What changed in this filing

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Item 1. Business

2022-09-22 compared with 2021-09-24 · 54 added, 62 removed, 171 unchanged (40% of the section changed)

& Electronics Corp.

(“Espey”)

is a power electronics design and original equipment manufacturing (OEM) company with a long history of developing and delivering highly

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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.”

Espey’s common stock is publicly-traded

on the NYSE American under the symbol “ESP.”

Espey began operations after incorporation in

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We strive to remain competitive as a leader in high power energy conversion and transformer solutions through the design

and manufacture of new and improved products by using advanced and “cutting edge”

electronics technologies.

and manufacture of new and improved products by using advanced and “cutting edge” electronics technologies.

Espey is ISO 9001:2015 and AS9100:2016 certified.

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shipboard radar, airborne power, ground-based radar, and ground mobile power.

Espey’s services include design and development

to specification, build to print, design services, design studies, environmental testing services, metal fabrication, painting services,

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the Company's total sales were $32,104,774 and $ 27,734,598, respectively.

Sales to four

domestic customers, accounted for 16%, 15%, 14% and 14%, respectively, of total sales in 2021.

Sales to two domestic customers

accounted for 24%, and 14%, respectively, of total sales in 2020.

Although we have made improvement in the number of significant

customers, this concentration level still presents significant risk.

A loss of one of these customers or programs related to these

customers could significantly impact the financial performance of the Company.

Historically, a small number of customers have

accounted for a large percentage of the Company’s total sales in any given fiscal year.

Sales to four domestic

customers, accounted for 17%, 16%, 14% and 11%, respectively, of total sales in 2022.

Sales to four domestic customers accounted for 16%,

15%, 14% and 14%, respectively, of total sales in 2021.

This concentration level presents significant risk.

A loss of one of these customers

or programs related to these customers could significantly impact the financial performance of the Company.

Historically, a small

number of customers have accounted for a large percentage of the Company’s total sales in any given fiscal year.

Export sales in fiscal years 2022 and 2021 were

approximately $1,644,000 and $2,019,000, respectively.

The decrease is primarily due to the decrease in magnetic sales offset, in part,

by an increase in power supply shipments.

The decrease is primarily due to the decrease in power supply sales offset, in

part, by an increase in build to print shipments.

Sources of Raw Materials

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are required to cover obsolete parts.

Historically, the Company has not typically

experienced any significant delays or shortages with respect to the purchase of raw materials and components used in the manufacture of

its products.

However, over the past several years, the growth and continuing demand in the power electronics industry across multiple

manufacturing sectors has created volatility and unpredictability in the availability of certain electronic components and, in some cases,

continues to create industry shortages.

These shortages have and will likely continue to impact our ability to support our customer’s

schedule demands, as lead times for these components have, in some instances, increased from readily available to waiting times of nearly

a year or more.

In addition, we continue to incur delays in material deliveries from some company suppliers due to the COVID-19 pandemic.

We continue to work with our customers to mitigate any adverse impact upon our ability to service their requirements.

For the past several years, the growth and continuing

demand in the power electronics industry across multiple manufacturing sectors has created volatility and unpredictability in the availability

of certain electronic components and, in some cases, creates industry shortages.

These shortages have and will likely continue to impact

our ability to support our customer’s schedule demands, as lead times for these components have, in some instances, increased from

readily available to waiting times of nearly a year or more.

In addition, we continue to incur delays in material deliveries from some

company suppliers due to effects from global events, including the COVID-19 pandemic, resulting in supply chain disruptions.

to work with our customers to mitigate any adverse impact upon our ability to service their requirements.

The President of the United States continued

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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 the Administration’s foreign

trade policies, will not have a negative impact on our future earnings by increasing our raw material prices and augmenting the lead time

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$76.8 million compared to approximately $65.6 million at June 30, 2021.

The Company’s total backlog represents the estimated remaining

sales value of work to be performed under firm contracts.

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The unfunded backlog at June

30, 2021 is approximately $2.1 million and represents two firm multi-year orders from a single customer for which funding has not yet

been appropriated by Congress or funded by our customer.

While there is no guarantee that future budgets and appropriations will provide

funding for individual programs, management has included in unfunded backlog only those programs that it believes are likely to receive

funding based on discussions with customers and program status.

30, 2022 is approximately $0.4 million and represents two multi-year orders from a single customer for which funding has not yet been

appropriated by Congress or funded by our customer.

While there is no guarantee that future budgets and appropriations will provide funding

for individual programs, management has included in unfunded backlog only those programs that it believes are likely to receive funding

based on discussions with customers and program status.

The unfunded backlog at June 30, 2021 was approximately $2.1 million, comprised

of one of the same multi-year orders from a single customer.

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 as information is known and estimable.

of the same multi-year orders from a single customer.

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

as information is known and estimable.

It is presently anticipated that a minimum of

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of governmental termination of orders for convenience, and the general strength of the industry sectors in which our customers transact

Future procurement needs supporting the military

and the rail industry continue to drive competition.

Many of our competitors have invested, and they continue to invest aggressively in

upfront product design costs and accept lower profit margins as a strategic means of maintaining existing business and enhancing

market share.

This continues to put pressure on the pricing of our current products and has lowered our profit margins on some of

our new business.

In order to compete effectively for new business, in some cases we have invested in upfront design costs, thereby

reducing initial profitability as a means of procuring new long-term programs.

As part of our strategy, we adjust our pricing in

order to achieve a balance which enables us both to retain repeat programs while being more competitive in bidding on new

We continue to place an emphasis on securing “build

to print”

opportunities, which allows production work to go directly to the manufacturing floor, limiting the impact on our engineering

Future procurement needs supporting the military and

the rail industry continue to drive competition.

Many of our competitors have invested, and they continue to invest aggressively in upfront

product design costs and accept lower profit margins as a strategic means of maintaining existing business and enhancing market share.

This continues to put pressure on the pricing of our current products and has lowered our profit margins on some of our new business.

In order to compete effectively for new business, in some cases we have invested in upfront design costs, thereby reducing initial profitability

as a means of procuring new long-term programs.

As part of our strategy, we adjust our pricing in order to achieve a balance which enables

us both to retain repeat programs while being more competitive in bidding on new programs.

We continue to place an emphasis on securing “build

to print” opportunities, which allows production work to go directly to the manufacturing floor, limiting the impact on our engineering

This allows us to keep our manufacturing team busy while the products being developed in-house transition to production.

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competitive position of the Company.

The Company’s U.S.

Government contract

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recommended appropriations for every federal agency and is the result of months of policy and program reviews throughout the executive

From February through September of each year, the appropriations and authorization committees of Congress review the President’s

budget proposals and establish the funding levels for the upcoming fiscal year in appropriations and authorization legislation.

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Consequently, a strengthening of the United States dollar against foreign currencies could increase the price

in local currencies of our products in foreign markets and make our products relatively more expensive than competitors’

in local currencies of our products in foreign markets and make our products relatively more expensive than competitors’ products.

Defense Contracts and Subcontracts

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procurement laws and regulations.

Some of the Company’s contracts are governed by the Federal Acquisition Regulation (FAR), which

lays out uniform policies and procedures for acquiring goods and services by the U.S.

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The FAR also contains guidelines and regulations for

managing a contract after award, including conditions under which contracts may be terminated, in whole or in part, at the government’s

convenience or for default.

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and other reviews by the government of its costs, performance, accounting and general business practices relating to its contracts, which

may result in adjustment of the Company’s contract-related costs and fees.

Cyber or Other Security Threats or Other Disruptions

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business