{"url_path":"/sec/feim/10-k/2026/item-7","section_key":"item-7","section_title":"Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-17","source_url":"https://www.sec.gov/Archives/edgar/data/39020/0001185185-26-002997-index.html","accession_number":"0001185185-26-002997","cik":"0000039020","ticker":"FEIM","issuer_name":"FREQUENCY ELECTRONICS INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/39020/0001185185-26-002997-index.html","primary_entity_key":"0000039020","primary_entity_name":"FREQUENCY ELECTRONICS INC"},"word_count":4093,"has_tables":true,"body_markdown":"Item\n7. Management’s Discussion and Analysis of Financial Condition and Results of Operations\n\n \n\n**“Safe\nHarbor**” **Statement under the Private Securities Litigation Reform Act of 1995:**\n\n \n\nThe\nstatements in this Annual Report on Form 10-K regarding future earnings and operations and other statements relating to the future\nconstitute “forward-looking” statements pursuant to the safe harbor provisions of the Private Securities Litigation\nReform Act of 1995.  Forward-looking statements inherently involve risks and uncertainties that could cause actual results to\ndiffer materially from the forward-looking statements.  Factors that would cause or contribute to such differences include, but\nare not limited to, the risks associated with reliance on key customers, including the U.S. government, the Company’s use of\nestimates when accounting for contracts, actions by significant customers or competitors, competitive factors, new products and\ntechnological changes, continued acceptance of the Company’s products in the marketplace, dependence upon third-party vendors,\nproduct prices and raw material costs, the Company’s ability to attract and retain key employees, general domestic and\ninternational economic conditions, health epidemics and pandemics, external disruptions to the Company’s facilities or supply\nchain, the Company’s operations in a highly regulated industry, the outcome of any litigation and arbitration proceedings,\ncybersecurity attacks, noncompliance with any of the covenants in the Credit Agreement, volatility in the Company’s stock\nprice, including due to the relatively low trading volume of its common stock, and failure to maintain an effective system of\ninternal controls over financial reporting. The factors listed above are not exhaustive. Other sections of this Form 10-K\ninclude additional factors that could materially and adversely impact the Company’s business, financial condition and results\nof operations.  Moreover, the Company operates in a very competitive and rapidly changing environment.  New factors emerge\nfrom time to time and it is not possible for management to predict the impact of all these factors on the Company’s business,\nfinancial condition or results of operations or the extent to which any factor, or combination of factors, may cause actual results\nto differ materially from those contained in any forward-looking statements.  Given these risks and uncertainties, investors\nshould not rely on forward-looking statements as a prediction of actual results.  Any or all of the forward-looking statements\ncontained in this Form 10-K and any other public statement made by the Company or its management may turn out to be incorrect. \nThe Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new\ninformation, future events or otherwise, except as required by law.\n\n \n\n**Critical\nAccounting Estimates**\n\n \n\nThe\nCompany’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements. The Company believes\nits most critical accounting policies to be the recognition of revenue and costs on production contracts, income taxes and the valuation\nof inventories. Each of these areas requires the Company to make use of reasonable estimates, including estimating the cost to complete\na contract, the realizable value of its inventories or the market value of its products. Changes in estimates can have a material impact\non the Company’s financial position and results of operations.\n\n \n\nRevenue\nRecognition\n\n \n\nRevenues\nfor most contracts are reported in operating results over time using the cost-to-cost method. Under this method, revenue is recorded\nbased upon the ratio that incurred costs bear to total estimated contract costs with related cost of revenues recorded as the costs are\nincurred. Each month management reviews estimated contract costs through a process of aggregating actual costs incurred and estimating\nadditional costs to completion based upon the current available information regarding labor, outside services, materials, overhead costs\nand status of the contract. The effect of any change in the estimated gross margin rate for a contract is reflected in revenues in the\nperiod in which the change is known. Provisions for the full amount of anticipated losses on contracts are made in the period in which\nthey become determinable.