ESPEY MFG & ELECTRONICS CORP

Previous wording

Espey Mfg. & Electronics Corp. (“Espey”) is a power electronics design and original equipment manufacturing (OEM) company with a long history of developing and delivering reliable products for use in military and severe environment applications. Design, manufacturing, and testing is performed in our in-service 150,000+ square foot facility located at 233 Ballston Ave, Saratoga Springs, New York. Espey is classified as a “smaller reporting company” for purposes of the reporting requirements under the Securities Exchange Act of 1934, as amended. Espey’s common stock is publicly-traded on the NYSE American under the symbol “ESP.”

Current wording

Espey Mfg. & Electronics Corp. (“Espey”) is a power electronics design and original equipment manufacturing (OEM) company with a long history of developing and delivering reliable products for use in military and severe environment applications. Design, manufacturing, and testing is performed in our in-service 174,000+ square foot facility located at 233 Ballston Ave, Saratoga Springs, New York. Espey is classified as a “smaller reporting company” for purposes of the reporting requirements under the Securities Exchange Act of 1934, as amended. Espey’s common stock is publicly-traded on the NYSE American under the symbol “ESP.”

Previous wording

Espey is an ISO 9001:2015 and AS9100:2016 certified manufacturer of power conversion, advanced magnetics and build to print specifications provided by the customer “build to print” products for the rugged industrial and military marketplace. Our primary products are power supplies, power converters, filters, power transformers, magnetic components, power distribution equipment, UPS systems, and antennas. The applications of these products include AC and DC locomotives, shipboard power, shipboard radar, airborne power, ground-based radar, and ground mobile power.

Current wording

Espey is an ISO 9001:2015 and AS9100:2016 certified manufacturer of power conversion, advanced magnetics and “build to print” products where specifications are provided by the customer for the rugged industrial and military marketplace. Our primary products are power supplies, power converters, filters, power transformers, magnetic components, power distribution equipment, UPS systems, and antennas. The applications of these products include AC and DC locomotives, shipboard power, shipboard radar, airborne power, ground-based radar, and ground mobile power.

Previous wording

Espey services include design and development to specification, build to specifications provided by the customer “build to print”, design services, design studies, environmental testing services, metal fabrication, painting services, and development of automatic testing equipment. Espey is vertically integrated, meaning that the Company produces individual components (including inductors), populates printed circuit boards, fabricates metalwork, paints, wires, qualifies, and fully tests items, mechanically, electrically and environmentally, in house. Portions of the manufacturing and testing process are subcontracted to vendors from time to time.

Current wording

Espey services include design, development, and build to specifications provided by the customer (build to print), design services, design studies, environmental testing services, metal fabrication, painting services, and development of automatic testing equipment. Espey is vertically integrated, meaning that the Company produces individual components (including inductors), populates printed circuit boards, fabricates metalwork, paints, wires, qualifies, and fully tests items, mechanically, electrically and environmentally, in house. Portions of the manufacturing and testing process are subcontracted to vendors on occasion.

Previous wording

The Company markets its products primarily through its own direct sales organization and through outside sales representatives. Business is solicited from large industrial manufacturers and defense companies, the government of the United States, foreign governments and major foreign electronic equipment companies. Espey is also on the eligible list of contractors with the United States Department of Defense. We pursue opportunities for prime contracts directly with the Department of Defense and are generally automatically solicited by Department of Defense procurement agencies for their needs falling within the major classes of products produced by the Company. Espey contracts with the Federal Government under cage code 20950 as Espey Mfg. & Electronics Corp.

Current wording

The Company markets its products primarily through its own direct sales organization and through outside sales representatives. Business is solicited from large industrial manufacturers and defense companies, the government of the United States, foreign governments and major foreign electronic equipment companies. Espey is also on the eligible list of contractors with the United States Department of Defense. We pursue opportunities for prime contracts directly with the Department of Defense and are generally solicited by Department of Defense procurement agencies for their needs falling within the major classes of products produced by the Company. Espey contracts with the Federal Government under cage code 20950 as Espey Mfg. & Electronics Corp.

Previous wording

Our business is not seasonal. However, the concentration of our business in the rail industry, and in equipment for military applications and industrial applications, and our customer concentrations expose us to on-going associated risks. These risks include, without limitation, fluctuating requirements for power supplies in the rail industry, dependence on appropriations from the United States Government and the governments of foreign nations, program allocations, the potential of governmental termination of orders for convenience, and the general strength of the industry sectors in which our customers transact business.

