"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

The statements in this quarterly report on Form 10-Q regarding future earnings and operations and other statements relating to the future constitute "forward-looking" statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "believe," "may," "will," "could," "should," "would," "anticipate," "estimate," "expect," "project," "intend," "objective," "seek," "strive," "might," "likely result," "build," "grow," "plan," "goal," "expand," "position," or similar words, or the negatives of these words, or similar terminology, identify forward-looking statements. These statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties, and a number of factorscould cause the Company's actual results to differ materially from those expressed in the forward-looking statementsreferred to above. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products in the marketplace, competitive factors, new products and technological changes, product prices and raw material costs, dependence upon third-party vendors, competitive developments, changes in manufacturing and transportation costs, changes in contractual terms, the availability of capital, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made and which reflect management's analysis, judgments, belief, or expectation only as of such date. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this report.

Critical Accounting Policies and Estimates

The Company's significant accounting policies are described in Note 1 to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended April 30, 2012. The Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation of inventory. Each of these areas requires the Company to make use of reasoned estimates including estimating the cost to complete a contract, the realizable value of its inventory or the market value of its products. Changes in estimates can have a material impact on the Company's financial position and results of operations.

Revenue Recognition

Revenues under larger, long-term contracts which generally require billings based on achievement of milestones rather than delivery of product, are reported in operating results using the percentage of completion method. On fixed-price contracts, which are typical for commercial and U.S. Government satellite programs and other long-term U.S. Government projects, and which require initial design and development of the product, revenue is recognized on the cost-to-cost method. Under this method, revenue is recorded based upon the ratio that incurred costs bear to total estimated contract costs with related cost of sales recorded as the costs are incurred. Each month management reviews estimated contract costs through a process of aggregating actual costs incurred and updating estimated costs to completion based upon the current available information and status of the contract. The effect of any change in the estimated gross margin percentage for a contract is reflected in revenues in the period in which the change is known. Provisions for anticipated losses on contracts are made in the period in which they become determinable.

On production-type orders, revenue is recorded as units are delivered with the related cost of sales recognized on each shipment based upon a percentage of estimated final program costs.

Changes in job performance on long-term contracts and production-type orders may result in revisions to costs and income and are recognized in the period in which revisions are determined to be required. Provisions for anticipated losses on customer orders are made in the period in which they become determinable.

For customer orders in the Company's Gillam-FEI and FEI-Zyfer segments or smaller contracts or orders in the FEI-NY segment, sales of products and services to customers are reported in operating results based upon (i) shipment of the product or (ii) performance of the services pursuant to terms of the customer order. When payment is contingent upon customer acceptance of the installed system, revenue is deferred until such acceptance is received and installation completed.

Costs and Expenses

Contract costs include all direct material, direct labor costs, manufacturing overhead and other direct costs related to contract performance. Selling, general and administrative costs are charged to expense as incurred.

Inventory

In accordance with industry practice, inventoried costs contain amounts relating to contracts and programs with long production cycles, a portion of which will not be realized within one year. Inventory write downs are established for slow-moving and obsolete items and are based upon management's experience and expectations for future business. Any changes arising from revised expectations are reflected in cost of sales in the period the revision is made.

Marketable Securities

All of the Company's investments in marketable securities are Level 1 securities which trade on public markets and have current prices that are readily available. In general, investments in fixed price securities are only in the commercial paper of financially sound corporations or the bonds of U.S. Government agencies. Although the value of such investments may fluctuate significantly based on economic factors, the Company's own financial strength enables it to wait for the securities to either recover their value or to mature such that any interim unrealized gains or losses are deemed to be temporary.

