What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-09-16 compared with 2024-09-27 · 424 added, 356 removed, 625 unchanged (56% of the section changed)

25 unchanged sentences

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

11 unchanged sentences

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.

Valuation of Inventory Costs Related to Contracts

in Process and Work in Process

Valuation of Inventory and Accruals Related to

Contracts 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.

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.

statements, inventory relating to contracts in process and work in process is valued at cost.

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.

Provision for losses on contracts is made when the existence of such losses becomes probable and estimable.

The provision for losses

on contracts is included in other accrued expenses on the balance sheet.

The estimation of total cost at completion of a contract

is subject to variables involving contract costs incurred and expected to be incurred 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 contract costs could be recorded if different assumptions were used, based on changes in circumstances, in the estimation

When a change in expected 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.

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

audit matter, which required a high degree of auditor judgment.

Addressing the matter involved performing subjective

2 unchanged sentences

performed included the following:

● We obtained an understanding of the process and

assumptions used by management to develop estimates to complete including labor, overhead and materials.

● We tested total cost at completion of a contract

by using process employed by management, including:

o Testing the completeness and accuracy of the source information used;

o Testing the mathematical accuracy of management’s calculations;

o Reviewing expected gross margin on contracts;

o Evaluating the reasonableness and consistency of methodology and assumptions applied by management;

o Performing a retrospective review of the prior-year estimates used to identify potential bias of management

/s/ Freed Maxick CPAs, P.C.

● Obtain understanding of the process and assumptions

used by management to develop estimates to complete including labor, overhead and materials.

● Perform retrospective review of prior period’s

cost of sales percentage and estimates to complete.

● Perform brainstorming meeting among the engagement

team to determine where the estimate may be susceptible to fraud or error.

● Test management’s estimate to complete

and expected gross margin.

● Review appropriateness of job loss accrual.

/s/ Freed Maxick, P.C.

We have served as the Company's auditor since 2014.

Buffalo, New York

Rochester, New York

September 16, 2025

5 unchanged sentences

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

Income tax receivable

Raw materials

14 unchanged sentences

Total current liabilities

Deferred tax liabilities

Total liabilities

27 unchanged sentences

Other comprehensive income, net of tax:

Unrealized gain (loss) on investment securities

Unrealized gain on investment securities

Total comprehensive income

11 unchanged sentences

Comprehensive income:

Other comprehensive loss,

Other comprehensive income,

net of tax of $ 1,884

Total comprehensive income

Stock options exercised

Stock-based compensation

1 unchanged sentence

$ 0.675 per share

( 1,678,070 )

Reduction of unearned ESOP shares

4 unchanged sentences

& Electronics Corp.

Statements of Changes in Stockholders' Equity

Statements of Changes in Stockholders' Equity (continued)

Years Ended June 30, 2025 and 2024

31 unchanged sentences

Increase in trade accounts receivable

Decrease (increase) in income tax receivable

Decrease (increase) in inventories

Decrease in income tax receivable

Increase in inventories

Increase in prepaid expenses and other current assets

( 1,702,160 )

Decrease (increase) in prepaid expenses and other current assets

Decrease in accounts payable

( 1,109,633 )

Increase (decrease) in accounts payable

Increase in accrued salaries and wages

(Decrease) increase in vacation accrual

Increase (decrease) in other accrued expenses

(Decrease) increase in payroll and other taxes withheld

Increase in vacation accrual

Decrease other accrued expenses

Increase in payroll and other taxes withheld

Increase in contract liabilities

Increase (decrease) in income taxes

Increase in income taxes payable

Net cash provided by operating activities

2 unchanged sentences

( 4,365,403 )

( 5,164,165 )

Proceeds from grant award

10 unchanged sentences

( 2,597,354 )

Proceeds from exercise of stock options

Net cash used in financing activities

( 1,678,070 )

Increase (decrease) in cash and cash equivalents

Proceeds from exercise of stock options

Net cash provided by (used in) financing activities

( 1,151,708 )

Increase in cash and cash equivalents

Cash and cash equivalents, beginning of the year

4 unchanged sentences

& Electronics Corp.

to Financial Statements

Notes to Financial Statements

of Operations

28 unchanged sentences

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

As the Company does not have standalone observable prices, a contract’s transaction price of each performance obligation is based

on the standalone selling price, which is determined using an expected cost plus a margin approach.

Raw materials are valued at the lower of cost

1 unchanged sentence

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

demand, inventory on hand, sales levels, market conditions, and other information and reduce inventory balances based on this analysis.

demand, inventory on hand, sales levels, market conditions, and other information.

Inventory balances are reduced based on this analysis.

Inventory relating to contracts in process and

12 unchanged sentences

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.

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

& Electronics Corp.

Notes to Financial Statements

Summary of Significant Accounting Policies, Continued

a contract is subject to variables including contract costs incurred and expected to be incurred as well as estimates regarding contract completion dates.

