What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-09-27 compared with 2023-09-21 · 452 added, 395 removed, 529 unchanged (62% of the section changed)

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applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in

accordance with the standards of the PCAOB.

We conducted our audits

in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to

have, nor were we engaged to perform, an audit of its internal control over financial reporting.

The Company is not required

to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required

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Critical Audit Matters

The critical audit matters communicated below are

matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the

audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

The critical audit matters communicated below

are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to

the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion

on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

on the critical audit matters or on the accounts or disclosures to which they relate.

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in Process and Work in Process

As discussed in Notes 2 and 5 to the financial statements,

inventory relating to contracts in process and work in process is valued at cost, including factory overhead incurred to date.

costs include material, subcontract costs, labor, and an allocation of overhead costs.

The costs attributed to units delivered under contracts

are based on the estimated average cost of all units expected to be produced.

Certain contracts are expected to extend beyond twelve months.

The estimation of total cost at completion of a contract

is subject to variables involving contract costs and estimates as to the length of time to complete the contract.

Given the significance

of the estimation processes and judgments described above, it is possible that materially different amounts of expected sales and contract

costs could be recorded if different assumptions were used, based on changes in circumstances, in the estimation process.

When a change

in expected sales value or estimated cost is determined, changes are reflected in current period earnings .

Due to the magnitude of the inventory, and the subjectivity involved in estimating the total cost at completion we identified the evaluation

of the estimate to complete as a critical audit matter, which required a high degree of auditor judgment.

As discussed in Notes 2 and 5 to the financial

statements, inventory relating to contracts in process and work in process is valued at cost, including factory overhead incurred to date.

Contract costs include material, subcontract costs, labor, and an allocation of overhead costs.

The costs attributed to units delivered

under contracts are based on the estimated average cost of all units expected to be produced.

Certain contracts are expected to extend

beyond twelve months.

The estimation of total cost at completion of

a contract is subject to variables involving contract costs and estimates as to the length of time to complete the contract.

significance of the estimation processes and judgments described above, it is possible that materially different amounts of expected sales

and contract costs could be recorded if different assumptions were used, based on changes in circumstances, in the estimation process.

When a change in expected sales value or estimated cost is determined, changes are reflected in current period earnings.

Due to the magnitude

of the inventory, and the subjectivity involved in estimating the total cost at completion we identified the evaluation of the estimate

to complete as a critical audit matter, which required a high degree of auditor judgment.

Addressing the matter involved performing subjective

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Investment securities

Trade accounts receivable, net of allowance of $ 3,000

Trade accounts receivable, less allowance for credit losses of $ 3,000

Income tax receivable

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Total inventories

Deferred tax asset

Prepaid expenses and other current assets

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Issued 3,129,874 shares as of June 30, 2024 and 2023.

Outstanding 2,702,633 as of June 30, 2023 and 2022 (includes 233,645 and 256,293 Unearned ESOP Shares, respectively)

Outstanding 2,733,958 and 2,702,633 shares as of June 30, 2024 and 2023, respectively (includes 211,487 and 233,645 Unearned ESOP Shares, respectively)

Capital in excess of par value

Accumulated other comprehensive loss

Accumulated other comprehensive gain (loss)

Retained earnings

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( 4,273,378 )

Cost of 427,241 shares of common stock in treasury as of June 30, 2023 and 2022

Cost of 395,916 and 427,241 shares of common stock in treasury as of June 30, 2024 and 2023, respectively

( 5,842,988 )

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Provision for income taxes

Other comprehensive income (loss), net of tax:

Unrealized (loss) gain on investment securities

Other comprehensive income, net of tax:

Unrealized gain (loss) on investment securities

Total comprehensive income

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Stockholders’

(Loss) Income

Balance as of June 30, 2022

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Comprehensive income:

Other comprehensive income, net of tax of $ 90

Other comprehensive loss,

net of tax of $ 104

Total comprehensive income

Stock-based compensation

Dividends paid on common stock

$ 0.20 per share

Reduction of unearned ESOP shares

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Comprehensive income:

Other comprehensive loss, net of tax of $ 104

Other comprehensive income,

net of tax of $ 1,884

Total comprehensive income

Stock options exercised

Stock-based compensation

Dividends paid on common stock $ 0.20 per share

Dividends paid on common stock

$ 0.675 per share

( 1,678,070 )

Reduction of unearned ESOP shares

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ESOP compensation expense

Deferred income tax (benefit) expense

Gain on disposal of property, plant and equipment

Deferred income tax benefit

( 1,032,981 )

Loss (gain) on disposal of property, plant and equipment

Changes in assets and liabilities:

Increase in trade accounts receivables

(Increase) decrease in income tax receivable

(Increase) decrease in inventories

Increase in trade accounts receivable

Decrease (increase) in income tax receivable

Decrease (increase) in inventories

( 1,329,132 )

Increase in prepaid expenses and other current assets

Decrease (increase) in prepaid expenses and other current assets

( 3,289,703 )

Decrease in accounts payable

Increase (decrease) in accounts payable

Increase in accrued salaries and wages

Increase (decrease) in vacation accrual

(Decrease) increase in other accrued expenses

Increase (decrease) in payroll and other taxes withheld

(Decrease) increase in vacation accrual

Increase (decrease) in other accrued expenses

(Decrease) increase in payroll and other taxes withheld

Increase in contract liabilities

(Decrease) increase in income taxes payable

Increase (decrease) in income taxes

Net cash provided by operating activities

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Additions to property, plant and equipment

( 5,164,165 )

Proceeds from grant award

Proceeds from sale of property, plant and equipment

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( 7,840,277 )

( 8,765,907 )

Cash Flows from Financing Activities:

Dividends paid on common stock

( 1,678,070 )

Proceeds from exercise of stock options

Net cash used in financing activities

(Decrease) increase in cash and short term investments

( 1,151,708 )

Increase (decrease) in cash and cash equivalents

( 5,355,305 )

Cash and cash equivalents, beginning of the year

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Supplemental Schedule of Cash Flow Information:

Income taxes paid net of refunds

Income taxes paid

The accompanying notes are an integral part of the financial statements.

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we will generate more or less profit or could incur a loss.

