SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10K
                                   (Mark One)
            [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
                    For the fiscal year ended April 30, 1996
                                       OR
            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF
              THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
                     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

Securities registered pursuant to Section 12 (b) of the Act:
                                                   Name of each exchange on
Title of each class                                     which registered
- -----------------------                           --------------------------
Common Stock (par value                          American Stock Exchange, Inc.
      $1.00 per share)

Securities registered pursuant to Section 12 (g) of the Act:

                                      None
                                (Title of Class)

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 if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
Registrant as of July 12,1996 - $24,488,500.

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

The number of shares  outstanding of Registrant's  Common Stock, par value $1.00
as of July 12,1996 - 4,848,395.

DOCUMENTS  INCORPORATED  BY  REFERENCE:  PART III  incorporates  information  by
reference  from  the  definitive  proxy  statement  for the  Annual  Meeting  of
Stockholders to be held on August 27,1996.

                           (Cover Page 1 of 63 pages)
                            Exhibit Index at Page 52




                                     PART I
Item 1. Business
GENERAL  DISCUSSION

     Frequency   Electronics,   Inc.(sometimes   referred  to  as  "Registrant",
"Frequency  Electronics"  or  "Company")  was founded in 1961 as a research  and
development firm in the area of time and frequency  control.  Unless the context
indicates otherwise,  references to the Registrant are to Frequency Electronics,
Inc. and its subsidiaries.
   
         Frequency  Electronics was  incorporated in Delaware in 1968 and became
the  successor  to the  business  of  Frequency  Electronics,  Inc.,  a New York
corporation,  organized in 1961.  The  principal  executive  office of Frequency
Electronics is located at 55 Charles  Lindbergh  Boulevard,  Mitchel Field,  New
York 11553. Its telephone number is 516-794-4500.
    
         The current authorized capital of the Registrant consists of 20,000,000
shares  of $1.00  par  value  common  stock,  of  which  4,846,395  shares  were
outstanding at April 30, 1996,  and 600,000 shares of $1.00 par value  preferred
stock, none of which have been issued to date.

         Since  its  inception,  Registrant  has been  involved  principally  in
military defense contracting by way of the design, development, manufacture, and
marketing of precision  time and frequency  control  products.  Its products are
used in guidance and  navigation,  communications,  surveillance  and electronic
counter measure and timing systems. Such products are used on many of the United
States' most  sophisticated  military  aircraft,  satellites,  and missiles.  In
recent years,  changing defense  priorities and severe federal government budget
pressures have significantly  changed the market environment for defense related
products.  Total U.S.  Government  defense and space  acquisitions have declined
steeply  and further  cuts  cannot be  discounted  over the coming  years.  As a
consequence, many major U.S. Government contracts have been subjected to program
stretch-outs.  The  Registrant's  business was highly dependent upon the defense
and space  spending  policies  of the U.S.  Government  when  fiscal 1996 began.
Although this  dependence will be less  significant in the future,  as discussed
below, any substantial reduction in government spending or change in emphasis in
the government's  defense and space programs would still have a material adverse
effect upon the Registrant's business. For additional factors which may have had
an  adverse  effect  on  Registrant's  business  with the U.S.  Government,  the
materiality,  if any, or extent of which effect is not readily  ascertainable by
Registrant  at  this  time,   reference  is  made  to  the  subtopic   "Material
Developments" of this Item 1 and to Item 3 (Legal Proceedings).
         In an effort to better  serve  customers on a more  competitive  basis,
Registrant has segmented its operations into two principal  industries:  Defense
and space for United States  Government end use, and  commercial  communications
and non-U.S.  defense and space. The Registrant's commercial  communications and
commercial  space programs have been  transferred to and are now produced by its
wholly owned subsidiary FEI Communications, Inc. ("FEIC"). FEIC was incorporated
in Delaware in December 1991, and was created as a separate  subsidiary  company
to provide ownership and management of assets and other services appropriate for
commercial  clients,  both domestic and foreign.  Registrant  believes that as a
separate entity operational flexibility and efficiency isenhanced.

         For the years ended April 30, 1996, 1995 and 1994,  approximately  55%,
75% and 69%, respectively of the Registrant's sales were for U.S. Government end
use. During fiscal 1996,  approximately  45% of the Registrant's  sales were for
commercial  products,  used  for  commercial  communications,  commercial  space
applications and foreign government end use.  Registrant  believes a substantial
commercial  market  exists  and has  developed  several  new  product  lines  as
discussed later in this Item 1.


MATERIAL DEVELOPMENTS
         On November  17,  1993,  Registrant  was  indicted on criminal  charges
alleging  conspiracy  and  fraud in  connection  with six  contracts  for  which
Registrant was a subcontractor.  In addition,  two derivative  actions have been
filed against the Board of Directors  essentially  seeking recovery on behalf of
the Company for any losses it incurs as a result of the indictment.  On December
14, 1993,  Registrant was notified by the U.S.  Department of the Air Force that
it had been  suspended  from  contracting  with any  agency  of the  government.
Current  contracted  programs  are  not  affected  by this  suspension.  Certain
exceptions will apply if a compelling reason exists. The suspension is temporary
subject  to  the  outcome  of the  legal  proceedings  in  connection  with  the
indictment. The Company and the individual defendants have pleaded not guilty to
all criminal  charges,  have denied all civil  allegations,  and will vigorously
contest all charges and allegations. See Item 3 - Legal Proceedings.

PRODUCTS
         Since  its  inception,  Registrant  has been  involved  in the  design,
development,  manufacture and marketing of precision time and frequency  control
products.  Using  the  technology  the  Registrant  has  developed  in time  and
frequency  products  for limited  applications,  the  Registrant  has modified a
number  of  products  for  wider  application  in the much  broader  navigation,
communications  and  electronic  warfare  markets  and  non-military  commercial
markets.
         The  Registrant's   products  are  used  in  guidance  and  navigation,
communications,  surveillance and electronic  countermeasure and timing systems.
These  products are built in accordance  with  Department of Defense or customer
standards and are used on many of the United States' most sophisticated military
aircraft, satellites and missiles.
         Registrant designs and manufactures the master clocks (quartz, rubidium
and cesium) for many  satellite  communication  systems for both  satellite  and
ground  applications.  The Global  Positioning  Satellite System, as well as the
MILSTAR  Satellite  System,  are but two  examples of the  programs in which the
Registrant  participates.  Registrant also supplies  significant timing products
utilized with many satellite communications systems.
         Registrant  manufactures the master clock for the Trident missile,  the
basic  timing  system for the  Voyager I and  Voyager II deep space  exploratory
missions and the quartz timing system for the Space  Shuttle.  The  Registrant's
cesium  beam  atomic  clock  is  presently  employed  in  low  frequency  secure
communications,  surveillance and positioning  systems for the United States Air
Force, Navy and Army.

         The  Registrant's  products  are  marketed  as  components,   microwave
products,   instruments,  or  complete  systems  and  are  used  in  navigation,
communications,    radar,   sonar,   guidance,   surveillance   and   electronic
countermeasure  equipment  and  systems.  Prices are  determined  based upon the
complexity,  design  requirement  and  delivery  schedule as  determined  by the
project details.

         Sales summaries for each class of Registrant's  products during each of
the last five years is set forth in Item 6 (Selected Financial Data).

         Most of  Registrant's  products  are  manufactured  from raw  materials
which, when combined with conventional electronic component parts available from
multiple  sources,  become  finished  products,  subsystems and systems used for
space exploration, satellite applications,  communication,  navigation, position
location, radar, and electronic counter-measures. These products, subsystems and
systems are employed in domestic and international  satellites,  earth stations,
aircraft, missiles, ships and submarines, and ground-based fixed, transportable,
portable and mobile installations.
         COMPONENTS - The Registrant's key technologies include quartz, rubidium
and cesium from which it manufactures  accurate time and frequency standards and
higher level assemblies which allow the users to locate their position, secure a
communications  system, or guide a missile with precision.  The components class
of Registrant's products is rounded out with crystal filters and discriminators,
surface acoustic wave resonators,  and space and  high-reliability  custom thick
and thin film hybrid integrated circuits.
         Quartz  is the  key  element  in  making  quartz  resonators  used  for
oscillators and filters utilized in most of its products.
         Precision quartz  oscillators use quartz resonators in conjunction with
electronic circuitry to produce signals with accurate and stable frequency.  The
Registrant's  products include several types of quartz oscillators,  suited to a
wide range of applications,  including: ultrastable units for critical satellite
and strategic systems,  and fast warm-up, low power consumption units for mobile
and tactical applications.
         The ovenized quartz  oscillator is the most accurate type,  wherein the
oscillator crystal is enclosed in a temperature  controlled environment called a
proportional oven. The Registrant  manufactures several varieties of temperature
controlling devices and ovens.
         The   voltage-controlled   quartz   oscillator  is  an   electronically
controlled  device  wherein  the  frequency  may  be  stabilized  or  modulated,
depending upon the application.
         The  temperature  compensated  quartz  oscillator is an  electronically
controlled  device using a temperature  sensitive device to directly  compensate
for the effect of temperature on the oscillator's frequency.
         The key components for the atomic instrument  products are manufactured
totally from raw materials. The rubidium lamp, filter and resonance cell provide
the optical  subassembly used in the manufacture of the  Registrant's  optically
pumped atomic rubidium  frequency  standards.  The cesium tube resonator is also
manufactured  totally from raw materials and is used in the  manufacture  of the
Registrant's cesium primary standard atomic clocks.
         Efficient and reliable DC-DC power  converters are manufactured for the
Registrant's  own  instruments,  and as stand  alone  products,  for  space  and
satellite applications.
         The  Registrant  manufactures  filters  and  discriminators  using  its
crystal  resonators,  for use in its own radio-frequency and microwave receiver,
signal conditioner and signal processor products.
         High  reliability,  MIL-M-38510  Class  S and  B,  custom  hybrids  are
manufactured in thick and thin film  technologies for applications from DC to 44
GHz.  These  are  used in  manufacturing  the  Registrant's  products,  and also
supplied directly to customers, for space and other high reliability systems.

         MICROWAVE  PRODUCTS - The  Registrant,  under an  agreement  with TRW's
Electronics   and  Technology   Division,   markets  their   extensive  line  of
millimeter/microwave  monolithic integrated circuits ("MIMICs") developed by TRW
for the  Department of Defense,  and microwave  monolithic  integrated  circuits
("MMICs")  developed  at TRW's own cost.  These  devices are  incorporated  into
"supercomponents" and integrated subassemblies.

         INSTRUMENTS - The Registrant's  instrument line consists of three basic
time and frequency generating instruments and a number of instruments which test
and  distribute  the time and  frequency.  The  Registrant's  time and frequency
generating  instruments  are the  quartz  frequency  standard,  rubidium  atomic
standard, and the cesium beam atomic clock.
         The  quartz  frequency   standard  is  an   electronically   controlled
solid-state  device  which  utilizes a quartz  crystal  oscillator  to produce a
highly  stable  output  signal at a  standardized  frequency.  The  Registrant's
frequency standard is used in  communications,  guidance and navigation and time
synchronization.  The Registrant's  products also include a precision  frequency
standard  with battery  back-up and memory  capability  enabling it to remain in
operation if a loss of power has occurred.  The optically pumped atomic rubidium
frequency  standard is a rugged,  compact,  militarized  solid-state  instrument
which provides both timing and low phase noise references used in communications
systems.
         The  cesium   beam  atomic   clock   utilizes   the  atomic   resonance
characteristics of cesium atoms to generate precise frequency, several orders of
magnitude  more accurate than other types of quartz  frequency  generators.  The
atomic clock is a compact,  militarized solid-state device which generates these
precision  frequencies  for use  with  advanced  communications  and  navigation
equipment.  A digital  time-of-day  clock is incorporated  which provides visual
universal  time display and provides  digital  timing with  ten-billionths  of a
second accuracy for systems use. The atomic clock  manufactured by Registrant is
a primary  standard,  capable of producing  time  accuracies  of better than one
second in seven hundred thousand years.
         As  communications  systems become more precise,  the  requirement  for
precise  frequency  signals to drive a  multitude  of  electronic  equipment  is
greatly  expanded.  To meet this  requirement,  the  Registrant  manufactures  a
distribution amplifier which is an electronically  controlled solid-state device
that receives  frequency from a frequency  standard and provides multiple signal
outputs of the input frequency.  A distribution  amplifier enables many items of
electronic  equipment  in a  single  facility,  aircraft  or ship to  receive  a
standardized  frequency  and/or time  signal  from a quartz,  rubidium or cesium
atomic standard.



         SYSTEMS - Essentially, the Registrant's systems portion of its business
is manufactured  by integrating  selections of its products into subsystems that
meet  customer-defined  needs. This is done by utilizing its unique knowledge of
interfacing these technologies,  and experience in applying them to a wide range
of systems. In general, though not limited to, the Registrant's systems generate
electronic frequencies of predetermined value, and then divide,  multiply,  mix,
convert, modulate,  demodulate,  filter, distribute,  combine, separate, switch,
measure, analyze, and/or compare, depending on the system application.
         The Systems  portion of the business  includes a complete  line of time
and frequency  control systems,  capable of generating many frequencies and time
scales that may be distributed to widely dispersed users, or within the confines
of a facility  or  platform,  or for a single  dedicated  purpose.  The time and
frequency control systems combine Registrant's  cesium,  rubidium and/or crystal
instruments,  with its other products, to provide systems for space exploration,
satellite tracking stations,  satellite-based  navigation and position location,
secure communication,  submarine and ship navigation calibration, and electronic
counter-measures  applications.  A number of these  time and  frequency  control
systems provide up to quadruple redundancy to assure operational longevity.
         For example, the Registrant  manufactured the Common Time and Frequency
System (CTFS) for the first and second Time Data Relay Satellite  System (TDRSS)
Ground System. It includes redundant cesium standards and redundant  Disciplined
Standards,  redundant  switches,  time code generators,  buffer amplifiers,  and
displays; and integrates WWVB, LORAN and GPS receivers and antennas, and various
instrumentation and non-interruptible power supplies.
         As a second  example,  the Registrant  manufactured a  triple-redundant
quartz  crystal  oscillator  and frequency  distribution  sub-system for MILSTAR
Satellite   Flight   #1   and   quadruple-redundant   rubidium   standards   and
dual-redundant  frequency distribution and DC-DC power converter sub-systems for
MILSTAR Flights #2 through #5.
         The Registrant also manufactures  satellite  communications  subsystems
such as the up and down converters for the TDRSS  satellites and the 30 channel,
triple conversion element separator for the TDRSS earth stations,  and the LNA's
up/down converters and receiver subsystems for the DSP.
         See Item 6 - Selected Financial Data - for sales data for each of these
product lines.

BACKLOG

         As  of  April  30,  1996,   the   Registrant's   backlog   amounted  to
approximately  $15  million of which  approximately  $13.7  million is funded as
compared to  approximately  $15 million of funded backlog at April 30, 1995 (see
Item 7). The backlog includes  purchase orders and contracts from commercial and
foreign customers of approximately $8.6 million.  A substantial  portion of this
backlog is expected to be filled  during  Registrant's  fiscal year ending April
30, 1997.  While the backlog includes firm purchase orders and contracts and may
be a guideline in  determining  the value of orders which may be  deliverable in
the period  indicated,  it is  subject  to change by reason of  several  factors
including possible cancellation of orders, change orders, terms of the contracts
and other factors beyond the Registrant's control.  Accordingly,  the backlog is
not  necessarily  indicative  of the revenues or profits  (losses)  which may be
realized when the results of such contracts are reported.


CUSTOMERS AND SUPPLIERS

         The  Registrant  markets  its  products  both  directly  and through 35
independent sales representative organizations located principally in the United
States.  Sales to non-U.S.  customers totaled  approximately 17% of net sales in
1996 and 16% in fiscal years 1995 and 1994.
         The  Registrant's  products  are sold to a variety of  customers,  both
governmental  and private.  For the years ended April 30,  1996,  1995 and 1994,
approximately  55%, 75% and 69%,  respectively,  of the Registrant's  sales were
made under contracts to the U.S.  Government or subcontracts for U.S. Government
end-use.  The  Registrant's  business is highly  dependent  upon the defense and
space spending  policies of the U.S.  Government.  Any substantial  reduction in
government spending or change in emphasis in the government's  defense and space
programs  would have a material  adverse effect upon the  Registrant's  business
(see Item 3).
         Sales to Hughes  Aircraft  Company  (HAC) and Space  Systems Loral each
exceeded 10% of the  Company's  consolidated  sales for the year ended April 30,
1996.  Collectively  these two companies  accounted for approximately 39% of the
Company's  consolidated  sales for the same period. For the year ended April 30,
1995,  sales to HAC, TRW and Raytheon Corp.  exceeded 10%  individually  and 56%
collectively of consolidated  sales. For the year ended April 30, 1994, sales to
HAC and  Raytheon  Corp.  exceeded  10%  individually  and 40%  collectively  of
consolidated  sales.  For the fiscal year ended April 30, 1996, the sales to HAC
were  substantially  all for U.S.  Government  end use  while the sales to Space
Systems Loral were for commercial  communication  and foreign  defense and space
applications. Sales to the above named customers in the fiscal years ended April
30, 1995 and 1994 were  substantially all for U.S.  government end use. The loss
by the Company of any one of these customers or, for those customers contracting
with  the  U.S.  Government,  the  loss of any  contracts  which  are  partially
subcontracted  to the  Company,  would  have a  material  adverse  effect on the
Company's  business.  The Company believes its relationship with these companies
to be  mutually  satisfactory  and,  except for the  pending  legal  proceedings
discussed  in Item 3, is not aware of any prospect  for the  cancellation  of or
significant  reduction  of any of their U.S.  Government  contracts in which the
Company is involved.