Current wording

Our business is not seasonal. However, the concentration of our business in the rail industry, equipment for military and industrial applications, and our customer concentrations expose us to on-going associated risks. These risks include, without limitation, fluctuating requirements for power supplies in the rail industry, dependence on appropriations from the United States Government and the governments of foreign nations, program allocations, the potential of governmental termination of orders for convenience, and the general strength of the industry sectors in which our customers transact business.

Previous wording

The total backlog at March 31, 2025 was $138 million, which included approximately $97.7 million from three significant customers, compared to $84.2 million at March 31, 2024, which included approximately $54.5 million from five significant customers. The Company’s total backlog represents the estimated remaining sales value of work to be performed under firm contracts. It is not uncommon to receive orders which include delivery schedules extending beyond a year from the contract purchase date. Due to this, a customer’s future reorder point may vary. The backlog at March 31, 2025 is fully funded, except for approximately $33.3 million, representing six firm follow-on multi-year orders from a single customer. While there is no guarantee that future budgets and appropriations will provide funding for individual programs, management has included in the unfunded backlog only those programs that it believes are likely to receive funding based on program status and discussions with customers. Contracts are subject to modification, change or cancellation, and the Company accounts for these changes as they are probable and estimable. The Company evaluates the impact of any scope modifications and will adjust reserves to the extent information is known or estimable.

Current wording

The total backlog at September 30, 2025 was approximately $141.1 million, which included $92.3 million from three significant customers, compared to approximately $94.6 million at September 30, 2024, which included $58.0 million from four significant customers. A single customer may participate in multiple active programs. Therefore, the loss of one program does not necessarily result in the loss of the customer relationship. For this reason, management believes that the customer backlog concentration poses minimal risk to the Company. The Company’s total backlog represents the estimated remaining sales value of work to be performed under firm contracts. It is not uncommon to receive orders which include delivery schedules extending beyond a year from the contract purchase date. Accordingly, a customer’s future reorder point may vary. The backlog at September 30, 2025 is fully funded, except for approximately $26 million, the majority of which represents amounts under multiple orders from a single customer. While there is no guarantee that future budgets and appropriations will provide funding for individual programs, management has included in the unfunded backlog only those programs that it believes are likely to receive funding based on program status and discussions with customers. Contracts are subject to modification, change or cancellation, and the Company accounts for these changes as they are probable and estimable. The Company evaluates the impact of any scope modifications and will adjust reserves to the extent information is known or estimable. Contracts are generally not cancellable without penalty or recourse.

Previous wording

Management expects revenues and earnings per share to be higher in fiscal year 2025 than fiscal year 2024. This expectation is driven primarily by orders already in our backlog that will be shipped in the final quarter of fiscal year 2025 and the change in product mix shipped during fiscal year 2025 as compared to fiscal year 2024.

Current wording

Management expects revenues to be higher in fiscal year 2026 than fiscal year 2025. This expectation is driven primarily by orders already in our backlog that are expected to be shipped before the end of fiscal year 2026. Following the review of the first quarter results, management believes that net income for fiscal year 2026 will approximate net income from fiscal year 2025. The Company does not anticipate that the government shutdown will have an adverse effect on future financial performance. However, the ultimate impact of such events is inherently uncertain and beyond the Company’s control, and actual results could differ from current expectations.

Previous wording

From time to time, we encounter part obsolescence which requires us to identify an alternate part suitable for use. We continue to work with our customers on strategies to mitigate any adverse impact upon our ability to service their requirements. Factors which may arise after the placement of the customer’s order may cause us to miss projected delivery dates. Inflationary costs are expected to continue, but are not expected to have a significant impact on operating income in fiscal year 2025. Tariffs on steel and aluminum imports from various countries continue to be a concern. Although we are not currently experiencing any significant financial or raw material sourcing issues resulting from the product tariffs, the Company is continuing to monitor the changes in foreign trade policies and the potential impact they could have on our business moving forward.

