UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

(Mark one)

 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period ended July 31, 2010

OR
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from __________ to __________

Commission File No. 1-8061

FREQUENCY ELECTRONICS, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
11-1986657
(State or other jurisdiction of
(I.R.S. Employer Identification No.)
incorporation or organization)
 
   
55 CHARLES LINDBERGH BLVD., MITCHEL FIELD, N.Y.
11553
(Address of principal executive offices)
(Zip Code)

Registrant's telephone number, including area code: 516-794-4500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes ¨  No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer  ¨     Accelerated filer ¨     Non-accelerated filer ¨  Smaller Reporting Company x
(do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨     No x

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of Registrant's Common Stock, par value $1.00 as of September 10, 2010 – 8,241,472
 


 
 
 

 

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES

INDEX

 
Page No.
   
Part I.  Financial Information:
 
   
Item 1 - Financial Statements:
 
   
Condensed Consolidated Balance Sheets - July 31, 2010 and April 30, 2010
3
   
Condensed Consolidated Statements of Operations Three Months Ended July 31, 2010 and 2009
4
   
Condensed Consolidated Statements of Cash Flows Three Months Ended July 31, 2010 and 2009
5
   
Notes to Condensed Consolidated Financial Statements
6-10
   
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
10-16
   
Item 3 – Quantitative and Qualitative Disclosures about Market Risk
16
   
Item 4T- Controls and Procedures
16-17
   
Part II.  Other Information:
 
   
Item 6 - Exhibits
17
   
Signatures
18
   
Exhibits
 

 
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Condensed Consolidated Balance Sheets
 

   
July 31,
   
April 30,
 
   
2010
   
2010
 
   
(UNAUDITED)
   
(AUDITED)
 
         
(NOTE A)
 
   
(In thousands except share data)
 
ASSETS:
           
Current assets:
           
Cash and cash equivalents
  $ 9,445     $ 9,954  
Marketable securities
    11,470       10,418  
Accounts receivable, net of allowance for doubtful accounts of $266
    8,669       10,504  
Costs and estimated earnings in excess of billings
    2,867       1,667  
Inventories, net
    27,053       26,975  
Prepaid expenses and other
    962       1,122  
Total current assets
    60,466       60,640  
Property, plant and equipment, at cost, less accumulated depreciation and amortization
    6,672       7,015  
Goodwill and other intangible assets
    218       218  
Cash surrender value of life insurance and cash held in trust
    9,049       8,917  
Investment in and loans receivable from affiliates
    3,837       3,813  
Other assets
    817       817  
Total assets
  $ 81,059     $ 81,420  
LIABILITIES AND STOCKHOLDERS' EQUITY:
               
Current liabilities:
               
Short-term credit and lease obligations
  $ 250     $ 246  
Accounts payable - trade
    2,350       1,720  
Income taxes payable
    195       295  
Accrued liabilities
    4,260       5,047  
Total current liabilities
    7,055       7,308  
Lease obligation- noncurrent
    377       441  
Deferred compensation
    9,652       9,624  
Deferred rent and other liabilities
    667       664  
Total liabilities
    17,751       18,037  
Commitments and contingencies
               
Stockholders' equity:
               
Preferred stock  - $1.00 par value
    -       -  
Common stock  -  $1.00 par value
    9,164       9,164  
Additional paid-in capital
    49,628       49,580  
Retained earnings
    5,778       5,271  
      64,570       64,015  
Common stock reacquired and held in treasury -at cost (922,467 shares at July 31, 2010 and 946,172 shares at April 30, 2010)
    (4,437 )     (4,651 )
Accumulated other comprehensive income
    3,175       4,019  
Total stockholders' equity
    63,308       63,383  
Total liabilities and stockholders' equity
  $ 81,059     $ 81,420  

See accompanying notes to condensed consolidated financial statements.

 
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Condensed Consolidated Statements of Operations

Three Months Ended July 31,
(Unaudited)

   
2010
   
2009
 
   
(In thousands except per share data)
 
             
Net revenues
  $ 12,124     $ 12,442  
Cost of revenues
    7,378       8,141  
Gross margin
    4,746       4,301  
                 
Selling and administrative expenses
    2,795       2,567  
Research and development expense
    1,162       1,075  
Operating profit
    789       659  
Other income (expense):
               
Investment income
    80       128  
Equity income (loss)
    28       (49 )
Interest expense
    (35 )     (44 )
Other expense, net
    (5 )     (40 )
Income before provision for income taxes
    857       654  
Provision for income taxes
    350       -  
Net income
  $ 507     $ 654  
                 
Net income per common share:
               
Basic
  $ 0.06     $ 0.08  
Diluted
  $ 0.06     $ 0.08  
                 
Average shares outstanding:
               
Basic
    8,233,570       8,164,627  
Diluted
    8,280,332       8,172,080  

See accompanying notes to condensed consolidated financial statements.