         The Registrant  purchases a variety of components  such as transistors,
resistors,  capacitors,  connectors and diodes for use in the manufacture of its
products.  The  Registrant is not  dependent  upon any one supplier or source of
supply for any of its component part purchases and maintains alternative sources
of supply for all of its  purchased  components.  The  Registrant  has found its
suppliers generally to be reliable and price-competitive.


  GOVERNMENT CONTRACTS

         During  the  fiscal  years  ended  April  30,  1996,   1995  and  1994,
approximately  55%, 75% and 69%,  respectively,  of the Registrant's  sales were
made either directly with U.S. Government agencies or indirectly with government
agencies through subcontracts  intended for government end-use. All but a few of
these  contracts  are on a fixed price basis.  Under a fixed price  contract the
price paid to the Registrant is not subject to adjustment by reason of the costs
incurred by the Registrant in the performance of the contract,  except for costs
incurred due to contract changes ordered by the customer. These contracts are on
a negotiated  basis under which the  Registrant  bears the risk of cost overruns
and derives the benefit from cost savings.
         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.  From time to time,  the  Defense
Contracts  Audit  Agency  ("DCAA")  of the  Department  of  Defense  audits  the
Registrant's  accounts with respect to these  contracts.  The  Registrant is not
aware of any basis for recovery with respect to past certificates.
         All  government  end-use  contracts are subject to  termination  by the
purchaser for the convenience of the U.S.  Government and are subject to various
other provisions for the protection of the U.S. Government. In the event of such
termination,  the  Registrant  is entitled to receive  compensation  as provided
under such contracts and in the applicable U.S.Government regulations.

COMMERCIAL MARKETS

         During the fiscal year ended April 30, 1996, the  Registrant  continued
to focus a  significant  portion of its  resources  and  efforts  on  developing
hardware for commercial  satellite programs and commercial ground  communication
systems which management  believes will result in future growth and increases in
profits. In fiscal 1994,  Registrant  transferred all commercial  communications
and  space  programs  to  its  wholly  owned  subsidiary,  FEIC.  The  foregoing
developments  have been implemented  with a view towards enabling  Registrant to
achieve  long-term  substantial  increases  in sales  from  other  than  Defense
Department programs.
     Some of the  product  lines  which the  Registrant  has  developed  for the
commercial market are as follows:

Commercial Rubidium  Atomic Standard:
          An extremely  small,low cost, low phase  noise,stable  atomic standard
          ideally suited for use in advanced cellular  communications,  wireless
          telecommunications and navigation applications.
Subminiature Oven Controlled Commercial Quartz Crystal Oscillator:
          A low cost, small size,  precision crystal  oscillator suited for high
          end  performance   required  in  satellite   transmissions,   airborne
          telephony, and geophysical survey positioning systems.
VSAT Transceivers:
          Used in  satellite  communications  for  private  data and voice earth
          stations and are currently under test and evaluation. The objective is
          to manufacture  VSAT products for both the domestic and export markets
          through joint venture arrangements.  Registrant is presently marketing
          its other products through a representative Chinese Company engaged in
          the electronics  business. A family of two product lines is planned to
          meet customer  needs.  The  Registrant has received its first contract
          for VSAT's in China.

RESEARCH AND DEVELOPMENT
         The Registrant's  technological  expertise has been an important factor
in its growth.  Until  recently,  virtually all of its research and  development
activities have taken place in connection with  customer-sponsored  research and
development   oriented  projects  conducted  under  fixed  price  contracts  and
subcontracts in support of U.S. Government programs.  These projects constituted
non-recurring  engineering  and were a substantial  portion of the  Registrant's
business.  The  Registrant  has been  successful  in applying  its  resources to
providing prototypes and preproduction  hardware for use in military navigation,
communication,   guidance  and  electronic  countermeasure  programs  and  space
applications. The output of these customer-sponsored projects, in all cases, are
proprietary to the Registrant.
         The  Registrant  continues  to focus a  significant  portion of its own
resources and efforts on developing hardware for commercial  satellite programs,
commercial  ground  communication  systems and wireless  communications  systems
which it  anticipates  will result in future  growth and  increases  in profits.
Through its wholly  owned  subsidiary,  FEIC,  the  Registrant  is  aggressively
pursuing markets for its commercial  rubidium product line and its C and KU-Band
VSAT transceivers.  The foregoing developments have been implemented with a view
towards enabling  Registrant to achieve long-term  increases in sales from other
than  Defense  Department  programs.  During  fiscal  1996,  1995 and 1994,  the
Registrant  expended  $1.1 million,  $1.9  million,  and $1.4 million of its own
funds, respectively, on such research and development activity.


PATENTS AND LICENSES
         The Registrant believes that its business is not dependent on patent or
license  protection.  Rather,  it is primarily  dependent upon the  Registrant's
technical competence, the quality of its products and its prompt and responsible
contract performance. However, the rights to inventions of employees working for
the Registrant are assigned to the Registrant and the Registrant presently holds
such patents and licenses. Registrant does not believe that patents and licenses
are material to its business.

COMPETITION

         The  Registrant  experiences  intense  competition  with respect to all
areas of its business.  The  Registrant  competes  primarily on the basis of the
accuracy,  performance  and  reliability  of its  products,  the  ability of its
products to perform in severe environments encountered in military and aerospace
applications,  prompt and responsive contract performance,  and the Registrant's
technical  competence  and price.  The Registrant has a unique and broad product
line which  includes  all three  frequency  standards  - quartz,  rubidium,  and
cesium.  The  Registrant  believes  its  ability  to take  such  raw  materials,
manufacture finished products,  integrate them into systems and sub-systems, and
to interface  these systems with end-user  applications  by determining the most
appropriate type, all under one roof,  provides the Registrant with an advantage
over many of its competitors.  The Registrant  believes that it is a significant
supplier of time and frequency products for the military and aerospace markets.

         Many of the Registrant's competitors are larger, have greater financial
resources and have larger research and development and marketing staffs than the
Registrant.  With  respect to the  cesium  beam  atomic  clock,  quartz  crystal
standard  and  rubidium  frequency   standard,   the  Registrant  competes  with
Hewlett-Packard Company, Datum, Inc., Austron, Inc., and E. G. and G., Inc.


EMPLOYEES
         The Registrant employs 208 persons.

OTHER ASPECTS
         The  Registrant's  business  is not  seasonal  and no  unusual  working
capital requirements exist.

Item 2.  Properties

         Registrant established its headquarters in December,  1981 in a 131,000
square foot  manufacturing  and office facility  located in Mitchel Field,  Long
Island,  New York (the "Mitchel Field  Complex").  The Mitchel Field Complex was
built and  equipped,  in part,  with the  proceeds  of a  $5,000,000  Industrial
Development  Bond  financing  arrangement  concluded  through the Nassau  County
Industrial  Development  Agency and  various  lending  institutions  ("Financing
Arrangement").  The  Mitchel  Field  Complex is erected on land  leased from the
County of Nassau  ("Nassau  County  Lease") dated as of February 24, 1981 for an
aggregate  period  of  99  years  (including  renewal  options   exercisable  at
Registrant's  sole  discretion).  Registrant  paid total base rentals under this
lease of  approximately  $167,000  during fiscal year ended April 30, 1996.  The
Nassau  County Lease  provides  for  increases  generally at 10 year  intervals.
Registrant has granted to the lending banks a security  interest in all personal
property  purchased  with the proceeds of this  financing  and a mortgage on the
Nassau County Lease.

         In June 1988, Registrant completed construction of an additional 90,000
square feet of manufacturing and office facility contiguous to the Mitchel Field
Complex.  These  additional  facilities  were  financed  with the  proceeds of a
$3,500,000  Industrial  Development  Bond Financing  arrangement with the Nassau
County Industrial  Development Agency and a lending institution,  as part of its
plan to finance the new plant and equipment ("Financing Arrangement II").
         Under the terms of the Financing  Arrangement and Financing Arrangement
II, interest is payable at 65% and 79%  respectively of the lending banks' prime
commercial  lending  rates.  This  advantageous  interest rate is made available
under an  exemption  from the  taxation  of  interest  payments  received by the
lenders as provided by the Internal  Revenue Code  ("Code").  In fiscal 1995 the
Financing Arrangement was fully repaid. Registrant has no reason to believe that
the exemption with respect to Financing Arrangement II will be challenged by the
Internal Revenue Service.
         Such  interest  rate formula  will remain in effect  during the 15-year
period required to amortize  Financing  Arrangement II. Registrant has the right
to prepay  the loan at any  time.  Financing  Arrangement  II  contains  certain
restrictions  with respect to the  maintenance of net worth and  encumbering the
building.
         In December 1990, a subsidiary of the Registrant signed a 15 year lease
with Lab Corporation of America ("LCA",  formerly  National Health  Laboratories
Incorporated).  The terms require that the subsidiary of the  Registrant  have a
building  constructed  for use by LCA for which  construction  was  completed in
November 1992. The Registrant  provided  $9,000,000 of financing for the cost of
the building for which a six-year term loan has been  negotiated.  This loan has
been  guaranteed  and  collateralized  by LCA assets.  Annual  rental  income of
$1,650,000  commenced in November 1992 upon completion of the building.  Minimum
rentals are subject to  adjustment  based on the  difference  between the actual
rate of interest  incurred on the  borrowing  used to construct the facility and
the targeted  range of 9.75% to 10.25%.  Under the terms of the lease  agreement
annual  rent  escalations  of 5% will  commence in the fourth year of the lease.
This lease is accounted  for as a direct  finance lease and income is recognized
by a method which produces a constant periodic rate of return on the outstanding
investment in the lease.


Item 3.  Legal Proceedings

U.S. Government Indictment

         On  November  17,  1993,  a Federal  Grand  Jury in the  United  States
District Court for the Eastern  District of New York returned an indictment in a
criminal proceeding entitled, "United States District Court, Eastern District of
New York, United States of America,  Plaintiff,  against Frequency  Electronics,
Inc.,   Martin  Bloch,   Abraham  Lazar,   Harry  Newman  and  Marvin  Norworth,
Defendants",  index  number CR  93-1261  ("Indictment").  As the  caption in the
proceeding indicates,  the Indictment named as defendants Frequency Electronics,
Inc  ("FEI"),  Martin  Bloch - its then  board  chairman,  president  and  chief
executive  officer,  Abraham  Lazar - one of its  directors,  Harry  Newman- its
secretary/treasurer,  and  Marvin  Norworth  its  then  contracts  manager.  The
eighteen  count  Indictment  charges  violations of Title 18, United States Code
("U.S.C.")  Sections 286 and 3551 et seq.,  1031(a), 2 and 3551 et seq., 1001, 2
and 3551 et seq.
         The Indictment  makes  allegations,  generally,  as follows:  TRW, Inc.
("TRW") was a prime  contractor on a contract with the United States  Government
("Government")  to build  satellites;  FEI was a subcontractor  of TRW under six
contracts to manufacture  electronic  devices for space  satellites  pursuant to
TRW's contracts with the Government; in February 1988, three of the subcontracts
were terminated by TRW and three of the subcontracts  were partially  terminated
by TRW and  restructured;  in connection with such  terminations,  FEI submitted
detailed  statements of information setting out its costs incurred in connection
with the  subcontracts,  for the  unpaid  portion of which it was  eligible  for
compensation,  directly or indirectly,  by the  Government;  among the costs for
which it was eligible for  compensation  were labor costs,  overhead and general
and  administrative  costs  (collectively  "costs");  settlement  proposals were
submitted  by  FEI  with  respect  to the  three  terminated  subcontracts;  the
proposals  contained,  among other things, the cost information  described above
and FEI was  compensated,  directly or indirectly,  by the Government;  contract
pricing  proposals  were  submitted by FEI with  respect to the three  partially
terminated and  restructured  subcontracts and such proposals  contained,  among
other things, the cost information  described above. FEI and TRW entered into an
agreement  restructuring such subcontracts and FEI was paid settlement  expenses
in connection with such restructured subcontracts.
         The  general  substance  of the  criminal  charges  against FEI and the
individual  defendants  named in the  Indictment is that FEI and the  individual
defendants  conspired to defraud and did defraud the Government and that some or
all of them committed, among others, the following criminal acts: they agreed to
defraud the Government;  they submitted  statements and invoices with respect to
FEI's  costs  incurred  in  connection  with  the  terminated  and/or  partially
terminated  and  restructured  subcontracts  for the  purpose  of FEI  obtaining
compensation thereunder, which statements and invoices were intentionally false;
the  statements  and  invoices  included  claims for labor costs and other costs
which were intentionally  false; FEI and the individual  defendants destroyed or
caused to be destroyed  important  records  relating to labor costs; FEI and the
individual  defendants  altered or caused to be altered FEI's records and vendor
invoices with respect to FEI's cost of labor,  materials  and services;  FEI and
the  individual  defendants  intentionally  made false  statements to Government
officials;  and FEI and the individual defendants  intentionally submitted false
documents to Government  officials.  The Indictment  does not specify the dollar
amount as to which it is claimed the Government was defrauded.
         Subsequent  to the  return of the  Indictment,  FEI and the  individual
defendants moved to dismiss the Indictment on various grounds ("Motion(s)"). The
Motions  were heard on May 13,  1994 and the Court  rendered  its  decision  and
denied the Motions.  Discovery  has not been  completed.  FEI has  determined to
vigorously defend the Indictment.