RESULTS OF OPERATIONS



The table below sets forth for the respective periods of fiscal years 2013 and
2012 (which end on April 30, 2013 and 2012, respectively) the percentage of
consolidated revenues represented by certain items in the Company's consolidated
statements of operations:

                                         Three months ended July 31,
                                          2012                2011
Net Revenues
FEI-NY                                         71.0 %              66.6 %
Gillam-FEI                                     11.4                12.5
FEI-Zyfer                                      20.1                23.7
Less intersegment revenues                     (2.5 )              (2.8 )
                                              100.0               100.0
Cost of revenues                               64.2                61.5
Gross margin                                   35.8                38.5
Selling and administrative expenses            20.9                19.8
Research and development expenses               8.4                 7.5
Operating profit                                6.5                11.2
Other income, net                               0.7                 1.2
Pretax income                                   7.2                12.4
Provision for income taxes                      2.6                 4.0
Net income                                      4.6 %               8.4 %

Impact of FEI-Elcom Acquisition

Fiscal year 2013 results include the results of operations of the Company's newly acquired subsidiary, FEI-Elcom Tech, Inc. (formerly Elcom Technologies, Inc. or "Elcom" and after the acquisition, "FEI-Elcom"), which is included in the FEI-NY segment. FEI-Elcom's third-party revenues were less than $1 million and the subsidiary recorded an operating loss of approximately $900,000 for the quarter ended July 31, 2012. In the comparable three-month period of the prior fiscal year, before the acquisition, Elcom recorded revenues of approximately $3.0 million, an operating profit of approximately $140,000 and net income of approximately $77,000. In the discussion below, all amounts for the three months ended July 31, 2011; do not include FEI-Elcom with the exception of the Company's "Other income (expenses)" which includes $19,000 of equity income from its minority interest in Elcom at that time.

                  Frequency Electronics, Inc. and Subsidiaries

                                  (Continued)



Revenues

                             Three months ended July 31,
                                                    Change
     Segment           2012         2011          $          %
FEI-NY               $ 11,848     $ 10,615       1,233        12 %
Gillam-FEI              1,908        1,988         (80 )      (4 )%
FEI-Zyfer               3,357        3,773        (416 )     (11 )%
Intersegment sales       (428 )       (437 )         9
                     $ 16,685     $ 15,939     $   746         5 %

For the three months ended July 31, 2012, revenues from recently acquired FEI-Elcom are included in revenues of the FEI-NY segment. In the fiscal year 2013 period, revenues from commercial and U.S. Government satellite programs accounted for approximately 50% of consolidated revenues compared to approximately 40% for the same period of fiscal year 2012. Revenues on these contracts are recognized primarily under the percentage of completion method. Revenues in the U.S. Government/DOD non-space business area which are recorded in the FEI-NY (including FEI-Elcom sales) and FEI-Zyfer segments were lower in fiscal year 2013 and accounted for approximately 15% of consolidated revenues compared to 20% of revenues in the fiscal year 2012 period. Network infrastructure revenues were lower in the FEI-NY and Gillam-FEI segments and accounted for approximately 25% of consolidated revenues in the three month period ended July 31, 2012 compared to less than 30% in the fiscal 2012 period.

Consolidated revenues for the three months ended July 31, 2011 increased by 31% compared to revenues for the same period of fiscal year 2011, and was generated primarily from satellite payload programs as a result of recent contract bookings in the FEI-NY segment. In the fiscal year 2012 period, revenues from commercial and U.S. Government satellite programs accounted for approximately 40% of consolidated revenues compared to approximately 30% for the same period of fiscal year 2011. Revenues on these contracts are recognized primarily under the percentage of completion method. Increased network infrastructure revenues generated by the FEI-Zyfer segment were partially offset by declines in that business area in the Gillam-FEI segment. Network infrastructure revenues were less than 30% of consolidated revenues for the three months ended July 31, 2011 compared to approximately 30% for the same period of fiscal year 2011. In the fiscal year 2012 quarter, revenues from the U.S. Government/DOD business area, which are recorded in the FEI-NY and FEI-Zyfer segments, were approximately the same dollar amount as the same period of fiscal year 2011, accounting for approximately 20% and 25%, respectively, of consolidated revenues.

Based on the Company's current backlog, over two-thirds of which represent satellite payload business, potential for additional new orders, as well as the Company's acquisition of FEI-Elcom in late fiscal year 2012, revenues for fiscal year 2013 are expected to grow. Satellite payload revenues will remain the dominant portion of the Company's business but revenues from the other major business areas, U.S. Government/DOD non-space and network infrastructure, are also expected to increase over fiscal year 2012 levels.