 
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Condensed Consolidated Statements of Cash Flows

Three Months Ended July 31,
 (Unaudited)
 
   
2010
   
2009
 
   
(In thousands)
 
             
Cash flows from operating activities:
           
Net income
  $ 507     $ 654  
Non-cash charges to earnings
    1,043       1,024  
Net changes in other assets and liabilities
    (1,058 )     (495 )
Net cash provided by operating activities
    492       1,183  
                 
Cash flows from investing activities:
               
Purchase of marketable securities
    (2,500 )     -  
Proceeds on redemption of marketable securities
    1,500       -  
Capital expenditures
    (243 )     (175 )
Net cash used in investing activities
    (1,243 )     (175 )
                 
Cash flows from financing activities:
               
Payment of short-term credit and lease obligations
    (70 )     (70 )
Net cash used in financing activities
    (70 )     (70 )
                 
Net (decrease) increase in cash and cash equivalents before effect of exchange rate changes
    (821 )     938  
                 
Effect of exchange rate changes on cash and cash equivalents
    312       (187 )
                 
Net (decrease) increase in cash and cash equivalents
    (509 )     751  
                 
Cash and cash equivalents at beginning of period
    9,954       4,911  
 
               
Cash and cash equivalents at end of period
  $ 9,445     $ 5,662  
                 
Supplemental disclosures of cash flow information:
               
Cash paid during the period for:
               
Interest
  $ 31     $ 55  
Income Taxes
  $ 450       -  

See accompanying notes to condensed consolidated financial statements.

 
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Notes to Condensed Consolidated Financial Statements
(Unaudited)

NOTE A - CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management of Frequency Electronics, Inc. (“the Company”), the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the consolidated financial position of the Company as of July 31, 2010 and the results of its operations and cash flows for the three months ended July 31, 2010 and 2009.  The April 30, 2010 condensed consolidated balance sheet was derived from audited financial statements.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's April 30, 2010 Annual Report to Stockholders on Form 10-K.  The results of operations for such interim periods are not necessarily indicative of the operating results for the full fiscal year.
 
NOTE B - EARNINGS PER SHARE

Reconciliation of the weighted average shares outstanding for basic and diluted Earnings Per Share are as follows:
   
Three months ended July 31,
 
   
2010
   
2009
 
Basic EPS Shares outstanding (weighted average)
    8,233,570       8,164,627  
Effect of Dilutive Securities
    46,762       7,453  
Diluted EPS Shares outstanding
    8,280,332       8,172,080  

The computation of diluted earnings per share excludes those options and stock appreciation rights (“SARS”) with an exercise price in excess of the average market price of the Company’s common shares during the periods presented.  The inclusion of such options and SARS in the computation of earnings per share would have been antidilutive.  The number of excluded options and SARS for the three months ended July 31, 2010 and 2009 were 1,020,775 and 1,325,525, respectively.
 
NOTE C – COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS
 
At July 31, 2010 and April 30, 2010, costs and estimated earnings in excess of billings on uncompleted contracts accounted for on the percentage of completion basis were approximately $2,867,000 and $1,667,000, respectively.  Such amounts represent revenue recognized on long-term contracts that had not been billed at the balance sheet dates, net of amounts billed in excess of the revenue recognized.  Such amounts are billed pursuant to contract terms.  During the three months ended July 31, 2010 and 2009, revenue recognized under percentage of completion contracts was approximately $5.1 million and $4.4 million, respectively.
 
NOTE D - INVENTORIES
 
Inventories, which are reported at the lower of cost or market, consist of the following:

   
July 31, 2010
   
April 30, 2010
 
   
(In thousands)
 
Raw Materials and Component Parts
  $ 11,779     $ 13,192  
Work in Progress
    12,318       11,039  
Finished Goods
    2,956       2,744  
    $ 27,053     $ 26,975  
 
As of July 31, 2010 and April 30, 2010, approximately $18.7 million and $18.2 million, respectively, of total inventory is located in the United States, approximately $7.6 million and $7.9 million, respectively, is located in Belgium and approximately $800,000 and $900,000, respectively, is located in China.

