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What changed in FREQUENCY ELECTRONICS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FREQUENCY ELECTRONICS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+143 added−149 removedSource: 10-K (2023-07-27) vs 10-K (2022-07-14)

Top changes in FREQUENCY ELECTRONICS INC's 2023 10-K

143 paragraphs added · 149 removed · 112 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

39 edited+3 added−2 removed50 unchanged
Biggest changeThe Company’s accounts with respect to these contracts are subject to audit by the Defense Contract Audit Agency (“DCAA”). The Company’s last full incurred cost audit was performed in 2008. The Company is required to submit, for subsequent review, an Incurred Cost Report by October 31, for each year then ended.
Biggest changeGovernment contracts are sometimes based in part on Certificates of Current Costs. An inaccuracy in such certificates may entitle the U.S. Government to an appropriate recovery. The Company’s accounts with respect to these contracts are subject to audit by the Defense Contract Audit Agency (“DCAA”). The Company’s last full incurred cost audit was performed in 2008.
Government and to the public and enterprise networks through jamming, multi-path or “spoofing” GPS signals may be mitigated by FEI-Zyfer’s technologies and products. High precision, ruggedized clocks combined with specialized software are essential for the security of government communication and systems. More than 78% of FEI-Zyfer’s revenues are derived from sales where the end user is the U.S. Government.
Government and to the public and enterprise networks through jamming, multi-path or “spoofing” GPS signals may be mitigated by FEI-Zyfer’s technologies and products. High precision, ruggedized clocks combined with specialized software are essential for the security of government communication and systems. More than 86% of FEI-Zyfer’s revenues are derived from sales where the end user is the U.S. Government.
Government is expected to contract options for additional GPS III satellites, and the Company is well positioned to compete for the onboard clock ensemble with its high-precision digital Rubidium atomic frequency standard. For the terrestrial secure command control and communications systems market, the Company’s products support multiple C4ISR and EW applications for the U.S.
Government is expected to contract options for additional GPS III satellites, and the Company believes it is well positioned to compete for the onboard clock ensemble with its high-precision digital Rubidium atomic frequency standard. For the terrestrial secure command control and communications systems market, the Company’s products support multiple C4ISR and EW applications for the U.S.
As of April 30, 2022, there were no amounts included in backlog under cost-plus fixed-fee contracts that had not been funded. The Company excludes from backlog those contracts or awards for which it has not received authorization to proceed. On fixed price contracts, the Company excludes any unfunded portion.
As of April 30, 2023, there were no amounts included in backlog under cost-plus fixed-fee contracts that had not been funded. The Company excludes from backlog those contracts or awards for which it has not received authorization to proceed. On fixed price contracts, the Company excludes any unfunded portion.
During fiscal years 2022 and 2021, some of the Company’s development resources were applied to the design-stage of fixed-price satellite payload sub-system programs. For fiscal year 2023, the resources to be allocated to R&D will depend on market conditions and identification of new opportunities, as was the case in fiscal year 2022.
During fiscal years 2023 and 2022, some of the Company’s development resources were applied to the design-stage of fixed-price satellite payload sub-system programs. For fiscal year 2024, the resources to be allocated to R&D will depend on market conditions and identification of new opportunities, as was the case in fiscal year 2023.
Bernstein - Chief Financial Officer and Secretary and Treasurer Thomas McClelland, age 67, joined the Company as an engineer in 1984 and was elected Vice President, Commercial Products in March 1999. In fiscal year 2011, Dr. McClelland’s title was modified to Vice President Advanced Development to describe his expanded role in the Company. In January 2020 Dr.
Bernstein - Chief Financial Officer and Secretary and Treasurer Thomas McClelland, age 68, joined the Company as an engineer in 1984 and was elected Vice President, Commercial Products in March 1999. In fiscal year 2011, Dr. McClelland’s title was modified to Vice President Advanced Development to describe his expanded role in the Company. In January 2020 Dr.
The loss by the Company of any one of these customers could have a material adverse effect on the Company’s business. The Company believes its relationship with these companies is mutually satisfactory. Additionally, the Company is not aware of any prospect for the cancellation or significant reduction of any of its commercial or existing U.S. Government contracts.
The loss by the Company of any one of these customers could have a material adverse effect on the Company’s business. The Company believes its relationship with these companies is mutually satisfactory. Additionally, the Company is not aware of any prospect for the cancellation or significant reduction of any of its commercial or existing U.S.
The Global Positioning Satellite System, the MILSTAR Satellite System and the AEHF Satellite System are examples of the programs in which the Company has participated or will participate - programs which management believes are important to the success of the U.S. Government’s communication, intelligence and Precision Navigation and Timing (“PNT”) needs.
The Global Positioning Satellite System, the MILSTAR Satellite System and the AEHF Satellite System are examples of the programs in which the Company has participated or plans to participate - programs which management believes are important to the success of the U.S. Government’s communication, intelligence and Precision Navigation and Timing (“PNT”) needs.
Government agencies or indirectly through subcontracts intended for government end-use. For fixed-price contracts, the price paid to the Company is not subject to adjustment by reason of costs incurred by the Company in the performance of the contract, except for costs incurred due to contract changes ordered by the customer.
Government agencies or indirectly through subcontracts intended for U.S. Government end-use. For fixed-price contracts, the price paid to the Company is not subject to adjustment by reason of costs incurred by the Company in the performance of the contract, except for costs incurred due to contract changes ordered by the customer.
Mancini served from 1998 to 2000 as Vice President, Sales and Marketing at Satellite Transmission Systems, Inc. and from 1995 to 1998 as Vice President, Business Development at Cardion, Inc., a Siemens A.G. company. From 1987 to 1995, he held the position of Vice President, Engineering at Cardion, Inc.
Mancini served from 1998 to 2000 as Vice President, Sales and Marketing at Satellite Transmission Systems, Inc. and from 1995 to 1998 as Vice President, Business Development at Cardion, Inc., a Siemens A.G. company. From 1987 to 1995, he held the position of Vice President, Engineering at Cardion, Inc. Steven L.
There were no end-use contracts terminated for the year ended April 30, 2022. FEI-Zyfer Segment: FEI-Zyfer designs, develops and manufactures products which provide PNT, primarily incorporating Global Navigation Satellite System(s) technology. FEI-Zyfer’s products make use of both “in-the-clear” civil and “crypto-secured” military signals for GPS.
There were no end-use contracts terminated for the fiscal year ended April 30, 2023. FEI-Zyfer Segment: FEI-Zyfer designs, develops and manufactures products which provide PNT, primarily incorporating Global Navigation Satellite System(s) technology. FEI-Zyfer’s products make use of both “in-the-clear” civil and “crypto-secured” military signals for GPS.
Government agencies that require government certified accounting systems. 6 Table of Contents Government end-use contracts are subject to termination by the purchaser for convenience or default, as well as various other Federal Acquisition Regulations provisions. In the event of a termination for convenience, the Company is entitled to receive compensation as provided under the specific terms of such contracts.
Government agencies that require government certified accounting systems. Government end-use contracts are subject to termination by the purchaser for convenience or default, as well as various other Federal Acquisition Regulations provisions. In the event of a termination for convenience, the Company is entitled to receive compensation as provided under the specific terms of such contracts.
The two reportable segments are (1) FEI-NY, which includes the subsidiaries FEI Government Systems, Inc., FEI Communications, Inc., and FEI-Elcom Tech, Inc. (“FEI-Elcom”) and (2) FEI-Zyfer, Inc. (“FEI-Zyfer”). Frequency Electronics has made a strategic decision to focus on satellite payloads, C4ISR and EW market segments, because these business areas represent significant opportunities for revenue growth. 1. FEI-NY – U.S.
The two reportable segments are (1) FEI-NY, which includes the subsidiaries FEI Government Systems, Inc., FEI Communications, Inc., and FEI-Elcom Tech, Inc. (“FEI-Elcom”) and (2) FEI-Zyfer, Inc. (“FEI-Zyfer”). Frequency Electronics has made a strategic decision to focus on satellite payloads, C4ISR and EW market segments, because the Company believes these business areas represent significant opportunities for revenue growth. 1.
The Company began consolidating FEI-Elcom’s manufacturing capabilities into its FEI-NY operations in 2020, in an effort to reduce costs and improve margin. These efforts continue. 2. FEI-Zyfer - Precision time references for terrestrial secure communications and command and control, and frequency products that incorporate GPS technology are manufactured by the Company’s subsidiary, FEI-Zyfer.
The Company began consolidating FEI-Elcom’s manufacturing capabilities into its FEI-NY operations in 2020, in an effort to reduce costs and improve margin. These efforts continue. 4 Table of Contents 2. FEI-Zyfer - Precision time references for terrestrial secure communications and command and control, and frequency products that incorporate GPS technology are manufactured by the Company’s subsidiary, FEI-Zyfer.