\n\n \n\nSignificant\njudgment is used in evaluating the financial information for certain contracts to determine an appropriate budget and estimated cost.\nThe Company evaluates this information continuously and bases its judgments on historical experience, design specifications, and expected\ncosts for material and labor.\n\n \n\nIncome\nTaxes\n\n \n\nOn\nJuly 4, 2025, President Trump signed H.R.1, the One Big Beautiful Bill Act (“OBBBA”) into law. In accordance with U.S. GAAP,\nthe Company accounted for the tax effects of changes in tax law in the period of enactment during the first quarter of fiscal year 2026.\nThe OBBBA made changes to the U.S. tax code, including, but not limited to: (1) allowing taxpayers to fully deduct domestic research\nexpenditures for tax years beginning after December 31, 2024, (2) provides a catch-up relief provision for taxpayers to accelerate deductions\nfor unamortized domestic research expenditures, (3) provides a permanent provision for 100% bonus depreciation deductions for most tangible\npersonal property with a recovery period of 20 years or less, acquired and placed in service after January 19, 2025, and (4) for tax\nyears beginning after December 31, 2024, restores Adjusted Taxable Income by adding back amortization and depreciation to calculate the\nlimitation on interest deductions (effectively returning to EBITDA). The enactment of the OBBBA did not have a material impact on our\nprovision or effective tax rate as of April 30, 2026. We continue to evaluate the OBBBA and its requirements, as well as its application\nto our business and its impact on cash taxes and our effective tax rate.\n\n \n\nOur\nincome tax expense, deferred tax asset and liabilities, and liabilities for unrecognized tax benefits reflect management’s best\nestimate of current and future taxes to be paid. Significant judgments and estimates are required in the determination of the consolidated\nincome tax expense.\n\n \n\n14\n\n[Table of Contents](#TableOfContents)\n\n \n\nDeferred\nincome taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the\nfinancial statements, which will result in taxable or deductible amounts in the future. Accounting for income taxes requires that a\nvaluation allowance be established when it is more likely than not that all or a portion of the deferred tax assets will not be\nrealized. In evaluating our ability to recover deferred tax assets in the jurisdiction from which they arise, we consider all\npositive and negative evidence, including the reversal of deferred tax liabilities, projected future taxable income, tax planning\nstrategies, and results of recent operations. In circumstances where there is sufficient negative evidence indicating that the\ndeferred tax assets will not be realizable, we establish a valuation allowance.\n\n \n\nThe\nCompany maintains a valuation allowance of approximately $1.4 million against certain deferred tax assets including state tax\ncredits and capital loss carryforwards because the realization of these tax attributes requires sufficient taxable income be sourced\nto the respective state jurisdiction and capital gain income is required to utilize capital losses. The Company will continue to\nevaluate the realizability of its deferred tax assets quarterly. Any further increases or decreases in the valuation allowance could\nhave an unfavorable or favorable impact on the Company’s income tax provision and net income in the period in which such\ndetermination is made. As of April 30, 2026, the deferred tax asset is recorded at its more-likely-than-not realizable\namount.\n\n \n\nTax\nbenefits are recognized for an uncertain tax position when, in the Company’s judgment, it is more likely than not that the position\nwill be sustained upon examination by a taxing authority. For a tax position that meets the more-likely-than-not recognition threshold,\nthe tax benefit is measured as the largest amount that is judged to have a greater than 50% likelihood of being realized upon ultimate\nsettlement with a taxing authority. The liability associated with unrecognized tax benefits is adjusted periodically due to changing\ncircumstances and when new information becomes available. Such adjustments are recognized entirely in the period in which they are identified.\nThe effective tax rate includes the net impact of changes in the liability for unrecognized tax benefits and subsequent adjustments as\nconsidered appropriate by the Company. While it is often difficult to predict the final outcome or the timing of resolution of any particular\ntax matter, the Company believes its liability for unrecognized tax benefits is adequate.