 
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
NOTE E – COMPREHENSIVE INCOME
 
For the three months ended July 31, 2010 and 2009, comprehensive (loss) income is composed of (in thousands):
   
Three months ended July 31,
 
   
2010
   
2009
 
Net income
  $ 507     $ 654  
Foreign currency translation adjustment
    (930 )     372  
Change in market value of marketable securities
    86       323  
Comprehensive (loss) income
  $ ( 337 )   $ 1,349  
 
NOTE F – SEGMENT INFORMATION
 
The Company operates under three reportable segments based on the geographic locations of its subsidiaries:
 
(1)
FEI-NY – operates out of New York and its operations consist principally of precision time and frequency control products used in three principal markets- communication satellites (both commercial and U.S. Government-funded); terrestrial cellular telephone or other ground-based telecommunication stations and other components and systems for the U.S. military.
 
(2)
Gillam-FEI - operates out of Belgium and France and primarily sells wireline synchronization and network management systems in non-U.S. markets.  All sales from Gillam-FEI to the United States are to other segments of the Company.
 
(3)
FEI-Zyfer – operates out of California and its products incorporate Global Positioning System (GPS) technologies into systems and subsystems for secure communications, both government and commercial, and other locator applications.  This segment also provides sales and support for the Company’s wireline telecommunications family of products, including US5G, which are sold in the United States market.
 
The FEI-NY segment also includes the operations of the Company’s wholly-owned subsidiary, FEI-Asia.  FEI-Asia functions primarily as a manufacturing facility for the FEI-NY segment.
 
The Company’s Chief Executive Officer measures segment performance based on total revenues and profits generated by each geographic location rather than on the specific types of customers or end-users.  Consequently, the Company determined that the segments indicated above most appropriately reflect the way the Company’s management views the business.
 
The table below presents information about reported segments with reconciliation of segment amounts to consolidated amounts as reported in the statement of operations or the balance sheet for each of the periods (in thousands):
   
Three months ended July 31,
 
   
2010
   
2009
 
Net revenues:
           
FEI-NY
  $ 7,642     $ 7,065  
Gillam-FEI
    2,973       2,474  
FEI-Zyfer
    2,497       4,249  
Less intercompany revenues
    (988 )     (1,346 )
Consolidated revenues
  $ 12,124     $ 12,442  
Operating profit:
               
FEI-NY
  $ 1,012     $ 87  
Gillam-FEI
    117       (20 )
FEI-Zyfer
    (161 )     656  
Corporate
    (179 )     (64 )
Consolidated operating profit
  $ 789     $ 659  
 
 
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
   
July 31, 2010
   
April 30, 2010
 
Identifiable assets:
           
FEI-NY (approximately $3.5 million in China)
  $ 35,568     $ 35,462  
Gillam-FEI (all in Belgium or France)
    18,683       19,594  
FEI-Zyfer
    7,098       7,413  
less intersegment balances
    (14,139 )     (14,655 )
Corporate
    33,849       33,606  
Consolidated identifiable assets
  $ 81,059     $ 81,420  

NOTE G – RELATED PARTY TRANSACTIONS
 
The Company has an equity interest in two strategically important companies: Elcom Technologies, Inc. (“Elcom”) and Morion Inc. (“Morion”).  During the three month periods ended July 31, 2010 and 2009, the Company acquired technical services from Elcom, purchased crystal oscillator products from Morion and sold certain of its products to both companies.  The Company also receives interest from Elcom under two notes receivable.  The table below summarizes these transactions:
 
   
Three months ended July 31,
 
   
2010
   
2009
 
   
(in thousands)
 
Purchases from:
           
Elcom
  $ 35     $ 6  
Morion
    17       166  
Sales to:
               
Elcom
  $ 58     $ 25  
Morion
    128       8  
Interest on Elcom notes receivable
  $ 25     $ 12  
 
The Company measures the current market value of Elcom based on comparisons to comparable companies as well as Elcom’s forecasts of future financial results.  In fiscal year 2010, the Company determined that its investment was impaired and for the year ended April 30, 2010, recorded impairment charges in the amount $550,000 in addition to its equity share in the income or loss of Elcom during the year.  No impairment charges were recorded during the three months ended July 31, 2010 and 2009.
 
NOTE H – FAIR VALUE OF FINANCIAL INSTRUMENTS
 
The cost, gross unrealized gains, gross unrealized losses and fair market value of available-for-sale securities at July 31, 2010 and April 30, 2010 are as follows (in thousands):
 
   
July 31, 2010
 
         
Gross
   
Gross
   
Fair
 
         
Unrealized
   
Unrealized
   
Market
 
   
Cost
   
Gains
   
Losses
   
Value
 
Fixed income securities
  $ 10,572     $ 348     $ (30 )   $ 10,890  
Equity securities
    450       130       -       580  
    $ 11,022     $ 478     $ (30 )   $ 11,470  