Current wording

From time to time, we encounter part obsolescence which requires us to identify an alternate part suitable for use. We continue to work with our customers on strategies to mitigate any adverse impact upon our ability to service their requirements. Factors which may arise after the placement of the customer’s order may cause us to miss projected delivery dates. Inflationary costs are expected to continue, but are not expected to have a significant impact on operating income in fiscal year 2026. Tariffs on steel and aluminum imports from various countries remain in effect and, while not directly imposed on the Company, have contributed to higher costs from suppliers. Although we are not currently experiencing any significant financial or raw material sourcing issues resulting from the product tariffs, the Company cannot provide any assurance that the existing tariffs, the potential of additional tariffs, and the associated volatility arising from foreign trade policies, will not have a negative impact on our future earnings.

Previous wording

Successful conversion of engineering program backlog into sales is largely dependent on the execution and completion of our engineering design efforts. It is not uncommon to experience technical or scheduling delays which arise from time to time as a result of, among other reasons, design complexity, the availability of personnel with the requisite expertise, and the requirements to obtain customer approval at various milestones. Cost overruns which may arise from technical and scheduling delays and increased raw material costs could negatively impact the timing of the conversion of backlog into sales, or the profitability of such sales. Engineering programs in both the funded and unfunded portions of the current backlog aggregate $12.3 million.

Current wording

Successful conversion of engineering program backlog into sales is largely dependent on the execution and completion of our engineering design efforts. It is not uncommon to experience technical or scheduling delays which arise from time to time as a result of, among other reasons, design complexity, the availability of personnel with the requisite expertise, and the requirements to obtain customer approval at various milestones. Cost overruns which may arise from technical and scheduling delays and increased raw material costs could negatively impact the timing of the conversion of backlog into sales, or the profitability of such sales. Engineering programs in both the funded and unfunded portions of the current backlog aggregate $11.8 million.

Previous wording

It is presently anticipated that a minimum of $9.6 million of orders comprising the March 31, 2025 backlog will be filled during the fiscal year ending June 30, 2025 subject, however, to the impact of the factors identified above. The minimum of $9.6 million does not include any shipments which may be made against orders subsequently received during the fiscal year ending June 30, 2025.

Current wording

It is presently anticipated that a minimum of $38.9 million of orders comprising the September 30, 2025 backlog will be filled during the fiscal year ending June 30, 2026 subject, however, to the impact of the factors identified above. The minimum of $38.9 million does not include any shipments which may be made against orders subsequently received during the fiscal year ending June 30, 2026.

Previous wording

As of March 31, 2025, new orders received year to date have exceeded total new orders received in fiscal 2024. New orders received in the first nine months of fiscal year 2025 were $75.1 million as compared to approximately $27.8 million new orders received in the first nine months of fiscal year 2024. Included in new orders received during the current fiscal year are two awards, one for $29.5 million and the other $19.8 million, when fully funded, to provide electric power distribution panels for the U.S. Navy’s Columbia class submarines through calendar year 2032. In addition to the backlog and the new orders already booked in fiscal year 2025, the Company currently has outstanding opportunities representing approximately $151 million in the aggregate as of May 1, 2025 for both repeat and new programs. Outstanding opportunities encompass various new and previously manufactured power supplies, transformers, and subassemblies. We consider the value of those opportunities we believe are likely to be awarded based on factors which include: quotation status, communicated award dates, historical ordering, public information on defense programs and program funding, discussion with customers, and our cost competitiveness. However, there can be no assurance that the Company will acquire any of the outstanding opportunities described above, many of which are subject to allocations of the United States defense spending and factors affecting the defense industry. Also, many solicitations we receive for the procurement of goods and services are associated with competitive bidding processes.

Current wording

The Company currently expects new orders in fiscal year 2026 to be lower than those received in fiscal year 2025. During fiscal year 2025, the Company received $86.4 million in new orders which included two significant, multi-year contract awards in an aggregate sum of $49.4 million. New orders received in the first three months of fiscal year 2026 were approximately $10.5 million as compared to $7.8 million of new orders received in the first three months of fiscal year 2025. In addition to the backlog, the Company currently has outstanding opportunities representing approximately $161.5 million in the aggregate as of November 10, 2025, for both repeat and new programs. Outstanding opportunities encompass various new and previously manufactured power supplies, transformers, and subassemblies. The stated amount includes only those opportunities that we believe are likely to be awarded based on factors which include: quotation status, communicated award dates, historical ordering, public information on defense programs and program funding, discussion with customers, and our cost competitiveness. However, there can be no assurance that the Company will acquire any of the outstanding opportunities described above, many of which are subject to allocations of the United States defense spending and elements affecting the defense industry. Many solicitations we receive for the procurement of goods and services takes place by competitive bidding.