                  Frequency Electronics, Inc. and Subsidiaries

                                   (Continued)



Gross margin

                                     Three months ended July 31,
                                                            Change
                                 2012        2011         $         %
                               $  5,981     $ 6,144     $ (163 )     (3 )%

                     GM Rate       35.8 %      38.5 %

Gross margin was impacted by lower revenues at both Gillam-FEI and FEI-Zyfer. The gross margin rate was reduced by the effect of FEI-Elcom as well as a higher percentage of lower margin network infrastructure product sales. In the latter portion of the fiscal first quarter ended July 31, 2012, FEI-Elcom received new orders for its products but was unable to manufacture and ship the products prior to the end of the quarter. The first quarter revenues recognized by FEI-Elcom were insufficient to fully cover its production costs during the fiscal 2013 quarter such that the consolidated gross margin rate was reduced by approximately 2%.

For the three months ended July 31, 2011, gross margin improved by 29% compared to the same period of fiscal 2011, reflecting the 31% quarter-to-quarter increase in revenue over the three month period ended July 31, 2010. The different mix of programs on which the Company is working in the fiscal year 2012 period accounted for the small decline in the gross margin rate compared to the three months ended July 31, 2010. Of the Company's three segments, the FEI-NY segment experienced the largest gross margin rate improvement as the higher volume of business covered more of that segment's fixed costs.

The gross margin rates recorded in the fiscal year 2013 and 2012 periods were less than the Company's targeted rate of 40%. As FEI-Elcom sales volume increases and as the sales product mix changes, the Company anticipates that its gross margin rates for the remainder of fiscal year 2013 will reach or exceed its target rate.

Selling and administrative expenses

Three months ended July 31,

                                 Change
     2012         2011         $        %
   $   3,485     $ 3,162     $ 323       10 %

For the three months ended July 31, 2012 and 2011, selling and administrative expenses were 21% and 20%, respectively, of consolidated revenues. The increase in expenses in the fiscal year 2013 quarter compared to the same period of fiscal year 2012 is due to selling and administrative expenses incurred at FEI-Elcom of approximately $600,000 which was partially offset by reduced incentive and deferred compensation expenses and lower operating costs in other segments. For the remainder of fiscal year 2013, the Company expects selling and administrative expenses to be incurred at approximately the same rate and approximate the Company's target of 20% of revenues or less.

Research and development expense

Three months ended July 31,

                                  Change
      2012         2011         $        %
    $   1,415     $ 1,198     $ 217       18 %

Research and development expenditures represent investments intended to keep the Company's products at the leading edge of time and frequency technology and enhance competitiveness for future revenues. Research and development spending for the three-month periods ended July 31, 2012 and 2011, was approximately 8% of revenues each year compared to the Company's target of 10% of revenues. The quarter-to-quarter increase in spending is due primarily to product development expenditures at FEI-Elcom of approximately $300,000. R&D spending in fiscal year 2013 continued to facilitate development of new satellite payload products from DC to Ka Band, development and improvement of miniaturized rubidium atomic clocks, development of new GPS-based synchronization products and further enhancement of the capabilities of the Company's line of low g-sensitivity and ruggedized rubidium oscillators. Included in these efforts are product redesign and process improvements to enhance product manufacturability and reduce production costs. In addition, the Company continues to conduct development activities on customer-funded programs the cost of which appears in cost of revenues, thus reducing the level of internal research and development spending. The Company will continue to devote significant resources to develop new products, enhance existing products and implement efficient manufacturing processes. For fiscal year 2013, the Company is targeting to spend under 10% of revenues on internal research and development projects. Internally generated cash and cash reserves are adequate to fund these development efforts.