(The sum of annual sales percentages exceeds 100% due to intersegment sales.) Consolidated revenues include sales to end-users in countries located outside of the U.S., primarily in Europe and China. During fiscal years 2022 and 2021, foreign sales comprised 2% and 3%, respectively, of consolidated revenues. For segment information, see Note 13 to the Consolidated Financial Statements.
(The sum of annual sales percentages exceeds 100% due to intersegment sales.) Consolidated revenues include sales to end-users in countries located outside of the U.S., primarily in Europe and Asia. During fiscal years 2023 and 2022, foreign sales comprised 3% and 2%, respectively, of consolidated revenues. For segment information, see Note 13 to the Consolidated Financial Statements.
Sales to non-U.S. end-users totaled approximately 2% and 3% of net revenues in fiscal years 2022 and 2021, respectively. The Company’s products are sold to both commercial and governmental customers. For the years ended April 30, 2022 and 2021, approximately 94% and 91%, respectively, of the Company’s sales were made under contracts to the U.S. Government or subcontracts for U.S.
Sales to non-U.S. end-users totaled approximately 3% and 2% of net revenues in fiscal years 2023 and 2022, respectively. The Company’s products are sold to both commercial and governmental customers. For the years ended April 30, 2023 and 2022, approximately 95% and 94%, respectively, of the Company’s sales were made under contracts to the U.S. Government or subcontracts for U.S.
The Company’s relationship with Morion, which includes ownership of 4.6% of the outstanding shares of Morion’s common stock, permits the Company to secure a cost-effective source for high precision quartz resonators and crystal oscillators. The Morion investment was accounted for under the cost method.
The Company’s relationship with Morion, which includes ownership of 4.6% of the outstanding shares of Morion’s common stock, permits the Company to secure a cost-effective source for high precision quartz resonators and crystal oscillators. Until April 30, 2022, the Morion investment was accounted for under the cost method.
Government end-use. During fiscal year 2022, Northrop Grumman Company (“Northrop Grumman”), Lockheed Martin Corporation (“Lockheed Martin”) and BAE Systems each accounted for more than 10% of the Company’s consolidated revenues. During fiscal year 2021, Northrop Grumman and Lockheed Martin each accounted for more than 10% of the Company’s consolidated revenues.
Government end-use. During fiscal year 2023, Lockheed Martin Corporation (“Lockheed Martin”), Northrop Grumman Company (“Northrop Grumman”), Office of Naval Research and BAE Systems each accounted for more than 10% of the Company’s consolidated revenues. During fiscal year 2022, Northrop Grumman, Lockheed Martin, and BAE Systems each accounted for more than 10% of the Company’s consolidated revenues.
McClelland’s title was modified to Senior Vice President and Chief Scientist. On July 8, 2022, Dr. McClelland was appointed the Company’s Interim President and Chief Executive Officer, in addition to his existing positions and responsibilities with the Company, following the resignation of Dr. Stanton D. Sloane, the Company’s former President and Chief Executive Officer, on July 8, 2022.
McClelland’s title was modified to Senior Vice President and Chief Scientist. On July 8, 2022, Dr. McClelland was appointed the Company’s Interim President and Chief Executive Officer, in addition to his existing positions and responsibilities with the Company, following the resignation of the Company’s former President and Chief Executive Officer, on July 8, 2022. On January 17, 2023, Dr.
The Company continues to focus a significant portion of its own resources and efforts on developing hardware for satellite (commercial and U.S. Government) and terrestrial commercial communications systems, including wireless and GPS-related systems. During fiscal years 2022 and 2021, the Company expended $5.0 million and $4.7 million of its own funds, respectively, on such R&D activity.
The Company continues to focus a significant portion of its own resources and efforts on developing hardware for satellites (commercial and U.S. Government) and terrestrial commercial communications systems, including wireless and GPS-related systems. During fiscal years 2023 and 2022, the Company expended $3.1 million and $5.0 million of its own funds, respectively, on such R&D activity.
The names of all executive officers of the Company and all positions and offices with the Company which they presently hold are as follows: Thomas McClelland - Interim President and Chief Executive Officer and Chief Scientist Oleandro Mancini - Senior Vice President, Business Development Adrian Lalicata - Vice President, RF & Microwave Systems Steven L.
The names of all executive officers of the Company and all positions and offices with the Company which they presently hold are as follows: Thomas McClelland - President and Chief Executive Officer Oleandro Mancini - Senior Vice President, Business Development Steven L.
During fiscal years 2022 and 2021, approximately 85% and 78%, respectively, of the Company’s consolidated revenues were from products sold by the FEI-NY segment. In fiscal years 2022 and 2021, sales for the FEI-Zyfer segment were 16% and 26% of consolidated revenues.
During fiscal years 2023 and 2022, approximately 79% and 85%, respectively, of the Company’s consolidated revenues were from products sold by the FEI-NY segment. In fiscal years 2023 and 2022, sales for the FEI-Zyfer segment were 24% and 16% of consolidated revenues.
BACKLOG As of April 30, 2022, the Company’s consolidated backlog amounted to approximately $40 million, the same as at the end of the prior fiscal year. Approximately 83% of the current backlog is expected to be filled during the Company’s fiscal year ending April 30, 2023.
BACKLOG As of April 30, 2023, the Company’s consolidated backlog amounted to approximately $57 million compared to $40 million, at the end of the prior fiscal year. Approximately 75% of the current backlog is expected to be filled during the Company’s fiscal year ending April 30, 2024.
It is likely that the DOD will move to adopt smaller and less expensive satellites for LEO applications, necessitating adaptation of the Company’s products or development of new products to better suit this type of satellite architecture.
It is likely that the DOD will move to adopt smaller and less expensive satellites for Low Earth Orbit (“LEO”) applications, which the Company anticipates will necessitate the adaptation of the Company’s products or development of new products to better suit this type of satellite architecture.
Oleandro Mancini, age 73, joined the Company in August 2000 as Vice President, Business Development and was promoted to Senior Vice President in 2010. Prior to joining the Company, Mr.
McClelland was appointed the Company’s President and Chief Executive Officer. Oleandro Mancini, age 74, joined the Company in August 2000 as Vice President, Business Development and was promoted to Senior Vice President in 2010. Prior to joining the Company, Mr.
EMPLOYEES Due to the specialized nature of our business, our performance depends on identifying, attracting, developing, motivating, and retaining a highly skilled workforce in multiple areas, including engineering, science, manufacturing, information technology, cybersecurity and business development.
EMPLOYEES Due to the specialized nature of our business, our performance depends on identifying, attracting, developing, motivating, and retaining a highly skilled workforce in multiple areas, including engineering, science, manufacturing, information technology, cybersecurity and business development. The Company develops its workforce using a broad-based recruiting process to select talented individuals and by offering competitive compensation and benefits.
All such required reports have been filed with no adverse comments to date. FEI has a DCAA audited and approved accounting system, which enables the Company to enter into contracts directly with U.S.
The Company is required to submit, for subsequent review, an Incurred Cost Report by October 31, for each year then ended. All such required reports have been filed with no adverse comments to date. FEI has a DCAA audited and approved accounting system, which enables the Company to enter into contracts directly with U.S.
The Company has previously outsourced certain manufacturing processes to third parties and to Russia-based Morion, in which the Company is a minority shareholder. The Company believes its ability to obtain raw materials, manufacture finished products, integrate them into systems and sub-systems and interface these systems with highly sophisticated end-user applications provides a strong competitive edge.
The Company believes its ability to obtain raw materials, manufacture finished products, integrate them into systems and sub-systems and interface these systems with highly sophisticated end-user applications provides a strong competitive edge.
With respect to non-space products, such as systems for precision time for terrestrial secure communication and command and control, and products for multiple applications in the EW market, the Company competes with larger domestic companies such as Microchip Technology Inc. and Mercury Systems.
With respect to non-space products, such as systems for precision time for terrestrial secure communication and command and control, and products for multiple applications in the EW market, the Company competes with larger domestic companies such as Microchip Technology Inc. and Mercury Systems. 8 Table of Contents The Company has previously outsourced certain manufacturing processes to third parties and to Russia-based Morion, in which the Company is a minority stockholder.
Relationships with employees are favorable as reflected in high retention rates and increasing average length of service. Due to low turnover of employees, the average age of the workforce is increasing with time.
The Company currently employs 196 employees (187 full-time and 9 part-time), all based in the U.S. No employees are represented by labor unions. Relationships with employees are favorable as reflected in high retention rates and increasing average length of service. Due to low turnover of employees, the average age of the workforce is increasing with time.
The Company has found its suppliers generally reliable and price-competitive; however, recent quotes for various parts and materials reflect significantly increased delivery schedules and price increases. Where supply chain issues have been encountered, the Company has responded by changing the source of supply or redesigning products and replacing unavailable parts and materials with alternates wherever possible.
Where supply chain issues have been encountered, the Company has responded by changing the source of supply or redesigning products and replacing unavailable parts and materials with alternates wherever possible. FEI is dependent on a limited number of suppliers for space qualified parts.