\n\n \n\n**RESULTS\nOF OPERATIONS**\n\n \n\n**Consolidated\nResults**\n\n \n\nThe\ntable below sets forth for the fiscal years ended April 30, 2026 and 2025, the percentage of consolidated net sales represented by certain\nitems in the Company’s consolidated statements of operations:\n\n \n\n  \nFiscal Years Ended April 30, \n\n  \n2026  \n2025 \n\nRevenues \n   \n  \n\nFEI-NY \n 72.2% \n 76.3%\n\nFEI-Zyfer \n 34.4  \n 26.7 \n\nLess intersegment revenues \n (6.6) \n (3.0)\n\n  \n 100.0  \n 100.0 \n\nCost of revenues \n 70.9  \n 56.9 \n\nGross margin \n 29.1  \n 43.1 \n\nSelling and administrative expenses \n 24.4  \n 17.6 \n\nResearch and development expenses \n 9.5  \n 8.7 \n\nOperating (loss)income \n (4.8) \n 16.8 \n\nOther income, net \n 0.2  \n 0.6 \n\nBenefit from income taxes \n (3.2) \n (16.5)\n\nNet (loss) income \n (1.4)% \n 33.9%\n\n \n\n**Revenues**\n\n \n\n  \nFiscal Years Ended April 30, \n\n  \n(in thousands) \n\nSegment \n2026  \n2025  \nChange \n\nFEI-NY \n$45,651  \n$53,269  \n$(7,618) \n (14.3)%\n\nFEI-Zyfer \n 21,731  \n 18,660  \n 3,071  \n 16.5%\n\nIntersegment revenues \n (4,155) \n (2,118) \n (2,037) \n 96.2%\n\n  \n$63,227  \n$69,811  \n$(6,584) \n (9.4)%\n\n \n\nFor\nthe fiscal year ended April 30, 2026 revenue decreased by approximately $6.6 million, or 9%, compared to the prior fiscal year.\nFiscal 2026 was a year of digestion from a revenue standpoint, as the Company pulled forward some revenue into last year’s\nFiscal 2025. As a result of the shutdown of the FEI-Elcom manufacturing business, the Company sacrificed some near-term revenue in\nthe fourth quarter. By doing so, the Company believes it is the right long-term decision to better align its capital and growth\npotential as it focuses on the much larger addressable markets it is starting to sell into: alternative position, navigation and\ntiming (ALT-PNT) solutions; quantum sensing, including magnetometers; space defense and exploration; and, proliferated satellite\nprograms.\n\n \n\n15\n\n[Table of Contents](#TableOfContents)\n\n \n\nSatellite\nprogram revenues for Government end-use were 31% and 53% of total revenues for fiscal years 2026 and 2025, respectively. Satellite program\nrevenues for commercial end-use were 6% of total revenue for both fiscal years 2026 and 2025.\n\n \n\nRevenues\non satellite program contracts are recorded in the FEI-NY segment and are recognized primarily under the percentage-of-completion (“POC”)\nmethod. Revenues from non-space U.S. Government/DOW customers increased by approximately $11.5 million, or 43.2%, in fiscal year 2026\ncompared to fiscal year 2025. These revenues are recorded in both the FEI-NY and FEI-Zyfer segments and accounted for approximately 60%\nand 38% of consolidated revenues for fiscal years 2026 and 2025, respectively. Other commercial and industrial sales accounted for approximately\n3% of consolidated revenues for both fiscal years 2026 and 2025. Sales in the other commercial and industrial sales area were $2.1 million\nand $2.4 million for the fiscal year ended April 30, 2026 and the fiscal year ended April 30, 2025, respectively.\n\n \n\n**Gross\nProfit**\n\n \n\n  \nFiscal Years Ended April 30, \n\n  \n(in thousands) \n\n  \n2026  \n2025  \nChange \n\nGross Profit \n$18,396  \n$30,097  \n$(11,701) \n (38.9)%\n\nGross Profit Percentage \n 29.1% \n 43.1% \n    \n   \n\n \n\nFor the fiscal year ended\nApril 30, 2026, the gross profit and gross profit percentage decreased as a result of several factors. The Company invested significantly\nin the business during Fiscal 2026 in order to better prepare for the anticipated strong growth ahead. The majority of this investment\nwas focused on hiring engineering talent in advance of the large ramp-up in production and revenue that is expected, based in part on\nthe historically high existing backlog. This had near-term dampening effects on gross margin, as engineering costs flowed through the\nmanufacturing overhead portion of our cost of revenues, raising this expense before the generation of revenue. Another meaningful investment\nwas a business process improvement investment, which should allow the Company to improve turnaround time; these expenses flowed through\noverhead and had a similar impact on gross margins. With the orders and demand coming in, the Company believes it is a prudent long-term\ndecision to be ready for that business and to super-serve customers, who increasingly want more work done more quickly. Additionally, the\nCompany has increased the internal focus on the largest and most profitable market opportunities, and de-emphasized or discontinued products\nwith