   
April 30, 2010
 
         
Gross
   
Gross
   
Fair
 
         
Unrealized
   
Unrealized
   
Market
 
   
Cost
   
Gains
   
Losses
   
Value
 
Fixed income securities
  $ 9,606     $ 261     $ (90 )   $ 9,777  
Equity securities
    450       191       -       641  
    $ 10,056     $ 452     $ (90 )   $ 10,418  

 
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Notes to Condensed Consolidated Financial Statements
(Unaudited)

The following table presents the fair value and unrealized losses, aggregated by investment type and length of time that individual securities have been in a continuous unrealized loss position:
 
   
Less than 12 months
   
12 Months or more
   
Total
 
   
Fair
   
Unrealized
   
Fair
   
Unrealized
   
Fair
   
Unrealized
 
   
Value
   
Losses
   
Value
   
Losses
   
Value
   
Losses
 
July 31, 2010
                                   
Fixed Income Securities
  $ -     $ -     $ 970     $ (30 )   $ 970     $ (30 )
Equity Securities
    -       -       -       -       -       -  
    $ -     $ -     $ 970     $ (30 )   $ 970     $ (30 )
April 30, 2010
                                               
Fixed Income Securities
  $ -     $ -     $ 3,438     $ (90 )   $ 3,438     $ (90 )
Equity Securities
    -       -       -       -       -       -  
    $ -     $ -     $ 3,438     $ (90 )   $ 3,438     $ (90 )
 
The Company regularly reviews its investment portfolio to identify and evaluate investments that have indications of possible impairment.  The Company does not believe that its investments in marketable securities with unrealized losses at July 31, 2010 are other-than-temporary due to market volatility of the security’s fair value, analysts’ expectations and the Company’s ability to hold the securities for a period of time sufficient to allow for any anticipated recoveries in market value.
 
During the three months ended July 31, 2010, the Company redeemed an available-for-sale security in the amount of $1,500,000 and realized a loss of $27,800 on the transaction which is included in the determination of net income for the period.  During the three months ended July 31, 2009, the Company did not sell or redeem any available-for-sale securities.  Accordingly, there were no realized gains or losses included in the determination of net income for that period.
 
Maturities of fixed income securities classified as available-for-sale at July 31, 2010 are as follows, at cost (in thousands):
 
Current
  $ 1,000  
Due after one year through five years
    9,572  
Due after five years through ten years
    -  
    $ 10,572  
 
The fair value accounting framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).  The three levels of the fair value hierarchy are described below:
 
 
Level 1
Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
 
 
Level 2
Inputs to the valuation methodology include:
 
- Quoted prices for similar assets or liabilities in active markets;
 
- Quoted prices for identical or similar assets or liabilities in inactive markets
 
- Inputs other than quoted prices that are observable for the asset or liability;
- Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
 
 
Level 3
Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.  Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.  All of the Company’s investments in marketable securities are valued on a Level 1 basis.

 
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Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
NOTE I - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
In June 2009, the FASB issued standards which modified how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated.  These standards clarify that the determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance.  These standards require an ongoing reassessment of whether a company is the primary beneficiary of a variable interest entity.  These standards also require additional disclosures about a company’s involvement in variable interest entities and any significant changes in risk exposure due to that involvement.  These standards are effective for fiscal years beginning after November 15, 2009 and were effective for the Company on May 1, 2010.  The adoption of these standards did not have a material impact on the financial condition, results of operations, cash flows and disclosures of the Company.
 
NOTE J – INCOME TAXES
 
The Company has established a valuation allowance against all the deferred tax assets of its domestic and foreign subsidiaries.  Because of the full valuation allowance, the provision for income taxes consists solely of taxes currently due to taxing authorities in the United States.  Any tax provision or benefit realized from temporary tax differences is offset by increases or decreases in the valuation allowance thus creating a higher than normally expected effective tax rate.  As of both July 31, 2010 and April 30, 2010, the deferred tax asset valuation allowance is approximately $8.1 million.
 
NOTE K – TREASURY STOCK TRANSACTIONS
 
During the three month period ended July 31, 2010, the Company made a contribution of 23,705 shares of its common stock held in treasury to the Company’s profit sharing plan and trust under section 401(k) of the Internal Revenue Code.  Such contribution is in accordance with the Company’s discretionary match of employee voluntary contributions to this plan.
 
*********************
 
Item 2
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
 
The statements in this quarterly report on Form 10-Q regarding future earnings and operations and other statements relating to the future constitute "forward-looking" statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.  Factors that would cause or contribute to such differences include, but are not limited to, 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, competitive developments, changes in manufacturing and transportation costs, changes in contractual terms, the availability of capital, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission.  By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this report.
 