Government and commercial satellite electronics, as well as products for the U.S. military and commercial telecom customers, are designed and manufactured at the Company’s Long Island, New York headquarters facility. 4 Table of Contents FEI-Elcom designs and manufactures Radio Frequency (“RF”) microwave modules, devices and subsystems up to 60 GHz including fast switching, ultra-low phase noise synthesizers, up-down converters, receivers, tuners, ceramic resonance oscillators and dielectric resonance oscillators.
FEI-Elcom designs and manufactures Radio Frequency (“RF”) microwave modules, devices and subsystems up to 60 GHz including fast switching, ultra-low phase noise synthesizers, up-down converters, receivers, tuners, ceramic resonance oscillators and dielectric resonance oscillators.
He also held leading engineering positions at Loral Electronic Systems, Cardion Electronics, and Airborne Instruments Laboratories. Steven L. Bernstein, age 57, joined the Company in April 2010 as its Controller and was appointed to the position of Chief Financial Officer in April 2016. Effective January 1, 2019, Mr.
Bernstein, age 58, joined the Company in April 2010 as its Controller and was appointed to the position of Chief Financial Officer in April 2016. Effective January 1, 2019, Mr. Bernstein was also appointed as Secretary and Treasurer of the Company, in addition to his role as Chief Financial Officer. Prior to joining the Company, Mr.
Consequently, the Company could experience delays in delivery of its end products or costs in excess of what was originally quoted. 7 Table of Contents RESEARCH AND DEVELOPMENT The Company’s technological leadership continues to be an essential factor as it pursues future growth in revenues and earnings.
RESEARCH AND DEVELOPMENT The Company’s technological leadership continues to be an essential factor as it pursues future growth in revenues and earnings.
Due to the current Russian-Ukraine conflict and resulting sanctions, the future status of FEI’s equity investment in Morion is uncertain. In response to these conditions, in connection with the preparation of the audited financial statements included in this annual report on Form 10-K, the Company impaired its investment in Morion in full.
In response to these conditions, in connection with the preparation of the audited financial statements included in the annual report on Form 10-K, for the fiscal year ended April 30, 2022, as amended (the “2022 Form 10-K”), the Company impaired its investment in Morion in full.
Bernstein was also appointed as Secretary and Treasurer of the Company, in addition to his role as Chief Financial Officer. Prior to joining the Company, Mr. Bernstein worked in the North America accounting group of Arrow Electronics, a Fortune 500 electronics distributor. 9 Table of Contents
Bernstein worked in the North America accounting group of Arrow Electronics, a Fortune 500 electronics distributor. 9 Table of Contents
However, the Company’s experience indicates that programs and/or product sales can be delayed or canceled due to variations associated with periodic U.S. Government appropriations cycles and shifting priorities. Negotiations on U.S. Government contracts are sometimes based in part on Certificates of Current Costs. An inaccuracy in such certificates may entitle the government to an appropriate recovery.
However, the Company’s experience indicates that programs and/or product sales can be delayed or canceled due to variations associated with periodic U.S. Government appropriations cycles and shifting priorities. If the U.S. Government canceled or delayed, even temporarily, programs and/or purchases involving Company products, the Company’s business could suffer a material adverse effect. 6 Table of Contents Negotiations on U.S.
FEI is dependent on a limited number of suppliers for space qualified parts. If these suppliers were unable to deliver in reasonable time frames, then prompt qualification of alternate suppliers may not be feasible or cost effective.
If these suppliers were unable to deliver in reasonable time frames, then the prompt qualification of alternate suppliers may not be feasible or cost effective. Consequently, the Company could experience delays in delivery of its end products or costs in excess of what was originally quoted.
The Company purchases a variety of electrical and other components and materials for use in the manufacture of its products. The Company is not dependent upon any one supplier or source of supply for any of its materials and maintains alternative sources of supply for all of its purchases.
The Company is not dependent upon any one supplier or source of supply for any of its materials and maintains alternative sources of supply for all of its purchases. The Company has found its suppliers generally reliable and price-competitive; however, recent quotes for various parts and materials reflect significantly increased delivery schedules and price increases.
Removed
The Company develops its workforce using a broad-based recruiting process to select talented individuals and by offering competitive compensation and benefits. 8 Table of Contents The Company currently employs approximately 197 employees, all based in the U.S. No employees are represented by labor unions.
Added
FEI-NY – U.S. Government and commercial satellite electronics, as well as products for the U.S. military and commercial telecom customers, are designed and manufactured at the Company’s Long Island, New York headquarters facility.
Removed
Adrian Lalicata, age 75, joined the Company in 2006 as Vice President, RF & Microwave Systems. Prior to joining the Company, Mr. Lalicata served as Vice President of Engineering at Herley-CTI and Communication Techniques, a Dover Company. Mr. Lalicata has also served as Director of Engineering at Microphase Corp. and Adcomm, Inc.
Added
Due to the current Russian-Ukraine conflict and resulting sanctions, the future status of FEI’s equity investment in Morion is uncertain.
Added
Government contracts; however, the cancellation or significant reduction of the Company’s commercial or existing U.S. Government contracts could also have a material adverse effect of the Company’s business. 7 Table of Contents The Company purchases a variety of electrical and other components and materials for use in the manufacture of its products.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

22 edited+12 added−2 removed56 unchanged
Biggest changeAccordingly, investigations, claims, disputes, enforcement actions, litigation or other legal proceedings could have a material adverse effect on our financial position, results of operations and/or cash flows. 13 Table of Contents Risks Related to Information Technology and Intellectual Property Our business could be adversely impacted by significant cybersecurity attacks.
Biggest changeAccordingly, investigations, claims, disputes, enforcement actions, litigation or other legal proceedings could have a material adverse effect on our financial position, results of operations and/or cash flows. 13 Table of Contents The Company ’ s failure to establish and maintain effective internal control over financial reporting resulted in a material misstatement of the audited consolidated financial statements in the Form 10-K for the fiscal year ended April 30, 2022 (the “ 2022 Form 10-K ” ).
Consolidation of industry can result in elimination of suppliers or discontinuation of certain product lines upon which we are reliant, necessitating lifetime buys of components or the need to redesign electronics to incorporate different components, having a negative effect on our financial position, results of operations and/or cash flows.
Consolidation of the industry can result in elimination of suppliers or discontinuation of certain product lines upon which we are reliant, necessitating lifetime buys of components or the need to redesign electronics to incorporate different components, having a negative effect on our financial position, results of operations and/or cash flows.
Specifically, the emergence of numerous low earth orbit (LEO) commercial satellite systems that have significantly lower requirements for life in orbit may result in new products based on commercial parts and processes not required for the high performance and/or longer lived geo-synchronous orbit (GEO) satellites for which the Company has typically developed products.
Specifically, the emergence of numerous LEO commercial satellite systems that have significantly lower requirements for life in orbit may result in new products based on commercial parts and processes not required for the high performance and/or longer lived geo-synchronous orbit (GEO) satellites for which the Company has typically developed products.
Accordingly, if we are unable to continue to compete successfully against our current or future competitor, we may experience declines in future revenues and market share, which could have a material adverse effect on our financial position, results of operations and/or cash flows.
Accordingly, if we are unable to continue to compete successfully against our current or future competitors, we may experience declines in future revenues and market share, which could have a material adverse effect on our financial position, results of operations and/or cash flows.
Our average employee tenure is approximately 15 years and the median age is approximately 55. Our products rely on very experienced engineers, physicists and manufacturing personnel who are trained in-house and who acquire competence only after a lengthy period of time.
Our average employee tenure is approximately 15 years and the median age is approximately 53. Our products rely on very experienced engineers, physicists and manufacturing personnel who are trained in-house and who acquire competence only after a lengthy period of time.
If these suppliers fail to perform or we are unable to procure or experience significant delays with respect to needed products, materials or services, our financial position, results of operations and/or cash flows could be materially adversely effected.
If these suppliers fail to perform or we are unable to procure or experience significant delays with respect to needed products, materials or services, our financial position, results of operations and/or cash flows could be materially adversely affected.
These could result in reputational damage, fines, litigation, operational impacts or significant costs for mitigation and/or recovery, all with adverse consequences to our financial position, results of operations and/or cash flows. Claims by third parties that our products infringe their intellectual property could result in costly disputes and/or require us to develop alternate designs.
These could result in reputational damage, fines, litigation, operational impacts or significant costs for mitigation and/or recovery, all with adverse consequences to our financial position, results of operations and/or cash flows. 14 Table of Contents Claims by third parties that our products infringe their intellectual property could result in costly disputes and/or require us to develop alternate designs.
Due to the relatively low trading volume of our shares of common stock, the sale of a large number of shares of our outstanding common stock may significantly depress the price of our common stock. 14 Table of Contents Item 1B. Unresolved Staff Comments Not Applicable.