We account for a contract with a customer after it

has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract

We account for a contract with a customer after

it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract

has commercial substance, and collection of substantially all of the amount to which the entity will be entitled in exchange for the goods

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and executed at or near the same time, or were negotiated with an overall profit objective.

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.

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

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.

We recognize revenue using the output method based

on the appraisal of results achieved and milestones reached or units delivered based on contractual shipment terms, typically shipping

Raw materials are valued at the lower of cost (average

cost) or net realizable value.

Raw materials are valued at the lower of cost

(average cost) or net realizable value.

Balances for slow-moving and obsolete inventory are reviewed on a regular basis by analyzing estimated

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Certain contracts are expected to extend beyond twelve months .

The estimation of total cost at completion of a contract

is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract.

The estimation of total cost at completion of

a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete the contract.

the significance of the estimation processes and judgments described above, it is possible that materially different amounts of expected

sales and contract costs could be recorded if different assumptions were used, based on changes in circumstances, in the estimation process.

When a change in expected sales value or estimated cost is determined, the change is reflected in current period earnings.

a change in expected sales value or estimated cost is determined, the change is reflected in current period earnings.

& Electronics Corp.

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Contract Liabilities

Contract liabilities include advance payments and

billings in excess of revenue recognized.

Contract liabilities include advance payments

and billings in excess of revenue recognized.

Depreciation of plant and equipment is computed

on a straight-line basis over the estimated useful lives of the assets.

Estimated useful lives of depreciable assets

are as follows:

Estimated useful lives of depreciable assets are

Buildings and improvements

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Standards Codification (“ASC”) Topic 740-10, "Accounting for Income Taxes."

Under the provisions of ASC 740-10, deferred

tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement

carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured

using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered

Under the provisions of ASC 740-10, deferred tax

assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying

amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using

enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or

The effect on deferred taxes and liabilities of a change in tax rates is recognized in earnings in the period that includes

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Cash and Cash Equivalents

Cash and cash equivalents consist of cash

and money market funds.

The Company considers all highly liquid investments with original maturities

of three months or less to be cash equivalents.

Cash and cash equivalents consist of cash and

money market funds.

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Investment Securities

The Company accounts for its investments in

debt securities in accordance with ASC 320-10-25, “Accounting for Certain Investments in Debt and Equity Securities.”

Investments in debt securities at June 30, 2023 consists of municipal bonds, and treasury bills, and at June 30, 2022, consisted of municipal

The Company classifies investments in debt securities as available-for-sale.

Unrealized holding gains and losses, net of

related tax effect, on available-for-sale debt securities are excluded from earnings and are reported as a separate component of stockholders’

equity until realized.

Realized gains and losses for debt securities classified as available-for-sale are included in earnings and

are determined using the specific identification method.

The Company accounts for its investments in debt

securities in accordance with ASC 320-10-25, “Accounting for Certain Investments in Debt and Equity Securities.” Investments

in debt securities at June 30, 2024 and 2023 consisted of municipal bonds and treasury bills.

The Company classifies investments

in debt securities as available-for-sale.

Unrealized holding gains and losses, net of related tax effect, on available-for-sale debt securities

are excluded from earnings and are reported as a separate component of stockholders’ equity until realized.

Realized gains

and losses for debt securities classified as available-for-sale are included in earnings and are determined using the specific identification

Interest income is recognized when earned.

Fair values are based

on quoted market prices available as of the balance sheet date, and are therefore considered a Level 1 valuation.

Certificates of deposit held for investment

with an original maturity greater than three months are carried at amortized cost and reported as short-term investments on the balance

The type of certificates of deposit that the Company invests in are not considered debt securities under Financial Accounting

Standards Board ("FASB") Accounting Standards Codification (“ASC”) 320, Investments - Debt Securities.

Fair values are based on quoted market prices available as of the balance

sheet date, and are therefore considered a Level 1 valuation.

Certificates of deposit held for investment with

an original maturity greater than three months are carried at amortized cost and reported as short-term investments on the balance sheets.

The type of certificates of deposit that the Company invests in are not considered debt securities under Financial Accounting Standards

Board ("FASB") Accounting Standards Codification (“ASC”) 320, Investments - Debt Securities.

Fair Value of Financial Instruments

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Summary of Significant Accounting Policies, Continued

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as

of the measurement date.

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the

measurement date.

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

prices in markets that are not active;

quoted prices

in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market

participants would use in pricing an asset or liability.

Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants

would use in pricing an asset or liability.

The carrying amounts of financial instruments,

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fair value as of June 30, 2024 and 2023 because of the immediate or short-term maturity of these financial instruments.

Accounts Receivable and Allowance for Doubtful

The Company extends credit to its customers

in the normal course of business and collateral is generally not required for trade receivables.

Accounts Receivable and Allowance for Credit Losses

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

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Accounts receivable are reported net of an allowance

for doubtful accounts.

The Company estimates the allowance based on its analysis of specific balances.

Interest is not charged on

past due balances.

Based on these factors, there was an allowance for doubtful accounts of $ 3,000 at June 30, 2023 and 2022.

Changes to the allowance for doubtful accounts are charged to expense and reduced by charge-offs, net of recoveries.

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 June 30, 2024 and 2023.

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, 2022 and July 1, 2023 were $ 5,733,174 and $ 5,755,282 , respectively.

Per Share Amounts

ASC 260-10 “Earnings Per Share

(EPS)” requires the Company to calculate net income per share based on basic and diluted net income per share, as defined.

Basic EPS excludes dilution and is computed by dividing net income by the weighted average number of shares outstanding for the

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock

were exercised or converted into common stock.

The dilutive effect of outstanding options issued by the Company are reflected

in diluted EPS using the treasury stock method.

Under the treasury stock method, options will only have a dilutive effect when

the average market price of common stock during the period exceeds the exercise price of the options.

ASC 260-10 “Earnings Per Share (EPS)”

requires the Company to calculate net income per share based on basic and diluted net income per share, as defined.

Basic EPS excludes

dilution and is computed by dividing net income by the weighted average number of shares outstanding for the period.

reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into

common stock.