Critical Accounting Policies and Estimates
 
The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements included in the Company’s April 30, 2010 Annual Report to Stockholders.  The Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation of inventory.  Each of these areas requires the Company to make use of reasoned estimates including estimating the cost to complete a contract, the realizable value of its inventory or the market value of its products.  Changes in estimates can have a material impact on the Company’s financial position and results of operations.

 
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
 
Revenue Recognition
 
Revenues under larger, long-term contracts which generally require billings based on achievement of milestones rather than delivery of product, are reported in operating results using the percentage of completion method.  On fixed-price contracts, which are typical for commercial and U.S. Government satellite programs and other long-term U.S. Government projects, and which require initial design and development of the product, revenue is recognized on 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 sales recorded as the costs are incurred.  Each month management reviews estimated contract costs through a process of aggregating actual costs incurred and updating estimated costs to completion based upon the current available information and status of the contract.  The effect of any change in the estimated gross margin percentage for a contract is reflected in revenues in the period in which the change is known.  Provisions for anticipated losses on contracts are made in the period in which they become determinable.
 
On production-type orders, revenue is recorded as units are delivered with the related cost of sales recognized on each shipment based upon a percentage of estimated final program costs.  Changes in job performance may result in revisions to costs and income and are recognized in the period in which revisions are determined to be required.  Provisions for anticipated losses on contracts are made in the period in which they become determinable.
 
For customer orders in the Company’s Gillam-FEI and FEI-Zyfer segments or smaller contracts or orders in the FEI-NY segment, 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.  When payment is contingent upon customer acceptance of the installed system, revenue is deferred until such acceptance is received and installation completed.
 
Costs and Expenses
 
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.
 
Inventory
 
In accordance with industry practice, inventoried costs contain amounts relating to contracts and programs with long production cycles, a portion of which will not be realized within one year.  Inventory write downs are established for slow-moving and obsolete items and are based upon management’s experience and expectations for future business.  Any changes arising from revised expectations are reflected in cost of sales in the period the revision is made.

 
11 of 18

 

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
 
RESULTS OF OPERATIONS
 
The table below sets forth for the respective periods of fiscal years 2011 and 2010 the percentage of consolidated revenues represented by certain items in the Company’s consolidated statements of operations:

   
Three months ended July 31,
 
   
2010
   
2009
 
Net Revenues
           
FEI-NY
    63.0 %     56.8 %
Gillam-FEI
    24.5       19.9  
FEI-Zyfer
    20.6       34.1  
Less intersegment revenues
    (8.1 )     (10.8 )
      100.0       100.0  
Cost of revenues
    60.9       65.4  
Gross margin
    39.1       34.6  
Selling and administrative expenses
    23.0       20.6  
Research and development expenses
    9.6       8.7  
Operating Income
    6.5       5.3  
Other income, net
    0.6       -  
Pretax income
    7.1       5.3  
Provision for income taxes
    2.9       -  
Net income
    4.2 %     5.3 %
 
(Note: All dollar amounts in following tables are in thousands, except Revenues which are in millions)
 
Revenues
 
   
(in millions)
 
   
Three months ended July 31,
 
               
Change
 
   
2010
   
2009
   
$
   
%
 
FEI-NY
  $ 7.6     $ 7.1     $ 0.6       8 %
Gillam-FEI
    3.0       2.5       0.5       20 %
FEI-Zyfer
    2.5       4.2       (1.8 )     (41 )%
Intersegment sales
    (1.0 )     (1.4 )     0.4          
    $ 12.1     $ 12.4     $ (0.3 )     (3 )%
 
The 3% decrease in revenues for the three months ended July 31, 2010 compared to the same period of fiscal year 2010, is due to the lower level of telecommunication infrastructure revenues generated by the FEI-Zyfer segment.  In the prior year, revenues for that segment and market area benefited from additional sales that had been delayed from the preceding fiscal quarter due to inventory shortages.  The lower fiscal year 2011 telecommunications revenues were partially offset by increased revenues from the FEI-NY and Gillam-FEI segments and the Company’s other two major market areas: satellite payloads and non-satellite U.S. Government/DOD.  For the fiscal year 2011 quarter, revenues from satellite payload programs increased modestly compared to the same period of fiscal year 2010 and accounted for 31% of consolidated revenues.  Revenues from U.S. Government/DOD non-space programs, which are recorded in the FEI-NY and FEI-Zyfer segments, increased by more than 20% year-over-year and accounted for more than 25% of consolidated revenue in the quarter ended July 31, 2010 compared to approximately 20% of consolidated revenues in the fiscal year 2010 quarter.  Revenues from Gillam-FEI’s non-telecommunication product line accounted for the increased fiscal year 2011 revenues in that segment.  During the remainder of fiscal year 2011, the Company expects to book additional new satellite payload business for both U.S. Government and commercial applications and to realize increased revenues from that market area.  Similarly, the Company expects to realize continued sales growth in U.S. Government/DOD non-space programs and from wireline telecommunication infrastructure products.
 