Operating profit

Three months ended July 31,
Change
2012 2011 $ % $ 1,081 $ 1,784 $ (703 ) (39 )%

The late fiscal year 2012 addition of FEI-Elcom reduced consolidated operating results for the first quarter of fiscal year 2013. Revenues increased but were offset by higher operating expenses resulting in lower consolidated operating profit in fiscal year 2013 than in fiscal year 2012. As a percentage of revenue, fiscal year 2013 operating profit was 6.5% of revenues compared to 11.2% of revenues last year. The Company anticipates that the FEI-Elcom acquisition will be accretive during fiscal year 2013 as the new subsidiary fully realizes the benefits of recent sales orders but, for the near term, the acquisition may reduce consolidated operating profits. The Company anticipates that for the full fiscal year 2013, it will generate an operating profit that exceeds that of the prior fiscal year.

Other income (expense)

                                     Three months ended July 31,
                                                            Change
                                2012         2011        $         %
Investment income              $   167       $ 125     $  42         34 %
Equity income                        -          19       (19 )       NM
Interest expense                   (56 )       (24 )     (32 )     (133 )%
Other income (expenses), net         6          80       (74 )      (92 )%
                               $   117       $ 200     $ (83 )      (42 )%

Investment income is derived primarily from the Company's holdings of marketable securities. Earnings on these securities may vary based on fluctuating interest rate levels and the timing of purchases or sales of securities. During the three months ended July 31, 2012, investments were held in higher yielding marketable securities than those held in the prior fiscal year. In addition, in the fiscal year 2012 period, the Company redeemed marketable securities which resulted in a realized gain of approximately $7,000. No investment gains or losses were recorded in the fiscal 2013 period.

Equity income in the three months ended July 31, 2011, represents the Company's share of the quarterly income recorded by Elcom in which the Company owned a 25% interest prior to its late fiscal year 2012 acquisition of FEI-Elcom.

The increase in interest expense for the three months ended July 31, 2012 compared to the same period of fiscal year 2012 is due to borrowings under the Company's line of credit from a financial institution. The Company borrowed $6 million during fiscal year 2012 to finance the acquisition of FEI-Elcom.

Other income in the three months ended July 31, 2011 resulted primarily from a realized gain of approximately $90,000 derived from the excess of proceeds over the cash values of life insurance policies covering a former employee. No similar gain was recognized during the fiscal year 2013 period. The fiscal year 2012 gain was partially offset by other insignificant non-operating expenses that were similar in type and amount to the current fiscal year.

Income tax provision

Three months ended July 31,
Change
2012 2011 $ % $ 430 $ 640 $ (210 ) (33 )%

The provision for income taxes for the three months ended July 31, 2012 decreased from the same period of fiscal year 2012 due to the 40% decrease in pretax income. The effective tax rate in fiscal year 2013 is expected to be in the range of 32% to 36% depending on the level of pretax income or loss recorded at the Company's foreign subsidiaries. As of July 31, 2012 and April 30, 2012, the remaining deferred tax asset valuation allowance is approximately $1.5 million.

The Company is subject to taxation in several countries as well as the states of New York, New Jersey and California. The statutory federal rates are 34% in the United States and Belgium. The effective rate is impacted by the income or loss of certain of the Company's European and Asian subsidiaries which are currently not taxed. In addition, the Company utilizes the availability of research and development tax credits and the Domestic Production Activity credit in the United States to lower its tax rate. As of April 30, 2012, the Company's European subsidiaries had available net operating loss carryforwards of approximately $1.2 million, which will offset future taxable income. As a result of the FEI-Elcom acquisition, the Company has a federal net operating loss carryforward of $6.6 million which may be applied in annually limited amounts to offset future U.S.-sourced taxable income over the next 20 years. For State of California income tax purposes, the Company has a tax loss carryforward of approximately $2.3 million which expires in 20 years.

Net income

Three months ended July 31,
Change
2012 2011 $ % $ 768 $ 1,344 $ (576 ) (43 )%

As detailed above, for the three months ended July 31, 2012, higher revenues due to the FEI-Elcom acquisition were offset by higher operating expenses, reducing net income for the quarter as compared to the prior year period. As FEI-Elcom executes on its business plan and makes deliveries of product against its increased backlog, the Company expects to record higher consolidated revenue and to realize improved gross margins and operating profits over the remainder of fiscal year 2013.