The dilutive effect of outstanding options issued by the Company are reflected in diluted EPS using the treasury stock

Under the treasury stock method, options will only have a dilutive effect when the average market price of common stock during

the period exceeds the exercise price of the options.

Comprehensive Income

Comprehensive income consists of net income and other

comprehensive income (loss).

Other comprehensive income for fiscal years ended June 30, 2023 and 2022 consists of unrealized holding

gains (losses) on available-for-sale debt securities.

Comprehensive income consists of net income and

other comprehensive income (loss).

Other comprehensive income for fiscal years ended June 30, 2024 and 2023 consists of unrealized

holding gains (losses) on available-for-sale debt securities.

Use of Estimates

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Actual results could differ from those estimates.

& Electronics Corp.

Notes to Financial Statements

Summary of Significant Accounting Policies, Continued

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, “Income

Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” ASU 2019-12 amends ASC 740 to simplify the accounting for income

taxes by removing certain exceptions for investments, intraperiod allocations and interim calculations, and adding guidance to reduce

complexity in the accounting standard under the FASB’s simplification initiative.

ASU 2019-12 is effective for public entities for

fiscal years beginning after December 15, 2020.

Upon adoption, the amendments in ASU 2019-12 should be applied on a prospective basis

to all periods presented.

The Company adopted the new guidance under ASU 2019-12 in the first quarter of fiscal year 2022 and removed

the exception for intraperiod allocations from its interim period tax provision calculation, accordingly.

The removal of the exception

for intraperiod allocations did not have a material impact on the Company.

Recent Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, “Financial

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expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable.

losses relating to available-for-sale debt securities are required to be recorded through an allowance for credit losses rather than as

a reduction in the amortized cost basis of the securities.

ASU 2016-13 is effective for public entities for fiscal years beginning

after December 15, 2022, including interim periods within those fiscal years.

Upon adoption, the amendments in ASU 2016-13 should be applied

on a prospective basis to all periods presented relating to available-for-sale debt securities.

For all other financial instruments the

Company upon adoption will apply the amendments on a modified-retrospective approach.

The Company is expected to adopt the new guidance

under ASU 2016-13 in the first quarter of fiscal year 2024 and is currently evaluating the impact of the adoption on its financial statements.

The adoption of this standard is not expected to have a material impact on the Company’s financial statements.

& Electronics Corp.

Notes to Financial Statements

Summary of Significant Accounting Policies, Continued

Credit losses relating to available-for-sale

debt securities are required to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis

of the securities.

ASU 2016-13 is effective for public entities for fiscal years beginning after December 15, 2022, including interim

periods within those fiscal years.

Upon adoption, the amendments in ASU 2016-13 should be applied on a prospective basis to all periods

presented relating to available-for-sale debt securities.

For all other financial instruments the Company upon adoption will apply the

amendments on a modified-retrospective approach.

The Company adopted the new guidance under ASU 2016-13 in the first quarter of fiscal

year 2024, and determined that the impact of the adoption on its financial statements is immaterial.

Recent Accounting Pronouncements Not Yet Adopted

2023, the FASB issued ASU No.

2023-09, “Income Taxes (“Topic 740”):

Improvements to Income Tax Disclosures”, which includes

amendments that further enhance income tax disclosures through the standardization and disaggregation of rate reconciliation categories

and income taxes paid.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be applied prospectively,

with early adoption and retrospective application permitted.

We are currently evaluating the impact of this standard to our

financial statements.

Impairment of Long-Lived Assets

Long-lived assets, including property, plant, and

equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not

be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated

undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future

cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Long-lived assets, including property, plant,

and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may

not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to

estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated

future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of

There were no impairments of long-lived assets in fiscal years 2024 and 2023.

Assets to be disposed of are separately presented

in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and no longer depreciated.

The assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability

Assets to be disposed of are separately

presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and no longer depreciated.

assets and liabilities of a disposed group classified as held for sale are presented separately in the appropriate asset and liability

sections of the balance sheet, if applicable.

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regulations that implement or supplement the FAR.

For example, the Department of Defense implements the FAR through the Defense

Federal Acquisition Regulation (DFAR).

For example, the Department of Defense implements the FAR through the Defense Federal

Acquisition Regulation (DFAR).

The FAR also contains guidelines and regulations

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convenience or for default.

If a contract is terminated for the convenience of the government, a contractor is entitled to receive

payments for its allowable costs and, in general, the proportionate share of fees or earnings for the work done.

If a contract is

terminated for default, the government generally pays for only the work it has accepted.

These regulations also subject the Company

to financial audits 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.

If a contract is terminated for the convenience of the government, a contractor is entitled to receive payments

for its allowable costs and, in general, the proportionate share of fees or earnings for the work done.

If a contract is terminated

for default, the government generally pays for only the work it has accepted.

These regulations also subject the Company to financial

audits 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.

& Electronics Corp.

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Contracts with Customers” to determine the recognition of revenue.

This standard requires entities to assess the products or

services promised in contracts with customers at contract inception to determine the appropriate unit at which to record

Revenue is recognized when control of the promised products or services is transferred to customers at an amount

that reflects the consideration to which the entity expects to be entitled to in exchange for those products or services.

Significant judgment is required in determining the

satisfaction of performance obligations.

This standard requires entities to assess the products or services

promised in contracts with customers at contract inception to determine the appropriate unit at which to record revenues.

is recognized when control of the promised products or services is transferred to customers at an amount that reflects the consideration

to which the entity expects to be entitled to in exchange for those products or services.

Significant judgment is required in determining

the satisfaction of performance obligations.

Revenues from our performance obligations are satisfied over time using the output method

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has the significant risks and rewards of ownership of the asset, and in most instances the customer has accepted the asset.

Total revenue recognized for the twelve months ended

June 30, 2023 based on units delivered totaled $ 27,770,365 compared to $ 26,931,949 for the same periods in fiscal year 2022.

revenue recognized for the twelve months ended June 30, 2023 based on milestones achieved totaled $ 7,821,958 compared to $ 5,172,825 for

the same periods in fiscal year 2022.

The Company offers a standard one-year product warranty.

Product warranties offered by the Company are classified as assurance-type warranties, which means, the warranty only guarantees that

the good or service functions as promised.