         On April 6, 1994, a Federal  Grand Jury in the United  States  District
Court for the Eastern District of New York returned a superseding  indictment in
a criminal proceeding entitled,  "United States District Court, Eastern District
of New York, United States of America, Plaintiff, against Frequency Electronics,
Inc.,   Martin  Bloch,   Abraham  Lazar,   Harry  Newman  and  Marvin  Norworth,
Defendants",  index number CR 93-0176 ("Superseding Indictment"). As the caption
in the proceeding indicates,  the Superseding Indictment named as defendants all
of the  same  parties  as in the  Indictment.  The  nineteen  count  Superseding
Indictment charges violations of Title 18, U.S.C. Sections 371 and 3551 et seq.,
1001,  2 and  3551  et seq.  It is  believed  that  the  Superseding  Indictment
primarily  represents  an attempt by the  Government to meet and cure certain of
the asserted deficiencies in the Indictment which were specified in the Motions.
The  Superseding  Indictment  enlarged  Count One of the  Indictment  from an 18
U.S.C.  Section 286  conspiracy  to a conspiracy  charged under Title 18, U.S.C.
Section 371. In addition,  the  Superseding  Indictment  contained an additional
count  charging a violation of Section  1001 of Title 18,  i.e.,  making a false
statement to a Government agency.  Other than the foregoing,  there are no other
substantial  differences between the Indictment and the Superseding  Indictment.
The Superseding  Indictment does not specify the dollar amount as to which it is
claimed the Government was defrauded.  The Government takes the position that it
may proceed to trial on either the Indictment or the Superseding Indictment. The
Government  has not  advised as to  whether  it  intends  to  proceed  under the
Indictment  or the  Superseding  Indictment  and the Court has not ruled on this
subject.  FEI  and  the  other  defendants  moved  to  dismiss  the  Superseding
Indictment  and those motions were also heard on May 13, 1994.  The Court denied
the motions  addressed to the  Superseding  Indictment.  Discovery  has not been
completed. FEI has determined to vigorously defend the Superseding Indictment.
         In connection  with the defense of the Indictment  and the  Superseding
Indictment,  FEI and the other  defendants  have sought the production of United
States  Government   classified   information  and  documents  pursuant  to  the
provisions of the  Classified  Information  Procedures  Act  ("CIPA").  A formal
hearing under CIPA  commenced on April 29, 1996.  The CIPA process is continuing
and no assessment can be made as to when it will be concluded or the outcome.
         Upon  a  conviction  of  FEI,  the  Government  may be  awarded  fines,
penalties, restitution, forfeitures, treble damages or other conditional relief.
         On November  17,  1993,  the  Government  commenced a civil  action for
damages in the United States District Court for the Eastern District of New York
entitled,  "United States District Court,  Eastern District of New York,  United
States of America, Plaintiff, against Frequency Electronics, Inc., Martin Bloch,
Abraham Lazar,  Harry Newman and Marvin Norworth,  Defendants", index number CV
93-5200 ("Government Civil Action"). The Government Civil Action sets forth four
causes of action against each of the named  defendants  alleging,  in substance,
fraud under 31 U.S.C.  Section 3729,  et seq,  (the "False Claims Act"),  fraud,
unjust enrichment and breach of contract.  In the complaint,  demand is made for
treble damages in an unspecified sum based upon the alleged violations under the
False Claims Act, plus costs and attorneys fees in an unspecified  amount,  plus
$10,000 for each false claim and for each false record and  statement.  Pursuant
to an  order of the  Court  dated  January  12,  1994,  all  proceedings  in the
Government  Civil Action  including,  without  limitation,  discovery are stayed
pending a jury verdict of the Indictment. Under the False Claims Act, a recovery
can be made in favor of the  Government  for a civil  penalty  of not less  than
$5,000  and not more than  $10,000  as to each  false  claim and for each  false
record and  statement,  plus three times the amount of damages it is  determined
the  Government  sustained,  plus legal  fees and  expenses.  No opinion  can be
offered as to the outcome of the Government Civil Action.  FEI has determined to
vigorously defend the Government Civil Action.
         A qui tam action was commenced in the United States  District Court for
the Eastern District of New York entitled, "The United States of America ex rel.
Ralph Muller, Plaintiff, against Frequency Electronics,  Inc., Raytheon Company,
Raytheon  Company  Subsidiaries  #1-10,  fictitious  names for  subsidiaries  of
Raytheon Company,  Hughes Aircraft Company, Hughes Aircraft Company subsidiaries
#1-20,  fictitious names for subsidiaries of Hughes Aircraft Company, and Martin
Bloch,  Defendants",  index number CV-92 5716  ("Muller  Qui Tam  Action").  The
Muller Qui Tam Action was brought pursuant to the provisions of the False Claims
Act and is an action by which an individual  may,  under certain  circumstances,
sue one or more third persons on behalf of the  Government for damages and other
relief.
         The  complaint  was filed on or about  December 3, 1992,  in camera and
under  seal  pursuant  to the  provisions  of the False  Claims  Act.  The Court
unsealed the complaint by order dated December 3, 1993,  after FEI complained to
the United  States  Attorney  for the  Eastern  District  of New York  regarding
newspaper articles that charged FEI with manufacturing  defective products based
upon claims in an unspecified  and  undisclosed  qui tam action.  It is believed
that the  Government  made  applications  to the Court on one or more  occasions
after December 3, 1993 to continue to have the file in the Muller Qui Tam Action
remain under seal. The complaint was served on FEI and Martin Bloch on March 28,
1994 and March 30, 1994, respectively.  Under the provisions of the False Claims
Act, the Government is permitted to take over the prosecution of the action. The
Government  has  declined  to  prosecute  the  Muller  Qui  Tam  Action  and the
plaintiff,  Ralph Muller ("Muller"),  is proceeding with the action on behalf of
the Government as is permitted under the False Claims Act.  Moreover,  while the
action  names as parties  defendant,  Hughes  Aircraft  Company  ("Hughes")  and
Raytheon  Company  ("Raytheon"),  along with several of their  subsidiaries,  it
appears that the Muller Qui Tam Action was  dismissed  voluntarily  by Muller on
April 6, 1994, as to Hughes, Raytheon and their respective subsidiaries. FEI and
Martin Bloch moved to dismiss the complaint on various  grounds and, at the oral
argument  of the motion to dismiss,  the Court  granted the motion to the extent
that the complaint  failed to plead fraud with  sufficient  particularity  as is
required  under the  Federal  Rules of Civil  Procedure  and the  plaintiff  was
directed to serve an amended complaint. On February 6, 1996, plaintiff served an
amended complaint ("Amended Complaint").
         The Amended Complaint,  insofar as it pertains to FEI and Martin Bloch,
contains  a series  of  allegations  to the  effect  that  Hughes  and  Raytheon
contracted with the Government to supply it with Advance Medium Range Air to Air
Missiles  ("AMRAAMS");  Hughes and Raytheon  (collectively,  the  "Contractors")
entered  into a  subcontract  with  FEI  pursuant  to which  FEI was to  design,
manufacture, test, sell and deliver to the Contractors certain oscillators which
constituted   components  of  the  AMRAAMS;   that  FEI   improperly   designed,
manufactured  and tested the  oscillators;  that  numerous  faulty and defective
oscillators were delivered to the Contractors; that the oscillators did not meet
contract  specifications;  that FEI was aware of the defective and faulty nature
of the oscillators;  that FEI and Martin Bloch knowingly directed non-disclosure
of the  design  flaws;  that  the  concealed  design  defects  in  developmental
oscillators permitteed FEI to manufacture additional defective oxcillators which
were used in operational  missiles;  that as a direct result of FEI's fraudulent
concealment  of the  defects,  FEI was  contracted  to  design  and  manufacture
additional oscillators;  that when missiles were returned to FEI for repair, FEI
charged  the  Government  for  repair  even  though  FEI knew the units had been
defective at the time of delivery;  that FEI falsified  test results and FEI and
Martin Bloch directed the  falsification of test results;  and that FEI sold and
delivered  the  oscillators  to the  Contractors;  as a result of the faulty and
defective oscillators, many of the AMRAAMS failed to function properly; and that
the Government sustained damages. The complaint demands an unspecified amount of
damages allegedly suffered by the Government,  and asks that the Court determine
the damages and assess civil  penalties as provided  under the False Claims Act,
and that the plaintiff Muller be awarded a bounty. Under the False Claims Act, a
recovery can be made in favor of the  Government for a civil penalty of not less
than $5,000 and not more than  $10,000 as to each false claim and for each false
record and  statement,  plus three times the amount of damages it is  determined
the Government sustained, plus legal fees and expenses.
         FEI has determined to vigorously  defend the Muller Qui Tam Action.  It
has answered the Amended Complaint,  denied the material  allegations,  asserted
seventeen affirmative  defenses,  and counterclaims for: libel and product libel
demanding damages of $3,000,000;  republication of the libel and product libel -
demanding  damages of  $3,000,000;  slander  demanding  damages  of  $3,000,000;
tortious  interference with prospects for additional business- demanding damages
of $1,865,010; prima facie tort - demanding damages of $1,865,010;  conversion -
demanding  damages of $11 plus an amount to be  determined  at trial;  breach of
employment contract - demanding damages of $1,865,010;  breach of fiduciary duty
- -  demanding  damages  of  $1,865,010;  plus  punitive  damages in the amount of
$30,000,000  on each of the tort causes of action,  and legal fees and expenses.
The substance of the counterclaims  alleged against Muller are predicated upon a
letter  dated  November  23, 1992  ("November  23  Letter")  written by Muller's
attorneys Schneider,  Harris, Harris and Furman ("SHHF") to the Government which
allegedly  contained  false and libelous  statements  concerning  FEI's  design,
manufacture  and  production of components for Hughes and Raytheon in connection
with the AMRAAMS.

         In addition,  FEI has  instituted a third party  action  against  SHHF,
Robert Harris,  Esq. and Rod Kovel,  Esq.,  attorneys for Muller,  in connection
with their alleged  authoring and publishing of the November 23 Letter  provided
to the  Government.  The  third-party  complaint  asserts the claims against the
attorneys for libel and product  libel,  republication  of the libel and product
libel, slander,  tortious interference with contractual  relations,  prima facie
tort and conversion.
     The  counterclaims and third-party  complaint have been served.  Muller has
replied to the counterclaims  asserted in FEI's answer to the Amended Complaint,
denied the substantive  allegations and asserted various  affirmative  defenses.
The third-party  defendants  have replied to the third-party  complaint and have
denied the substantive  allegations and asserted various  affirmative  defenses.
Discovery has not commenced.
         Muller  moved  to  dismiss  the  counterclaims  in the  answer  and the
third-party  defendants  moved to dismiss  the  third-party  complaint.  FEI and
Martin Bloch moved to dismiss the  complaint  in the Muller Qui Tam Action.  The
motions were argued on January 5, 1996 and, at the time,  the Court directed the
plaintiff  to serve  the  Amended  Complaint.  At the oral  argument,  the Court
deferred a portion of its  decision  and,  in  addition,  it  indicated a formal
decision and order would be provided as to certain of the relief  requested.  To
date, the Court has not rendered its formal decision and order.
         No  opinion  can be  offered  as to the  outcome  of the Muller Qui Tam
Action, the FEI counterclaims, third-party action or the pending motions.
         On  December  1, 1993,  FEI was served  with a  complaint  in an action
entitled,  "In the Court of  Chancery  of the State of  Delaware  In and For New
Castle County,  Diane Solash Derivatively,  on behalf of Frequency  Electronics,
Inc., a Delaware  corporation,  Plaintiff,  vs. Martin B. Bloch, Peter O. Clark,
Joseph P. Franklin,  Joel Girsky,  Abraham Lazar, John C. Ho, E. John Rosenwald,
Jr.,  individuals,  Defendants  and  Frequency  Electronics,  Inc.,  a  Delaware
Corporation,  Nominal Defendant",  Civil Action No. 13266 ("Solash Action"). All
of the  individual  defendants  named in the complaint are or were  directors of
FEI,  Martin B. Bloch was  president  and  chairman  of the board of  directors,
Abraham Lazar was a vice-president, and Joseph P. Franklin is presently chairman
of the board of  directors.  On January 24,  1994,  plaintiff  served an amended
complaint adding as named defendants Harry Newman, FEI's secretary/treasurer and
Marvin  Norworth,  FEI's  contracts  manager,  who has since retired.  This is a
derivative  action which is permitted by law to be  instituted  by a shareholder
for the  benefit of a  corporation  to enforce an alleged  right or claim of the
corporation  where it is alleged  that such  corporation  has either  failed and
refused to do so or may not  reasonably  be expected to do so. FEI is named as a
nominal defendant.  In the Solash Action, the complaint alleges that the members
of FEI's board of  directors  may not  reasonably  be expected to  authorize  an
action against themselves.
         The  substance  of  the  amended  complaint  contains  allegations,  in
general,  as  follows:  the  Indictment  was  issued  (reciting  certain  of the
allegations  contained in the Indictment);  the misconduct of FEI's personnel as
alleged  in  the  Indictment  is  such  that  FEI is  exposed  to  material  and
substantial  monetary judgments and penalties as well as the loss of significant
Government  business;  such  misconduct  is likely to continue;  the  individual
defendants  were under a fiduciary  obligation  to FEI and its  shareholders  to
supervise,  manage  and  control  with  due  care  and  diligence  the  business
operations of FEI and the business conduct of its personnel; that they failed to
do so and  as a  direct  consequence,  the  matters  alleged  in the  Indictment
occurred;  and that the individual defendants breached their fiduciary duty. The
amended complaint seeks judgment against the individual defendants in the amount
of all losses and damages suffered by FEI and indemnification, on account of the
matters alleged in the amended complaint,  together with interest,  costs, legal
and other  experts'  fees.  See  additional  comment  with respect to the Solash
Action below.
         On  February  4, 1994,  FEI was served  with a  complaint  in an action
entitled  "Supreme  Court of the  State of New York,  County of New York,  Moise
Katz, Plaintiff,  against Martin B. Bloch, Joseph P. Franklin, Joel Girsky, John
C. Ho,  Abraham  Lazar,  E.  John  Rosenwald,  Jr.,  Defendants,  and  Frequency
Electronics,  Inc., Nominal Defendant",  Index Number 93-129450 ("Katz Action").
This is a derivative  action which is  permitted  by law to be  instituted  by a
shareholder  for the  benefit of a  corporation  to enforce an alleged  right or
claim of the  corporation  where it is alleged that such  corporation has either
failed and refused to do so or may not  reasonably  be expected to do so. FEI is
named as a nominal defendant. In the Katz Action, the complaint alleges that the
members of FEI's board of directors may not  reasonably be expected to authorize
an action  against  themselves.  All of the individual  defendants  named in the
complaint are directors of FEI, Martin B.Bloch was president and chairman of the
board of directors,  Abraham Lazar was a vice president, and  Joseph P. Franklin
is presently chairman of the board of directors.
         The substance of the complaint  contains  allegations,  in general,  as
follows:  the  Indictment  was  issued  (reciting  certain  of  the  allegations
contained in the  Indictment);  the misconduct of FEI's  personnel as alleged in
the Indictment is such that FEI is exposed to material and substantial  monetary
judgments and penalties as well as the loss of significant  Government business;
such  misconduct is likely to continue;  the individual  defendants were under a
fiduciary  obligation  to FEI and its  shareholders  to  supervise,  manage  and
control  with due care and  diligence  the  business  operations  of FEI and the
business  conduct  of  its  personnel;  that  they  failed  to  do so  and  as a
consequence, the matters alleged in the Indictment occurred; that the individual
defendants  were grossly  negligent and as a consequence  the matters alleged in
the Indictment occurred; that the individual defendants voluntarily participated
in such  wrongdoing  and  attempted  to  conceal  it;  and that  the  individual
defendants  intentionally  and negligently  breached their fiduciary duty to FEI
and its  shareholders.  The complaint seeks judgment against these defendants in
favor of FEI in the amount of all losses and damages  suffered by FEI on account
of the facts alleged in the complaint,  together with interest, costs, legal and
other experts' fees.
         FEI and all of the  defendants  have moved to dismiss the  complaint in
the Katz Action  ("Motion(s)").  At the time of the Motions, the plaintiff moved
to amend the  complaint  by setting  forth  certain  additional  allegations  of
wrongdoing including,  among others,  amplifying allegations with respect to the
Indictment, setting forth allegations relating to the Muller Qui Tam Action, and
allegations  attempting  to clarify the  relationship  of the parties to the New
York forum,  the latter  allegations  having been  attacked on the  Motions.  In
connection  with the  Motions,  the  defendants  stipulated  that they would not
object to any  application  by the  plaintiff  Katz to  intervene  in the Solash
action.  By order dated  September 21, 1994,  the Court granted the  defendants'
Motions, dismissed the complaint and denied the plaintiff's cross-motions.
         On or about  November 17,  1994,  FEI was served with a complaint in an
action  entitled,  "In the Court of Chancery of the State of Delaware In and For
New Castle County, Moise Katz Derivatively,  on behalf of Frequency Electronics,
Inc., a Delaware  corporation,  Plaintiff,  vs. Martin B. Bloch, Peter O. Clark,
Joseph P. Franklin,  Joel Girsky,  John C. Ho, Abraham Lazar, E. John Rosenwald,
Jr.,  Harry  Newman,  Marvin  Norworth,  individuals,  Defendants  and Frequency
Electronics, Inc., a Delaware corporation,  Nominal Defendant", Civil Action No.
13841 ("Katz Delaware  Action").  All of the individual  defendants named in the
complaint,  with the exception of Harry Newman  ("Newman")  and Marvin  Norworth
("Norworth"),  were all  directors  of FEI,  Martin B. Bloch was  president  and
chairman of the board of  directors,  Abraham  Lazar was a  vice-president,  and
Joseph P. Franklin is presently  chairman of the board of  directors.  Newman is
FEI's secretary/treasurer and Norworth was FEI's contracts manager and has since
retired.  This is a derivative action which is permitted by law to be instituted
by a shareholder for the benefit of a corporation to enforce an alleged right or
claim of the  corporation  where it is alleged that such  corporation has either
failed or refused to do so or may not  reasonably  be  expected to do so. FEI is
named as a nominal defendant. In the Katz Delaware Action, the complaint alleges
that the members of FEI's board of directors  may not  reasonably be expected to
authorize an action against themselves.
         The substance of the complaint  contains  allegations,  in general,  as
follows:  the  Indictment  was  issued  (reciting  certain  of  the  allegations
contained in the  Indictment);  the misconduct of FEI's  personnel as alleged in
the Indictment is such that FEI is exposed to material and substantial  monetary
judgments and penalties as well as the loss of significant  Government business;
such  misconduct is likely to continue;  the individual  defendants were under a
fiduciary  obligation  to FEI and its  shareholders  to supervise,  manage,  and
control  with due care and  diligence  the  business  operations  of FEI and the
business  conduct of its  personnel;  that they  failed to do so and as a direct
consequence,  the  matters  alleged  in the  Indictment  occurred;  and that the
individual  defendants  breached  their  fiduciary  duty.  The  complaint  seeks
judgment  against  the  individual  defendants  in the  amount of all losses and
damages suffered by FEI and  indemnification,  on account of the matters alleged
in the complaint, together with interest, costs, legal, and other experts' fees.
         Pursuant  to the order of the  Court,  the  Solash  Action and the Katz
Delaware  Action have been  consolidated  under  consolidated  Civil  Action No.
13266,  with the caption "In Re  Frequency  Electronics  Derivative  Litigation"
("Derivative Litigation").
         In the Derivative Litigation,  FEI and all of the individual defendants
have moved to dismiss  the  consolidated  complaint  and to stay the  Derivative
Litigation   pending  a  disposition  of  the  Indictment  and  the  Superseding
Indictment ("Motion(s)"). To date, the Motions have not been heard by the Court.
However, as a result of the Motions,  pursuant to a Stipulation and Order of the
Court dated May 17,1995 and a Stipulation  and Order of the Court dated June 14,
1995, the Derivative Litigation has been dismissed as to Newman and Norworth and
is  otherwise  stayed  pending  a  disposition  of the  Indictment,  Superseding
Indictment and related  investigations until the further order of the Court. FEI
has determined to vigorously defend the Derivative Litigation. Discovery has not
been commenced.  No opinion can be offered as to the outcome of the Motion(s) or
with respect to the Derivative Litigation.
         A qui tam action was commenced in the United States  District Court for
the Eastern  District of New York entitled,  "United States of America,  ex rel.
Howard B. Geldart,  Plaintiff - Relator v. Frequency  Electronics,  Inc., Markus
Hechler,  Harry  Newman,  Marvin  Norworth,  and Steven  Calceglia,  Defendants"
(Geldart Qui Tam  Action").  The Geldard Qui Tam Action was brought  pursuant to
the False Claims Act, which is described above.
         The  complaint  was  originally  filed on or about  October 19, 1993 in
camera and under seal  pursuant to the  provisions  of the False  Claims Act. An
amended  complaint was filed on or about April 4, 1995.  The Court  unsealed the
amended  complaint on or about June 2, 1995. The amended complaint was served on
FEI on or about July 27, 1995.  The Government has exercised its right under the
False Claims Act to take over the prosecution of this action.
         The amended  complaint  alleges  that FEI  created and used  materially
false  cost data to  justify  cost  estimates  in bid  packages  and  otherwise,
affecting  prices and fees  charged and paid for defense  procurement  contracts
relating to the AMRAAM  missile,  and to a program for the replacement of cesium
standard parts,  and to continue to justify the award of and payments under such
contracts;  that the false claims  caused the United States  unknowingly  to pay
more than the  actual  cost  (plus a  reasonable  profit)  of the  products  and
services;  that FEI knowingly  made transfers to costs from contract to contract
that were unjustified and materially false and otherwise overstated the costs of
its contracts;  that this  materially  false cost data was used to support false
cost  estimates by FEI to the United States or its  contractors,  to fradulently
accelerate  costs incurred so as to obtain  progress  payments,  to justify cost
estimates in bids for contracts of a nature similar to ones already awarded FEI,
and to misrepresent cost information to the United States and its contractors.
         FEI has determined to vigorously defend the Geldart Qui Tam Action. The
time of the  defendants to answer or move with respect to the amended  complaint
has been  extended up to and  including  August 16, 1996.  To date,  none of the
defendants have answered the amended complaint.
         On December 22, 1993,  February  10, 1994,  February 24, 1994,  May 10,
1994 and June 7,  1994,  Grand Jury  Subpoenas  Duces  Tecum were  served on FEI
("Subpoenas"), the Subpoenas were each returnable before a Grand Jury sitting in
the United  States  District  Court for the Eastern  District  of New York.  The
Subpoenas  called for the  production  of a variety of finance,  accounting  and
other documents,  computer records and computer tapes relating to the AMRAAMS. A
number of FEI  employees  have been  subpoenaed to appear before the Grand Jury.
The  prosecutor  has not advised as to the theory of this  investigation.  Based
upon the FEI  documents  subpoenaed,  it  appears  that the  inquiry  relates to
finance and/or  pricing  matters.  FEI is advised the notices  provided with the
Subpoenas to FEI employees  indicate  their  testimony is required in connection
with an  investigation  related to false  statements  (18 U.S.C.  Section 1001),
false claims (18 U.S.C.  Section  287),  and  conspiracy  to present  fraudulent
claims (18 U.S.C.  Section 286). FEI regards  charges or claims of violations of
Government  laws and  regulations as extremely  serious and recognizes that such
charges or claims could have a material  adverse affect on it. FEI's business is
primarily  dependent  upon  contracts  with the  Government  and  contracts  and
subcontracts with other companies as to which the Government or its agencies are
the  end-user.  Under  the law,  a Grand  Jury  indictment  of FEI or any of its
officers,  directors or employees,  can result in suspension or debarment of FEI
from receiving Government  contracts for a specified period of time.  Registrant
is  currently  subject  to such a  suspension  by  reason of its  indictment  on
November  17,  1993.  Upon  conviction  of FEI  or in a  civil  proceeding,  the
Government may seek fines, penalties,  restitution,  forfeitures, treble damages
or other  conditional  relief.  To date, no charges have been filed,  nor claims
asserted  against  FEI as a result of the Grand  Jury  investigation  related to
AMRAAM.
         Robert H.  Harris,  Esq.  ("Harris"),  a counsel to one of FEI's former
employees  who was  subpoenaed to testify  before the Grand Jury,  threatened to
file a claim against FEI, in the name of such counsel,  in the form of a qui tam
action  pursuant to the False Claims Act. To date,  FEI has not been served with
any legal  process  relating to the False  Claims Act other than the  Government
Civil Action, the Muller Qui Tam Action and the Geldart Qui Tam Action.
         FEI  has  filed  claims  with  its  insurance  carriers  pertaining  to
potential  coverages for directors and officers relating to the first Grand Jury
Investigation,  the Indictment and the  Superseding  Indictment,  the Government
Civil Action,  the Muller Qui Tam Action, the Geldart Qui Tam Action, the Solash
Action and the Katz Action.
         Certain  disclaimers  of coverage  have been made by the carriers  with
respect to certain of these matters. No opinion can be offered as to coverage or
the extent of coverage under any of the foregoing  policies.  At the appropriate
time,  FEI  intends  to  vigorously  pursue  its  rights  with  respect to these
insurance policies.
         Included in selling and administrative expenses are legal fees incurred
in connection with the above matters of approximately  $919,000,  $2,300,000 and
$1,819,000 for fiscal years 1996, 1995 and 1994, respectively.