Previous wording

Historically, a small number of customers have accounted for a large percentage of the Company’s total sales in any given fiscal year. Management continues to pursue opportunities with current and new customers with an overall objective of lowering the concentration of sales, mitigating excessive reliance upon a single major product of a particular program and minimizing the impact of the loss of a single significant customer. Given the nature of our business, we believe our existing sales order backlog is fairly diversified in terms of customers and the category of products on order.

Current wording

Historically, a small number of customers have accounted for a large percentage of the Company’s total sales in any given fiscal year. Management continues to pursue opportunities with current and new customers with an overall objective of lowering the concentration of sales, mitigating excessive reliance upon a single major product of a particular program and minimizing the impact of the loss of a single significant customer. As previously stated above, a single customer may participate in multiple active programs. Therefore, the loss of one program does not necessarily result in the loss of the customer relationship. For this reason, management believes that sales concentration poses minimal risk to the Company. Given the nature of our business, we believe our existing sales order backlog is fairly diversified in terms of customers and the category of products on order.

Previous wording

The majority of our sales are generated from military contracts from defense companies, the United States Department of Defense, other agencies of the government of the United States and foreign governments, for the design and development and/or manufacture of products. Sales are also generated from industrial manufacturers for similar services. We provide our products and design and development services under fixed-price contracts. Under fixed-price contracts we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss.

Current wording

The majority of our sales are generated from military contracts from defense companies, the Department of Defense, other agencies of the government of the United States and foreign governments. We provide our products and design and development services under fixed-price contracts. Under fixed-price contracts we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, our generated profit will fluctuate or a loss could be incurred.

Previous wording

We evaluate the products or services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. Significant judgment is required in determining performance obligations. We determine the transaction price for each contract based on the consideration we expect to receive for the products or services being provided under the contract. The transaction price for each performance obligation is based on the estimated standalone selling price of the product or service underlying each performance obligation. Transaction prices on our contracts subject to the Federal Acquisition Regulations (FAR) are typically based on estimated costs plus a reasonable profit margin.

Current wording

We evaluate the products or services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. Significant judgment is required in determining performance obligations. We determine the transaction price for each contract based on the consideration we expect to receive for the products or services being provided under the contract. As the Company does not have standalone observable prices, a contract’s transaction price of each performance obligation is based on the standalone selling price, which is determined using an expected cost plus a margin approach.

Previous wording

The Company extends credit to its customers in the normal course of business and collateral is generally not required for trade receivables. Exposure to credit risk is controlled through the use of credit approvals, credit limits, and monitoring procedures. Accounts receivable are reported net of an allowance for credit losses. The Company estimates the allowance based on its analysis of historical experience, current economic market conditions, performance of specific account reviews, and other factored considerations to include, but not limited to, contracts covered by government funding and the overall health of the industry. Interest is not charged on past due balances. Based on these factors, there was an allowance for credit losses of $3,000 at March 31, 2025 and June 30, 2024. Changes to the allowance for credit losses are charged to expense and reduced by charge-offs, net of recoveries. The opening accounts receivable balance, net of allowance for credit losses of $3,000, at July 1, 2023 and July 1, 2024 were $5,755,282 and $6,635,490, respectively.

Current wording

The Company extends credit to its customers in the normal course of business and collateral is generally not required for trade receivables. Exposure to credit risk is controlled through the use of credit approvals, credit limits, and monitoring procedures. The accounts receivable balance is reported net of an allowance for credit losses. The Company estimates the allowance based on its analysis of historical experience, current economic market conditions, performance of specific account reviews, and other factored considerations to include, but not limited to, contracts covered by government funding and the overall health of the industry. Interest is not charged on past due balances. Based on these factors, there was an allowance for credit losses of $3,000 at September 30, 2025 and June 30, 2025. Changes to the allowance for credit losses are charged to expense and reduced by charge-offs, net of recoveries. The opening accounts receivable balance, net of allowance for credit losses of $3,000, at July 1, 2024 and July 1, 2025 were $6,635,490 and $7,598,888, respectively.