lower growth potential and lower margin profiles that have historically been part of the business. Specifically, the Company chose\nto restructure FEI-Elcom effective April 30, 2026. The Company believes FEI-Elcom did not have the growth or margin potential of the Company’s\ncore space and defense markets, nor those of the much larger addressable markets the Company is starting to sell into: alternative position,\nnavigation and timing (ALT-PNT) solutions; quantum sensing, including magnetometers and Rydberg sensors; space defense and exploration;\nand, proliferated satellite programs. The FEI-Elcom restructuring included a $3.8 million inventory write-down, a non-cash charge which\nflowed through cost of revenues further depressed gross margins for this reported period, but which, we believe is not reflective of ongoing\nbusiness trends. The Company had several non-recurring charges that flowed through operating expenses this quarter, the majority of which\nwas a non-cash charge for an accrual related to a one-time change in employee sick/paid-time-off policies. Most of this charge flowed\nthrough cost of revenues, impacting gross margins, and the balance flowed through selling and administrative expenses.\n\n \n\n**Selling\nand Administrative Expenses**\n\n \n\nFiscal Years Ended April 30, \n\n(in thousands) \n\n2026  \n2025  \nChange \n\n$15,403  \n$12,289  \n$3,114  \n 25.3%\n\n \n\nIn fiscal years ended April\n30, 2026 and 2025, selling and administrative expenses (“SG&A”) were 24% and 18% of consolidated revenues, respectively.\nBoth SG&A expenses in total and as a percentage of revenue increased in fiscal year 2026, as compared to the prior fiscal year. As\nmentioned above, there were also significant investments in the future and one-time charges that were included in SG&A. The largest\nand most important is the opening of the Colorado facility and all the associated costs. The Company believes this facility will be a\nkey contributor to the future growth of the Company. Additional expenses were recorded for the restructuring of FEI-Elcom. The majority\nof the remaining increase was non-recuring charges related to a change in sick/paid-time off policies and legal expenses related to the\nvarious items the Company has instituted for the future growth of the Company. Going forward, the Company expects to demonstrate operating\nleverage on its SG&A expenses as revenue increases.\n\n \n\n16\n\n[Table of Contents](#TableOfContents)\n\n \n\n**Research\nand Development Expenses**\n\n \n\nFiscal Years Ended April 30, \n\n(in thousands) \n\n2026  \n2025  \nChange \n\n$5,994  \n$6,076  \n$(82) \n (1.3)%\n\n \n\nAs a percentage of consolidated\nrevenue, R&D expense for the fiscal years ended April 30, 2026 and 2025 were 10% and 9%, respectively. The Company funded R&D\nas a percentage of consolidated revenue was slightly higher in fiscal year 2026 as compared to the previous fiscal year, partially because\nthe previous fiscal year R&D expenditures were lower than planned and some of the expenses were subsequently captured in fiscal year\n2026. The increase in R&D expense as a percentage of consolidated revenue, also reflects the Company’s commitment to maintaining\nits technical excellence. The Company expects future R&D investment to be in line with, or even potentially above, historical spending,\nbut the Company expects to demonstrate operating leverage on its R&D expenses as revenue increases.\n\n \n\nThe\nfunds received in connection with customer funded R&D appear in revenues and the associated expenses are included in cost of revenues\nand are not included in the table above. The Company believes that internally generated cash and cash reserves are adequate to fund its\nfuture R&D activity.\n\n \n\n**Operating\n(loss) income**\n\n \n\nFiscal Years Ended April 30, \n\n(in thousands) \n\n2026  \n2025  \nChange \n\n$(3,001) \n$11,732  \n$(14,733) \n (125.6)%\n\n \n\nFor the fiscal year ended\nApril 30, 2026, the Company recorded an operating loss of $3.0 million compared to an operating income of $11.7 million in the prior fiscal\nyear. As mentioned in the revenue, gross profit, and SG&A sections above, the Company’s fiscal 2026 was a critically important\nyear for the future of the Company. Going forward the Company expects to demonstrate significant operating leverage as revenue increases.\n\n \n\n**Other\nIncome, net**\n\n \n\n  \nFiscal Years Ended April 30, \n\n  \n(in thousands) \n\n  \n2026  \n2025  \nChange \n\nIncome on investments \n$673  \n$519  \n$154  \n 29.7%\n\nInterest expense \n (87) \n (104) \n 17  \n (16.3)%\n\nOther expense, net \n (493) \n (3) \n (490) \n 16,333.3%\n\n  \n$93  \n$412  \n$(319) \n (77.4)%\n\n \n\nThe\nchange from the prior fiscal year was mainly caused by a gain on the sale of the Company’s available-for sale marketable securities\nand a loss on investment due to the restructuring of FEI-Elcom. Additionally, interest expense was approximately 16% lower in fiscal\nyear 2026, as compared to the prior fiscal year.