Due to the relatively low trading volume of our shares of common stock, the sale of a large number of shares of our outstanding common stock may significantly depress the price of our common stock. 15 Table of Contents Item 1B. Unresolved Staff Comments Not Applicable.
We have and may in the future become subject to investigations, claims, disputes, enforcement actions and administrative, civil or criminal litigation, arbitration or other legal proceedings across a broad array of matters, including government contracts, commercial transactions, false claims, false statements, compliance with government orders, mischarging, contract performance, fraud, procurement integrity, securities laws and requirements, products liability, warranties, hazardous materials, personal injury claims, environmental, stockholder derivative actions, acquisitions and divestitures, intellectual property, tax, corporate law and obligations, employment (including our prior litigation with our founder and former President, Chief Scientist and director), export/import, anti-corruption, debt and equity, labor, health and safety, the COVID-19 pandemic and the Company’s response to it, accidents, and employee benefits and plans, including plan administration, improper payments, and issues related to privacy and security (cyber and physical).
We have and may in the future become subject to investigations, claims, disputes, enforcement actions and administrative, civil or criminal litigation, arbitration or other legal proceedings across a broad array of matters, including government contracts, commercial transactions, false claims, false statements, compliance with government orders, mischarging, contract performance, fraud, procurement integrity, securities laws and requirements, products liability, warranties, hazardous materials, personal injury claims, environmental, stockholder derivative actions, acquisitions and divestitures, intellectual property, tax, corporate law and obligations, employment, export/import, anti-corruption, debt and equity, labor, health and safety, the COVID-19 pandemic and the Company’s response to it, accidents, and employee benefits and plans, including plan administration, improper payments, and issues related to privacy and security (cyber and physical).
For fiscal 2022 and fiscal 2021, approximately 94% and 91% of the Company’s sales, respectively, were made under contracts to the U.S. government or subcontracts for U.S. government end-use. As a subcontractor, the Company is reliant on a few large customers that generally hold the ultimate contract with the U.S. government.
For fiscal 2023 and fiscal 2022, approximately 95% and 94% of the Company’s sales, respectively, were made under contracts to the U.S. Government or subcontracts for U.S. Government end-use. As a subcontractor, the Company is reliant on a few large customers that generally hold the ultimate contract with the U.S. Government.
Due to their nature, fixed price contracts inherently tend to have more financial risk than cost-type contracts, including as a result of inflationary pressures, labor shortages, and increased labor rates. In fiscal 2022, 89% of our sales were derived from fixed-price contracts.
Due to their nature, fixed price contracts inherently tend to have more financial risk than cost-type contracts, including as a result of inflationary pressures, labor shortages, and increased labor rates. In fiscal 2023, 81% of our sales were derived from fixed-price contracts.
Adverse changes in global economic or geopolitical conditions may adversely effect of business operations and financial condition. Global economic and geopolitical conditions may adversely affect our business operations and financial condition.
Adverse changes in global economic or geopolitical conditions may adversely affect business operations and financial condition. Global economic and geopolitical conditions may adversely affect our business operations and financial condition.
Approximately 42.7% of our outstanding common stock is held by 5 individuals or entities. The market price of our common stock could decline if a large number of our shares of outstanding common stock are sold in the public market by our existing stockholders or as a result of the perception that such sales could occur.
Approximately 50.4% of our outstanding common stock is held by 6 individuals or entities. The market price of our common stock could decline if a large number of our shares of outstanding common stock are sold in the public market by our existing stockholders or as a result of the perception that such sales could occur.
As a U.S. government defense industry contractor, the Company has experience cybersecurity attacks in the past and may be subjected to significant cybersecurity attacks in the future in an effort to, among other things, steal intellectual property, disrupt operations, embed ransomware, or initiate insider attacks.
Government defense industry contractor, the Company has experienced cybersecurity attacks in the past and may be subjected to significant cybersecurity attacks in the future in an effort to, among other things, steal intellectual property, disrupt operations, embed ransomware, or initiate insider attacks.
Risks Related to Our Common Stock Our stock price may continue to be volatile. The trading price of our common stock may continue to be volatile, which may adversely affect our investors in our common stock may experience substantial losses. This volatility may or may not be related to our operating performance.
Risks Related to Our Common Stock Our stock price may continue to be volatile. The trading price of our common stock may continue to be volatile. As a result, investors in our common stock may experience substantial losses. This volatility may or may not be related to our operating performance.
These U.S government programs may be only partially or incrementally funded and are subject to potential termination, may be subject to funding reductions and/or delays due to changes in government priorities or other factors.
These U.S Government programs may be only partially or incrementally funded and are subject to potential termination, may be subject to funding reductions and/or delays due to changes in government priorities or other factors. Whether direct contracts with the U.S. Government or contracts with prime contractors to the U.S.
During fiscal 2022, Northrop Grumman Company, Lockheed Martin Corporation and BAE Systems each accounted for more than 10% of the Company’s consolidated revenues. These customers typically incorporate our products into larger programs.
During fiscal year 2023, Lockheed Martin, Northrop Grumman, Office of Naval Research and BAE Systems each accounted for more than 10% of the Company’s consolidated revenues. These customers typically incorporate our products into larger programs.
Item 1A. Risk Factors Risks Related to Business Operations and Our Industry We rely heavily on U.S. government programs for a substantial portion of our business.
Item 1A. Risk Factors Risks Related to Business Operations and Our Industry We rely heavily on U.S. Government programs for a substantial portion of our business. Accordingly, changes in U.S. Government priorities or delays or reductions in spending by the U.S.
If appropriations are delayed or a government shutdown was to occur and was to continue for an extended period of time, we could be at risk of program or contract cancellations and other disruptions and nonpayment.
Government shutdowns, and the federal debt ceiling could also adversely affect our industry and the funding for our current and future contracts. If appropriations are delayed or a government shutdown was to occur and was to continue for an extended period of time, we could be at risk of program or contract cancellations and other disruptions and nonpayment.
Either as a prime contractor or as a subcontractor, we rely heavily on U.S. government programs, from which we derived approximately 94% and 91% of our sales in fiscal 2022 and fiscal 2021, respectively.
Government on such programs could have a material adverse effect on our business, financial position, results of operations and/or cash flows. Either as a prime contractor or as a subcontractor, we rely heavily on U.S. Government programs, from which we derived approximately 95% and 94% of our sales in fiscal 2023 and fiscal 2022, respectively.
Whether direct contracts with the U.S. government or contracts with prime contractors to the U.S. government, our contracts typically are funded at a level less than the full contract value and require periodic incremental additional funding in order to continue.
Government, our contracts typically are funded at a level less than the full contract value and require periodic incremental additional funding in order to continue. Should circumstances change regarding funding and sufficient funding become unavailable, contracts may be terminated, delayed significantly or put on stop work status. U.S.
Should circumstances change regarding funding and sufficient funding become unavailable, contracts may be terminated, delayed significantly or put on stop work status. U.S. government contracts are subject to congressional funding, which may be unavailable due to changes in priorities or subject to continuing resolution, which may result in funding reductions, eliminations or other effects that could impact our business.
Government contracts are subject to congressional funding, which may be unavailable due to changes in priorities or subject to continuing resolution, which may result in funding reductions, eliminations or other effects that could impact our business. Furthermore, budget uncertainty, the risk of future budget cuts, the potential for U.S.
Removed
Accordingly, changes in U.S. government priorities or delays or reductions in spending by the U.S. government on such programs could have a material adverse effect on our business, financial position, results of operations and/or cash flows.
Added
Although we have remediated the material weakness, we cannot assure you that other material weaknesses in internal control over financial reporting will not occur in the future. An ineffective control environment and could result in material misstatements in future consolidated financial statements.
Removed
Furthermore, budget uncertainty, the risk of future budget cuts, the potential for U.S. government shutdowns, and the federal debt ceiling could also adversely affect our industry and the funding for our current and future contracts.
Added
Additionally, the Company ’ s failure to establish and maintain effective internal control over financial reporting could result in the Company ’ s failure to meet its reporting and financial obligations, which in turn could have a negative impact on its financial condition. Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements.
Added
In the course of preparing the condensed consolidated financial statements for the second quarter of fiscal 2023, ended October 31, 2022, the Company identified revisions related to the calculations, and errors related to the presentation of contract assets and contract liabilities in the 2022 Form 10-K.
Added
Following the identification of these prior errors and revisions, management re-evaluated the Company’s internal control over financial reporting as of April 30, 2022 and as of July 31, 2022 and identified certain deficiencies, which the Company concluded constituted material weaknesses in the Company’s internal control over financial reporting as of April 30, 2022 and for the three months ended July 31, 2022.
Added
Under standards established by the Public Company Accounting Oversight Board (United States) (“PCAOB”), a material weakness is defined as a deficiency, or a 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.
Added
A material weakness in the design of monitoring controls indicates that the Company has not sufficiently developed and/or documented internal controls by which management can review and oversee the Company’s financial information to detect and correct material errors or that the personnel responsible for performing the review did not have the sufficient skill set or knowledge of the subject matter to perform a proper assessment.