Based on this, the provided warranty is not considered to be a distinct performance obligation.

The impact of variable consideration has been considered but none identified which would result in the adjustment of the transaction price

as of June 30, 2023.

Total revenue recognized for the year ended June

30, 2024 based on units delivered totaled $ 33,403,833 compared to $ 27,770,365 for the same period in fiscal year 2023.

Total revenue

recognized for the year ended June 30, 2024 based on milestones achieved totaled $ 5,332,486 compared to $ 7,821,958 for the same period

in fiscal year 2023.

The Company offers a standard one-year product

Product warranties offered by the Company are classified as assurance-type warranties, which means, the warranty only

guarantees that the good or service functions as promised.

Based on this, the provided warranty is not considered to be a distinct

performance obligation.

The impact of variable consideration has been considered but none identified which would result in the

adjustment of the transaction price as of June 30, 2024.

Our payment terms are generally 30-60 days.

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as of June 30, 2024 and 2023, respectively.

The increase in contract liabilities is primarily due to the advance collection of cash

on specific contracts, offset in part, by revenue recognized.

Revenue recognized, that was in contract liabilities in the beginning of

the fiscal year, approximated $ 2,018,642 for the twelve months ended June 30, 2023.

The Company used the practical expedient to expense

incremental costs incurred to obtain a contract when the contract term is less than one year.

The increase in contract liabilities is primarily due to the advance collection of cash on

specific contracts, offset in part, by revenue recognized.

Revenue recognized, that was in contract liabilities in the beginning of the

fiscal year, approximated $ 1,191,954 for the year ended June 30, 2024.

The Company used the practical expedient to expense incremental

costs incurred to obtain a contract when the contract term is less than one year.

The Company’s backlog at June 30, 2024 totaling

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Investment Securities

Investment securities at June 30, 2023 consist of

certificates of deposit, municipal bonds and U.S.

treasury bills and at June 30, 2022, consisted of certificates of deposit and municipal

The Company classifies investment securities as available-for-sale which have been determined to be level 1 assets.

gross unrealized gains, gross unrealized losses and fair value debt securities by major security type at June 30, 2023 and June 30,

2022 are as follows:

Investment securities at June 30, 2024 consist

of certificates of deposit, municipal bonds and U.S.

treasury bills and at June 30, 2023, consisted of certificates of deposit, municipal

bonds and U.S.

treasury bills.

The Company classifies investment securities as available-for-sale which have been determined to be level

The cost, gross unrealized gains, gross unrealized losses and fair value debt securities by major security type at June

30, 2024 and June 30, 2023 are as follows:

June 30, 2024

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Municipal bonds

Treasury Bills

Total investment securities

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Contracts in Process

Contracts in process

at June 30, 2023 and 2022 are as follows:

process at June 30, 2024 and 2023 are as follows:

Unrecognized gross contract value

Costs related to contracts in process

Included in costs relating to contracts in

process at June 30, 2023 and 2022 are costs relative to contracts that may not be completed within the ensuing year as contracts vary

in size, scope and duration.

Under the units-of-delivery method, the related sale and cost of sales will not be reflected in the statements

of comprehensive income until the units under contract are shipped.

Included in costs relating to contracts in process

at June 30, 2024 and 2023 are costs relative to contracts that may not be completed within the ensuing year as contracts vary in size,

scope and duration.

Under the units-of-delivery method, the related sale and cost of sales will not be reflected in the statements of

comprehensive income until the units under contract are shipped.

Property, Plant and Equipment

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Property, Plant and Equipment, Continued

Depreciation expense was $ 484,920 and $ 494,635

for the years ended June 30, 2023 and 2022, respectively.

Depreciation expense was $ 453,517

and $ 484,920 for the years ended June 30, 2024 and 2023, respectively.

The Company was awarded $ 7.4 million in

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Combatant Industrial Base.

The work will be conducted on Espey’s property in Saratoga Springs, NY, with completion slated for

The Company expects to be paid within 30 days after the submission of three milestone invoices, but will not be paid for

expenses incurred in excess of the specified milestone payment limits.

The Company expects to have an initial cash outlay to satisfy

income tax obligations arising from the value of the award.

Included in building and improvements at June 30, 2023 and 2022 was

$ 308,001 and $ 58,296 respectively, for facility and capital upgrades under the funding award.

As of September 19, 2023, the first milestone totaling approximately $ 969,000 was achieved and reimbursed.

The Company expects to record

the receipt of milestones payments received as a reduction from the cost of the assets.

The work is being conducted on the Company’s property in Saratoga Springs, NY, with completion

slated for the end of calendar year 2024.

The Company expects to be paid within 30 days after the submission of three milestone

invoices, but will not be paid for expenses incurred in excess of the specified milestone payment limits.

The Company will record

the receipt of milestone payments received as a reduction from the cost of the assets.

The Company will have an initial cash outlay

to satisfy income tax obligations arising from the value of the milestone payments received.

The cash outlay arising from federal

income tax obligations is expected to be recaptured in future periods.

Until recaptured, estimated tax obligations associated with

the receipt of milestone payments are recorded on the balance sheet and included in deferred tax assets.

As of June 30, 2024, net

deferred tax asset includes a deferred tax asset of $ 888,032 associated with milestone reimbursements received totaling $ 4,228,722 .

Included in property, plant, and equipment at June 30, 2024 was $ 965,392 not yet reimbursed, for facility and capital upgrades

under the funding award, compared to $ 308,001 in spending not yet reimbursed included in property, plant, and equipment at June 30,

Included in accounts payable at June 30, 2024 was approximately $ 272,560 for facility and capital upgrades eligible to be

reimbursed under the funding award compared to $ 9,095 included in accounts payable at June 30, 2023.

Pension Expense

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critical status.

In addition, the Company is obligated to make contributions to the National Electrical Benefit Fund (NEBF) (Plan

identifying number is 53-0181657).

The Plan is a defined pension benefit plan covering eligible union employees.

contributions and expenses amounted to $ 72,350 in fiscal year 2023 and $ 73,771 in

fiscal year 2022.