Government Contract Suspension

         On December 14, 1993, Registrant was notified by the U.S. Department of
the Air Force that,  effective  December 13, 1993,  it had been  suspended  from
contracting with, or acting as subcontractor  under any contract with any agency
of the U.S.  Government  and that such  suspension is effective  throughout  the
executive  branch  of the  Government.  The  suspension  is also  applicable  to
Registrant's  former chairman and chief executive  officer,  one of Registrant's
directors and former vice presidents,  Registrant's secretary and treasurer, who
went on leave of absence from such position,  and Registrant's contract manager,
who went on leave of  absence  from such  position  and has since  retired.  The
suspension is  temporary,  subject to the outcome of legal  proceedings  against
Registrant and certain  individuals  named above presently pending in the United
States District Court as discussed above.
         The  suspension  does not preclude the  completion by Registrant of its
performance of Government contracts or subcontracts awarded to it and pending on
the date of suspension. The Government may also conduct business with Registrant
during  the  period  of  suspension  when  a  Government  department  or  agency
determines  that  a  compelling  reason  exists  for it to do  so.  Examples  of
compelling reasons are: (1) only Registrant can provide the supplies or services
required; (2) urgency requires contracting with Registrant; and (3) the national
defense requires continued dealings with Registrant.  However, except for all of
the foregoing, during the period of suspension:

         (1)      Offers  will  not be  solicited  from,  contracts  will not be
                  awarded  to,  existing   contracts  will  not  be  renewed  or
                  otherwise extended for, and subcontracts  requiring Government
                  approval will not be approved for  Registrant by any agency in
                  the executive branch of the Government, unless the head of the
                  agency taking the contracting action, or a designee, states in
                  writing the compelling  reason for continued  business between
                  Registrant and the agency.
         (2)      Registrant may not conduct  business with the Government as an
                  agent or  representative  of other  contractors and it may not
                  act as an individual surety for other contractors.
         (3)      No government  contractor  may award  Registrant a subcontract
                  equal to or in excess of $25,000  unless there is a compelling
                  reason  to  do  so  and  the  contractor  first  notifies  the
                  contracting   officer  and  further   complies   with  certain
                  Government registrations.
         (4)      Registrant's   affiliation   with   or   relation   with   any
                  organization  doing  business  with  the  Government  will  be
                  carefully  examined to  determine  the impact of these ties on
                  the  responsibility  of that  organization  to be a government
                  contractor or subcontractor.
         The suspension  regulations allow Registrant the opportunity to contest
the suspension by submitting to the suspending  agency  information and argument
in opposition to the  suspension.  Since  Registrant  and all of the  individual
defendants  have  pleaded  not  guilty  to the  Indictment  and the  Superseding
Indictment  and denied the charges  alleged in the  Government's  related  civil
action,  denied  the  allegations  in the  Muller  Qui  Tam  Action  and,  it is
anticipated,  will deny the  allegations  in the  Geldart  Qui Tam  Action,  the
Registrant  believes  that  the  suspension  is  unwarranted  and,  accordingly,
Registrant  has undertaken to vigorously  contest the  suspension.  However,  to
date, the suspension has not been withdrawn and no opinion can be provided as to
removing the suspension pending a favorable  disposition of the  above-described
         If the Indictment results in conviction, the period of suspension could
be extended by way of the  debarment of  Registrant  from any future  Government
contracts or subcontracts.  Debarment is imposed for a period  commensurate with
the seriousness of the causes. Generally, debarment does not exceed three years.
The duration of  Registrant's  suspension  will be considered in determining the
debarment  period.  The debarring  official may also extend the debarment for an
additional period if that official  determines that an extension is necessary to
protect the Government's interest. A debarment may not be extended solely on the
basis of the facts and circumstances upon which the initial debarment action was
based.  The  debarring  official  may  likewise  reduce  the period or extent of
debarment,  upon  Registrant's  request,  supported by documentation for reasons
such as: 1) newly discovered material evidence; 2) reversal of the conviction or
civil  judgment  upon which the  debarment  was based;  (3) bona fide  change in
ownership or management;  4) elimination of other causes for which the debarment
was imposed; or 5) other reasons the debarring official deems appropriate.
         Approximately  55% of  Registrant's  business is comprised of prime and
subcontracts  in which the  Government  is the end-user.  The other  category of
Registrant's  business,  which it has been  expanding  in  recent  years,  is in
commercial and export markets unrelated to the Government. In view of the extent
to  which   Registrant  is  currently   reliant  on  Government   contracts  and
subcontracts and the effect which the suspension, unless withdrawn, will have on
Registrant's  ability to continue to obtain such business,  Registrant  believes
that the suspension and possible  debarment is an extremely serious matter which
is likely to have a material adverse effect on Registrant's  business prospects,
financial  condition,  results  of  its  operations  and  cash  flows.  However,
Registrant  is unable to ascertain at this time whether or not this has been the
case. 

Environmental Matters

     The State of California  Regional  Water  Quality  Control Board has issued
certain  abatement  orders relative to ground water  contaminations  originating
from  the  site of  premises  obtained  by the  Company  in  connection  with an
acquisition.  In June, 1988, the U.S.  Environmental  Protection Agency proposed
that such premises be added to the National Priorities List, which would subject
the premises to the  Super-fund  requirements  of federal law. No estimate as to
the cost to clean up the  premises  has been  made or  provided  to  Registrant.
Pursuant  to the terms of the  Purchase  Agreement,  the seller,  a  financially
capable party,  has  indemnified  Registrant  from any damages arising from this
environmental matter. Since Registrant has only secondary responsibility,  it is
of the opinion that the outcome will not have a significant  impact on financial
condition, results of operations or cash flows.

Item 4.  Submission of Matters to a Vote of Security Holders
         No matters were  required to be submitted  by  Registrant  to a vote of
security holders during the fourth quarter of
fiscal 1996.

Item 4(a) Executive Officers of the Registrant

         The  executive  officers  hold office  until the annual  meeting of the
Board of Directors  following  the annual  meeting of  stockholders,  subject to
earlier  removal by the Board of Directors.  Since fiscal 1994 certain  officers
have taken  voluntary  leaves of absence as discussed in  Registrant's  Form 8-K
dated November 17, 1993.

         The names of all executive officers of Registrant and all positions and
offices with the Registrant which they presently hold are as follows:
  Joseph P. Franklin - Chairman of the Board of Directors, Chief Executive
                         Officer,  Chief Financial Officer.
  Martin B. Bloch    - President(1), Chief Scientist
  John C. Ho         - Vice President of Research and  Development and Director
  Marvin Meirs       - Vice President, Engineering
  Alfred Vulcan      - Vice President, Systems Engineering
  Markus Hechler     - Vice President, Manufacturing and  Acting Secretary
  Charles S. Stone   - Vice President, Low Noise Development
  Leonard Martire    - Vice President, Space Systems and Business Development
  Harry Newman       - Secretary and Treasurer(2)

         None of the officers and directors are related.

         (1) In connection with the indictment as discussed under item 3 - Legal
           Proceedings,  Martin  B.  Bloch  has  taken a  leave  of  absence  as
           president, and no one has been elected as acting president.
         (2) In connection with the indictment as discussed under item 3 - Legal
           Proceedings,  Harry  Newman has taken a leave of absence as secretary
           and treasurer and Markus Hechler, a vice president of Registrant, has
           been elected acting secretary.

         Joseph P.  Franklin,  age 62, has served as a Director  of the  Company
since March  1990.  In  December  1993 he was  elected  Chairman of the Board of
Directors,  Chief Executive Officer and, since September 15, 1995, has served as
Chief Financial  Officer.  He has been the Chief  Executive  Officer of Franklin
S.A.,  since August  1987,  a Spanish  business  consulting  company  located in
Madrid,  Spain,  specializing in joint  ventures,  and was a director of several
prominent Spanish companies.  General Franklin was a Major General in the United
States Army until he retired in July 1987.
         Martin B. Bloch,  age 60, has been a Director of the Company and of its
predecessor  since  1961.  He  recently  resigned  as  Chairman  of the Board of
Directors and Chief  Executive  Officer and is currently its President and Chief
Scientist.   Previously,   he  served  as  chief  electronics  engineer  of  the
Electronics Division of Bulova Watch Company.
         John  C.  Ho,  age  63,  has  been  employed  by the  Company  and  its
predecessor  since 1961 and has served as a Vice  President  since 1963 and as a
Director since 1968.
          Marvin  Meirs,  age 58, was employed by the Company in an  engineering
capacity from 1966 to 1972 and rejoined  the Company in such  capacity in 1973,
serving as Vice President, Engineering since 1978. 
          Alfred  Vulcan,  age 59, joined the Company as an engineer in 1973 and
has served as its Vice President, Systems Engineering since 1978.
         Markus  Hechler,  age 50, joined the Company in 1967, and has served as
its Vice President,  Manufacturing  since 1982, and as Assistant Secretary since
1978. He was elected Acting  Secretary in December 1993 when Harry Newman took a
leave of absence.
         Charles S. Stone, age 65, joined the Company in 1984, and has served as
its Vice  President  since that time.  Prior to joining the  Company,  Mr. Stone
served as Senior Vice  President of Austron Inc.,  from 1966 to 1979, and Senior
Scientist of Tracor Inc., from 1962 to 1966.
         Leonard  Martire,  age 59, joined the Company in August 1987 and served
as Executive Vice President of FEI Microwave,  Inc., the Company's  wholly owned
subsidiary until May 1993 when he was elected Vice President, Space Systems.
         Harry Newman, age 49, has been employed by the Company as Secretary and
Treasurer  since  1979,  prior to which he served as  Divisional  Controller  of
Jonathan  Logan,  Inc.,  apparel  manufacturers,  from  1976  to  1979,  and  as
supervising  Senior  Accountant with Clarence Rainess and Co.,  Certified Public
Accountants, from 1971 to 1975.

                                     PART II

Item 5.   Market for the Registrant's Common Equity and Related Stockholder 
          Matters
         The Common  Stock of the  Registrant  is listed on the  American  Stock
Exchange under the symbol "FEI". The following table shows the high and low sale
price for the Registrant's Common Stock for the quarters indicated,  as reported
by the American Stock Exchange.

       FISCAL QUARTER                        HIGH SALE   LOW SALE
       --------------                        ---------   --------
          1996 -
       FIRST QUARTER                        $5           $3  1/8
       SECOND QUARTER                        5 1/8        3  5/8
       THIRD QUARTER                         6 1/2        3  5/16
       FOURTH QUARTER                        8 1/2        4  7/8
          1995 -
       FIRST QUARTER                        $4 1/4       $3  5/8
       SECOND QUARTER                        4            3  1/8
       THIRD QUARTER                         5 1/2        2  7/8
       FOURTH QUARTER                        5 1/8        3 13/16

     As of July 12, 1996, the approximate  number of holders of record of common
stock was 969. 

DIVIDEND POLICY
         The  Registrant  has paid no cash  dividends  on its  Common  Stock and
currently  intends  to  follow a policy  of  retaining  earnings  for use in its
business.



Item 6.  Selected Financial Data
         The following  table sets forth  selected  financial data including net
sales and operating income for the five year period ended April 30, 1996.

                                          Years Ended April 30,
                            1996      1995        1994        1993        1992
                            ----      ----        ----        ----        ----
                                    (in thousands, except share data)
Net Sales
    Components          $  9,349   $  5,602    $  1,965    $  5,216    $  6,998
    Microwave
        Products           1,216         93       2,687      17,335      25,432
    Instruments            9,524     14,065      15,921      17,495      17,398
    Systems                3,801      4,321       6,891       3,185       3,375
    Purchase Services      1,202        --          --          --         --
                          ------   --------    --------    --------    --------

Total Net Sales         $ 25,092   $ 24,081    $ 27,464    $ 43,231    $ 53,203
                        ========   ========    ========    ========    ========

Operating Profit
    (Loss)              $  1,047   ($ 6,025)  ($  6,174)   ($12,279)   $  2,952
                        ========   ========    ========    ========    ========
Net Earnings
    (Loss)              $  2,822   ($ 3,843)  ($  4,622)   ($ 7,966)   $    462
                        ========   ========    ========    ========    ========
Average Common
    Shares and
    Common Equiv-
    alent Shares
    Outstanding       4,626,581   4,835,367   5,410,762    5,596,788  5,751,408
Earnings (Loss)
    per Common and
    Common Equiv-
    alent Shares        $ .61      ($ .80)     ($ .85)       ($1.42)      $.08
                        =====       =====       =====         =====      =====

Total Assets            $68,770     $65,032     $72,655     $97,065     $99,592
                        =======     =======     =======     =======     =======

Long-Term
    Obligations         $14,877     $14,959     $15,327     $24,945     $25,124
                        =======     =======     =======    ========     =======




Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

  RESULTS OF OPERATIONS

         The table  below  sets forth for the fiscal  years  ended  April 30 the
percentage  of  consolidated  net  sales  represented  by  certain  items in the
Company's consolidated statements of operations:

                                                    1996      1995      1994
                                                    ----      ----      ----
    Net Sales
          US Government                             55.3%     74.7%     68.7%
          Commercial                                44.7      25.3      31.3
                                                   -----     -----     -----
                                                   100.0     100.0     100.0
    Cost of Sales                                   66.5      85.5      91.3
    Selling and administrative expenses             25.1      31.4      26.2
    Research and development expenses                4.2       8.1       5.0
                                                   -----     -----     -----
    Operating income (loss)                          4.2     (25.0)    (22.5)

    Other income (expense)- net                      7.8       8.5       5.5
    (Provision) benefit for income taxes            (0.8)     (0.3)      0.2
                                                   -----     -----     -----
    Income (loss) before cumulative effect
          of change in accounting principle         11.2     (16.8)    (16.8)
    Net income (loss)                               11.2%    (16.0%)   (16.8%)
                                                   =====     =====     =====

Operating Income

         Operating  income for the year ended April 30,  1996,  improved by $7.1
million  over the year ended April 30, 1995 and by $7.2 million over fiscal year
1994. This result was achieved  through  increased sales to non-U.S.  Government
contract customers coupled with significant  improvement in gross margins due to
cost  cutting  efforts  and the  conclusion  of certain  unprofitable  contracts
initiated by the Company's  former west coast  operations.  Reduced  selling and
administrative  expenses and more focused  research and  development  costs,  as
discussed below,  further enhanced the operating  results for the current fiscal
year.