 
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FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
 
Gross margin
   
Three months ended July 31,
 
               
Change
 
   
2010
    
2009
   
$
   
%
 
    $ 4,746     $ 4,301     $ 445       10 %
GM Rate
    39.1 %     34.6 %                
 
The improvement in gross margin and gross margin rate for the three months ended July 31, 2010 compared to the same period a year ago reflect the benefits of the efficiency improvements which were implemented in the prior year and the different mix of programs on which the Company is working in the fiscal year 2011 period.  Of the Company’s three segments, the FEI-NY segment experienced the largest gross margin rate improvement.  The gross margin rate recorded in the fiscal year 2011 period approaches the Company’s targeted rate.  The Company anticipates that its gross margin rates for the remainder of fiscal year 2011 will be comparable to the current periods and will show an improvement over the prior fiscal year.
 
Selling and administrative expenses
 
   
Three months ended July 31,
 
               
Change
 
     
2010
   
2009
   
$
   
%
 
    $ 2,795     $ 2,567     $ 228       9 %
 
For the three months ended July 31, 2010 and 2009, selling and administrative expenses were 23% and 21%, respectively, of consolidated revenues.  The increase in expenses in the fiscal year 2011 quarter compared to the same period of fiscal year 2010 is primarily due to increased incentive compensation expenses resulting from greater profitability.  For the remainder of fiscal year 2011, the Company expects selling and administrative expenses to be incurred at approximately the same rate in dollars but could decrease as a percentage of revenues as sales increase.
 
Research and development expense
 
   
Three months ended July 31,
 
               
Change
 
   
2010
   
2009
   
$
   
%
  
 
  $ 1,162     $ 1,075     $ 87       8 %
 
Research and development expenditures represent investments intended to keep the Company’s products at the leading edge of time and frequency technology and enhance competitiveness for future revenues.  Research and development spending for the three-month periods ended July 31, 2010 and 2009, was 10% and 9% of revenues, respectively, compared to the Company’s target of 10% of revenues.  R&D spending in fiscal year 2011 continued the development of new satellite payload products, including new C and Ku band beacon/telemetry transceivers, a new family of frequency generators and converters, and new product introductions and improvements in the technology of the Company’s GPS-based wireless products and wireline synchronization equipment.  In addition, the Company continues to conduct development activities on customer-funded programs the cost of which appears in cost of revenues, thus reducing the level of internal research and development spending.  The Company will continue to devote significant resources to develop new products, enhance existing products and implement efficient manufacturing processes.  For the remainder of fiscal year 2011, the Company anticipates that internal research and development spending will be approximately 10% of revenues.  Internally generated cash and cash reserves are adequate to fund these development efforts.

 
13 of 18

 

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
 
Operating Income
   
Three months ended July 31,
 
               
Change
 
   
2010
   
2009
   
$
   
%
 
     $ 789     $ 659     $ 130       20 %
 
Increased gross margin from an improved gross margin rate partially offset by higher operating expenses, particularly in the FEI-NY segment, enabled the Company to record a 20% improvement in operating income for the three-months ended July 31, 2010, compared to the same period of fiscal year 2010.  The Company anticipates that at the current level of business and having implemented certain cost saving measures, that it can sustain operating income at this level.  As the Company gains additional business through increased bookings on its current product lines and expands its product offerings through research and development efforts, operating income is expected to further improve.  The Company anticipates that it will generate operating income for the full fiscal year 2011.
 
Other income (expense)
   
Three months ended July 31,
 
               
Change
 
   
2010
   
2009
   
$
   
%
 
Investment income
  $ 80     $ 128     $ (48 )     (38 )%
Equity income (loss)
    28       (49 )     77    
NM
 
Interest expense
    (35 )     (44 )     9       20 %
Other expenses, net
    (5 )     (40 )     35       88 %
    $ 68     $ (5 )   $ 73    
NM
 
 
Investment income is derived primarily from the Company’s holdings of marketable securities.  Earnings on these securities may vary based on fluctuating interest rate levels and the timing of purchases or sales of securities.  During the quarter ended July 31, 2010, the Company redeemed a marketable security which resulted in a realized loss of approximately $28,000.  No gains or losses on marketable securities were recorded during the same period of fiscal year 2010.
 
Equity income (loss) in the fiscal year 2011 and 2010 periods represent the Company’s share of the quarterly income or loss recorded by Elcom Technologies in which the Company owns a 25% interest.
 