The contribution did not and will not in the future have a material impact on the Company’s financial

In the last quarter of the current fiscal year, the Company notified the third-party administrator of the IBEW

Local 1799 Pension Fund of its intention to withdraw permanently from the plan effective June 16, 2024.

As required by the Employee

Retirement Income Security Act “ERISA”, the Company is subject to a termination withdrawal liability.

At June 30, 2024,

the Company recorded a termination withdrawal obligation totaling $ 772,157 , based on calculated amounts provided by a third party

actuary retained by the Pension Fund.

The outstanding amount is shown within the accounts payable balance on the Company’s

balance sheet at June 30, 2024.

An initial withdrawal liability contribution payment to the Plan totaling $ 210,305 was made during

The remaining liability of $ 561,852 is expected to be paid in the second half of fiscal 2025.

As the Company was the only

remaining contributing employer to the multiemployer pension plan, its withdrawal constitutes a mass withdrawal termination.

withdrawal calculations are contingent upon the availability of January 1, 2025 assets and the finalization of December 31, 2024

liabilities as the withdrawal liability will need to be re-determined based on a December 31, 2024 measurement date.

does not expect future adjustments to the established liability to have a material impact on the Company’s financial

The cost of the withdrawal liability obligation is recorded in indirect overhead product costs, capitalized in inventory

and expensed through cost of sales based on shipments.

The Company is obligated to make contributions

to the National Electrical Benefit Fund (NEBF) (Plan identifying number is 53-0181657).

The Plan is a defined pension benefit plan covering

eligible union employees.

Such contributions and expenses amounted to $ 79,429 in fiscal year 2024 and $ 72,350 in fiscal year 2023.

The contribution did not and will not in the future have a material impact on the Company’s financial statements.

The Company sponsors a 401(k) plan for non-union

2 unchanged sentences

$ 53,768 , for fiscal years 2024 and 2023, respectively.

& Electronics Corp.

Notes to Financial Statements

Provision for Income Taxes

A summary of the components of the provision for income

taxes for the years ended June 30, 2023 and 2022 is as follows:

A summary of the components of the provision for

income taxes for the years ended June 30, 2024 and 2023 is as follows:

Current tax expense - federal

Current tax expense - state

Deferred tax (benefit) expense

Current tax (benefit) expense - state

Deferred tax benefit

( 1,032,981 )

Provision for income taxes

Deferred income taxes reflect the impact of

"temporary differences" between the amount of assets and liabilities for financial reporting purposes and such amounts measured

by tax laws and regulations.

Deferred income taxes reflect the impact of "temporary

differences" between the amount of assets and liabilities for financial reporting purposes and such amounts measured by tax laws

and regulations.

These "temporary differences" are determined in accordance with ASC 740-10.

& Electronics Corp.

Notes to Financial Statements

Provision for Income Taxes, Continued

The combined U.S.

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Stock-based compensation

Rate Differential on Net Operating Loss Carryback

Effective tax rate

For the years ended June 30, 2023 and 2022

deferred income tax (benefit) expense of ($40,002) and $9,271, respectively, results from the changes in temporary differences for

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of June

30, 2023 and 2022 are presented as follows:

For the years ended June 30, 2024 and 2023 deferred

income tax benefit of $ 1,032,981 and $ 40,002 , respectively, results from the changes in temporary differences for each year.

The tax effects

of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of June 30, 2024 and 2023 are presented

Deferred tax assets:

Accrued expenses

Property, plant and equipment - principally due to differences in depreciation methods

Pension Withdrawal

Stock-based compensation

5 unchanged sentences

Total deferred tax liability

Net deferred tax liability

$ ( 137,827 )

Net deferred tax asset (liability)

$ ( 137,827 )

In assessing the realization of deferred tax

assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which

those temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future

taxable income, and tax planning strategies in making this assessment.

Based upon the level of historical taxable income and projection

for future taxable income over the period in which the deferred tax assets are deductible, management believes it is more likely than

not that the Company will realize the benefits of these temporary differences without consideration of a valuation allowance.

& Electronics Corp.

Notes to Financial Statements

Provision for Income Taxes, Continued

In assessing the realization of deferred tax assets,

management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.

realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary

differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income,

and tax planning strategies in making this assessment.

Based upon the level of historical taxable income and projection for future taxable

income over the period in which the deferred tax assets are deductible, management believes it is more likely than not that the Company

will realize the benefits of these temporary differences without consideration of a valuation allowance.

As the result of the implementation of the FASB

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tax benefits.

& Electronics Corp.

Notes to Financial Statements

Provision for Income Taxes, Continued

The Company recognizes interest and penalties

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returns for tax years ending June 30, 2024, 2023, and 2022 remain open to examination by the respective taxing authorities.

A significant portion of the

Company's business is the production of military and industrial electronic equipment for use by the U.S.

and foreign governments and

certain industrial customers.

A significant portion of the Company's business

is the production of military and industrial electronic equipment for use by the U.S.

and foreign governments and certain industrial customers.

Sales to five domestic customers accounted for 81 % of total sales in 2024.

Sales to four domestic

customers accounted for 57 % of total sales in 2022.

The related accounts receivable balance, as a percentage of the Company's total

trade accounts receivable balance, was 81 % represented by five customers at June 30, 2023 and 74 % represented by four customers at

June 30, 2022.

Export sales in fiscal years

2023 and 2022 were approximately $ 549,510 and $ 1,644,000 , respectively.

Stock Ownership Plan

The Company sponsors a leveraged employee

stock ownership plan (the "ESOP") that covers all nonunion employees who work 1,000 or more hours per year and are employed

The Company makes annual contributions to the ESOP equal to the ESOP's debt service less dividends on unallocated shares

received by the ESOP.

Sales to five domestic customers accounted for 81 % of total

sales in 2023.

Orders from significant customers may include more than one program and procurement may originate from various divisions

of the significant customer.

The related accounts receivable balance, as a percentage of the Company's total trade accounts receivable

balance, was 79 % represented by five customers at June 30, 2024 and 81 % represented by five customers at June 30, 2023.

Export shipments in fiscal years 2024 and 2023

were $ 2,350,087 and $ 549,510 , respectively.