Added
As a result of the material weaknesses, the Company’s management concluded that the audited consolidated financial statements included in the 2022 Form 10-K were materially misstated. Accordingly, the Company filed the amendment to its 2022 Form 10-K in order to correct the audited consolidated financial statements for the fiscal year ended April 30, 2022.
Added
The material weaknesses were due to revisions related to the calculations, and errors related to the presentation of contract assets and contract liabilities.
Added
In response, the Company implemented the following remediation steps to address the material weaknesses: The Company used additional checks and balances surrounding the calculations and formulas used, as well as additional verification checks regarding the presentation of contract assets and contract liabilities to comply with current reporting requirements.
Added
As of April 30, 2023, the Company’s management believes the identified material weaknesses have been remediated. The Company cannot assure you that new material weaknesses in our internal control over financial reporting will not arise in the future.
Added
Any failure to maintain existing or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in new material weaknesses in the Company’s internal control over financial reporting, could result in future material misstatements in its consolidated financial statements and cause the Company to fail to meet its reporting and financial obligations, which in turn could have a negative impact on the Company’s financial condition.
Added
Risks Related to Information Technology and Intellectual Property Our business could be adversely impacted by significant cybersecurity attacks. As a U.S.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn January 1998, the Company sold this building and the related land lease to Reckson Associates Realty Corp. (“Reckson”), leasing back the space that it presently occupies. The Company leases its manufacturing and office space from RA 55 CLB LLC (as successor-in-interest to Reckson). The lease expires on September 30, 2029.
Biggest changeIn January 1998, the Company sold the building and the related land lease to Reckson Associates Realty Corp. (“Reckson”), leasing back the space that it presently occupies. The Company leases its manufacturing and office space from RA 55 CLB LLC (as successor-in-interest to Reckson). The lease expires on September 30, 2029.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings From time to time, the Company may become a defendant in litigation arising out of the ordinary course of business. As of July 14, 2022, the Company is not party to any material pending legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 15 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings From time to time, the Company may become a defendant in litigation arising out of the ordinary course of business. As of July 27, 2023, the Company is not party to any material pending legal proceedings. Item 4. Mine Safety Disclosures Not applicable. 16 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAny future determinations as to the declaration of dividends on our common stock will be made at the discretion of the Board of Directors and will depend on our earnings, operating and financial conditions, capital requirements and other factors deemed relevant by the Board of Directors.
Biggest changeThe total amount of the special dividend payment was $9.4 million. Any future determinations as to the declaration of dividends on our common stock will be made at the discretion of the Board of Directors and will depend on our earnings, operating and financial conditions, capital requirements and other factors deemed relevant by the Board of Directors.
Shares may be purchased in open market purchases, private transactions or otherwise at such times and from time to time, and at such prices and in such amounts as the Company believes appropriate and in the best interests of its shareholders. The timing and volume of repurchases will vary depending on market conditions and other factors.
Shares may be purchased in open market purchases, private transactions or otherwise at such times and from time to time, and at such prices and in such amounts as the Company believes appropriate and in the best interests of its stockholders. The timing and volume of repurchases will vary depending on market conditions and other factors.
Purchases may be commenced or suspended at any time without notice. The Company has acquired approximately $4 million of its common stock out of the total authorization of $5 million. The Company did not make any purchases of stock for the treasury during fiscal years 2022 or 2021. Item 6. [Reserved]
Purchases may be commenced or suspended at any time without notice. The Company has acquired approximately $4 million of its common stock out of the total authorization of $5 million. The Company did not make any purchases of stock for the treasury during fiscal years 2023 or 2022. Item 6. [Reserved]
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of the Company is listed on The Nasdaq Global Market (“NASDAQ”) under the ticker symbol “FEIM.” As of July 11, 2022, the approximate number of holders of record of common stock was 440.
Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of the Company is listed on The Nasdaq Global Market (“NASDAQ”) under the ticker symbol “FEIM.” As of July 17, 2023, the approximate number of holders of record of common stock was 408.
Removed
DIVIDEND POLICY No dividends were declared or paid during fiscal years 2022 and 2021. The Company currently intends to retain any future earnings for use in the business.
Added
DIVIDEND POLICY No dividends were declared or paid during fiscal year 2022. On December 20, 2022, the Board of Directors of the Company declared a special cash dividend of $1.00 per share of common stock. The dividend was paid on January 26, 2023, to stockholders of record as of the close of business on January 6, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeOf most significance was the impact of increased engineering costs incurred on the developmental programs and the delay in Zyfer bookings, including the relocation of the manufacturing from the California facility to the New York facility. 20 Table of Contents Other Income (Expense), net Fiscal Years Ended April 30, (in thousands) 2022 2021 Change Investment income $ 199 $ 458 $ (259 ) (56.6 )% Loss on disposal of asset (110 ) - (110 ) NM Loss on impairment of Morion (796 ) - (796 ) NM Interest expense (77 ) (127 ) 50 (39.4 )% Other income (expense), net 160 1,103 (943 ) (85.5 )% $ (624 ) $ 1,434 $ (2,058 ) (143.5 )% Investment income is derived primarily from the Company’s holdings of marketable securities, which primarily consist of fixed income securities.
Biggest changeOther Income (Expense), net Fiscal Years Ended April 30, (in thousands) 2023 2022 Change (Loss) income on Investments $ (606 ) $ 199 $ (805 ) NM Loss on disposal of asset - (110 ) 110 (100.0 )% Loss on impairment of Morion - (796 ) 796 (100.0 )% Interest expense (156 ) (77 ) (79 ) NM Other income (expense), net 7 160 (153 ) (95.6 )% $ (755 ) $ (624 ) $ (131 ) 21.0 % Losses on investment income was derived primarily from the sale of the Company’s available-for-sale marketable securities, which primarily consisted of fixed income securities, during the fiscal year ended April 30, 2023.
According to OFAC, the Cautionary Letter was issued instead of pursuing a civil monetary penalty or taking other enforcement action. Due to the current Russia-Ukraine conflict and resulting sanctions, the future status of FEI’s equity investment in Morion is uncertain.
According to OFAC, the Cautionary Letter was issued instead of pursuing a civil monetary penalty or taking other enforcement action. Due to the Russia-Ukraine conflict and resulting sanctions, the future status of FEI’s equity investment in Morion is uncertain.
During fiscal year 2022, the Company secured partial customer funding for a portion of its R&D efforts. The customer funds received in connection therewith appear in revenues and are not included in R&D expenses.
During fiscal year 2023, the Company secured partial customer funding for a portion of its R&D efforts. The customer funds received in connection therewith appear in revenues and are not included in R&D expenses.
For fiscal year 2023, 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 as in fiscal 2022. The Company expects internally generated cash will be adequate to fund these R&D efforts.
For fiscal year 2024, 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 as in fiscal 2023. The Company expects internally generated cash will be adequate to fund these future R&D efforts.
Factors that would cause or contribute to such differences include, but are not limited to, the risks associated with health epidemics and pandemics, including the COVID-19 pandemic and similar outbreaks, such as their impact on our financial condition and results of operations and on our ability to continue manufacturing and distributing our products, and the impact of health epidemics and pandemics on general economic conditions, including any resulting recession, our inability to integrate operations and personnel, actions by significant customers or competitors, general domestic and international economic conditions, reliance on key customers, 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, and the outcome of any litigation and arbitration proceedings.
Factors that would cause or contribute to such differences include, but are not limited to, the risks associated with health epidemics and pandemics, including the COVID-19 pandemic and similar outbreaks, such as their impact on our financial condition and results of operations and on our ability to continue manufacturing and distributing our products, and the impact of health epidemics and pandemics on general economic conditions, including any resulting recession, our inability to integrate operations and personnel, actions by significant customers or competitors, general domestic and international economic conditions, reliance on key customers, 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.
In response to these conditions, in connection with the preparation of the audited financial statements included in this annual report on Form 10-K, the Company impaired its investment in Morion in full. The impairment of $796,000 is included in other income (expense), net, in the Consolidated Statements of Operations for the fiscal year ended April 30, 2022.
In response to these conditions, in connection with the preparation of the audited financial statements included in the 2022 Form 10-K, the Company impaired its investment in Morion in full. The impairment of $796,000 is included in other income (expense), net, in the Consolidated Statements of Operations for the fiscal year ended April 30, 2022.
During the fiscal years ended April 30, 2022 and 2021, the Company received dividends from Morion in the amount of approximately $123,000 and $105,000, respectively, which is included in other income, net in the consolidated statements of operations as part of the FEI-NY segment.
During the fiscal years ended April 30, 2022, the Company received dividends from Morion in the amount of approximately $123,000, which is included in other income, net in the consolidated statements of operations as part of the FEI-NY segment.