Net Sales

         Net sales in fiscal 1996  increased by over $1 million over fiscal 1995
but were lower than fiscal 1994 by $2.4  million.  As  illustrated  in the table
above,  commercial  sales  have  become a much more  significant  portion of the
Company's business.  Sales to such customers for the fiscal year ended April 30,
1996  increased by $5.1 million over fiscal 1995 and by $2.6 million over fiscal
1994. Sales to non-U.S. Government contract customers are expected to become the
dominant  source of revenues  in  subsequent  fiscal  years.  The  Company  will
continue to engage in  contracts  for which the end user is the U.S.  Government
but such sales are not  expected to  increase  significantly  in absolute  sales
dollars due mainly to the overall decline in U.S.  Government  (principally  DOD
and NASA) spending.





         Sales in fiscal 1994 were higher than in both 1996 and 1995 as a result
of the completion of two significant  programs that year which were  effectively
not  replaced in  subsequent  periods.  On one of these  projects,  the customer
decided  not to  exercise  certain  contract  options.  Also,  as  noted  above,
reductions in DOD and NASA programs have had a negative impact on revenues.

         Included in fiscal 1996 commercial sales is approximately  $1.2 million
of revenues related to parts procurement and screening services on behalf of the
Globalstar  Satellite program. The Company expects to recognize an additional $1
million in incentive revenues in fiscal 1997 and intends to actively promote its
procurement  services  on  other  satellite  programs.  Fiscal  1996  commercial
revenues also  benefited  from a combined $1.8 million  increase in sales of the
Company's commercial rubidium product line and the TRW MIMIC/MMIC product lines;
sales of which were not significant in fiscal 1994. Sales of these product lines
are expected to continue to grow,  particularly for commercial rubidium,  as the
Company further advances its products into the marketplace.

Gross margins

         Gross  margins  for the  fiscal  year  ended  April  30,  1996,  showed
continued  improvement over fiscal years 1995 and 1994, increasing to 33.5% from
14.5%  and  8.7%,  respectively.   These  results  have  been  obtained  through
meaningful cost reductions  primarily in the areas of personnel and compensation
coupled with operational efficiencies and product mix. Fiscal 1994 gross margins
were negatively impacted by higher than anticipated  technical development costs
incurred  during  the  engineering,  design,  and  production  stages of certain
projects. The impact of these items was greatly reduced in fiscal 1995 and 1996.
In  addition,  fiscal years 1995 and 1994  incurred  costs  associated  with the
restructuring and consolidation of the Company's former west coast facility. The
assets  and   activities  of  that  entity  were   relocated  to  the  Company's
headquarters location during fiscal 1995.

         Gross   margin  in  fiscal   1996  was   negatively   impacted  by  the
establishment  of reserves for certain slow moving or obsolete  inventory  items
and accruals for employee bonuses.  Without these charges to earnings,  the 1996
gross  margin  would have been  approximately  35.7%.  While the Company  cannot
reasonably  predict the need for future inventory reserves or the possibility of
cost  overruns on existing or future  contracts,  the Company  anticipates  that
future gross margins will be comparable to that experienced during fiscal 1996.

Selling and administrative expenses

          Selling and  administrative  costs declined by $1.3 million or 17% for
the year ended April 30, 1996,  over fiscal 1995 and by $0.9 million or 12% over
fiscal 1994.  The  principal  cause of these  decreases  was a reduced  level of
activity in 1996 related to the Company's defense of the ongoing litigation with
the government and related actions. Related legal fees were $1.4 million less in
1996 than in 1995 and $0.9  million less than in 1994.  Offsetting  such reduced
legal  expenses  in  fiscal  1996,  was  the  increased  provision  for  certain
uncollectible accounts receivable and accrued officers and employee bonuses. Bad
debt expense for fiscal 1996 was approximately  $580,000 compared to nominal bad
debt expense in fiscal years 1995 and 1994. Without regard to bad debt expenses,
bonuses and the legal fees  related to the  government  litigation,  selling and
administrative  costs in fiscal 1996 were $632,000  lower (12%) than in 1995 and
$737,000 lower (14%) than in 1994. This result was achieved  through a reduction
in the number of  personnel,  reduced  insurance  costs and  improved  operating
efficiencies.  As sales  increase,  the  ratio  of  selling  and  administrative
expenses,  excluding  legal  costs,  to net sales is expected to  decrease.  The
Company is unable to predict the future  level of legal  costs for any  specific
period as this is dependent on factors outside of its immediate control.



Research and development expenses

         Company-funded  research and development  costs in the year ended April
30,  1996,  decreased by $890,000  (46%) and  $317,000  (23%) from the levels of
spending in fiscal 1995 and 1994, respectively.  The decreases in Company-funded
costs are the result of an effort to focus research and  development  activities
on a narrower band of commercial  projects which will provide the best return on
investment.  Research and development spending in fiscal 1995 was higher than in
1994 principally due to an intense effort to develop the two VSAT product lines.
In fiscal 1996,  spending on these product lines  continued but at a lower level
as  development  of one line was completed and  development on the other line is
nearing  the  preproduction  stage.  For fiscal  1997,  the  Company  expects to
continue to invest in research and development at approximately the same rate as
it did for fiscal 1996.

  Other Income and Expense

         For the year ended April 30, 1996, other income (expense)-net decreased
by $74,000  (4%) from fiscal 1995 and  increased  by $473,000  (31%) over fiscal
1994. During fiscal year 1995, the Company realized a gain of approximately $1.2
million on the sale of certain  marketable  securities.  Excluding that one-time
gain, 1996 other income (expense)-net were significantly  improved over both the
fiscal 1995 and 1994 results.

         In particular,  interest income increased by $535,000 and $424,000 over
fiscal 1995 and 1994, respectively,  as the result of both higher interest rates
and a notable  increase  in  interest-earning  assets in fiscal  1996.  Interest
income in fiscal 1994  included  interest  earned on federal  income tax refunds
which did not recur to the same  extent in fiscal 1996 or 1995.  Excluding  such
interest,  interest  income in fiscal  1996 and 1995  increased  by 92% and 13%,
respectively,  over the  comparable  1994  levels.  On the other hand,  interest
expense in fiscal  1996  decreased  by $67,000 and  $6,000,  respectively,  from
fiscal 1995 and 1994  levels.  This was the result of declining  long-term  debt
balances as the Company makes scheduled principal payments,  offset by increased
interest rates during 1996. Although the Company is unable to predict the future
levels of interest rates, at current rates the Company anticipates that interest
income will continue to increase and interest  expense will continue to decrease
when compared to earlier fiscal years.

         Other income,  net, which  consists  principally of rental income under
the long-term  direct  finance  lease with Lab  Corporation  of America,  should
continue at moderately  increasing levels over the 15-year term of the lease. As
noted above,  in fiscal 1995,  the Company also  realized a one-time gain on the
sale of certain  marketable  securities  which was recorded in this line item of
the statement of operations.

LIQUIDITY AND CAPITAL RESOURCES

         The  Company's  balance  sheet  continues  to reflect a strong  working
capital  position of $41.8 million and $39.1 million at April 30, 1996 and 1995,
respectively.  Included in working capital at April 30, 1996 is $21.5 million of
cash, cash equivalents and short-term  investments which are readily convertible
to cash should the need arise. The Company's  current ratio at April 30, 1996 is
10 to 1  compared  to a 13 to 1 ratio at April  30,  1995.  The  decline  in the
current ratio is due  principally to an increase in trade accounts  payable as a
consequence of the parts  procurement and screening  services for the Globalstar
Satellite  program and to the accrual of certain year-end  incentive  bonuses as
the result of the profitable year experienced by the Company.

         Net cash provided by operating  activities for the year ended April 30,
1996,  was almost $7 million  compared  to $4.3  million for fiscal  1995.  This
significant increase in cash inflow is the result of the return to profitability
in 1996  with  net  income  of  $2.8  million,  certain  noncash  charges  of an
additional  $2.9  million and the net change in assets and  liabilities  of $1.3
million.

         Net cash provided by investing  activities for the year ended April 30,
1996,  was $6.1  million.  Of this  amount,  $5.9  million  was  provided by the
conversion of certain U.S.  government and agency securities to short-term money
market investments.  The Company may continue to convert short-term  investments
to cash  equivalents or invest cash  equivalents  in  longer-term  securities as
dictated by its investment strategies.  An additional $500,000 was received upon
the sale of the building owned by the Company's former west coast operation.  In
addition to cash, the Company  received a promissory  note in the amount of $1.8
million for the balance of the sale price.  The promissory note for the building
sale will be  repaid in  monthly  installments  over a period of 5 years  with a
balloon payment at the end.

         During  fiscal 1996,  the Company  acquired  new  computer  software to
manage its financial and operational systems.  Installation of the software will
occur in the  early  part of fiscal  1997.  The  total  capitalized  cost of the
software  and  installation  costs is  expected  to be less than  $500,000.  The
Company has no other material commitments for capital expenditures.  Total fixed
asset purchases in fiscal 1996 approximated $330,000,  including the capitalized
software costs.

         Net cash used in  financing  activities  for the year  ended  April 30,
1996, was $1.4 million  compared to $3.3 million in fiscal 1995. Of this amount,
$749,000  was used to make  regularly  scheduled  long-term  debt  payments  and
$698,000  was used to  acquire  185,500  shares  of  common  stock to be held in
treasury.  The Company may continue to purchase shares for its treasury whenever
appropriate  opportunities arise but it has neither a formal repurchase plan nor
commitments to purchase additional shares in the future.

         The  Company  will  continue  to expend its  resources  and  efforts to
develop  hardware  for  commercial  satellite  programs  and  commercial  ground
communication  and navigation  systems which management  believes will result in
future growth and continued  profitability.  Internally  generated  cash will be
adequate to fund development efforts in these markets.

         At April 30, 1996, the Company's  backlog amounted to approximately $15
million of which  approximately $13.7 million is funded. This is compared to the
approximately $15 million backlog at April 30, 1995. The April 30, 1996, backlog
consists  of  approximately  $8.6  million  (57%)  for  commercial  and  foreign
customers and $6.4 million  (43%) for U.S.  Government  contracts.  As discussed
more thoroughly in Material Developments,  Item 3 and Note 9 to the consolidated
financial statements, the Company is temporarily suspended from contracting with
any  agency of the U.S.  Government.  Although  the  Company  is  becoming  less
dependent on U. S. Government contracts,  the suspension,  unless withdrawn,  is
likely to have a material  adverse effect on the Company's  business  prospects,
financial condition and results of operations.

         The Company also has available  for income tax purposes,  approximately
$11.4 million of net operating loss  carryforwards  which may be applied against
future taxable income.


OTHER MATTERS

      On May 1, 1994,  the  Company  adopted  the  provisions  of  Statement  of
Financial  Accounting  Standards No. 115, "Accounting for Certain Investments in
Debt and Equity  Securities"  ("Statement  115").  Pursuant  to  Statement  115,
investments  in  certain  debt  and  equity   securities   are   categorized  as
available-for-sale  and are carried at fair  value,  with  unrealized  gains and
losses excluded from income and recorded  directly to stockholders'  equity.  In
accordance with Statement 115, prior period  financial  statements have not been
restated to reflect the change in accounting principle. The favorable cumulative
effect of this change in accounting principle was approximately $215,000 or $.04
per share which was recorded during the year ended April 30, 1995.
      Effective May 1, 1994,  the Company  changed its method of accounting  for
its Employee  Stock  Ownership  Plan  ("ESOP") in accordance  with  Statement of
Position  ("SOP") 93-6.  In fiscal years 1996 and 1995,  in accordance  with SOP
93-6, the annual expense related to the leveraged ESOP is determined as interest
incurred  on the note  plus  compensation  cost  based on the fair  value of the
shares released. For the year ended April 30, 1994,  compensation cost was based
on the cost of the shares  released.  The effect of this change on the statement
of  operations  for the year ended  April 30,  1995 was a benefit of $208,000 or
$.04 per share.  The SOP also requires that ESOP shares that are committed to be
released are considered  outstanding  for purposes of  calculating  earnings per
share.  Prior to fiscal  1995 all ESOP shares were  considered  outstanding  for
purposes of calculating earnings per share.

     The financial information reported herein is not necessarily  indicative of
future  operating  results or of the future  financial  condition of Registrant.
Except as noted,  management is unaware of any impending  transactions or events
that are likely to have a material adverse effect on results from operations.

INFLATION
      During  fiscal  1996,  as in the two prior  fiscal  years,  the  impact of
inflation on the Registrant's business has not been materially significant.



Item 8. Financial Statements and Supplementary Data

                        REPORT OF INDEPENDENT ACCOUNTANTS
                               ------------------

To the Board of Directors and Stockholders of Frequency Electronics, Inc.
         We have audited the consolidated financial statements and the financial
statement  schedule of FREQUENCY  ELECTRONICS,  INC. and SUBSIDIARIES  listed in
Item 14(a) of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these financial  statements and financial  statement
schedule based on our audits.
         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
Frequency Electronics,  Inc. and Subsidiaries as of April 30, 1996 and 1995, and
the  consolidated  results of their  operations and their cash flows for each of
the three years in the period ended April 30, 1996, in conformity with generally
accepted  accounting  principles.  In addition,  in our opinion,  the  financial
statement  schedule  referred to above, when considered in relation to the basic
financial  statements  taken  as a  whole,  presents  fairly,  in  all  material
respects, the information required to be included therein.
         As  more  fully  discussed  in  Note  9 to the  consolidated  financial
statements,  the Company and certain of its  employees  were indicted and served
with a civil suit by the United States Government (the "Government")  commencing
in November 1993 in the United States District Court for the Eastern District of
New York (the  "Eastern  District")  alleging  fraud and certain  criminal  acts
relating  to certain  Government  contracts.  In  addition,  certain  derivative
actions have been filed against the Company,  as a nominal defendant,  its board
of directors,  and certain individuals essentially seeking recovery on behalf of
the Company for any losses it may incur as a result of the Government indictment
and civil actions.  The Company,  its former chief executive  officer and others
have also been named as  defendants  in certain qui tam actions in which  claims
are  made  by  individuals  on  behalf  of  the  Government   that  the  Company
manufactured  certain  defective  components  which were  ultimately sold to the
Government.  The Company was notified by an agency of the Government that it has
been  temporarily  suspended from  contracting  with the government  pending the
outcome of the legal  proceedings in the Eastern  District.  The Company and the
individual  defendants have pleaded not guilty to the indictment and have denied
the  allegations  of the  Government,  derivative  and qui tam  actions and will
vigorously contest all such civil and criminal proceedings. The government civil
action has been stayed  pending the resolution of the  indictment.  The ultimate
outcome  of these  actions  and the  government's  suspension,  as well as their
impact, if any, on the consolidated  financial  statements and operations cannot
presently be  determined.  Accordingly,  no provision for any liability that may
result has been made in the accompanying consolidated financial statements.
         In  1995,  as  discussed  in  Note  1  to  the  consolidated  financial
statements, the Company changed its method of accounting for certain investments
in debt and equity  securities  and, as discussed in Note 11, changed its method
of accounting for contributions to its Employee Stock Ownership Plan.

                                                  COOPERS & LYBRAND L.L.P.     

  Melville, New York
  June 26, 1996.


                  FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
                           Consolidated Balance Sheets
                             April 30, 1996 and 1995
                                   -----------

                           ASSETS:                     1996      1995
                                                       ----      ----
                                                       (In thousands)
     Current assets:
         Cash and cash equivalents                   $15,915   $ 4,291
         Marketable securities (Note 3)                5,632    11,387
         Accounts receivable, net of allowance for
         doubtful accounts of $483 in 1996 and $562
           in 1995 (Note 4)                           13,415    13,894
         Inventories (Note 5)                         10,281    11,168
         Prepaid expenses and other                    1,026     1,257
         Refundable income taxes                                   318
                                                     -------   -------
                Total current assets                  46,269    42,315
     Property, plant and equipment, at cost,
         less accumulated depreciation and
         amortization (Notes 6 and 7)                  8,839     9,192
     Investment in direct finance lease (Note 8)       9,607     9,452
     Other assets                                      4,055     1,777
     Asset held for sale (Note 2)                                2,296
                                                     -------   -------
                Total assets                         $68,770   $65,032
                                                     =======   =======








              The accompanying notes are an integral part of these
                             financial statements.



                  FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
                           Consolidated Balance Sheets
                             April 30, 1996 and 1995
                                   -----------
          LIABILITIES AND STOCKHOLDERS' EQUITY:        1996       1995
                                                       ----       ----
                                                        (In thousands)
Current liabilities:
    Current maturities of long-term debt (Note 7)  $    750    $    750
    Accounts payable - trade                          1,379         727
    Accrued liabilities                               2,262       1,782
    Income taxes payable                                 79
                                                    -------     -------
           Total current liabilities                  4,470       3,259

Long-term debt, net of current maturities (Note 7)   11,438      12,187
Deferred compensation (Note 11)                       3,302       2,628
Other                                                   137         144
                                                    -------     -------
                                                     19,347      18,218
                                                    -------     -------
Commitments and contingencies (Notes 8 and 9)

Stockholders' equity (Note 11):

    Preferred stock - authorized 600,000 shares
           of $1.00 par value; no shares issued
    Common stock - authorized  20,000,000 shares 
           of $1.00 par value; issued- 6,006,300
            shares in 1996 and 1995                   6,006       6,006
    Additional paid-in capital                       35,024      35,131
    Retained earnings                                16,265      13,443
                                                    -------     -------
                                                     57,295      54,580
    Common stock reacquired and held in treasury -
           at cost (1,159,905 shares in 1996 and
           964,305 shares in 1995)                   (5,075)     (4,387)
     Unamortized ESOP debt (Notes 7 and 11)          (2,000)     (2,500)
     Notes receivable - common stock (Note 10)         (740)       (822)
     Unearned compensation                             (113)        (18)
     Unrealized holding gain (loss)                      56         (39)
                                                   --------    --------
           Total stockholders' equity                49,423      46,814
                                                   --------    --------
     Total liabilities and stockholders' equity    $ 68,770    $ 65,032
                                                   ========    ========

 
              The accompanying notes are an integral part of these
                             financial statements.