Employee Stock Ownership Plan

The Company sponsors a leveraged employee stock

ownership plan (the "ESOP") that covers all nonunion employees who work 1,000 or more hours per year and are employed on June

The Company makes annual contributions to the ESOP equal to the ESOP's debt service less dividends on unallocated shares received

All dividends on unallocated shares received by the ESOP are used to pay debt service.

Dividends on allocated ESOP

shares are recorded as a reduction of retained earnings.

As the debt is repaid, shares are released and allocated to active employees,

based on the proportion of debt service paid in the year.

Dividends on allocated ESOP shares

are recorded as a reduction of retained earnings.

As the debt is repaid, shares are released and allocated to active employees, based

on the proportion of debt service paid in the year.

The Company accounts for its ESOP in accordance with FASB ASC 718-40.

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The loan will be repaid in fifteen (15) equal annual installments of principal commencing June 2021.

Directors has fixed the interest rate and the unpaid balance will bear interest at a fixed rate of 3.00 % per annum.

ESOP compensation

expense was $ 365,646 and $ 325,067 for the years ended June 30, 2023 and 2022, respectively.

The Board of Directors

has fixed the interest rate and the unpaid balance will bear interest at a fixed rate of 3.00 % per annum.

ESOP compensation expense was

$ 438,136 and $ 365,646 for the years ended June 30, 2024 and 2023, respectively.

& Electronics Corp.

Notes to Financial Statements

Employee Stock Ownership Plan, Continued

The ESOP shares as of June 30,

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Allocated shares

Unreleased shares

Unearned shares

Total shares held by the ESOP

Fair value of unreleased shares

Fair value of unearned shares

The Company may at times be required to repurchase

shares at the ESOP participants’ request at the fair market value.

During the twelve months ended June 30, 2023 and 2022, the Company

During the years ended June 30, 2024 and 2023, the Company

did not repurchase shares previously held by the ESOP.

& Electronics Corp.

Notes to Financial Statements

Employee Stock Ownership Plan, Continued

The ESOP allows for eligible participants to

take whole share distributions from the plan on specific dates in accordance with the provision of the plan.

Share distributions from

the ESOP during the twelve months ended June 30, 2023 and 2022 totaled 33,780 shares and 14,265 shares, respectively.

The ESOP allows for eligible participants to take

whole share distributions from the plan on specific dates in accordance with the provision of the plan.

Share distributions from the ESOP

during the years ended June 30, 2024 and 2023 totaled 55,984 shares and 33,780 shares, respectively.

Stock-based Compensation

The Company follows ASC 718 in establishing

standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, as well as transactions

The Company follows ASC 718 in establishing standards

for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, as well as transactions

in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity

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before income taxes.

The amount of this stock-based compensation expense related to non-qualified stock options (“NQSO”) for

the fiscal years ended June 30, 2023 and 2022, was $ 21,432 and $ 29,287 , respectively.

The deferred tax benefit related to the NQSO’s

The amount of this stock-based compensation expense related to non-qualified stock options (“NQSOs”)

for the fiscal years ended June 30, 2024 and 2023, was $ 34,903 and $ 21,432 , respectively.

The deferred tax benefit related to the NQSOs

as of June 30, 2024 and 2023 was approximately $ 7,330 and $ 4,501 , respectively.

The remaining stock option expense, in each year, related

to incentive stock options (“ISO”) which are not deductible by the corporation when exercised, assuming a qualifying disposition

to incentive stock options (“ISOs”) which are not deductible by the corporation when exercised, assuming a qualifying disposition

and as such no deferred tax benefit was established related to these amounts.

As of June 30, 2024, there was approximately

of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over the next 2 years, of

which $ 128,766 relates to ISO’s and $ 26,388 relates to NQSO’s.

The total deferred tax benefit related the NQSO’s in

$ 204,765 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over the next

1.75 years, of which $ 181,955 relates to ISOs and $ 22,809 relates to NQSOs.

The total deferred tax benefit related to the NQSOs in

future years will be $ 4,790 .

The Company has one employee

stock option plan under which options or stock awards may be granted, the 2017 Stock Option and Restricted Stock Plan (the

"2017 Plan"), approved by the Company's shareholders at the Company's Annual Meeting on December 1, 2017.

Directors may grant options to acquire shares of common stock to employees and non-employee directors of the Company at the fair

market value of the common stock on the date of grant.

The maximum aggregate number of shares of common stock subject to options or

awards to non-employee directors is 133,000 and the maximum aggregate number of shares of common stock subject to options or awards

granted to non-employee directors during any single fiscal year is the lesser of 13,300 and 33 1/3% of the total number of shares

subject to options or awards granted in such fiscal year.

The maximum number of shares subject to options or awards granted to any

individual employee may not exceed 15,000 in a fiscal year.

Generally, options granted have a two-year vesting period based on two

years of continuous service and have a ten-year contractual life.

Option grants provide for accelerated vesting if there is a change

The Company has one employee stock option plan

under which options or stock awards may be granted, the 2017 Stock Option and Restricted Stock Plan (the "2017 Plan"), approved

by the Company's shareholders at the Company's Annual Meeting on December 1, 2017.

The Board of Directors may grant options to acquire

shares of common stock to employees and non-employee directors of the Company at the fair market value of the common stock on the date

The maximum aggregate number of shares of common stock subject to options or awards to non-employee directors is 133,000 and

the maximum aggregate number of shares of common stock subject to options or awards granted to non-employee directors during any single

fiscal year is the lesser of 13,300 and 33 1/3% of the total number of shares subject to options or awards granted in such fiscal year.

The maximum number of shares subject to options or awards granted to any individual employee may not exceed 15,000 in a fiscal year.

options granted have a two-year vesting period based on two years of

continuous service and have a ten-year contractual life.

Option grants provide for accelerated vesting if there is a change in control.

Shares issued upon the exercise of options are from those held in Treasury.

Options covering 400,000 shares are

authorized for issuance under the 2017 Plan.

As of June 30, 2023, options covering 382,104 shares have been granted, of which

245,831 are outstanding, and 136,273 shares have been cancelled.

As of June 30, 2023, option covering 154,169 shares remain

available for grant, after factoring the cancelled shares, which are eligible to be re-granted.