During the fiscal years ended April 30, 2022 and 2021, the Company sold product and training services to Morion in the aggregate amount of approximately $23,000 and $94,000, respectively, included in revenues in the consolidated statements of operations as part of the FEI-NY segment.
During the fiscal year ended April 30, 2022, the Company sold product and training services to Morion in the aggregate amount of approximately $23,000, included in revenues in the consolidated statements of operations as part of the FEI-NY segment.
As of April 30, 2022 and 2021, we have a full valuation allowance against our U.S. net deferred tax assets. If these estimates and assumptions change in the future, the Company may be required to reduce its existing valuation allowance resulting in less income tax expense.
As of April 30, 2023 and 2022, we have a full valuation allowance against our U.S. deferred tax assets. If these estimates and assumptions change in the future, the Company may be required to reduce its existing valuation allowance resulting in less income tax expense. The Company evaluates the likelihood of realizing its deferred tax assets quarterly.
During the fiscal years ended April 30, 2022 and 2021, the Company acquired product from Morion in the aggregate amount of approximately $215,000 and $710,000, respectively.
During the fiscal years ended April 30, 2023 and 2022, the Company acquired product from Morion in the aggregate amount of approximately $196,000 and $215,000, respectively.
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. 16 Table of Contents Critical Accounting Policies and Estimates The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements.
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. 17 Table of Contents Critical Accounting Estimates The Company’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements.
The Company also has state net operating loss carryforwards, and state tax credits that expire in various years and amounts. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations was $4.0 million in fiscal year 2022 compared to cash provided by operations of $12.2 million in fiscal year 2021.
The Company also has state net operating loss carryforwards, and state tax credits that expire in various years and amounts. 21 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations was $1.2 million in fiscal year 2023 compared to cash provided by operations of $4.0 million in fiscal year 2022.
(See Note 12 to the Consolidated Financial Statements for a reconciliation of the actual tax benefit to the expected tax provision at the federal statutory rate.) As of April 30, 2022, the Company has U.S. federal net operating losses of $29.6 million of which $15.9 million begins to expire in Fiscal 2026 through Fiscal 2038, including $3.4 million which is subject to annual limitation under IRC Section 382.
(See Note 12 to the Consolidated Financial Statements for a reconciliation of the actual tax benefit to the expected tax provision at the federal statutory rate.) As of April 30, 2023, the Company has U.S. federal net operating losses of $31.3 million of which $15.7 million begins to expire in fiscal year 2026 through fiscal year 2038, including $3.1 million which is subject to annual limitation under IRC Section 382.
Satellite program revenues for government end-use were 52% and 42% of total revenues for fiscal years 2022 and 2021, respectively. Satellite program revenues for commercial end-use were 2% and 7% of total revenue for Fiscal 2022 and Fiscal 2021, respectively. Revenues on satellite program contracts are recorded in the FEI-NY segment and are recognized primarily under the Percentage-of-Completion (“POC”) method.
Satellite program revenues for government end-use were 43% and 52% of total revenues for fiscal years 2023 and 2022, respectively. Satellite program revenues for commercial end-use were 1% and 2% of total revenue for fiscal year 2023 and 2022, respectively. Revenues on satellite program contracts are recorded in the FEI-NY segment and are recognized primarily under the Percentage-of-Completion (“POC”) method.
Significant judgments and estimates are required in the determination of the consolidated income tax expense. 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.
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.
The Company’s balance sheet continues to reflect a highly liquid position with working capital of $34.2 million at April 30, 2022 as compared to $40.6 million at April 30, 2021. Included in working capital at April 30, 2022 was $21.5 million consisting of cash, cash equivalents and short-term investments.
The Company’s balance sheet continues to reflect a highly liquid position with working capital of $21.0 million at April 30, 2023 as compared to $34.2 million at April 30, 2022. Included in working capital at April 30, 2023 was $12.0 million consisting of cash and cash equivalents.
For the years ended April 30, 2022 and 2021, other commercial and industrial sales accounted for approximately 5% of total revenues. Sales in this business area were $2.6 million for the year ended April 30, 2022 compared to $2.5 million for the preceding fiscal year.
Other commercial and industrial sales accounted for approximately 6% and 5% of consolidated revenues for fiscal years 2023 and 2022, respectively. Sales in this business area were $2.6 million for both the fiscal year ended April 30, 2023 and the fiscal year ended April 30, 2022.
In fiscal year 2022, investing activities included the proceeds related to sales of marketable securities net of the purchases of marketable securities of $422,000 and purchases of capital expenditures of $1.9 million.
In fiscal year 2023, investing activities included the proceeds related to sales of marketable securities net of the purchases of marketable securities of $9.6 million and purchases of capital expenditures of $0.9 million.
The Company believes that its cash and cash equivalents, as well as marketable securities as of April 30, 2022 and cash flows from operations will provide sufficient liquidity to meet its operating needs in the normal course of business through the next twelve months from the date of issuance of these consolidated financial statements.
The Company believes that its cash, as of April 30, 2023, and cash flows from operations will provide sufficient liquidity to meet its operating needs in the normal course of business in both the short-term (next twelve months from the date of issuance of these consolidated financial statements) and in the long-term (beyond the next twelve months).
The remaining U.S. federal net operating losses of $13.7 million have an indefinite carry-forward period. The U.S. federal capital loss carry-forward of $9.9 million expires in Fiscal 2023. U.S. federal R&D credits of $1.0 million begin to expire in Fiscal 2036 through Fiscal 2040.
The remaining U.S. federal net operating losses of $15.6 million have an indefinite carry-forward period. The U.S. federal capital loss carry-forward of $0.9 million expires in fiscal years 2025 and 2027. U.S. federal R&D credits of $0.9 million begin to expire in fiscal year 2036 through fiscal year 2040.
Revenues from non-space U.S. Government/DOD customers decreased by approximately $5.2 million, or 21%, in Fiscal 2022 compared to Fiscal 2021. These revenues are recorded in both the FEI-NY and FEI-Zyfer segments and accounted for approximately 41% and 46% of consolidated revenues for fiscal years 2022 and 2021, respectively.
Revenues from non-space U.S. Government/DOD customers increased by approximately $0.7 million, or 4%, in fiscal year 2023 compared to fiscal year 2022. These revenues are recorded in both the FEI-NY and FEI-Zyfer segments and accounted for approximately 50% and 41% of consolidated revenues for fiscal years 2023 and 2022, respectively.
The Company’s current ratio at April 30, 2022 was 2.5 to 1 compared to 3.2 to 1 at the end of the prior fiscal year. 21 Table of Contents During fiscal years 2022 and 2021, the Company incurred $5.4 million and $4.7 million, respectively, in non-cash charges to earnings, including adjustments relating to net assets and liabilities for operating leases, loss provision accrual, loss on impairment of Morion, provision for a note receivable, depreciation and amortization expense, inventory adjustments, warranty and accounts receivable reserves and certain employee benefit plan expenses, including accounting for stock-based compensation.
During fiscal years 2023 and 2022, the Company incurred $5.0 million and $5.4 million, respectively, in non-cash charges to earnings, including adjustments relating to net assets and liabilities for operating leases, loss provision accrual, loss on impairment of Morion, provision for a note receivable, depreciation and amortization expense, inventory adjustments, warranty and accounts receivable reserves and certain employee benefit plan expenses, including accounting for stock-based compensation.
Morion is a less than wholly-owned subsidiary of Gazprombank, a state-owned Russian bank. The U.S. Ukraine-related sanctions regime has since 2014 included a list of sectoral sanctions identifications (“SSI”) pursuant to Executive Order 13662, which prohibits certain transactions, including certain extensions of credit, with an entity designated as an SSI or certain affiliates of an entity designated as an SSI.
Ukraine-related sanctions regime has since 2014 included a list of sectoral sanctions identifications (“SSI”) pursuant to Executive Order 13662, which prohibits certain transactions, including certain extensions of credit, with an entity designated as an SSI or certain affiliates of an entity designated as an SSI.
The Company evaluates the likelihood of realizing its deferred tax assets quarterly. 17 Table of Contents Tax benefits are recognized for an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority.
Tax benefits are recognized for an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position will be sustained upon examination by a taxing authority.
However, the Company expects the new standard to have an immaterial effect on its consolidated financial statements. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which replaces the incurred loss impairment methodology in current U.S.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which replaces the incurred loss impairment methodology in current U.S.
Income Tax Provision (Benefit) Fiscal Years Ended April 30, (in thousands) 2022 2021 Change $ 1 $ (204 ) $ 205 (100.5 )% Fiscal Years Ended April 30, (in thousands) 2022 2021 Effective tax rate on pre-tax book income (loss): (0.0 )% (42.7 )% For the fiscal year ended April 30, 2022, the Company recorded an income tax provision of $1,000.
Income Tax Provision Fiscal Years Ended April 30, (in thousands) 2023 2022 Change $ 74 $ 1 $ 73 NM Fiscal Years Ended April 30, (in thousands) 2023 2022 Effective tax rate on pre-tax book loss: (1.3 )% (0.0 )% For the fiscal year ended April 30, 2023, the Company recorded an income tax provision of $74,000.