Previous wording

Net sales for the three months ended March 31, 2025 and 2024 were $10,302,719 and $8,254,653, respectively, a 24.8% increase. Net sales for the nine months ended March 31, 2025 and 2024 were $34,354,677 and $27,125,408, respectively, a 26.7% increase. In general, sales fluctuations may occur during comparable fiscal periods as the direct result of sales backlog levels, product mix, and specific contractual terms of those firm orders placed including contract value, scope of work, and contract delivery schedules.

Current wording

Net sales for the three months ended September 30, 2025 and 2024 were $9,092,876 and $10,443,218, respectively, a 12.9% decrease. In general, sales fluctuations may occur during comparable fiscal periods as the direct result of sales backlog levels, product mix, and specific contractual terms of those firm orders placed including contract value, scope of work, and contract delivery schedules.

Previous wording

For the three months ended March 31, 2025, the increase in sales when compared to the same period last year is primarily due to more deliveries against an overall higher sales backlog and the product mix comprising those shipments. The increase in sales in the current year was mainly related to our power supply and build to print programs. During the current quarter, sales increased on deliveries for some key build to print and power supply contracts. These increases were partially offset by the completion of a power supply program which had sales in the prior comparable period and a decrease in sales relating to two main magnetics programs. These decreases are attributable to the timing of shipments on certain programs.

Current wording

For the three months ended September 30, 2025, the decrease in sales when compared to the same period last year is primarily due to less deliveries and milestones met during the quarter due to the product mix comprising those shipments and milestones. The decrease in sales in the current year was mainly related to a few specific programs for our magnetics, power supply and build to print product groups. During the current quarter, sales declined due to the completion of a key build-to-print program that we saw in the prior comparable period and reduced deliveries on a power supply contract compared to the same quarter last year. Additionally, we saw a decrease in deliveries for a key multi-year magnetics program when compared to the first quarter in fiscal year 2024. These decreases were partially offset by the increase in sales on core power supply, magnetics, and build-to-print programs, different from those mentioned above. These decreases are attributable to the timing of shipments on certain programs. The decline in sales during the first quarter primarily reflects the timing of shipments on select programs and is not indicative of a sustained change in overall sales trends or order volume.

Previous wording

Gross profits for the three months ended March 31, 2025 and 2024 were $2,948,384 and $2,064,191, respectively. Gross profit as a percentage of sales was approximately 28.6% and 25.0%, for the same periods, respectively. Gross profits for the nine months ended March 31, 2025 and 2024 were $8,912,978 and $7,452,143, respectively. Gross profit as a percentage of sales was approximately 25.9% and 27.5%for the same periods, respectively.

Current wording

Gross profits for the three months ended September 30, 2025 and 2024 were $3,217,002 and $2,800,882, respectively. Gross profit as a percentage of sales was approximately 35.4% and 26.8%, for the same periods, respectively. The increase in gross margin percentage for the three months ended September 30, 2025, was primarily driven by product mix, labor cost efficiencies, and negotiated savings on material purchases for major power supply programs, as well as effective management of field support and subcontracting costs. The improvement in gross profits in the first quarter of fiscal year 2026 compared to the prior year, was partially offset by unanticipated costs on certain fixed-price engineering design contracts for power supplies, arising from unforeseen complexities in the designs.

Previous wording

Selling, general and administrative expenses were $1,197,262 for the three months ended March 31, 2025, an increase of $226,042, compared to the three months ended March 31, 2024. Selling, general and administrative expenses were $3,418,206 for the nine months ended March 31, 2025, an increase of $373,615 compared to the nine months ended March 31, 2024. The increase in spending for the three months ended March 31, 2025 as compared to the same period in 2024 relates mainly to the increase in employee compensation costs, outside selling costs related to non-employee sales representatives, an increase in employee recruitment fees, and increases in dues, subscriptions and training costs. The increase in spending for the nine months ended March 31, 2025 as compared to the same period in 2024 relates mainly to the increase in employee compensation costs, outside selling costs related to non-employee sales representatives, an increase in outbound freight costs related to higher sales, and an increase in employee recruitment fees.

Current wording

Selling, general and administrative expenses were $1,151,266 for the three months ended September 30, 2025, an increase of $69,597, compared to the three months ended September 30, 2024. The slight increase in spending for the three months ended September 30, 2025 as compared to the same period last year relates to the increase in employee compensation costs, facility costs, and outside selling costs related to non-employee sales representatives. These increases were partially offset by a decrease in officer compensation, stock option expense, and shipping costs.