While no further grants of options

may be made under the Company’s 2007 Stock Option and Restricted Stock Plan, as of June 30, 2023, 50,500 options were

outstanding under such plan of which all are vested and exercisable.

& Electronics Corp.

Notes to Financial Statements

Stock-based Compensation, Continued

Options covering 400,000 shares are authorized for issuance

under the 2017 Plan.

As of June 30, 2024, options covering 31,325 shares have been exercised, options covering 287,706 shares are outstanding

and options covering 143,973 shares have been cancelled.

As of June 30, 2024, options covering 80,969 shares remain available for grant,

after factoring the cancelled shares, which are eligible to be re-granted.

While no further grants of options may be made under the Company’s

2007 Stock Option and Restricted Stock Plan, as of June 30, 2024, 34,350 options were outstanding under such plan of which all are vested

and exercisable.

ASC 718 requires the use of a valuation model

2 unchanged sentences

various assumptions including those for volatility, expected life, and interest rates.

& Electronics Corp.

Notes to Financial Statements

Stock-based Compensation, Continued

The table below outlines the weighted average assumptions

that the Company used to calculate the fair value of each option award for the year ended June 30, 2023 and 2022.

The table below outlines the weighted average

assumptions that the Company used to calculate the fair value of each option award for the years ended June 30, 2024 and 2023.

Dividend yield

5 unchanged sentences

payment of a quarterly dividend.

The Company paid regular cash dividends on common stock of $ 0.20 per share for the fiscal year

ended June 30, 2023 and paid no cash dividends for the fiscal year ended June 30, 2022.

Expected stock price volatility is based on

the historical volatility of the Company’s stock.

The risk-free interest rate is based on the implied yield available on U.S.

The Company paid regular cash dividends on common stock of $ 0.675 per share for the fiscal year ended

June 30, 2024 and paid regular cash dividends on common stock of $ 0.20 per share for the fiscal year ended June 30, 2023.

Expected stock

price volatility is based on the historical volatility of the Company’s stock.

The risk-free interest rate is based on the implied

yield available on U.S.

Treasury issues with an equivalent term approximating the expected life of the options.

The expected option term (in years)

represents the estimated period of time until exercise and is based on actual historical experience.

The following table summarizes stock option

activity during the twelve months ended June 30, 2023:

Employee Stock Options Plan

The expected option term

(in years) represents the estimated period of time until exercise and is based on actual historical experience.

The following table summarizes stock option activity

during the year ended June 30, 2024:

Employee Stock Option Plans

Number of Weighted Average

Shares Average Remaining Aggregate

Subject Exercise Contractual Intrinsic

to Option Price Term Value

Balance at July 1, 2023 296,331 $ 19.15 6.49

Granted 80,900 $ 16.78 9.22

Exercised ( 31,325 ) $ 16.80 —

Forfeited or expired ( 23,850 ) $ 24.30 —

2 unchanged sentences

Exercisable at June 30, 2024 174,756 $ 20.98 4.83 $ 382,667

The aggregate intrinsic value in the table

above represents the total pretax intrinsic value (the difference between the closing sale price of the Company’s common stock

as reported on the NYSE American on June 30, 2023 and the exercise price, multiplied by the number of in-the-money options) that would

have been received by the option holders if all option holders had exercised their options on June 30, 2023.

This amount changes based

on the fair market value of the Company’s common stock.

The total intrinsic values of the options exercised during the twelve months

ended June 30, 2023 and 2022 was $ 0 .

The aggregate intrinsic value in the table above

represents the total pretax intrinsic value (the difference between the closing sale price of the Company’s common stock as reported

on the NYSE American on June 30, 2024 and the exercise price, multiplied by the number of in-the-money options) that would have been

received by the option holders if all option holders had exercised their options on June 30, 2024.

This amount changes based on the fair

market value of the Company’s common stock.

& Electronics Corp.

1 unchanged sentence

Stock-based Compensation, Continued

intrinsic values of the options exercised during the twelve months ended June 30, 2024 and 2023 was $ 195,236 and $ 0 , respectively.

The following table summarizes changes in non-vested stock options

during the twelve months ended June 30, 2023:

during the year ended June 30, 2024:

Weighted Number

Non-vested at July 1, 2023

2 unchanged sentences

Concentration of Credit Risk

Financial instruments that potentially subject the

Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments and accounts receivable.

Financial instruments that potentially subject

the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments and accounts receivable.

The Company maintains cash and cash equivalents with various financial institutions.

6 unchanged sentences

as a percentage of the Company's total trade accounts receivable balance, was 79 % represented by five customers at June 30, 2024 and 81 %

represented by four customers at June 30, 2022.

Although the Company's exposure to credit risk

associated with nonpayment of these concentrated balances is affected by the conditions or occurrences within the U.S.

and foreign governments,

the Company believes that its trade accounts receivable credit risk exposure is limited.

The Company performs ongoing credit evaluations

of its customer's financial conditions and requires collateral, such as progress payments, in certain circumstances.

The Company establishes

an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

represented by five customers at June 30, 2023.

Although the Company's exposure to credit

risk associated with nonpayment of these concentrated balances is affected by the conditions or occurrences within the U.S.

foreign governments, the Company believes that its trade accounts receivable credit risk exposure is limited.

The Company performs

ongoing credit evaluations of its customer's financial conditions and requires collateral, such as progress payments, in certain

circumstances.

The Company establishes an allowance for credit losses based upon factors surrounding the credit risk of specific

customers, historical trends and other information.

Related Parties

The administration of the

shares of common stock held by the ESOP Trust is subject to the Espey Mfg.

The administration of the shares of common stock

held by the ESOP Trust is subject to the Espey Mfg.

& Electronics Corp.

Employee Retirement Plan and

Trust (ESOP) and a Trust Agreement, each effective as of July 1, 2016.

The Trustees’ rights with respect to the disposition of

shares are governed by the terms of the Plan and the Trust Agreement.

As to shares that have been allocated to the accounts of

participants in the ESOP Trust, the Plan provides that the Trustees are required to vote such shares in accordance with instructions

received from the participants.