\n\n \n\n17\n\n[Table of Contents](#TableOfContents)\n\n \n\n**Income\nTax Benefit**\n\n \n\nFiscal Years Ended April 30, \n\n(in thousands) \n\n2026  \n2025  \nChange \n\n$(2,005) \n$(11,542) \n$9,537  \n (82.6)%\n\n \n\n  \nFiscal Years Ended April 30, \n\n  \n(in thousands) \n\n  \n2026  \n2025 \n\nEffective tax rate on pre-tax book (loss) income: \n 69.0% \n (95.0)%\n\n \n\nFor\nthe fiscal year ended April 30, 2026, the Company recorded an income tax benefit of $2.0 million. For the fiscal year ended April 30,\n2025, the Company recorded an income tax benefit of $11.5 million.\n\n \n\nThe Company’s effective\ntax rate of 69.0% for fiscal year 2026 differs from the statutory rate primarily due to state income taxes, tax credits and the tax effects\nof stock-based compensation windfall benefits recognized during the fiscal year partially offset by an Internal Revenue Code Section 162(m)\nlimitation on compensation deductions.\n\n \n\nAs\nof April 30, 2026, the Company has U.S. federal net operating losses of $10.9 million of which $1.7 million begins to expire in fiscal\nyear 2027 through fiscal year 2031. The U.S. federal net operating losses of $10.9 million includes $1.7 million which is subject to\nan annual limitation under Internal Revenue Code Section 382. The remaining U.S. federal net operating losses of $9.2 million have an\nindefinite carry-forward period. The U.S. federal capital loss carry-forward of $0.7 million expires in fiscal years 2028. U.S. federal\nR&D credits of $0.8 million begin to expire in fiscal year 2038 through fiscal year 2046. The Company also has state net operating\nloss carryforwards, and state tax credits that expire in various years and amounts.\n\n \n\n**LIQUIDITY\nAND CAPITAL RESOURCES**\n\n \n\nNet\ncash provided by operations was $1.3 million in fiscal year 2026 compared to net cash used in operations of $1.4 million in fiscal year\n2025. The Company’s balance sheet continues to reflect a highly liquid position with working capital of $27.0 million at April\n30, 2026 as compared to $29.7 million at April 30, 2025.  Included in working capital at April 30, 2026 was $1.6 million consisting\nof cash and cash equivalents.  The Company’s current ratio was 2.3 to 1 at both April 30, 2026 and at April 30, 2025.\n\n \n\nDuring fiscal years 2026 and\n2025, the Company incurred $9.3 million and $3.9 million, respectively, in non-cash charges to earnings, including adjustments relating\nto amortization of ROU assets, loss provision accrual, deferred tax assets, depreciation and amortization expense, inventory adjustments,\nwarranty and accounts receivable reserves and certain employee benefit plan expenses, including accounting for stock-based compensation.\nDuring fiscal year 2026, cash provided by operations was mainly due to increases in deferred tax assets, accounts payable, accrued liabilities,\nand decreases in inventory, which were partially offset by a decrease in contract liabilities and an increase in the net loss. During\nfiscal year 2025, cash used in operations was mainly due to increases in net income, mainly in the U.S. Government/DOW Satellite market,\nand deferred tax assets primarily due to the reduction of the valuation allowance, partially offset by a decrease in contract liabilities\nand contract assets.\n\n \n\nNet\ncash used in investing activities for the fiscal year ended April 30, 2026 was $2.9 million compared to $1.8 million used in investing\nactivities for the fiscal year ended April 30, 2025 all relating to purchases of capital expenditures.\n\n \n\nNet\ncash used in financing activities for the fiscal year ended April 30, 2026 was $1.6 million, all related to purchase of treasury stock.\nNet cash used in financing activities for the fiscal year ended April 30, 2025 was $9.9 million, of which $9.6 million was related to\na special cash dividend payment of $1.00 per share of common stock paid on August 29, 2024.\n\n \n\nThe\nCompany will continue to expend resources for R&D to develop, improve and acquire products for space applications, guidance and targeting\nsystems, and communication systems that management believes will result in future growth and profitability. The Company anticipates securing\nadditional customer funding for a portion of its R&D activities and will allocate internal funds depending on market conditions and\nidentification of new opportunities.  