Previous wording

Other income for the three months ended March 31, 2025 and 2024 was $336,306 and $184,821, respectively. Other income for the nine months ended March 31, 2025 and 2024 was $883,139 and $513,158, respectively. The increase for the three and nine months ended March 31, 2025 is primarily due to the increase in interest income resulting from an increase in cash held in money markets and investment securities. Interest income is a function of the level of investments and investment strategies that generally tend to be conservative.

Current wording

Other income for the three months ended September 30, 2025 and 2024 was $491,782 and $278,408, respectively. The increase for the three months ended September 30, 2025 is entirely due to the increase in interest income resulting from an increase in cash held in money market accounts and investment securities. Interest income is a function of the level of investments and investment strategies that generally tend to be conservative.

Previous wording

The Company’s effective tax rate for the three and nine months ended March 31, 2025 was approximately 18.3%, compared to 19.2% and 20.3% for the three and nine months ended March 31, 2024. The effective tax rate in fiscal 2025 and fiscal 2024 is less than the statutory tax rate mainly due to the benefit received from ESOP dividends paid on allocated shares as well as the benefit from foreign derived intangible income, offset in part, by the permanent difference for incentive stock option expense recorded for book purposes which is not deductible for tax purposes. The effective tax rate for the three and nine months ended March 31, 2025 was lower than the prior year primarily from a greater benefit derived from the ESOP dividends paid on allocated shares and the benefit derived from the exercise of incentive stock options in the current period when compared to the same prior year period.

Current wording

The Company’s effective tax rate for the three months ended September 30, 2025 was approximately 15.2%, compared to approximately 20.0% for the three months ended September 30, 2024. The effective tax rate in fiscal year 2026 is less than the statutory tax rate mainly due to the benefit received from ESOP dividends paid on allocated shares, the benefit from stock-based compensation, and FDII deductions, offset in part by the permanent difference in ESOP fair market value and cost which is not deductible for tax purposes. The effective tax rate for the three months ended September 30, 2025 was lower than the same period in the prior year, primarily due to a greater benefit derived from the ESOP dividends paid on allocated shares and the benefit derived from the exercise of incentive stock options, and the foreign-derived intangible income deduction in the current period when compared to the same period last year. In July 2025, the One Big Beautiful Bill Act (the "Tax Act") was enacted, introducing a series of corporate tax changes in the U.S., including 100% bonus depreciation on qualified property and full expensing for research and development expenditures. The impacts of the Tax Act are reflected in our results for the fiscal quarter ended September 30, 2025, and there was no material impact to our income tax expense or effective tax rate.

Previous wording

Net income for the three months ended March 31, 2025 was $1,704,487 or $0.66 and $0.63 per share, basic and diluted, compared to net income of $1,031,930 or $0.41 and $0.40 per share, basic and diluted, for the three months ended March 31, 2024. Net income for the nine months ended March 31, 2025 was $5,211,303 or $2.03 and $1.95 per share, basic and diluted, compared to $3,921,844 or $1.58 and $1.56 per share, basic and diluted, for the nine months ended March 31, 2024. The increase in net income in the three months ended March 31, 2025 when compared to the same period last year resulted primarily from the increase in gross profits and interest income which is slightly offset by an increase in selling, general, and administrative expenses and an increase in the provision for income taxes. The increase in net income in the nine months ended March 31, 2025 when compared to the same period last year resulted primarily from the increase in gross profit and the increase in interest income, offset in part, by an increase in selling, general, and administrative expenses and an increase in the provision for income taxes, all discussed above.

Current wording

Net income for the three months ended September 30, 2025 was $2,169,836 or $0.80 and $0.76 per share, basic and diluted, compared to net income of $1,598,317 or $0.63 and $0.61 per share, basic and diluted, for the three months ended September 30, 2024. The increase in net income in the three months ended September 30, 2025 when compared to the same period last year resulted primarily from the increase in gross profits, increase in interest income, and a decrease in the provision for income taxes which is slightly offset by an increase in selling, general, and administrative expenses, all discussed above.

