealized gains on assets held in the Frequency Electronics, Inc. Deferred Compensation Trust.

### (Benefit) Provision for Income Tax

*Periods ended January 31,*

*(in thousands)*

| Three months 2025 | 2024 | Change |  | Nine months 2025 | 2024 | Change |  |
| ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| $(11,824) | $6 | $(11,830) | (197,166.7)% | $(11,552) | $19 | $(11,571) | (60,900.0)% |

|  | Three months Periods ended January 31, 2025 | 2024 | Nine months 2025 | 2024 |
| --- | ---: | ---: | ---: | ---: |
| Effective tax rate on pre-tax book income (loss): | (330.2)% | 4.4% | (129.3)% | 0.6% |

17

In assessing the realizability of deferred tax assets, the Company evaluates whether it is more likely than not (more than 50%) that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company assesses all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, prior earnings history, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Significant weight is given to positive and negative evidence that is objectively verifiable. Concluding that a valuation allowance is not needed is difficult when there is significant negative evidence such as cumulative losses in recent years.

The change in estimate occurred in Q3 2025 because Frequency no longer has cumulative losses in recent years due to significant earnings in Q3 2025. The positive evidence that led to the Q3 2025 release of the valuation allowance includes (i) objectively verifiable cumulative earnings as of January 31, 2025, (ii) utilization of net operating loss carryforwards and a reduction of the net deferred tax asset, (iii) a backlog of $73 million, and (iv) sufficient projections of future taxable income that support the more-likely-than-not realization of the existing deferred tax asset and the remaining net operating loss carryforward. The projections of future taxable income are considered objectively verifiable positive evidence because the Company has demonstrated a sustained return to profitability as of Q3 2025. The Company maintains a valuation allowance of $1.3 million against certain deferred tax assets including state tax credits and capital loss carryforwards 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. The Company will continue to evaluate the realizability of its net deferred tax assets quarterly. Any further increases or decreases in the valuation allowance could have an unfavorable or favorable impact on the Company’s income tax provision and net income in the period in which such determination is made. As of January 31, 2025, the deferred tax asset is recorded at its more-likely-than-not realizable amount.

Under the accounting for income taxes guidance, the change in the valuation allowance may be reflected in the annual estimated effective tax rate or recognized discretely in the interim period, or both. The Company recognized the reduction in the valuation allowance in both the annual estimated effective tax rate and discretely in Q3 2025. The estimated annual effective tax rate for the fiscal year ending April 30, 2025 is 3.54%. This calculation reflects estimated income tax expense based on our current year annual pretax income forecast which is offset by the estimated change in the current year valuation allowance. During the three months ended January 31, 2025, the Company reduced its valuation allowance and recognized a discrete income tax benefit of $11.8 million resulting in an income tax benefit of 330.6% and 132.8% for the three and nine months ended January 31, 2025.

For the three months ended January 31, 2025, the Company recorded an income tax benefit of $11.8 million which includes a discrete tax income benefit of $11.9 million. The discrete tax benefit is primarily due to the reduction in the valuation allowance. The calculation of the overall income tax benefit consists of a discrete tax benefit for the release of the valuation allowance offset by current U.S. federal and state income taxes. For the three months ended January 31, 2024, the Company recorded an income tax provision of $6,000.

For the nine months ended January 31, 2025, the Company recorded an income tax benefit of $11.6 million which includes a discrete tax benefit of $11.9 million. The calculation of the overall income tax provision consists of a discrete tax benefit for the release of the valuation allowance offset by current U.S. federal and state income taxes. For the nine months ended January 31, 2024, the Company recorded an income tax provision of $19,000.

The effective tax rate for the three months ended January 31, 2025 was an income tax benefit of 330.2% on pretax income of $3.6 million compared to an income tax provision of 4.4% on pretax income of $0.1 million in the comparable prior fiscal year period. The effective tax rate for the three months ended January 31, 2025 differs from the U.S. federal statutory rate of 21% primarily due to the release of the valuation allowance.

The effective tax rate for the nine months ended January 31, 2025 was an income tax benefit of 129.3% on pretax income of $8.9 million compared to an income tax provision of 0.6% on pretax income of $3.0 million in the comparable prior fiscal year period. The effective tax rate for the nine months ended January 31, 2025 differs from the U.S. federal statutory rate of 21% primarily due to the release of the valuation allowance.