The decrease in interest expense for the three months ended July 31, 2010 compared to the same period of fiscal year 2010 is due to lower levels of credit and lease obligations in the fiscal year 2011 quarter.
 
Other expenses in the fiscal year 2011 quarter were insignificant compared to the quarter ended July 31, 2009 in which period the Company recorded royalty expense and certain foreign currency exchange losses at the Company’s overseas subsidiaries.  Such expenses were not incurred during fiscal year 2011.
 
Income Tax Provision
 
   
Three months ended July 31,
 
               
Change
 
   
2010
   
2009
   
$
   
%
 
     $ 350       -     $ 350    
NM
 
                                 
The Company has established a valuation allowance against all the deferred tax assets of its domestic and foreign subsidiaries.  Because of the full valuation allowance, the provision for income taxes consists solely of taxes currently due to taxing authorities in the United States.  Any tax provision or benefit realized from temporary tax differences is offset by increases or decreases in the valuation allowance thus creating a higher than normally expected effective tax rate.  As of both July 31, 2010 and April 30, 2010, the deferred tax asset valuation allowance is approximately $8.1 million.

 
14 of 18

 

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
 
In the first quarter of fiscal year 2010, the Company expected to carryforward a portion of the tax loss incurred in the previous fiscal year.  Consequently, the Company did not expect to incur any current tax expense even though it recorded pretax income for both financial reporting and tax purposes.  Subsequent to the end of the Company’s second quarter, in November 2009, Congress changed the tax code enabling companies to carry back tax losses up to five years rather than two years.  Consequently, the Company’s U.S. corporate tax return, filed in January 2010, claimed full benefit for the loss incurred in fiscal year 2009 and received a tax refund during fiscal year 2010.  In the second half of fiscal year 2010, the Company recorded an additional tax benefit due to the change in tax law but also recorded a tax provision on that year’s earnings since the prior year tax loss had been fully utilized.
 
The Company is subject to taxation in several countries as well as the states of New York and California.  The statutory federal rates are 34% in the United States and Belgium.  The effective rate is impacted by the income or loss of certain of the Company’s European and Asian subsidiaries which are currently not taxed.  In addition, the Company utilizes the availability of research and development tax credits in the United States to lower its tax rate.  As of April 30, 2010, the Company’s European subsidiaries had available net operating loss carryforwards of approximately $1.3 million, which will offset future taxable income.  The domestic U.S. tax loss carryforward for state income tax purposes is approximately $8.4 million in New York and $2.3 million in California.
 

Net Income
   
Three months ended July 31,
 
               
Change
 
   
2010
   
2009
   
$
   
%
 
     $ 507     $ 654     $ (147 )     (22 )%
                                 
As discussed above, for the three months ended July 31, 2010, the Company recorded a provision for income taxes but was not required to do so in the same period of fiscal year 2010.  Consequently, net income in fiscal year 2011 is less than fiscal year 2010 even though pretax income for the period ended July 31, 2010 is greater than the prior year.  The Company expects to realize improved gross and operating margins throughout fiscal year 2011 and anticipates that it will report a profit for the full year.  However, comparisons of net income to the prior year will be inconsistent due to the change in tax law as discussed above.
 
LIQUIDITY AND CAPITAL RESOURCES
 
The Company’s balance sheet continues to reflect a strong working capital position of $53 million at July 31, 2010, similar to that at April 30, 2009.  Included in working capital at July 31, 2010 is $20.9 million of cash, cash equivalents and marketable securities.  The Company’s current ratio at July 31, 2010 is 8.6 to 1.
 
For the three months ended July 31, 2010, the Company had positive cash flow from operating activities of $492,000 compared to $1.2 million provided by operations in the comparable fiscal year 2010 period.  The primary sources of cash in the fiscal year 2010 period were profitable operations and net increase in trade payables.  For the three months ended July 31, 2010 and 2009, the Company incurred over $1.0 million of non-cash operating expenses, such as depreciation and amortization and accruals for employee benefit programs.  For the balance of fiscal year 2011, the Company expects to generate positive cash flow from operating activities.
 
Net cash used in investing activities for the three months ended July 31, 2010 and 2009, was $1.2 million and $175,000, respectively.  In the fiscal year 2011 quarter, the Company redeemed a marketable security in the amount of $1.5 million and invested in additional marketable securities for $2.5 million.  In both fiscal years, the Company acquired property, plant and equipment in the amount of $243,000 and $175,000, respectively.  The Company may continue to acquire or sell marketable securities as dictated by its investment strategies as well as by the cash requirements for its development activities.  Property, plant and equipment purchases for all of fiscal year 2011 are expected to be less than $1.0 million.  Internally generated cash is adequate to acquire this level of property, plant and equipment.
 