The Company expects internally generated cash will be adequate to fund these R&D efforts. \nThe Company may also pursue acquisitions to expand its range of products and may use internally generated cash and external funding in\nconnection with such acquisitions.\n\n \n\n18\n\n[Table of Contents](#TableOfContents)\n\n \n\nDuring fiscal year 2026, as in fiscal year 2025, the impact of inflation\non the Company’s business was an increase in costs for materials and services. The Company believes inflation may continue to impact\nexpenses in fiscal year 2027 and future years.\n\n \n\nAs\nof April 30, 2026, the Company had retained earnings of $2.8 million. The Company believes that its cash, as of April 30, 2026, cash\nflows from operations, and borrowings available under the Credit Agreement (as defined below) will provide sufficient liquidity to meet\nits operating needs in the normal course of business in both the short-term (next twelve months from the date of issuance of these consolidated\nfinancial statements) and in the long-term (beyond the next twelve months).\n\n \n\nOn\nJune 12, 2026, the Company entered into a senior, secured revolving credit facility with JPMorgan Chase Bank, N.A., as the lender (the\n“Credit Agreement”). The Credit Agreement provides for a three-year revolving credit facility of $10.0 million, of which\nup to $5.0 million is available for the issuance of letters of credit. The Credit Agreement provides that the Company may, at its option,\nincrease the aggregate amount of the revolving credit facility in an amount up to $10.0 million, subject to certain customary conditions\nand on the terms set forth in the Credit Agreement. There can be no assurance that additional funding will become available. Commitments\nunder the revolving credit facility are subject to a commitment fee of 0.35% per annum on the daily amount of the undrawn portion of\nthe revolving credit facility. The Company’s obligations under the Credit Agreement are guaranteed by FEI-Zyfer, Inc., a wholly-owned\nsubsidiary of the Company. The revolving credit facility matures on June 12, 2029. For more information regarding the Credit Agreement,\nsee Note 7 to the Consolidated Financial Statements.\n\n \n\n**RECENT\nACCOUNTING PRONOUNCEMENTS**\n\n \n\nIn\nDecember 2023, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2023-09, “Income Taxes (Topic 740):\nImprovements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 is intended to enhance the transparency and decision\nusefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily\nthrough changes to the rate reconciliation and income taxes paid information. Early adoption is permitted. A public entity can apply\nthe amendments in ASU 2023-09 prospectively or retrospectively to all annual periods beginning after December 15, 2024. The guidance\nwas adopted by the Company prospectively for the year ended April 30, 2026, and the Company, accordingly, made the required changes in\nits income tax related disclosure (Refer to “Note 12. Income Taxes”). The adoption of ASU 2023-09 did not have any material\nimpact on the Company’s audited consolidated financial statements.\n\n \n\nIn\nNovember 2024, the FASB issued ASU No. 2024-03, *Income Statement – Reporting Comprehensive Income – Expense Disaggregation\nDisclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses*. This ASU requires entities to disclose certain expenses,\nincluding purchases of inventory, employee compensation, depreciation, and intangible asset amortization, by caption. Additionally, entities\nmust provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively.\nThe amendments are effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after\nDecember 15, 2027, with early adoption permitted. The Company is currently evaluating the impact this standard will have on the consolidated\nfinancial statements.\n\n \n\nIn\nDecember 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements, an amendment of the FASB Accounting\nStandards Codification. The amendments in this ASU primarily provide clarification on interim reporting requirements and enhanced disclosure\nrequirements. The amendments also include a disclosure principle to disclose all events since the end of the last annual reporting period\nthat have a material impact on the Company. The ASU is effective for fiscal years beginning after December 15, 2027, and all interim\nreporting periods within applicable annual periods, with early adoption permitted. The Company is currently evaluating the effect that\nthis standard will have on its consolidated financial statements and related disclosures.\n\n \n\n**OTHER\nMATTERS**\n\n \n\nThe\nfinancial information reported herein is not necessarily indicative of future operating results or of the future financial condition\nof the Company."}