### LIQUIDITY AND CAPITAL RESOURCES

The Company’s consolidated balance sheets continue to reflect a strong working capital position of approximately $27.3 million at January 31, 2025 and at April 30, 2024. Included in working capital at January 31, 2025 and April 30, 2024 was $5.5 million and $18.3 million, respectively, of cash and cash equivalents. The Company’s current ratio was 2.2 to 1 at January 31, 2025 compared to 1.9 to 1 as of April 30, 2024.

Net cash used in operating activities for the nine months ended January 31, 2025 was approximately $1.3 million and net cash provided by operating activities for the nine months ended January 31, 2024 was approximately $1.2 million. The increase in net cash used in operating activities in the first nine months of fiscal 2025 as compared to the prior fiscal year period was primarily due to an increase in operating income offset by increases in deferred tax assets, accounts receivable, and inventories levels. For the nine months ended January 31, 2025 and 2024, the Company incurred approximately $4.2 million and $3.1 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.

Net cash used in investing activities for the nine months ended January 31, 2025 and 2024 was approximately $1.2 million and $0.7 million, respectively. The Company acquired property, plant, and equipment in the amount of approximately $1.2 million and $0.7 million for the nine month periods ended January 31, 2025 and 2024, respectively.

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 a special cash dividend payment of $1.00 per share of common stock paid on August 29, 2024. There were no financing activities for the nine months ended January 31, 2024.

The Company has been authorized by its Board of Directors to repurchase up to $5.0 million worth of shares of its common stock when appropriate opportunities arise. During the nine months ended January 31, 2025, the Company acquired 24,264 shares, at a weighted average share price of $15.55 per share, from withholdings pursuant to RSU tax repayments. As of January 31, 2025, the Company has repurchased approximately $3.9 million of its common stock out of the $5.0 million authorization. For the nine months ended January 31, 2024, there were no repurchases of shares.

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.

As of January 31, 2025, the Company’s consolidated funded backlog was approximately $73 million compared to approximately $78 million at April 30, 2024. Approximately 65% of the backlog, as of January 31, 2025, 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, 2026 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.

## Controls and procedures

As filed, 6,162 characters.

#### 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, because of the material weakness in internal control over financial reporting disclosed below, as of January 31, 2025, the Company’s disclosure controls and procedures were not 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.

#### Material Weakness on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of April 30, 2024. In making this assessment, management used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, the Company’s management concluded that the Company’s internal control over financial reporting was not effective as of April 30, 2024, because of the material weakness in internal control over financial reporting discussed below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

In the course of preparing the Company’s consolidated financial statements as of April 30, 2024 and for the year then ended, management identified a material weakness in internal control over the calculation of loss provision accruals in contracts with customers. The Company’s controls over loss provision accruals were not sufficiently designed to capture previously recognized contract losses when calculating the required balance of loss provision accruals as of the end of the reporting period. The errors resulting from this material weakness did not cause material misstatements in previously issued annual or interim financial statements. Such errors were corrected prior to the issuance of the Company’s consolidated financial statements as of April 30, 2024 and for the year then ended. If not remediated timely, the deficiency described above could result in a material misstatement to the future annual or interim consolidated financial statements.

The Company concluded that the item noted above constituted a material weakness in the Company’s internal control over financial reporting as of April 30, 2024.

Notwithstanding the existence of the material weakness described above, management believes that the audited consolidated financial statements included in the Form 10-K fairly presented, in all material respects, our financial position, results of operations and cash flows as of and for the periods presented, in conformity with GAAP.

#### Plan to Remediate Material Weakness

The Company is currently in the process of remediating the material weakness and has taken actions to address the underlying causes of the material weakness including improving controls over the calculation of loss provision accruals. The Company has updated its method of calculating loss provision accruals by considering previously recognized contract losses. The Company has also started to implement enhanced review, reconciliation, and monitoring controls over loss provision accruals and its underlying calculations. The Company intends to remediate these deficiencies as soon as possible and believes these actions will be sufficient to remediate the identified material weaknesses and strengthen the Company’s internal control over financial reporting. As the Company continues to evaluate and improve its internal control over financial reporting, management may determine that additional measures or modifications to the remediation plan are necessary to address the material weakness. Moreover, the Company cannot provide assurance that additional material weaknesses will not arise in the future.

#### Changes in Internal Control Over Financial Reporting

We are in the process of implementing certain changes to our internal control over financial reporting to remediate the material weaknesses discussed above. Except as noted above, 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, 2025 that has materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 339 characters.

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.

Filed Mar 17, 2025.
Source: SEC EDGAR, the filing index for accession 0001185185-25-000189. Last ingested by Listed: Nov 5, 2026, 18:05 ET. No prices; not investment advice.