Net cash used in financing activities for the three months ended July 31, 2010 and 2009, was $70,000 each quarter which consisted solely of payments against the Company’s capital lease obligation.

 
15 of 18

 

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued)
 
The Company has been authorized by its Board of Directors to repurchase up to $5 million worth of shares of its common stock for treasury whenever appropriate opportunities arise but it has neither a formal repurchase plan nor commitments to purchase additional shares in the future.  As of July 31, 2010, the Company has repurchased approximately $4 million of its common stock out of the $5 million authorization.
 
The Company will continue to expend resources to develop and improve products for space applications, guidance and targeting systems, and communication systems which management believes will result in future growth and continued profitability.  During fiscal year 2011, the Company intends to make a substantial investment of capital and technical resources to develop and acquire new products to meet the needs of the U.S. Government, commercial space and telecommunications infrastructure marketplaces and to invest in more efficient product designs and manufacturing procedures.  Where possible, the Company will secure partial customer funding for such development efforts but is targeting to spend its own funds at a rate of approximately 10% of revenues to achieve its development goals.  Internally generated cash will be adequate to fund these development efforts.  The Company may also pursue acquisitions to expand its range of products and may use internally generated cash and external funding in connection with such acquisitions.
 
As of July 31, 2010, the Company's consolidated backlog amounted to approximately $32 million.  Approximately 75% of this backlog is expected to be filled in the next twelve months.  Included in the backlog at July 31, 2010 is approximately $7 million under cost-plus-fee contracts which the Company believes represent firm commitments from its customers for which the Company has not received full funding to date.  The Company excludes from backlog any contracts or awards for which it has not received authorization to proceed.
 
The Company believes that its liquidity is adequate to meet its operating and investment needs through at least April 30, 2011.
 
Off-Balance Sheet Arrangements
 
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
 
Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable.
 

Item 4T.
Controls and Procedures
 
Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report.  There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures.  Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.  Based on their evaluation, the Company’s chief executive officer and chief financial officer have concluded that, for the reasons discussed below, as of July 31, 2010, the Company’s disclosure controls and procedures were not effective to ensure that information relating to the Company, including its consolidated subsidiaries, required to be included in its reports that it filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

 
16 of 18

 

FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
(Continued) 
 
Management’s Report on Internal Control over Financial Reporting
 
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.  The Company’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
As disclosed in its Form 10-K for the year ended April 30, 2010, the Company has identified several material weaknesses in its internal control over financial reporting.  While the Company did not conduct a full assessment of the effectiveness of internal controls over financial reporting at July 31, 2010, for the first quarter of fiscal year 2011, there were no substantial changes made to the Company’s internal control over financial reporting since management’s assessment of April 30, 2010, and therefore the weaknesses previously identified by management continued to exist at July 31, 2010.  Please refer to the Company’s Annual Report on Form 10-K for the year ended April 30, 2010 for a more detailed discussion of the weaknesses previously identified by management.
 
Changes in Internal Control Over Financial Reporting. There were no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended July 31, 2010 to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
PART II
ITEM 6 - Exhibits
 
31.1 -
Certification by the Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
31.2 -
Certification by the Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
32.1 -
Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2 -
Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 
17 of 18

 
 
SIGNATURES

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

 
FREQUENCY ELECTRONICS, INC.
 
(Registrant)
       
Date: September 14, 2010 
BY 
/s/  Alan Miller   
   
      Alan Miller
 
Secretary/Treasurer and Chief Financial Officer
   
Signing on behalf of the registrant and as
principal financial officer
 
 
18 of 18

 

Exhibit 31.1

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

Certification of CEO

I, Martin B. Bloch, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Frequency Electronics, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
  /s/  Martin Bloch
 
September 14, 2010
Martin B. Bloch
   
Chief Executive Officer
   

 
 

 

Exhibit 31.2

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

Certification of CFO

I, Alan L. Miller, certify that

1.  I have reviewed this quarterly report on Form 10-Q of Frequency Electronics, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)  Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

  /s/  Alan Miller
 
September 14, 2010
Alan L. Miller
   
Chief Financial Officer
   

 
 

 

 Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Certification of CEO

In connection with the Quarterly Report of Frequency Electronics, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Martin B. Bloch, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

  /s/  Martin Bloch
 
September 14, 2010
Martin B. Bloch
   
Chief Executive Officer
   
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
 
This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

 
 

 

 Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Certification of CFO

In connection with the Quarterly Report of Frequency Electronics, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alan L. Miller, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
  /s/  Alan Miller
 
September 14, 2010
Alan L. Miller
   
Chief Financial Officer
   
 
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
 
This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.