                  FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES
                      Consolidated Statements of Operations
                   Years ended April 30, 1996, 1995, and 1994
                                   -----------

                                                 1996       1995      1994
                                              (In thousands, except share data)

Net sales (Note 13)                            $25,092    $24,081    $27,464
                                               -------    -------    -------
Cost of sales                                   16,689     20,602     25,083
Selling and administrative expenses              6,306      7,564      7,188
Research and development expenses                1,050      1,940      1,367
                                               -------    -------    -------

      Total operating expenses                  24,045     30,106     33,638
                                               -------    -------    -------
           Operating profit (loss)               1,047     (6,025)    (6,174)

Other income (expense):
      Interest income                            1,293        758        869
      Interest expense                            (967)    (1,034)      (973)
      Other, net (Notes 3 and 8)                 1,649      2,325      1,606
                                               -------    -------    -------
Earnings (Loss) before (provision)
    benefit for income taxes                     3,022     (3,976)    (4,672)
(Provision) benefit for income
    taxes (Note 12)                               (200)       (82)        50
                                               -------    -------    -------
Net Earnings (Loss) before cumulative
    effect of change in accounting principle     2,822     (4,058)    (4,622)
Cumulative effect of change in
    accounting principle                                      215      
                                               -------    -------    -------
Net Earnings (Loss)                            $ 2,822    ($3,843)   ($4,622)
                                               =======    =======    =======
Earnings (Loss) per common share before
     cumulative effect of change in
     accounting principle (Note 1)             $ .61      ($ .84)    ($ .85)

Cumulative effect of change in
     accounting principle                                    .04       
                                               -----      -------    -------

Earnings (Loss) per common share               $ .61      ($ .80)    ($ .85)
                                               =====      =======    =======

Weighted average common shares and
     common share equivalents outstanding
     (Note 1)                                4,626,581   4,835,367  5,410,762
                                             =========   =========  =========


              The accompanying notes are an integral part of these
                             financial statements.