LIQUIDITY AND CAPITAL RESOURCES

The Company's balance sheet continues to reflect a strong working capital position of $64.2 million at July 31, 2012, compared to working capital of $63.3 million at April 30, 2012. Included in working capital at July 31, 2012 is $22.1 million consisting of cash, cash equivalents and marketable securities. The Company's current ratio at July 31, 2012 is 5.2 to 1.

For the three months ended July 31, 2012, the Company used cash from operations in the amount of $402,000 compared to positive cash flow from operating activities of $2.7 million in the comparable fiscal year 2012 period. The reduced cash flow in the fiscal year 2013 period resulted from the operating loss incurred by recently acquired FEI-Elcom, increased costs and estimated earnings in excess of billings ("unbilled accounts receivables"), increased inventory and payments made against accounts payable-trade. Unbilled receivables arise from the use of the percentage of completion method on the Company's long-term contracts, including satellite payload contracts. Under this method revenue was recognized but contractual milestones were not yet billed in accordance with the terms of the contracts. For the three months ended July 31, 2012 and 2011, the Company incurred approximately $1.3 million and $1.1 million, respectively, of non-cash operating expenses, such as depreciation and amortization and accruals for employee benefit programs. For the balance of fiscal year 2013, the Company expects to generate positive cash flow from operating activities.

Net cash provided by investing activities for the three months ended July 31, 2012, was $951,000 compared to $333,000 used by such activity for the same period of fiscal year 2012. During the fiscal year 2013 period, marketable securities were redeemed in the amount of $2.0 million compared to $4.5 million of such redemptions during the fiscal year 2012 period. These proceeds and other cash was reinvested in additional marketable securities for the periods ended July 31, 2012 and 2011 in the amount of $717,000 and $4.3 million, respectively. In fiscal years 2013 and 2012, the Company acquired property, plant and equipment in the amount of approximately $332,000 and $520,000, respectively. The Company may continue to invest cash equivalents in longer-term securities or to convert short-term investments to cash equivalents as dictated by its investment and acquisition strategies. The Company will continue to acquire more efficient equipment to automate its production process. The Company intends to spend between $2.0 million and $3.0 million on capital equipment during fiscal year 2013. Internally generated cash is adequate to acquire this level of capital equipment.

Net cash used in financing activities for the three months ended July 31, 2012 and 2011, was $87,000 and $53,000, respectively. During the fiscal year 2013 and 2012 periods, the Company made payments of $107,000 and $66,000, respectively, against capital lease obligations. In addition, during the three months ended July 31, 2012 and 2011, cash of $20,000 and $13,000, respectively, was received upon exercise of employee stock options or completion of a restricted stock transaction.

The Company has been authorized by its Board of Directors to repurchase up to $5 million worth of shares of its common stock for treasury whenever appropriate opportunities arise but it has neither a formal repurchase plan nor commitments to purchase additional shares in the future. As of July 31, 2012, the Company has repurchased approximately $4 million of its common stock out of the $5 million authorization.

The Company will continue to expend resources to develop, improve and acquire products for space applications, guidance and targeting systems, and communication systems which management believes will result in future growth and continued profitability. During fiscal year 2013, the Company intends to make a substantial investment of capital and technical resources to develop and acquire new products to meet the needs of the U.S. Government, commercial space and telecommunications infrastructure marketplaces and to invest in more efficient product designs and manufacturing procedures. Where possible, the Company will secure partial customer funding for such development efforts but is targeting to spend its own funds at a rate of less than 10% of revenues to achieve its development goals. Internally generated cash will be adequate to fund these development efforts. The Company may also pursue acquisitions to expand its range of products and may use internally generated cash and external funding in connection with such acquisitions.

As of July 31, 2012, the Company's consolidated backlog is approximately $58 million. Approximately 70% of this backlog is expected to be realized in the next twelve months. Included in the backlog at July 31, 2012 is approximately $1 million under cost-plus-fee contracts which the Company believes represent firm commitments from its customers for which the Company has not received full funding to date. The Company excludes from backlog any contracts or awards for which it has not received authorization to proceed. On fixed price contracts, the Company excludes any unfunded portion which, as of July 31, 2012, was in . . .