Previous wording

The Company's working capital as of March 31, 2025 and 2024 was approximately $40.8 million and approximately $36.6 million, respectively. The Company may at times be required to repurchase shares at the ESOP participants’ request at fair market value. During the three and nine months ended March 31, 2025 and 2024, the Company did not repurchase any shares held by the ESOP. Under an existing authorization from the Company's Board of Directors, as of March 31, 2025, management is authorized to purchase an additional $783,460 of Company stock.

Current wording

The Company's working capital as of September 30, 2025 and 2024 was approximately $46.9 million and approximately $38.6 million, respectively. The Company may at times be required to repurchase shares at the ESOP participants’ request at fair market value. During the three months ended September 30, 2025 and 2024, the Company did not repurchase any shares held by the ESOP. Under existing authorizations from the Company's Board of Directors, as of September 30, 2025, management is authorized to purchase an additional $783,460 of Company stock.

Previous wording

Net cash provided by operating activities fluctuates between periods primarily as a result of differences in sales and net income, provision for income taxes, the timing of the collection of accounts receivable, purchase of inventory, and payment of accounts payable. The increase in cash provided by operating activities compared to the prior year primarily relates to an increase in contract liabilities for cash advances received from customers and an increase in prepaid expenses and other current assets offset in part by a decrease in inventories and decrease in accounts payable. Net cash used in investing activities increased in the nine months ended March 31, 2025 as compared to the same period in 2024 due to higher investment securities offset in part by the increased proceeds from the maturity of investment securities when compared to the same period last year. Cash used in financing activities for the nine months ended March 31, 2025 slightly increased primarily to dividend payments on common stock, offset in part, by proceeds from the exercise of stock options. The Company currently believes that the cash flow generated from operations and when necessary, from cash and cash equivalents will be sufficient to meet its long-term funding requirements for the foreseeable future.

Current wording

Net cash provided by operating activities fluctuates between periods primarily as a result of differences in sales and net income, provision for income taxes, the timing of the collection of accounts receivable, purchase of inventory, and payment of accounts payable. The increase in cash provided by operating activities compared to the prior year primarily relates to an increase in contract liabilities for cash advances received from customers and a decrease in trade accounts receivables. This is offset in part by an increase in inventories, decrease in accrued salaries and wages, and an increase in prepaid expenses and other current assets. Net cash used in investing activities decreased in the three months ended September 30, 2025 as compared to the same period in 2024 due to less purchased investment securities offset in part by proceeds from the maturity of investment securities as well as grant proceeds received when compared to the same period last year. Net cash used in financing activities increased solely due to the increase in dividends paid when compared to the same period last year. The Company currently believes that the cash flow generated from operations and when necessary, from cash and cash equivalents will be sufficient to meet its long-term funding requirements for the foreseeable future.

Previous wording

During the nine months ended March 31, 2025 and 2024, the Company expended $2,509,088 and $4,501,997, respectively, for plant improvements and new equipment, of which $2,346,233 and $4,294,632, respectively, was either reimbursed or eligible to be reimbursed under the not to exceed $7.4 million and $3.4 million awards received by the Company. The awards received by the Company are in support of facility and capital equipment upgrades for testing and qualification for the United States Navy. These funding awards are part of the Navy’s investment to improve and sustain the Surface Combatant Industrial Base. The Company has budgeted approximately $500,000 for new equipment and plant improvements in fiscal year 2025, not reimbursable under the funding awards received. A majority of these expenditures will be made to stay competitive in the marketplace and to meet the needs of current contracts.

Current wording

During the three months ended September 30, 2025, the Company expended $1,290,569 for plant improvements and new equipment, of which $1,014,804 was reimbursed under the $3.4 million award received by the Company in the second quarter of fiscal year 2025. During the three months ended September 30, 2024, the Company expended $664,351 for plant improvements and new equipment, of which $595,823 was either reimbursed or eligible to be reimbursed under the $7.4 million award received by the Company in fiscal year 2023. The awards received by the Company are in support of facility and capital equipment upgrades for testing and qualification for the United States Navy. These funding awards are part of the Navy’s investment to improve and sustain the Surface Combatant Industrial Base. The Company has budgeted approximately $850,000 for new equipment and plant improvements in fiscal year 2026, not reimbursable under the funding awards received. A majority of these expenditures will be made to upgrade our facilities, stay competitive in the marketplace, and to meet the needs of current contracts.