                  FREQUENCY ELECTRONICS, INC. AND SUBSIDIARIES
           Consolidated Statements of Changes in Stockholders' Equity
                    Years ended April 30, 1996, 1995 and 1994
                        (In thousands, except share data)
                           ---------------------------
Unrealized gain or (loss) on Additional Treasury stock Receivable noncurrent Common Stock paid-in Retained (at cost) Unamortized Common Unearned marketable Shares Amount capital earnings Shares Amount ESOP debt Stock compensation securities Total ------ ------ ------- -------- ------ ------ --------- ----- ------------ ---------- ------- Balance at May 1, 1993 6,006,300 $6,006 $35,339 $21,908 496,505 ($2,423) ($3,500) ($215) $57,115 Exercise of restricted stock purchase rights (4,000) 4 (33) (29) Amoritization of unearned compensation 169 169 Purchase of treasury 126,800 (556) (556) stock Amortization of ESOP debt as a result of shares allocated 500 500 Net loss (4,622) (4,622) --------- ----- ------ ------ ------- ------ ------ ----- ------ ------ ------- Balance at April 30, 1994 6,006,300 6,006 35,339 17,286 619,305 (2,975) (3,000) (79) 52,577 Amortization of unearned compensation 61 61 Purchase of treasury 345,000 (1,412) (1,412) stock Amortization of ESOP debt as a result of shares allocated (208) 500 292 Decrease in market value of marketable (39) (39) securities Advances to officers and employees for the purchase of stock (822) (822) Net loss (3,843) (3,843) --------- ----- ------ ------ ------- ------ ------ ----- ------ ------ ------- Balance at April 30, 1995 6,006,300 6,006 35,131 13,443 964,305 (4,387) (2,500) (822) (18) (39) 46,814 Amortization of ESOP debt as a result of shares allocated (156) 500 344 Shares issued under restricted stock plan 49 (25,000) 92 (116) 25 Purchase of treasury 200,600 (698) (698) stock Restricted stock surrendered to treasury stock 20,000 (82) 82 Amortization of unearned compensation 21 21 Increase in market value of marketable securities 95 95 Net earnings 2,822 2,822 --------- ------ ------- ------- --------- ------- ------- ----- ------ ---- ------- Balance at April 30, 1996 6,006,300 $6,006 $35,024 $16,265 1,159,905 ($5,075) ($2,000) ($740) ($113) $ 56 $49,423 ========= ====== ======= ======= ========= ======= ======= ===== ====== ==== =======
FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Consolidated Statements of Cash Flows Years ended April 30, 1996, 1995 and 1994 ----------- 1996 1995 1994 ---- ---- ---- (In thousands) Cash flows from operating activities: Net earnings (loss) $2,822 ($3,843) ($4,622) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization Property 974 995 1,576 Other 20 20 (425) Provision for losses on accounts receivable and inventories 996 (Gains) losses on marketable securities (59) (1,197) (94) Loss (gain) on sale or disposal of property, plant and equipment (4) 560 Common stock issued for compensation plans 4 Amortization resulting from allocation of ESOP shares 344 292 500 Employee benefit plan provisions 765 717 237 Finance lease accretion (155) (188) (156) Changes in assets and liabilities: Accounts receivable (101) 8,318 10,265 Inventories 180 322 1,672 Prepaid and other 231 (360) 290 Other assets (511) 685 883 Accounts payable - trade 652 (357) (111) Accrued liabilities 480 (800) (4,912) Income taxes payable 79 (281) Refundable income taxes 318 (31) 1,335 Other liabilities (78) (311) __ ------ ------ ------ Net cash provided by operating activities 6,953 4,262 6,721 ------ ------ ------ Cash flows from investing activities: Purchase of marketable securities (11,094) Proceeds from disposition of marketable 5,910 3,440 securities Capital expenditures (330) (168) (404) Proceeds from sale of property, plant and equipment 513 34 ------ ------ ------ Net cash provided by (used in) investing activities 6,093 (7,822) (370) ------ ------ ------ Continued FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES Consolidated Statements of Cash Flows Years ended April 30, 1996, 1995 and 1994 (Continued) ----------- 1996 1995 1994 ---- ---- ---- (In thousands) Cash flows from financing activities: Principal payments of long-term debt (749) (1,086) (11,913) Purchase of treasury stock (698) (1,412) (556) Sale of stock from treasury 25 Notes receivable from employees (822) Proceeds from long-term borrowings 800 ------ ------ ------ Net cash used in financing activities (1,422) (3,320) (11,669) ------ ------ ------ Net increase (decrease) in cash and cash equivalents 11,624 (6,880) (5,318) Cash and cash equivalents at beginning of year 4,291 11,171 16,489 ------ ------ ------ Cash and cash equivalents at end of year $15,915 $ 4,291 $11,171 ======= ======= ======= Supplemental disclosures of cash flow information (Note 15): Cash paid during the year for: Interest $942 $1,017 $833 ==== ====== ==== Income taxes $ 81 $151 $383 ==== ====== ===== The accompanying notes are an integral part of these financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Accounting Policies Principles of Consolidation: The consolidated financial statements include the accounts of Frequency Electronics, Inc. and its wholly-owned subsidiaries (the "Company" or "Registrant"). The Company is principally engaged in the design, development and manufacture of precision time and frequency control products and components for microwave integrated circuit applications. Intercompany accounts and significant intercompany transactions are eliminated in consolidation. These financial statements have been prepared in conformity with generally accepted accounting principles and require management to make estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. Actual results could differ from these estimates. Inventories: Inventories, which consist of work-in-process and raw materials, are accounted for at the lower of cost (specific and average) or market. Property, Plant and Equipment: Property, plant and equipment is recorded at cost and includes interest on funds borrowed to finance construction. Expenditures for renewals and betterments are capitalized; maintenance and repairs are charged to income when incurred. When fixed assets are sold or retired, the cost and related accumulated depreciation and amortization are eliminated from the respective accounts and any gain or loss is credited or charged to income. If events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the long-lived asset, an impairment loss is recognized. To date, no impairment losses have been recognized. Depreciation and Amortization: Depreciation of fixed assets is computed on the straight-line method based upon the estimated useful lives of the assets (40 years for buildings and 3 to 10 years for other depreciable assets). Leasehold improvements are amortized on the straight-line method over the shorter of the term of the lease or the useful life of the related improvement. Revenue and Cost Recognition: Sales of products and services to customers are generally reported in operating results based upon shipment of the product or the performance of services pursuant to contractual terms. Revenue under contracts for which shipments are an inappropriate measurement of performance are reported in operating results using the percentage of completion method based upon the ratio that incurred costs bear to total estimated costs. Provisions for anticipated losses are made in the period in which they become determinable. 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. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as depreciation, indirect labor and supplies. Selling, general and administrative costs are charged to expense as incurred. 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. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Income Taxes: Deferred tax liabilities and assets are recognized in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Earnings Per Share: Primary earnings per share are computed by dividing net earnings by the weighted average number of shares of common stock and, when dilutive, common stock equivalents outstanding. Fully diluted earnings per share are not presented since they do not materially vary from primary earnings per share. Marketable Securities: Marketable securities consist of investments in common stocks, mutual funds, and debt securities of U.S. government agencies. At April 30, 1994, these investments were recorded at the lower of aggregate cost or market. Substantially all of the marketable securities at April 30, 1996 and April 30, 1995 were held in the custody of one financial institution. On May 1, 1994, the Company adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("Statement 115"). Pursuant to Statement 115, investments in certain debt and equity securities are categorized as available for sale and are carried at fair value, with unrealized gains and losses excluded from income and recorded directly to stockholders' equity. In accordance with Statement 115, prior period financial statements have not been restated to reflect this change in accounting principle. For the year ended April 30, 1995, the favorable cumulative effect of this change in accounting principle was approximately $215,000 or $.04 per share. Cash Equivalents: The Company considers certificates of deposit and other highly liquid investments with original maturities of three months or less to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. Such investments may be in excess of the FDIC insurance limit. No losses have been experienced on such investments. Fair Values of Financial Instruments: Cash and cash equivalents and loans payable are reflectedin the accompanying consolidated balance sheets at amounts considered by management to reasonably approximate fair value. Management is not aware of any factors that would significantly affect the value of these amounts. Stock-based Plans: In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," which establishes financial accounting and reporting standards for stock-based plans. The Statement, which becomes effective in fiscal 1997, requires the Company to choose between accounting for issuances of stock and other equity instruments to employees based on their fair value or disclosing the pro forma effects such accounting would have had on the Company's net income and earnings per share. The Company has begun to gather the documentation necessary to address the impactof this Statement in relation to its stock-based employee plans. The Company will likely choose the disclosure method to report this information in future financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 2. Restructuring In the fourth quarter of fiscal 1993, the Company recorded a $5.4 million charge relating to the consolidation of the Company's west coast operations with its east coast headquarters facility. The restructuring, which consolidated the manufacturing, engineering and marketing functions and resulted in the sale or disposal of certain unprofitable product lines, is substantially complete. At April 30, 1995, the only remaining asset was a building which had been written down to its estimated realizable value of $2.3 million. In June 1995, the building was sold for such amount. The Company received $500,000 in cash and a promissory note for $1.8 million. Such note bears interest at 10% and requires monthly installments of principal and interest of $19,343 until July 31, 2000 when the entire remaining principal balance shall be due and payable. 3. Marketable Securities Marketable securities at April 30, 1996 and 1995 are summarized as follows (in thousands): April 30,1996 Unrealized Market Holding Cost Value Gain (Loss) Fixed income securities $ 4,231 $ 4,346 $ 115 Equity Securities 1,345 1,286 (59) ------ ------- ----- $ 5,576 $ 5,632 $ 56 ======= ======= ===== April 30,1995 Unrealized Market Holding Cost Value Gain (Loss) Fixed income securities $ 9,965 $ 10,019 $54 Equity Securities 1,461 1,368 (93) ------ ------- --- $11,426 $ 11,387 ($39) ======= ======== === As of April 30, 1996, gross unrealized gains on fixed income securities were $115. Gross unrealized losses on equity securities were $59. As of April 30, 1995, gross unrealized gains and losses on fixed income securities were $123 and $69, respectively. Gross unrealized losses on equity securities were $93. Maturities of fixed income securities classified as available for sale at April 30, 1996 are as follows (in thousands): Current $ 960 Due after one year through five years 2,674 Due after five years through ten years 498 After ten years 99 ------- $4,231 ====== The proceeds from sales of available-for-sale securities and the gross realized gains (based on specific identification) were $174 thousand and $58 thousand, respectively for the year ended April 30, 1996. For the year ended April 30, 1995, proceeds from sales of available-for-sale securities and the gross realized gains were $2.4 million and $1.2 million, respectively. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 4. Accounts Receivable Accounts receivable include costs and estimated earnings in excess of billings on uncompleted contracts accounted for on the percentage of completion basis of approximately $5,315,000 at April 30, 1996 and $5,456,000 at April 30, 1995. Such amounts represent revenue recognized on long-term contracts that has not been billed as of the balance sheet date. 5. Inventories Inventories, which are reported net of reserves of $940,000 and $524,000, at April 30, 1996 and 1995, respectively, consisted of the following (in thousands): 1996 1995 ---- ---- Raw Materials and Component Parts $1,998 $1,569 Work in Progress 8,283 9,599 ------ ------- $10,281 $11,168 ======= ======= Title to all inventories related to United States Government contracts that provide for progress billings vests in the U.S. Government. 6. Property, Plant and Equipment Property, plant and equipment consists of the following (in thousands): 1996 1995 ---- ---- Buildings and building improvements $ 8,751 $ 8,753 Machinery, equipment and furniture 15,191 15,079 Capitalized leases 121 152 ------ ------ 24,063 23,984 Less, accumulated depreciation and amortization 15,224 14,792 ------- ------ $ 8,839 $ 9,192 ======= ======= Depreciation and amortization expense for the years ended April 30, 1996, 1995 and 1994 was $974,000, $995,000, and $1,576,000, respectively. Maintenance and repairs charged to operations for the years ended April 30, 1996, 1995 and 1994 was approximately $320,000, $562,000, and $880,000, respectively. Portions of a building owned by the Company are leased to outside parties. Related cost and accumulated depreciation at April 30, 1996 are approximately $565,000 and $163,000, respectively. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 7. Long-Term Debt Long-term debt consists of the following (in thousands): 1996 1995 ---- ---- Unsecured note payable in forty equal quarterly installments of $125,000 through April 1, 2000 with interest at adjusted LIBOR plus 1.00% (6.7813% at April 30, 1996) (1) $ 2,000 $ 2,500 Nassau County Industrial Development Bonds payable in quarterly installments of $62,500 through September 30, 2000 at 79% of prime(6.5175%at April 30, 1996) (2) 1,188 1,437 Real Estate Construction Loan in the amount of $9,000,000, maturity date July 31, 1997 with interest at LIBOR plus 1.375% (6.625% at April 30, 1996) or prime plus 0.25% (3) 9,000 9,000 ------ ------ 12,188 12,937 Less, current maturities 750 750 ------ ------ $11,438 $12,187 ======= ======= (1) This note, originally in the amount of $5,000,000, was used to fund the purchase of 714,286 shares of the Company's common stock for the Employee Stock Ownership Plan (see Note 11). Under the terms of this loan the Company has the right to borrow either at the bank's stipulated prime rate, at LIBOR plus 1.0% or at a designated fixed rate to be determined. (2) This obligation is collateralized by certain property, plant and equipment having a net book value of approximately $6,175,000 at April 30, 1996. (3) This obligation is collateralized by the tenant's assets for which a building was constructed (see Note 8). Aggregate amounts of long-term debt scheduled to mature in each of the subsequent years ending April 30, are as follows (in thousands): 1997 $ 750 1998 9,750 1999 750 2000 750 2001 188 ------- $12,188 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 8. Leases Operating Leases: The Company leases land, on which its plant is located, under an operating lease expiring in 2080. The lease provides for payments of real estate taxes, insurance and other charges by the lessee. The lease agreement provides for rental escalations ranging from three to ten percent at varying periods of from four to ten years. The Company also has sublease rentals providing for annual rental income. These sublease agreements provide for escalations which are substantially the same as those in the Company's lease. Lease commitments and related sublease rental income for real property at April 30, 1996 are as follows (in thousands): Aggregate Lease Sublease Commitments Rental Income 1997 $ 247 $ 66 1998 226 66 1999 191 66 2000 175 66 2001 167 66 2002 and thereafter 18,630 396 ------- ---- $19,636 $726 ======= ==== Lease rental expenses, including real estate taxes, charged to operations for the years ended April 30, 1996, 1995 and 1994 were approximately $783,000, $1,036,000 and $910,000, respectively. Sublease rental income for the years ended April 30, 1996, 1995 and 1994 was approximately $66,000 in each year. Direct Finance Lease: During 1993, construction was completed on a building which is being leased to Laboratory Corportation of America ("LCA") formerly National Health Laboratories, Inc. under a fifteen year direct finance lease. Income on this direct finance lease is recognized by a method which produces a constant periodic rate of return on the outstanding investment in the lease. Minimum rentals are based on the specified rental rate in the agreement and are subject to adjustment based on the difference between the actual rate of interest incurred on the borrowing used to construct the facility and the targeted range of 9.75% to 10.25%. During fiscal 1996, 1995 and 1994, rental reductions, representing actual interest savings, of approximately $240,618, $286,000, and $437,000, respectively were passed through to LCA. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The Company's net investment in the direct finance lease is as follows (in thousands): Minimum lease payments receivable $26,132 Unearned Income (16,525) Net Investment $ 9,607 ======= The scheduled maturities for the direct financing lease receivable at April 30, 1996 are as follows (in thousands): 1997 $ 1,804 1998 1,895 1999 1,989 2000 2,089 2001 2,194 2002 and thereafter 16,161 ------- $26,132 ======= 9. Commitments and Contingencies U.S. Government Indictment: On November 17, 1993, a Federal Grand Jury (the "Grand Jury") in the United States District Court for the Eastern District of New York indicted the Company and certain individuals (including certain officers) alleging that they conspired to and did defraud the U.S. Government ("the Government") and committed certain criminal acts in connection with six contracts (which were terminated for the convenience of the Government) under which the Company was a subcontractor and the Government was the end-user. Such alleged criminal acts included submitting false documents, intentionally making false statements and destroying or causing to be destroyed, records relating to labor and other costs. On April 6, 1994 the Grand Jury returned a superseding indictment for the purpose, it is believed, of curing certain asserted deficiencies in the original indictment. Upon a conviction under the original or superseding indictment (collectively the "Indictment") the Government may seek fines, penalties, forfeitures, restitution, treble damages and other conditional relief. The Company and the other defendants have pleaded not guilty to and intend to vigorously defend the Indictment. U.S. Government Civil Action: Contemporaneously with the issuance of the original indictment, the Government commenced a civil action for damages naming the same parties and alleging essentially the identical facts and charges set forth in the Indictment. The complaint seeks to recover treble damages in an unspecified amount, $10,000 for each false claim, record and statement, certain costs and attorney's fees, and such other relief the court deems proper. Neither the Indictment nor the civil action alleges the dollar amounts as to which the Government claims it was defrauded. The Company was reimbursed for costs incurred for contract performance and for settlement costs in connection with the six terminated contracts. The civil action has been stayed pending the disposition of the Indictment. The Company and the other defendants have denied the allegations of and intend vigorously to contest the civil action. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Private Civil Derivative Actions: On December 1, 1993, and February 4, 1994, two separate derivative shareholder actions (pursuant to a court order, are now consolidated under one civil action) were served in state court actions against the Company as a nominal defendant and the entire board of directors and certain individuals. A derivative action is one permitted by law to be instituted by a shareholder for the benefit of a corporation to enforce an alleged right or claim of the corporation where it is alleged that such corporation has either failed and refused to do so or may not reasonably be expected to do so. The substance of the complaint in each action is similar and comprises a series of allegations that the misconduct of Company personnel, involved in the aforementioned Indictment, is such that it exposes the Company to material and substantial monetary judgments and penalties and the loss of significant business, and the directors were under a fiduciary obligation to manage and control the business operations of the Company and the conduct of its personnel. The complaint seeks judgment against the directors in the amount of all losses and damages suffered by the Company on account of the facts alleged in the complaint, together with interest costs, legal and other professional fees. The Company and the other defendants have denied the allegations of and intend vigorously to contest the derivative actions. The derivative shareholder actions have been stayed pending the disposition of the Indictment, and related investigations. Qui Tam Actions: In March 1994, a qui tam action was served upon the Company and Martin Bloch, its former chief executive officer and in July 1995, a separate qui tam action was served upon the Company and certain employees of the Company. A qui tam action is a form of derivative action wherein an individual may, under certain circumstances, bring a legal action against one or more third persons on behalf of the Government for damages and other relief by reason of one or more alleged wrongs perpetrated against the Government by such third persons. The March 1994 complaint alleges that the Company, in connection with its subcontract to design and manufacture certain oscillators which are components of the Government's Advance Medium Range Air to Air Missiles ("AMRAAMS"), improperly designed, manufactured and tested the oscillators and as a result the Government sustained damages. The complaint demands an unspecified amount of damages allegedly suffered by the Government, and asks that the Court determine the damages and assess civil penalties as provided under the False Claims Act. The July 1995 complaint alleges that the Company created and used materially false cost data to justify cost estimates in bid packages and otherwise affecting prices and fees charged and paid for defense procurement contracts relating to the AMRAAM missile and to a program for the replacement of cesium standard parts, and to continue to justify the award of the payments under such contracts; that the false claims caused the United States unknowingly to pay more than the actual cost (plus a reasonable profit) of the products and services; that FEI knowingly made transfers to costs from contract to contract that were unjustified and materially false and otherwise overstated the costs of its contracts; that this materially false cost data was used to support false cost estimates by FEI to the United States or its contractors, to fraudulently accelerate costs incurred so as to obtain progress payments, to justify cost estimates bids for contracts of a nature similar to ones already awarded FEI, and to misrepresent cost information to the United States and its contractors. Under the False Claims Act, a recovery can be made in favor of the Government for a civil penalty of not less than $5,000 and not more than $10,000 as to each false claim and for each false record and statement, plus three times the amount of damages it is determined the Government sustained, plus legal fees and expenses. The Company and Mr. Bloch have denied the allegations of and intend to vigorously defend the March 1994, qui tam action. The Company intends to vigorously defend the July 1995 qui tam action, but as of year end, none of the defendents have answered the complaints. A response is not required until August 1996. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Company Position and Legal Fees: The Company and the individual defendants in each of the legal matters described above consider the allegations and the charges asserted to be unjustified. They further consider the actions of the Company and the individual defendants with respect to the subject matter of these charges to have been taken in good faith and without wrongful intent, criminal or otherwise. Because of the uncertainty associated with the foregoing matters, the Company is unable to estimate the potential liability or loss that may result, if any, and accordingly, no provision has been made in the accompanying consolidated financial statements. Included in selling and administrative expenses are legal fees incurred in connection with the above matters of approximately $919,000, $2,300,000 and $1,819,000, for fiscal years ended 1996, 1995 and 1994, respectively. Government Contract Suspension: On December 14, 1993, the Company was notified by the U.S. Department of the Air Force that, effective December 13, 1993, it had been suspended from contracting with, or acting as subcontractor under any contract with any agency of the Government and that such suspension is effective throughout the executive branch of the Government. The suspension is also applicable to: Martin Bloch, FEI's former chairman and chief executive officer, presently on leave of absence from the position of president; Harry Newman, FEI's secretary and treasurer, presently on leave of absence from such positions; and Marvin Norworth, FEI's contract manager who went on a leave of absence from such position and has since retired. The suspension is temporary, subject to the outcome of legal proceedings against the Company and certain individuals presently pending in the Eastern District as discussed above. The suspension does not preclude the completion by the Company of its performance of Government contracts or subcontracts awarded to it and pending on the date of suspension. The Government may also conduct business with the Company during the period of suspension when a Government department or agency determines that a compelling reason exists for it to do so. The suspension allows the Company the opportunity to contest the suspension by submitting information and argument in opposition to the suspension. Since the Company and all the individual defendants have pleaded not guilty to the Indictment and denied the charges alleged in the Government's related civil action, denied the allegations in the Muller Qui Tam Action and, it is anticipated, will deny the allegations in the Geldart Qui Tam Action, the Company believes that the suspension is unwarranted and, accordingly, is vigorously contesting the suspension. However, to date, the suspension has not been withdrawn and no assurance can be given as to removing the suspension pending a favorable disposition of the aforementioned legal proceedings. If the Indictment results in conviction, the period of suspension could be extended by way of debarment of the Company from any future Government contracts or subcontracts. Debarment is imposed for a period commensurate with the seriousness of the causes. Generally, debarment does not exceed three years. The duration of the Company's suspension will be considered in determining the debarment period. Approximately 55% of the Company's revenue for fiscal 1996 is comprised of prime and subcontracts in which the Government is the end-user. The other category of the Company's business is in commercial and export markets unrelated to the Government. In view of the extent to which the Company is currently reliant on government contracts and subcontracts and the effect which the suspension, unless withdrawn, will have on the Company's ability to continue to obtain such business, the Company believes that the suspension and possible debarment is an extremely serious matter which is likely to have a material adverse effect on the Company's business prospects, financial condition, results of its operations and cash flows. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Unasserted Claims: By reason of a separate Grand Jury investigation, the Company was served at various times with a series of Grand Jury subpoenas commencing in late December 1993. The subpoenas, with which the Company complied, called for the production of a variety of finance, accounting and other documents relating to AMRAAMS. The prosecutor has not advised as to the theory of this investigation. Based upon the documents subpoenaed, it appears that the inquiry relates to finance and/or pricing matters. The Company regards charges or claims of violations of Government laws and regulations as extremely serious and recognizes that such charges or claims could have a material adverse affect on it. In the event of an indictment and conviction against the Company in this matter, the Government may seek fines, penalties, restitution, forfeitures, treble damages or other conditional relief. The Company would also be subject to the suspension and debarment regulations of the Department of Defense described above. To date, no charges have been filed nor claims asserted against the Company as a result of this Grand Jury investigation. Environmental Matters: In connection with an acquisition in 1987, the Company obtained certain real estate which the U.S. Environmental Protection Agency proposed be added to the National Priorities List which would subject the premises to the Superfund requirements of the law. No estimate as to the cost to clean up the premises has been made or provided to the Company. Pursuant to the terms of the purchase agreement, the seller, a financially capable party, indemnified the Company from any liabilities arising from this environmental matter and, accordingly, it is management's opinion that the outcome will not have a significant impact on the Company's financial position, results of operations or cash flows. Other: The Company is subject to various other legal proceedings and claims which arise in the ordinary course of business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial position, results of operations or cash flows of the Company. 10. Notes Receivable - Common Stock In October 1994, certain officers and employees acquired an aggregate of 250,000 shares of the Company's common stock in the open market. The purchase price of these shares of approximately $822,000 was financed by advances from the Company to such officers and employees. The notes, collateralized by the shares of common stock purchased, accrue interest at 1/2% above prime (8.25% at date of issuance) which is payable and adjusted annually. The principal is due in its entirety at the earlier of termination of employment or October 1999. During the year ended April 30, 1996, one of the officers left the Company and surrendered 25,000 shares acquired under this arrangement. Accordingly, the related note receivable was satisfied. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 11. Employee Benefit Plans Stock Options: The Company has various Incentive Stock Option Plans ("ISOP's") for key management employees (including officers and directors who are employees). The ISOP's provide that eligible employees may be granted options to purchase an aggregate of 900,000 shares of the Company's common stock. Under one Plan the options are exercisable one year after the date of grant. Under the remaining plans the options are exercisable over a four-year period beginning one year after the date of grant. The options expire ten years after the date of grant and are subject to certain restrictions on transferability of the shares obtained on exercise. The options are granted at the discretion of the Stock Option committee at an exercise price not less than the fair market value of the Company's common stock on the date of grant. Transactions under these plans are as follows: 1996 1995 1994 ---- ---- ---- Outstanding at beginning of year 543,071 591,446 560,846 Granted 52,000 113,000 Expired or canceled (12,156) (48,375) (82,400) ------- ------- ------- Outstanding at end of year 582,915 543,071 591,446 ======= ======= ======= Options exercisable at end of year 494,915 380,428 478,446 ======= ======= ======= Options available for grant at end of year 278,698 327,198 296,548 ======= ======= ======= At April 30, 1996 and 1995 option prices per share were $4.875 - $6.875 The excess of the consideration received over the par value of the common stock or cost of treasury stock issued under these option plans has been recognized as an increase in additional paid-in capital. No charges are made to income with respect to stock options. Restricted Stock Plan: During fiscal 1990, the Company adopted a Restricted Stock Plan which provides that key management employees may be granted rights to purchase an aggregate of 250,000 shares of the Company's common stock. The grants, transferability restrictions and purchase price are determined at the discretion of a special committee of the board of directors. The purchase price may not be less than the par value of the common stock. 1996 1995 1994 ---- ---- ---- Exercisable at beginning of year 25,000 25,000 7,500 Granted (purchase price-$1.00 per share) 90,000 25,000 Exercised and expired (25,000) (7,500) -------- -------- -------- Exercisable at end of year 90,000 25,000 25,000 ======= ======= ======= Balance of shares available for grant at end of year 62,500 152,500 152,500 ======= ======= ======= NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Transferability of shares is restricted for a four year period, except in the event of a change in control as defined. Amounts shown as unearned compensation in stockholders' equity represent the excess of the fair market value of the shares over the purchase price at the date of grant which is being amortized as compensation expense over the period in which the restrictions lapse. Employee Stock Ownership Plan/Stock Bonus Plan: During 1990 the Company amended its Stock Bonus Plan to become an Employee Stock Ownership Plan (ESOP). This amendment became effective January 1, 1990. A loan in the amount of $5,000,000 was negotiated with a bank on May 22, 1990 to fund the Trust. The loan is for a ten year period with forty equal quarterly installments of $125,000, plus interest at various rates at the Company's option. The Company reacquired 374,435 shares of its common stock during fiscal 1990. These shares plus approximately 340,000 additional shares issued by the Company from its authorized, unissued shares were sold to the ESOP in May 1990. Shares are released for allocation to participants based on the ratio of the current year's debt service to the sum of the current year's debt service plus the principal to be paid for all future years. At April 30,1996, 330,048 shares were allocated to participant accounts. Effective May 1, 1994, the Company changed its method of accounting for its ESOP in accordance with Statement of Position ("SOP") 93-6. In accordance with SOP 93-6 the annual expense related to the leveraged ESOP, determined as interest incurred on the note plus compensation cost based on the fair value of the shares released was approximately $515,000 and $479,000 for the years ended April 30, 1996 and 1995, respectively. For the year ended April 30,1994, compensation cost was based on the cost of the shares released and the annual expense (including interest) was $610,000. The effect of this change on the statement of operations for the year ended April 30, 1995 was a benefit of $208,000 or $.04 per share. The SOP also requires that ESOP shares that are committed to be released are considered outstanding for purposes of calculating earnings per share. In fiscal 1994 all ESOP shares were considered outstanding for purposes of calculating earnings per share. The fair value of unallocated shares approximates $1.4 million and $1.7 million at April 30, 1996 and 1995, respectively. Deferred Compensation Plan: The Company has instituted a program for key employees providing for the payment of benefits upon retirement or death. Under the plan, these employees receive specified retirement payments for the remainder of the employees' life with a minimum payment of ten years' benefits to either the employee or their beneficiaries. The plan also provides for reduced benefits upon early retirement or termination of employment. The Company has purchased whole life insurance policies on each of the participant's lives which it intends to use to fund the liabilities under the plan. Deferred compensation expense charged to operations during the years ended April 30, 1996, 1995, and 1994 was approximately $744,000, $717,000, and $598,000, respectively. Profit Sharing Plan: The Company has a profit sharing plan and trust under section 401(k) of the Internal Revenue Code. This plan allows all eligible employees to defer a portion of their income through voluntary contributions to the plan. In accordance with the provisions of the plan, the Company can make discretionary matching contributions in the form of cash or common stock. There were no such contributions in fiscal 1996, 1995 or 1994. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Income Incentive Pool: The Company maintains incentive bonus programs for certain employees which are based on operating profits of the Company. The Company also adopted a plan for the President and Chief Executive Officer of the Company,which formula is based on pre-tax profits. The Company charged $125,000 to operations under these plans for the fiscal year ended April 30, 1996. The Company had no charges to operations for the fiscal years ended April 30, 1995 and 1994. 12. Income Taxes The provision (benefit) for income taxes consists of the following (in thousands): 1996 1995 1994 ---- ---- ---- Current Federal $ 45 ($92) Current State and Local 155 $82 42 ---- --- ----- $200 $82 ($50) ==== === ==== The components of deferred taxes are as follows (in thousands): 1996 1995 ---- ---- Deferred tax assets: Accounts receivable $ 84 $ 372 Employee benefits 1,708 1,350 Inventory 643 353 Asset writedowns 719 Miscellaneous 3 Net operating loss carryforwards 4,542 4,456 ----- ----- Total deferred tax asset 6,980 7,250 ----- ----- Deferred tax liabilities: Property, plant and equipment 2,248 2,220 ----- ----- Net deferred tax asset 4,732 5,030 Valuation allowance (4,732) (5,030) ------ ------ $ - $ - ====== ====== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued The following table reconciles the reported income tax expense (benefit) with the amount computed using the federal statutory income tax rate. 1996 1995 1994 ---- ---- ---- (In thousands) Computed "expected" tax expense (benefit) $1,027 ($1,352) ($1,588) State and local tax, net of federal benefit 102 55 89 Dividend received deduction (21) (22) (22) Loss carryforward for which no tax 1,372 1,454 benefit was recorded Benefit of loss carryforward (917) Other items, net, none of which individually exceeds 5% of federal taxes at statutory rates 9 29 17 ------- ------ ------- $ 200 $ 82 ($ 50) ======= ====== ======= At April 30, 1996, the Company has net operating loss carryforwards of approximately $11 million which may be applied against future taxable income and which expire in fiscal years 2008 through 2010. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 13. Industry and Operations The Company is engaged in the manufacture and sale of precision time and frequency control products for defense and space for U.S. Government end use and commercial communication and non-U.S. defense and space. As a result, the Company's operations have been classified into two business segments as follows (in thousands): 1996 1995 1994 ---- ---- ---- Net sales: Commercial $ 11,220 $ 6,103 $ 8,597 U.S. Government 13,872 17,978 18,867 Operating income (loss): Commercial 2,140 (2,088) (1,982) U.S. Government 1,551 281 (513) Corporate (2,644) (4,218) (3,679) Identifiable assets: Commercial 10,408 6,348 10,677 U.S. Government 23,103 27,606 37,838 Corporate 35,259 31,078 24,140 Depreciation: Commercial 427 351 275 U.S. Government 517 615 1,202 Corporate 30 29 99 Capital expenditures: Commercial 3 40 124 U.S. Government 327 128 277 Corporate 3 Sales to Hughes Aircraft Company (HAC) and Space Systems Loral each exceeded 10% of the Company's consolidated sales for the year ended April 30, 1996. Collectively these two companies accounted for approximately 39% of the Company's consolidated sales for the same period. For the year ended April 30, 1995, sales to HAC, TRW and Raytheon Corp. exceeded 10% individually and 56% collectively of consolidated sales. For the year ended April 30, 1994, sales to HAC and Raytheon Corp. exceeded 10% individually and 40% collectively of consolidated sales. For the fiscal year ended April 30, 1996, the sales to HAC were substantially all for U.S. Government end-use while the sales to Space Systems Loral were for commercial communication and foreign defense and space applications. Sales to the above named customers in the fiscal years ended April 30, 1995 amd 1994 were substantially all for U.S. government end-use. The loss by the Company of any one of these customers or, for those customers contracting with the U.S. Government, the loss of any contracts which are partially subcontracted to the Company, would have a material adverse effect on the Company's business. The Company believes its relationship with these companies to be mutually satisfactory and, except for the pending legal proceedings discussed in Note 9, is not aware of any prospect for the cancellation of or significant reduction of any of their U.S. Government contracts in which the Company is involved. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued Export sales were as follows (in thousands): 1996 1995 1994 ---- --- ---- Korea $1,858 $ 100 Canada 525 1,071 Italy 9 663 $2,032 United Kingdom 871 671 903 Indonesia 427 21 Other 631 1,386 1,518 ------ ------ ------ $4,321 $3,912 $4,453 ====== ====== ====== 14. Interim Results (Unaudited) Quarterly results for fiscal years 1996 and 1995 are as follows (in thousands, except per share data): 1996 Quarter 1st 2nd 3rd 4th Net sales $5,338 $5,576 $6,513 $7,665 Gross profit 1,337 1,979 2,224 2,863 Net earnings 256 971 913 682 *Income per share 0.05 0.19 0.19 0.15 1995 Quarter 1st 2nd 3rd 4th Net sales $6,616 $ 5,958 $ 5,479 $6,028 Gross profit 1,375 698 613 793 Loss before cumulative effect of accounting change (613) (1,713) (470) (1,262) Net loss (398) (1,713) (470) (1,262) *Loss per share before cumulative effect of accounting change (0.11) (0.32) (0.09) (0.31) *Loss per share (0.07) (0.32) (0.09) (0.31) *Quarterly earnings per share data does not equal the annual amount due to changes in the average common equivalent shares outstanding. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued 15. Other Information The following provides information about investing and financing activities of the Company that affect assets or liabilities but do not result in cash flow for the three years ended April 30, 1996, 1995 and 1994 and, therefore, are excluded from the Consolidated Statements of Cash Flows (in thousands): 1996 1995 1994 ---- ---- ---- Sale of a building, classified as asset held for sale in 1995, for $2.3 million consisting of $500 thousand in cash and a promissory note for $1.8 million. $1,800 Reclassification of a building to asset held for sale $2,700 Write-off of fully depreciated fixed assets 543 $6,634 16. Related Party Transactions On January 31,1995 the Company purchased 225,000 shares of its common stock from an affiliate of Richard C. Blum & Associates L.P. (collectively, with its affiliates, "Blum") at the then quoted bid price of $4.25 per share or $956,250. Blum's ownership of the Company's outstanding common stock was thereby reduced from 16.64% (876,350 shares) to 12.92% (651,350). FREQUENCY ELECTRONICS, INC. and SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands) Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Additions Description Balance Charged Charged to at to costs other Balance at beginning and accounts Deductions end of of period expenses -describe -describe period Year ended April 30,1996 Allowance for doubtful accounts $562 $580 $659(a) $483 Year ended April 30,1995 Allowance for doubtful accounts $562 $562 Year ended April 30,1994 Allowance for doubtful accounts $562 $562 (a) Accounts written off Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure NONE PART III Item 10. Directors and Executive Officers of the Registrant This item is incorporated herein by reference from the Registrant's definitive proxy statement for the annual meeting of stockholders to be held on August 27, 1996. Item 11. Executive Compensation This item is incorporated herein by reference from the Registrant's definitive proxy statement for the annual meeting of stockholders to be held on August 27, 1996. Item 12. Security Ownership of Certain Beneficial Owners and Management This item is incorporated herein by reference from the Registrant's definitive proxy statement for the annual meeting of stockholders to be held on August 27, 1996. Item 13. Certain Relationships and Related Transactions This item is incorporated herein by reference from the Registrant's definitive proxy statement for the annual meeting of stockholders to be held on August 27, 1996. PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) (1) FINANCIAL STATEMENTS The financial statements and financial statement schedules are listed below and are filed as part of this report. Index to Financial Statements and Financial Statement Schedules Included in Part II of this report: Page(s) Report of Independent Accountants 25 Consolidated Balance Sheets 26-27 April 30, 1996 and 1995 Consolidated Statements of Operations - years ended April 30, 1996, 1995 and 1994 28 Consolidated Statements of Changes in Stockholders' Equity - years ended April 30, 1996, 1995 and 1994 29 Consolidated Statements of Cash Flows - years ended April 30, 1996, 1995 and 1994 30-31 Notes to Consolidated Financial Statements 32-48 (2) FINANCIAL STATEMENT SCHEDULES Included in Part II of this report: Schedule II - Valuation and Qualifying Accounts 49 Other financial statement schedules are omitted because they are not required or the information is presented in the consolidated financial statements or notes thereto. (3) EXHIBITS Exhibit 23.1- Consent of Independent Accountants 62 The exhibits listed on the accompanying index to exhibits beginning on page 52 are filed as part of this annual report. (b) REPORTS ON FORM 8-K Registrant's Forms 8-K, dated July 27, 1995 and December 14, 1995, containing disclosure under Item 5 thereof, were filed with the Securities and Exchange Commission during the quarters ended July 31, 1995 and January 31, 1996, respectively. INDEX TO EXHIBITS ITEM 14(a)3 Certain of the following exhibits were filed with the Securities and Exchange Commission as exhibits, numbered as indicated below, to the Registration Statement or report specified below, which exhibits are incorporated herein by reference: Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ---------- -------------------------- ---------------- 1 (3) Copy of Ceritificate of Incorporation of the Registrant filed with the Secretary of State of Delaware (1) 3.1 2 (3) Amendment to Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on March 27, 1981 (2) 3.2 3 (3) Copy of By-Laws of the Registrant, as amended to date (3) 3.3 4 (4) Specimen of Common Stock certificate (1) 4.1 5 (10) Lease agreement as amended, between Registrant and Hyde Park Associates (predecessor in interest to We're Associates Company) (4) 10.1 6 (10) Stock Bonus Plan of Registrant and Trust Agreement thereunder (4) 10.2 Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ----------- --------------------------- ---------------- 7 (10) Employment agreement between Registrant and Martin B. Bloch 10.3 8 (10) Employment agreement between Registrant and Abraham Lazar (4) 10.4 9 (10) Employment agreement between Registrant and John C. Ho (4) 10.5 10 (10) Employment agreement between Registrant and Marvin Meirs (4) 10.6 11 (10) Employment agreement between Registrant and Alfred Vulcan (4) 10.7 12 (10) Employment agreement between Registrant and Harry Newman (4) 10.8 13 (10) Employment agreement between Registrant and Marcus Hechler (4) 10.9 14 (10) Form of stock escrow agreement between Vincenti & Schickler as escrow agent and certain officers of Registrant (4) 10.10 15 (10) Form of Agreement concerning Executive Compensation (2) 10.11 16 (10) Bond Purchase Agreement between Nassau Country Industrial Development Agency, Long Island Trust Company, The Bank of New York, Bank Leumi Trust Company of New York and Registrant (5) 16 Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ----------- -------------------------- --------------- 17 (10) Five Million dollar Industrial Development Bonds of Registrant with Nassau County Industry Development Agency (5) 17 18 (10) Lease Agreement between Registrant and the County of Nassau (5) 18 19 (10) Assignment of Lease between Registrant and the County of Nassau by Registrant to the Nassau County Industrial Development Agency and the Acknowledgement and Consent of the County of Nassau (5) 19 20 (10) Installment Sale Agreement between the Nassau County Industrial Development Agency and Registrant, and the promissory notes of Registrant to the Nassau County Industrial Development Agency and Long Island Trust Company, The Bank of New York and Bank Leumi Trust Company of New York (5) 20 21 (10) Assignment of Installment Sale Agreement between the Nassau County Industrial Development Agency and Registrant, from the Nassau County Industrial Development Agency to Long Island Trust Company, The Bank of New York, Bank Leumi Trust Company of New York, and the Acknowledgment and Consent of Registrant (5) 21 Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ---------- ----------------------------- --------------- 22 (10) Guaranty Agreement from Registrant, Marlboro Research Corporation, Tek-Wave, Inc., Atomichron, Frequency Electronics International Corp. to Long Island Trust Company, The Bank of New York and Bank Leumi Trust Company of New York (5) 22 23 (10) Bill of Sale from Registrant conveying personal property to the Nassau County Industrial Development Agency (5) 23 24 (10) Leasehold Mortgage between the Nassau County Industrial Development Agency and Long Island Trust Company, The Bank of New York and Bank Leumi Trust Company of New York, and the Acknowledgment and Consent of the Registrant (5) 24 25 (10) Registrant's 1982 Incentive Stock Option Plan (5) 25 26 (10) Amendment dated April 19, 1981 to Stock Bonus Plan of Registrant and Trust Agreement (3) 20.1 27 (3) Amendment to Certificate of Incorporation of the Registrant filed with Secretary of State of Delaware on October 26, 1984 (6) 27 28 (10) Registrant's 1984 Incentive Stock Option Plan (6) 28 Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ---------- ---------------------------- --------------- 29 (10) Pledge and Assignment dated December 1, 1985 between Registrant, Nassau County Industrial Development Agency and National Westminster Bank USA (7) 29 30 (10) Bond Purchase Agreement dated December 1, 1985 between Registrant, Nassau County Industrial Development Agency and National Westminster Bank USA (7) 30 31 (10) Three Million Five Hundred Thousand Dollar 1985 Industrial Development Revenue Bond of Registrant with Nassau County Industrial Development Agency (7) 31 32 (10) Mortgage and Security Agreement dated December 1, 1985 between Nassau County Industrial Development Agency and National Westminster Bank USA (7) 32 33 (10) Sales Agreement dated December 1, 1985 between Nassau County Industrial Development Agency and Registrant (7) 33 34 (3) Three Million Five Hundred Thousand Dollar Promissory Note dated December 1, 1985 between Registrant, Nassau County Industrial Development Agency and National Westminster Bank USA (7) 34 Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ---------- ---------------------------- ---------------- 35 (10) Guaranty dated December 1, 1985, between Registrant, Marlboro Research Corporation, Tek-Wave, Inc., Atomichron, Inc., Frequency Electronics International Corp. and Brightline Corporation to National Westminister Bank U.S.A (7) 35 36 (10) Registrant's Cash or Deferral Profit Sharing Plan and Trust under Section 401 Internal Revenue Code, dated April 1, 1985 (7) 36 37 (22) List of subsidiaries of Registrant (7) 37 38 (10) Computation of Earnings Included in the Financial Statement per Share of Common Stock 38 39 (10) Amendment Restated Effective as of May 1, 1984 of the Stock Bonus Plan and Trust Agreement of Registrant (7) 39 40 (28) Form 8-K dated January 20, 1987 and filed January 21, 1987 (File No. 1-8061) (8) No Number 41 (28) Form 8-K dated June 25, 1987 and filed June 26, 1987 (File No. 1-8061) (9) No Number 42 (3) Amendment to Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on October 22, 1986 (11) 42 Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ---------- ---------------------------- --------------- 43 (10) Amendment Restated Effective as of May 1, 1984 of the Stock Bonus Plan and Trust Agreement of Registrant (11) 43 44 (2) Agreement of Purchase and Sale between FEI Microwave, Inc. and TRW Microwave, Inc. dated as of August 12, 1987 (10) 44 45 (3) Amended and Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of Delaware on October 26, 1987 (13) 45 46 (22) List of Subsidiaries of Registrant (13) 46 47 (10) Employment agreement between Registrant and Charles Stone (12) 47 48 (10) Employment agreement between Registrant and Jerry Bloch (12) 48 49 (3) Employment agreement between Registrant and Joseph Kastenholz (12) 49 50 (10) Registrant's 1987 Incentive Stock Option Plan (12) 50 51 (10) Registrant's Senior Executive Stock Option Plan (12) 51 Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ---------- ---------------------------- --------------- 52 (10) Amendment dated Jan. 1, 1988 to Registrant's Cash or Deferred Profit Sharing Plan and Trust under Section 401 of Internal Revenue Code (12) 52 53 (10) Amendment to Guarantee dated as of Dec. 1, 1985 made by Registrant to National Westminster Bank USA ("Nat West") dated as of Jan. 18, 1989 (12) 53 54 (10) Loan Agreement between FEIM and Nat West dated as of Jan. 18, 1989 (12) 54 55 (10) Note by FEIM in favor of Nat West dated as of Jan. 18, 1989 (12) 55 56 (10) Loan Agreement between Tech 1 and Nat West dated as of Jan. 18, 1989 (12) 56 57 (10) Note by Tech 1 in favor of Nat West dated as of Jan. 18, 1989 (12) 57 58 (10) Executive Incentive Compensation Plan between Registrant and various employees (12) 58 59 (3) Amended Certificate of In- corporation of the Registrant filed with the Secretary of State of Delaware on November 2, 1989 (13) 59 60 (10) Registrant's Employee Stock Option Plan (13) 60 Exhibit No. as filed with Registration Exhibit No. Identifica- Statement or in this tion per Reg. Description report specified Form 10-K 229.601(b) of Exhibit below - --------- ---------- ---------------------------- --------------- 61 (10) Loan Agreement between Registrant and Nat West dated May 22, 1990 (13) 61 62 (10) Loan Agreement between Registrant's Employee Stock Ownership Plan and Registrant dated May 22, 1990 (13) 62 63 (23.1) Consent of Independent Accountants to incorporation by reference of 1996 audit report in Registrant's Form S-8 Registration Statement. 63 NOTES: (1) Filed with the SEC as an exhibit, numbered as indicated above, to the registration statement of Registrant on Form S-1, File No. 2-29609, which exhibit is incorporated herein by reference. (2) Filed with the SEC as an exhibit, numbered as indicated above, to the registration statement of Registrant on Form S-1, File No. 2-71727, which exhibit is incorporated herein by reference. (3) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 10-K, File No. 1-8061 for the year ended April 30, 1981, which exhibit is incorporated herein by reference. (4) Filed with the SEC as an exhibit, numbered as indicated above, to the registration statement of Registrant on Form S-1, File No. 2-69527, which exhibit is incorporated herein by reference. (5) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 10-K, File No. 1-8061, for the year ended April 30, 1982, which exhibit is incorporated herein by reference. (6) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 10-K, File No. 1-8061, for the year ended April 30, 1985, which exhibit is incorporated herein by reference. (7) Filed with the SEC as exhibit, numbered as indicated above, to the annual report of Registrant on Form 10-K, File No. 1-8061, for the year ended April 30, 1986, which exhibit is incorporated herein by reference. (8) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 8-K, dated January 15, 1987, which exhibit is incorporated herein by reference. (9) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 8-K, dated June 25, 1987, which exhibit is incorporated herein by reference. (10) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 8-K, dated August 12, 1987, which exhibit is incorporated herein by reference. (11) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 10-K, File No. 1-8061, for the year ended April 30, 1987, which exhibit is incorporated herein by reference. (12) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 10-K, File No. 1-8061, for the year ended April 30, 1989, which exhibit is incorporated herein by reference. (13) Filed with the SEC as an exhibit, numbered as indicated above, to the annual report of Registrant on Form 10-K, File No. 1-8061, for the year ended April 30, 1990, which exhibit is incorporated herein by reference. EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of Frequency Electronics, Inc. on Form S-8 of our report dated July 26, 1996, on our audits of the consolidated financial statements and financial statement schedule of Frequency Electronics, Inc. as of April 30, 1996 and 1995, and for the years ended April 30, 1996, 1995, and 1994, which report is incorporated by reference in this Annual Report on Form 10-K. COOPERS & LYBRAND, L.L.P. Melville, New York July 26, 1996 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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 By: /s/Joseph P. Franklin --------------------------- Joseph P. Franklin Chairman of the Board and Chief Executive Officer By: /s/Alan L. Miller ----------------------- Alan L. Miller Controller Dated: July 26, 1996 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: Signature Title Date /s/ John Ho Director and Vice President 7/26/96 (John Ho) /s/ Joel Girsky Director 7/26/96 (Joel Girsky) /s/ Martin B. Bloch President & Director 7/26/96 (Martin B. Bloch)
 


5 0000039020 Frequency Electronics, Inc. 1000 YEAR APR-30-1996 MAY-1-1995 APR-30-1996 15,915 5,632 13,898 483 10,281 46,269 24,063 15,224 68,770 4,470 12,188 0 0 6,006 43,417 68,770 25,092 28,034 16,689 24,045 0 580 967 3,022 200 3,022 0 0 0 3,022 .61 .61