As to unallocated shares and allocated shares for which voting instructions have not been received

from participants, the Plan provides that the Trustees are required to vote such shares in accordance with the direction of the

Board of Directors of the Company under the terms of the Plan and Trust Agreement, which is

currently in the same proportion as the instructions received on the allocated shares.

Employee Retirement Plan and Trust (ESOP) and a Trust Agreement,

each effective as of July 1, 2016.

The Trustees’ rights with respect to the disposition of shares are governed by the terms of the

Plan and the Trust Agreement.

As to shares that have been allocated to the accounts of participants in the ESOP Trust, the Plan provides

that the Trustees are required to vote such shares in accordance with instructions received from the participants.

As to unallocated shares

and allocated shares for which voting instructions have not been received from participants, the Plan provides that the Trustees are required

to vote such shares in accordance with the direction of the Board of Directors of the Company under the terms of the Plan and Trust Agreement,

which is currently in the same proportion as the instructions received on the allocated shares.

See Note 10 for additional information

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and Contingencies

The Company at certain times

enters into standby letters of credit agreements with financial institutions primarily relating to the guarantee of future

performance on certain contracts.

Contingent liabilities on outstanding standby letters of credit agreements aggregated to zero at

June 30, 2023 and 2022.

The Company at certain times enters into

standby letters of credit agreements with financial institutions primarily relating to the guarantee of future performance on

certain contracts.

Contingent liabilities on outstanding standby letters of credit agreements aggregated to zero at June 30, 2024

The Company, as a U.S.

Government contractor, is subject to audits, reviews, and investigations by the U.S.

Government related to its negotiation and performance of government contracts and its accounting for such contracts.

comply with applicable U.S.

Government standards by a contractor may result in suspension from eligibility for award of any new

government contract and a guilty plea or conviction may result in debarment from eligibility

The government may, in certain cases, also terminate existing contracts, recover damages, and impose other sanctions and penalties.

As a result of contract audits the Company will determine a range of possible outcomes and in accordance with ASC 450 “Contingencies”

the Company will accrue amounts within a range that appears to be its best estimate of a possible outcome.

Adjustments are made to accruals,

if any, periodically based on current information.

related to its negotiation and performance of government contracts and its accounting for such contracts.

Failure to comply with

applicable U.S.

Government standards by a contractor may result in suspension from eligibility for award of any new government

contract and a guilty plea or conviction may result in debarment from eligibility for awards.

& Electronics Corp.

1 unchanged sentence

Commitments and Contingencies, Continued

We are party to various litigation matters and claims

arising from time to time in the ordinary course of business.

The government may, in certain cases, also terminate existing contracts, recover damages, and

impose other sanctions and penalties.

As a result of contract audits the Company will determine a range of possible outcomes and in accordance

with ASC 450 “Contingencies” the Company will accrue amounts within a range that appears to be its best estimate of a possible

Adjustments are made to accruals, if any, periodically based on current information.

We are party to various litigation matters and

claims arising from time to time in the ordinary course of business.

While the results of such matters cannot be predicted with certainty,

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Common shares outstanding, beginning of period

Common shares issued to ESOP during the period

Unearned ESOP shares

Weighted average common shares issued during the period

Weighted average common shares purchased during the period

Weighted average ESOP shares earned during the period

Denominator for basic earnings per common shares – Weighted average common shares

Denominator for basic earnings per common shares –

Weighted average common shares

Common shares outstanding, beginning of period

Common shares issued to ESOP during the period

Unearned ESOP shares

Weighted average common shares issued during the period

Weighted average common shares purchased during the period

Weighted average ESOP shares earned during the period

Weighted average dilutive effect of stock options

Denominator for diluted earnings per common shares – Weighted average common shares

Denominator for diluted earnings per common shares –

Weighted average common shares

& Electronics Corp.

1 unchanged sentence

Stockholders’ Equity, Continued

Not included in this computation of earnings

per share for the year ended June 30, 2023 and 2022 were options to purchase 130,656 and 246,273 shares, respectively, of the Company’s

Not included in this computation of earnings per

share for the year ended June 30, 2024 and 2023 were options to purchase 62,691 and 130,656 shares, respectively, of the Company’s

common stock.

1 unchanged sentence

the average market price of those shares.

Effective March 13, 2023, the

Company reinstated payment of a quarterly dividend.

The Company paid regular cash dividends on common stock of $ 0.20 per share for the

fiscal year ended June 30, 2023 and paid no cash dividends for the fiscal year ended June 30, 2022.

Our Board of Directors assesses the

Company’s dividend policy periodically.

There is no assurance that the Board of Directors will maintain the amount of the regular

cash dividend during any future years.

Effective March 13, 2023, the Company reinstated

payment of a quarterly dividend.

The Company paid regular cash dividends on common stock of $ 0.675 per share for the fiscal year ended

June 30, 2024 and paid regular cash dividends on common stock of $ 0.20 per share for the fiscal year ended June 30, 2023.

Directors assesses the Company’s dividend policy periodically.

There is no assurance that the Board of Directors will maintain the

amount of the regular cash dividend during any future years.

Line of Credit

2 unchanged sentences

The agreement provides that the Company may borrow up to $ 3,000,000 .

provides for interest payments equal to the BSBY Daily Floating Rate plus 2 percentage points.

provides for interest payments equal to the SOFR Daily Floating Rate plus 2 percentage points.

Any borrowing under the line of credit

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Quarterly Financial Information (Unaudited)

First Second Third Fourth

2024 Quarter Quarter Quarter Quarter

Net sales $ 8,568,214 $ 10,302,541 $ 8,254,653 $ 11,610,911

Gross profit 2,245,377 3,142,575 2,064,191 3,200,917

Net income 1,094,544 1,795,370 1,031,930 1,893,296

Net income per share -

Basic 0.44 0.73 0.41 0.76

Diluted 0.44 0.72 0.40 0.73

Net sales $ 8,635,795 $ 8,804,109 $ 9,809,616 $ 8,342,803

Gross profit 1,812,142 2,260,722 1,973,429 2,004,245

Net income 768,266 1,146,042 867,288 895,535

Net income per share -

Basic 0.31 0.47 0.35 0.37

Diluted 0.31 0.47 0.35 0.36

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data