What changed in this filing

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Item 1. Business

2023-09-21 compared with 2022-09-22 · 68 added, 61 removed, 164 unchanged (44% of the section changed)

18 unchanged sentences

Espey’s services include design and development

to specification, 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

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.

In fiscal years ended June 30, 2023 and 2022,

the Company's total sales were $35,592,323 and $32,104,774, respectively.

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%,

Sales to five domestic customers accounted for 23%, 18%, 16%,

13% and 11%, respectively, of total sales in 2023.

Sales to four domestic customers accounted for 17%, 16%, 14% and 11%, respectively,

of total sales in 2022.

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.

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.

In some instances, our sales may include shipments

to more than one business unit of a particular customer.

Export sales in fiscal years 2023 and 2022 were

approximately $549,510 and $1,644,000, respectively.

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

part, by an increase in build to print shipments.

The decrease is primarily due to the decrease in power supply sales resulting from

the timing of contractual delivery schedules.

Sources of Raw Materials

7 unchanged sentences

are required to cover obsolete parts.

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 growth and continuing demand in the power

electronics industry across multiple manufacturing sectors, coupled with resulting supply chain disruptions from the effects of global

events, has created volatility and unpredictability in the availability of certain electronic components and, in some cases, continues

to create industry shortages.

These shortages 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.

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

These issues, if

they persist, may cause us to miss projected delivery dates.

The President of the United States continued

3 unchanged sentences

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

for the availability of raw materials.

From time to time the Company must identify parts to replace parts

which are no longer produced.

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

time for the availability of raw materials.

From time to time the Company must identify parts to replace

parts which are no longer produced.

Sales Backlog

3 unchanged sentences

sales value of work to be performed under firm contracts.

The funded portion of this backlog at June 30, 2022 is approximately $76.4 million.

The funded portion of this backlog at June 30, 2023 was approximately $83.5 million.

This includes items that have been authorized and appropriated by Congress and/or funded by the customer.

The unfunded backlog at June

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 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.

The unfunded backlog at June 30, 2023 was approximately $32 thousand and represents a small amount under one firm multi-year

order from a single 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, 2022 was approximately $0.4

million and represented two firm multi-year orders from a single customer for which funding had not yet been appropriated by Congress

and/or funded by our 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

1 unchanged sentence

ending June 30, 2024.

The minimum of $35 million does not include any shipments which may be made

against orders received subsequently to the fiscal year ending June 30, 2022.

The minimum of $39.5 million does not include any shipments which may be

made against orders received subsequently to the fiscal year ending June 30, 2023.

The estimate of the June 30, 2023 backlog to be shipped

35 unchanged sentences

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.

Our sales strategy includes identifying and obtaining

multiple new engineering design and development contracts in any given fiscal year to ensure optimal utilization of our engineering personnel

in addition to securing follow-on production awards for product previously designed in-house, as well as, build to print opportunities.

The Company targets those programs and opportunities which will generate future longer-term production tails in ensuing years.

From time to time, we accept work associated with engineering design studies.

While unlikely to result in near-term follow-on orders,

this positions us competitively on future awards and expands our engineering team’s skillset.

Research and Development

4 unchanged sentences

with stringent size and weight requirements.

We do very little pure research as our business primarily is driven by customer product needs

and custom product development with some customer funding.

We do very little pure research as our business primarily is driven by customer product

needs and custom product development with some customer funding.

The Company's expenditures for research and development were approximately

50 unchanged sentences

Cyber or Other Security Threats or Other Disruptions

We routinely experience cybersecurity threats in the

form of unauthorized attempts to gain access to our sensitive information.

We routinely experience cybersecurity threats in

the form of unauthorized attempts to gain access to our sensitive information.

The threats we face vary from attacks common to most industries

to more advanced attacks with the specific objective of accessing national security information.

We believe our threat detection and mitigation

processes and procedures are above adequate.

The processes and procedures in place are designed to detect, manage and prevent current

threats and respond quickly to detect and mitigate new threats.

To ensure our systems remain protected, we continually assess and acquire,

as appropriate, new available technology and provide employee training to utilize effectively our technological assets.

Prior cyberattacks

directed at us have not had a material impact on our financial results nor restricted us from being awarded contracts from other defense

companies or directly from the United States Department of Defense.

However, we can provide no assurance that the occurrence of any future

event would not adversely affect our internal operations, our reputation and competitive advantage, and our future financial results.

We believe our threat detection and

mitigation processes and procedures are above adequate.

The processes and procedures in place are designed to detect, manage and prevent

current threats and respond quickly to detect and mitigate new threats.

To ensure our systems remain protected, we continually assess

and acquire, as appropriate, new available technology and provide employee training to utilize effectively our technological assets.

Prior cyberattacks directed at us have not had a material impact on our financial results nor restricted us from being awarded contracts

from other defense companies or directly from the United States Department of Defense.

However, we can provide no assurance that the

occurrence of any future event would not adversely affect our internal operations, our reputation and competitive advantage, and our

future financial results.

The Company's entire operation, including administrative,

18 unchanged sentences

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