For the fiscal year ended April 30, 2021, the Company recorded an income tax benefit of $(204,000) primarily due to a reduction in the uncertain tax position liability in connection with the expiration of the statute of limitations The Company’s effective tax rate of (0.0)% for Fiscal 2022 differs from the U.S. federal statutory rate of 21% primarily due to state taxes and domestic losses for which the Company is not recognizing an income tax benefit.
For the fiscal year ended April 30, 2022, the Company recorded an income tax provision of $1,000. The Company’s effective tax rate of (1.3)% for fiscal year 2023 differs from the U.S. federal statutory rate of 21% primarily due to state taxes and domestic losses for which the Company is not recognizing an income tax benefit.
Research and Development Expenses Fiscal Years Ended April 30, (in thousands) 2022 2021 Change $ 4,975 $ 4,690 $ 285 6.1 % As a percentage of consolidated revenue, R&D expense for the years ended April 30, 2022 and 2021 was approximately 10% and 9%, respectively.
Research and Development Expenses Fiscal Years Ended April 30, (in thousands) 2023 2022 Change $ 3,149 $ 4,975 $ (1,826 ) (36.7 )% As a percentage of consolidated revenue, R&D expense for the fiscal years ended April 30, 2023 and 2022 were 8% and 10%, respectively.
Selling and Administrative Expenses Fiscal Years Ended April 30, (in thousands) 2022 2021 Change $ 11,662 $ 13,189 $ (1,527 ) (11.6 )% In fiscal years ended April 30, 2022 and 2021, selling and administrative expenses (“SG&A”) were 24% of consolidated revenues.
Selling and Administrative Expenses Fiscal Years Ended April 30, (in thousands) 2023 2022 Change $ 9,372 $ 11,662 $ (2,290 ) (19.6 )% In fiscal years ended April 30, 2023 and 2022, selling and administrative expenses (“SG&A”) were 23% and 24% of consolidated revenues, respectively.
Control over these performance obligations passes to the customer over time and therefore these revenues are reported in operating results 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.
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.
The new guidance must be applied on a prospective basis and is effective for periods beginning after December 15, 2022, with early adoption permitted. The Company will not be adopting ASU 2017-04 early, and is in the process of determining the effect that ASU 2017-04 may have.
The new guidance must be applied on a prospective basis and is effective for periods beginning after December 15, 2022, with early adoption permitted. The Company is evaluating the effect, if any, the update will have on its consolidated financial statements.
The Company received a loan under the Paycheck Protection Program in April 2020, which it repaid in full in May 2020. 18 Table of Contents RESULTS OF OPERATIONS Consolidated Results The table below sets forth for the fiscal years ended April 30, 2022 and 2021, the percentage of consolidated net sales represented by certain items in the Company’s consolidated statements of operations: Fiscal Years Ended April 30, 2022 2021 Revenues FEI-NY 85.2 % 78.2 % FEI-Zyfer 16.2 25.5 Less intersegment revenues (1.4 ) (3.7 ) 100.0 100.0 Cost of revenues 82.2 68.8 Gross margin 17.8 31.2 Selling and administrative expenses 24.1 24.3 Research and development expenses 10.3 8.7 Operating loss (16.6 ) (1.8 ) Other (expense) income, net (1.3 ) 2.6 Benefit from income taxes - (0.4 ) Net (loss) income (17.9 )% 1.2 % Revenues Fiscal Years Ended April 30, (in thousands) Segment 2022 2021 Change FEI-NY $ 41,157 $ 42,400 $ (1,243 ) (2.9 )% FEI-Zyfer 7,827 13,835 (6,008 ) (43.4 )% Intersegment revenues (688 ) (1,981 ) 1,293 (65.3 )% $ 48,296 $ 54,254 $ (5,958 ) (11.0 )% Fiscal 2022 revenues from satellite programs, one of the Company’s largest business areas, decreased by $0.9 million, or 3%, compared to the prior fiscal year.
While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its liability for unrecognized tax benefits is adequate. 18 Table of Contents RESULTS OF OPERATIONS Consolidated Results The table below sets forth for the fiscal years ended April 30, 2023 and 2022, the percentage of consolidated net sales represented by certain items in the Company’s consolidated statements of operations: Fiscal Years Ended April 30, 2023 2022 Revenues FEI-NY 79.2 % 85.2 % FEI-Zyfer 24.4 16.2 Less intersegment revenues (3.6 ) (1.4 ) 100.0 100.0 Cost of revenues 80.8 82.2 Gross margin 19.2 17.8 Selling and administrative expenses 23.0 24.1 Research and development expenses 7.7 10.3 Operating loss (11.5 ) (16.6 ) Other (expense) income, net (1.8 ) (1.3 ) Provision from income taxes 0.2 - Net loss (13.5 )% (17.9 )% Revenues Fiscal Years Ended April 30, (in thousands) Segment 2023 2022 Change FEI-NY $ 32,314 $ 41,157 $ (8,843 ) (21.5 )% FEI-Zyfer 9,932 7,827 2,105 26.9 % Intersegment revenues (1,469 ) (688 ) (781 ) NM $ 40,777 $ 48,296 $ (7,519 ) (15.6 )% Fiscal year 2023 revenues from satellite programs, one of the Company’s largest business areas, decreased by $8.2 million, or 31%, compared to the prior fiscal year.
Any changes arising from revised expectations are reflected in cost of revenues in the period the revision is made. Income Taxes Our income tax expense, deferred tax asset and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid.
Income Taxes Our income tax expense, deferred tax asset and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. Significant judgments and estimates are required in the determination of the consolidated income tax expense.
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 and status of the contract. The effect of any change in the estimated gross margin rate for a contract is reflected in revenues in the period in which the change is known.
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.
Purchases of materials from Morion consist mainly of quartz crystal blanks which are used in the fabrication of quartz resonators. In the event that these items become unavailable from Morion, the Company is in the process of establishing alternate sources of supply. The Company is also capable of fabricating the crystal blanks in-house.
In the event that these items become unavailable from Morion, the Company is in the process of establishing alternate sources of supply. The Company is also capable of fabricating the crystal blanks in-house. Morion is a less than wholly-owned subsidiary of Gazprombank, a state-owned Russian bank. The U.S.
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 April 30, 2022, the Company had an accumulated deficit of $20.1 million.
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. During fiscal year 2023, as in fiscal year 2022, the impact of inflation on the Company’s business was due to increases in costs for materials and services.
During fiscal year 2022, operating cash was increased by decreases in contract assets and inventory and increases in contract liabilities. During fiscal year 2021, operating cash was increased by decreases in inventory and increases in contract assets and contract liabilities. Contract liabilities include amounts for programs that are pre-funded for long-lead materials required to be purchased.
Contract liabilities include amounts for programs that are pre-funded for long-lead materials required to be purchased. Net cash provided by investing activities for the fiscal year ended April 30, 2023 was $8.7 million compared to $2.3 million used in investing activities for the fiscal year ended April 30, 2022.
The funds received in connection with customer funded R&D appears in revenues and the associated expenses are included in cost of revenues and are not included in the table above. The Company believes that internally generated cash and cash reserves are adequate to fund its R&D activity.
That being said, FEI is committed to maintaining its technical excellence, and expects future R&D investment to be in line with, or even potentially above historical commitments. The funds received in connection with customer funded R&D appears in revenues and the associated expenses are included in cost of revenues and are not included in the table above.
As of April 30, 2022, the Company had available credit at variable terms based on its securities holdings under an advisory arrangement. No borrowings have been made under this advisory arrangement. The Company will continue to expend resources to develop, improve and acquire products for space and other applications, which management believes will result in future growth and profitability.
There was no cash used in financing activities for the fiscal year ended April 30, 2022. The Company will continue to expend resources to develop, improve and acquire products for space and other applications, which management believes will result in future growth and profitability.
Operating Loss Fiscal Years Ended April 30, (in thousands) 2022 2021 Change $ (8,038 ) $ (958 ) $ (7,080 ) NM For the fiscal year ended April 30, 2022, the Company recorded an operating loss of $8.1 million compared to an operating loss of $1.0 million in the prior year.
The Company believes that internally generated cash and cash reserves are adequate to fund its future R&D activity. 20 Table of Contents Operating Loss Fiscal Years Ended April 30, (in thousands) 2023 2022 Change $ (4,672 ) $ (8,038 ) $ 3,366 (41.9 )% For the fiscal year ended April 30, 2023, the Company recorded an operating loss of $4.7 million compared to an operating loss of $8.1 million in the prior fiscal year.
Gross Profit Fiscal Years Ended April 30, (in thousands) 2022 2021 Change $ 8,599 $ 16,921 $ (8,322 ) (49.2 )% Gross Profit Percentage 17.8 % 31.2 % For the fiscal year ended April 30, 2022, the gross profit and gross profit percentage decreased as the result of several factors.
The Company believes those engineering issues have largely been resolved, and the delayed programs are expected to start during fiscal year 2024 and contribute significantly to sales in fiscal year 2024. 19 Table of Contents Gross Profit Fiscal Years Ended April 30, (in thousands) 2023 2022 Change $ 7,849 $ 8,599 $ (750 ) (8.7 )% Gross Profit Percentage 19.2 % 17.8 % For the fiscal year ended April 30, 2023, the gross profit decreased and gross profit percentage increased as the result of several factors.
In fiscal year 2021, investing activities included the proceeds related to sales of marketable securities net of the purchases of marketable securities of $46,000 and purchases of capital expenditures of $1.2 million. The Company may continue to invest cash equivalents as dictated by its investment and acquisition strategies.
In fiscal year 2022, investing activities included the proceeds related to sales of marketable securities net of the purchases of marketable securities of $422,000 and purchases of capital expenditures of $1.9 million. Net cash used in financing activities for the fiscal year ended April 30, 2023 was approximately $9.4 million related to a dividend payout.
Changes in estimates can have a material impact on the Company’s financial position and results of operations. Revenue Recognition Revenue is recognized when a performance obligation is satisfied, which is when the expected goods or services are transferred to the customer, in an amount that reflects the consideration to which the Company expects to receive.
Changes in estimates can have a material impact on the Company’s financial position and results of operations. Revenue Recognition Revenues are reported in operating results over time using the cost-to-cost method.
The Company evaluates this information continuously and bases its judgments on historical experience, design specifications, and expected costs for material and labor. Contract costs include all direct material, direct labor costs, manufacturing overhead and other direct costs related to contract performance. Selling, general and administrative costs are charged to expense as incurred.
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.
The likelihood of future sales to, purchases, and dividend payments from Morion is questionable. INFLATION During fiscal year 2022, as in fiscal year 2021, the impact of inflation on the Company’s business was due to increases for materials and services throughout fiscal year 2022. The Company believes this may continue to impact expenses in fiscal 2023 and future years.
The Company believes this may continue to impact expenses in fiscal year 2024 and future years. As of April 30, 2023, the Company had an accumulated deficit of $25.6 million.
Removed
A performance obligation is a distinct product or service that is transferred to the customer based on the contract. The transaction price is allocated to each performance obligation and is recognized as revenue upon satisfaction of that performance obligation.
Added
The effect of any change in the estimated gross margin 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.
Removed
The Company derives revenue from contracts with the government, government prime contractors and commercial companies by units sold with specific contractual performance requirements, in many cases unique to the specific customer and/or application. The Company’s contracts typically include one performance obligation which is satisfied by shipped projects and completed services/reports required in the contract.
Added
The majority of the decrease in sales for fiscal year 2023 was in government satellite programs. This decrease is attributable in part to space programs which were delayed due to engineering issues, and in part to programs which were expected to start during fiscal year 2023 but have been delayed.
Removed
Provisions for the full amount of anticipated losses on contracts are made in the period in which they become determinable. For smaller contracts or orders, sales of products and services to customers are reported in operating results based upon (i) shipment of the product or (ii) performance of the services pursuant to terms of the customer order.
Added
The decrease in gross profit dollars was directly related to the decrease in revenues. Although the gross profit percentage increased slightly in fiscal year 2023 as compared to fiscal year 2022, it remains far below our targeted gross profit percentage range of 35%-40%.
Removed
When payment is contingent upon customer acceptance of the installed system, revenue is deferred until such acceptance is received and installation completed. The Company’s products generally carry a one-year warranty, but may vary based on the contract terms. Significant judgment is used in evaluating the financial information for certain contracts to determine an appropriate budget and estimated cost.
Added
However, the Company is encouraged by the fact that the gross profit percentage for the third and fourth quarters of fiscal year 2023 were both over 30%, and the Company anticipates that this trend will continue in fiscal year 2024.
Removed
While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, the Company believes its liability for unrecognized tax benefits is adequate. Interest and penalties recognized on income taxes are recorded as income tax expense.
Added
The low gross profit percentage for fiscal 2022 and fiscal 2023 started in the fourth quarter of fiscal 2022, when we reported that several developmental stage programs experienced substantially higher than anticipated engineering costs.
Removed
COVID-19 Pandemic Update On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (“COVID-19”) and the risks to the international community as the virus spread globally beyond its point of origin.
Added
This continued into the first quarter and partially into second quarter of fiscal year 2023, however, the Company believes those issues have been largely resolved and the gross margin for the third and fourth quarters of fiscal year 2023 has increased to over 30%, as mentioned above.
Removed
In March 2020, the WHO classified the COVID-19 pandemic as a pandemic, based on the rapid increase in exposure globally. The Company’s priority during the COVID-19 pandemic has been to protect the health and safety of its employees while remaining operational.
Added
The decrease in SG&A expenses was mainly due to the decrease in professional fees, deferred compensation expense, stock compensation expense and depreciation expense.
Removed
Within the limitations imposed by governmental health and safety procedures, the Company has continued to manufacture its full range of products at its facilities. The Company has educated employees about COVID-19 symptoms and hygiene best practices.
Added
The $1.8 million decrease in R&D expense year over year was largely due to a renewed focus on correcting the program specific engineering issues identified above as part of an overall effort to return the Company to profitability.
Removed
The Company’s policies also include taking an employee’s temperature before entering facilities; mandating handwashing and use of hand sanitizer; requiring social distancing and, requiring face coverings; encouraging, and in some cases, requiring remote work for those employees who can work from home; and disinfecting facilities.
Added
It should also be noted that FEI has dedicated resources and made substantial progress on two advanced technology development programs which are externally funded, and thus do not show up as internally funded R&D.
Removed
As of July 8, 2022, the Company was aware of eighty-three employees that have had confirmed cases of COVID-19 since the COVID-19 pandemic began, with one fatality in fiscal year 2021. Additional employees have been absent or self-quarantined due to possible COVID exposure, although not having tested positive.
Added
The decrease in operating loss was due to changes made affecting the second half of fiscal year 2023. The Company recorded approximately $614,000 of operating income in the second half of fiscal year 2023, a significant improvement from the $5.4 million operating loss for the first half of fiscal year 2023.
Removed
Since the COVID-19 pandemic began, facilities have remained open except for needing to temporarily vacate certain areas for cleaning and disinfecting following employees either testing positive for COVID or because they had been exposed or possibly exposed to third parties who were positive.
Added
Investment income was derived primarily from the Company’s holdings of marketable securities, which primarily consisted of fixed income securities for the fiscal year ended April 30, 2022.
Removed
Certain Company vendors have been unable to deliver materials on time due to COVID-19 related impacts to their workforces or their supply chains. These delays have impacted the Company’s production schedules, and increased costs associated with procurement of materials and services. The Company continues to monitor these and its other vendors and, if necessary, seek alternative suppliers.
Added
The Company’s current ratio at April 30, 2023 was 1.8 to 1 compared to 2.6 to 1, at the end of the prior fiscal year.
Removed
The Company also believes the pandemic has impacted customers, resulting in delays with respect to anticipated new orders. The full impact of the COVID-19 pandemic continues to evolve as of the date of this report.
Added
During fiscal year 2023, operating cash was increased by decreases in loss on provision accrual and other liabilities and increases in contract assets and inventory, offset by an increase in contract liabilities. During fiscal year 2022, operating cash was increased by a decrease in contract assets and inventory and increases in contract liabilities.
Removed
As such, it is uncertain as to the full magnitude that the pandemic may ultimately have on the Company’s financial condition, liquidity, and future financial results. Management is actively monitoring the impact of the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce.
Added
During the fiscal year ended April 30, 2023, the Company sold no product and training services to Morion, and the Company received no dividends from Morion. Purchases of materials from Morion consist mainly of quartz crystal blanks which are used in the fabrication of quartz resonators.
Removed
Given the changing dynamics of the pandemic and the global responses to curb its spread, including the progress on vaccine distribution, the Company is not able to estimate any future effects of the COVID-19 pandemic on its future results of operations, financial condition, or liquidity.
Added
The likelihood of future sales to, purchases, and dividend payments from Morion is questionable.
Removed
On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property.
Removed
The CARES Act also appropriated funds for the Small Business Administration (SBA) Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by the COVID-19 pandemic.
Removed
The majority of the decrease in sales for fiscal 2022 were in the FEI-Zyfer segment caused by two main factors. The first was a delay in bookings and the second was the relocation of manufacturing from the California facility to the New York facility.
Removed
It is important to note that in both cases the revenue was not lost; instead, the Company believes has been shifted into fiscal 2023.
Removed
Decreased revenues in the FEI-NY segment, which includes FEI-Elcom, as well as at FEI-Zyfer, had a concomitant impact on absorption. 19 Table of Contents Delays in the award of anticipated contracts had a significant down-stream effect on revenue, with a resulting reduction of gross profit.

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