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

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

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

Contract Liabilities

1 unchanged sentence

and billings in excess of revenue recognized.

& Electronics Corp.

Notes to Financial Statements

Summary of Significant Accounting Policies,

Depreciation of plant and equipment is computed

5 unchanged sentences

Furniture and fixtures

The Company follows the provisions of Accounting

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 or

The Company follows the provisions of the Financial

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

Under the provisions of FASB 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

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

7 unchanged sentences

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

in debt securities at June 30, 2025 and 2024 consisted of a combination of municipal bonds, U.S.

Treasury bills, and certificates of

The Company classifies investments in debt securities as available-for-sale, which are reported at fair market value.

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.

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 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 values are based on

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

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”)

FASB ASC Topic 820 “Fair Value Measurement”

establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable

1 unchanged sentence

The standard describes three levels of inputs that may be used to measure fair value:

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;

quoted prices in markets that are not active;

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

& Electronics Corp.

Notes to Financial Statements

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.

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

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.

Summary of Significant Accounting Policies,

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,

12 unchanged sentences

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.

Based on these factors, there was an allowance

for credit losses of $ 3,000 at June 30, 2025 and 2024.

Changes to the allowance for credit losses are charged to expense and reduced

by charge-offs, net of recoveries.

The opening accounts receivable balance, net of allowance for credit losses of $ 3,000 , at July 1, 2024

and July 1, 2023 were $ 6,635,490 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 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.

FASB ASC Topic 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.

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

for the period.

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.

Comprehensive Income

10 unchanged sentences

Recently Adopted Accounting Standards

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

Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments”, which

requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected, with further clarifications

made more recently.

For trade receivables, loans and other financial instruments, the Company will be required to use a forward-looking

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

In November 2023, the FASB issued ASU 2023-07, “Segment

Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ,” which provides updates to qualitative and quantitative

reportable segment disclosure requirements.

The amendments in ASU 2023-07 require all public entities, including those with a single reportable

segment, to include additional disclosures around significant segment expenses, as well as identify

measures used by the Chief Operating Decision Maker in evaluating segment performance, allocating resources, and assessing Company results.

Espey adopted ASU 2023-07 effective June 30, 2025.

The adoption of 2023-07 did not change the way that the Company identifies its reportable

segments and, did not have a material impact on the Company’s segment-related disclosures.

Refer to the notes to the financial statements

for further information on Espey’s reportable segment.

& 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.

Summary of Significant Accounting Policies,

Recent Accounting Pronouncements Not Yet Adopted

1 unchanged sentence

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.

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.

We are currently evaluating the impact of this standard to our financial

2024, the FASB issued ASU No.

2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures”

(Subtopic 220-40) which is intended to improve disclosures around public business entities expenses and address requests from investors

for more detailed information about the types of expenses that are within commonly presented expense captions such as cost of sales and

selling, general, and administrative costs.

This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods

within fiscal years beginning after December 15, 2027, with early adoption permitted.

We are currently evaluating the impact of this standard

to our financial statements.

Impairment of Long-Lived Assets

38 unchanged sentences

Notes to Financial Statements

The Company follows ASC 606 “Revenue from

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 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

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

shipping point.

Revenue is recognized when, or as, the customer takes control of the product or services.

The output method

best depicts the transfer of control to the customer as the output method represents work completed.

Control is typically transferred

to the customer at the shipping point as the Company has a present right to payment, the customer has legal title to the asset, the customer

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

The Company follows FASB ASC 606

“Revenue from 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 revenues.

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

Significant judgment is required in

determining performance obligations.

from our performance obligations are satisfied over time using the output method, using direct measurements of the value to the

customer of the goods or services transferred to date relative to the remaining goods or services promised under the contract.

output method considers the appraisal of results achieved, milestones reached or units delivered based on contractual shipment

terms, typically shipping point.

Revenue is recognized when, or as, the customer takes control of the product or

The output method best depicts the transfer of control to the customer as the output method represents progress

toward satisfaction of each performance obligation.

For units delivered, control is typically transferred to the customer at the

shipping point as the Company has a present right to payment, the customer has legal title to the asset, the customer has the

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

For milestones achieved, the customer has confirmed the performance defined in the contract has been met and the Company is entitled to

Total revenue recognized for the year ended June

4 unchanged sentences

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.

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.

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

as of June 30, 2025.

Our payment terms are generally 30-60 days.

1 unchanged sentence

$ 9,043,422 as of June 30, 2025 and 2024, 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 $ 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

approximately $ 97.2 million is expected, based on expected due dates, to be recognized in the following fiscal years:

45 % in 2025, 33 %

in 2026, 10 % in 2027, and 12 % thereafter.

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 $ 3,666,815 for the year ended June 30, 2025.

The opening contract

liabilities balance at July 1, 2024 and July 1, 2023 were $ 9,043,422 and $ 8,081,838 , respectively.

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, representing performance

obligations not yet satisfied, at June 30, 2025 totaling approximately $ 139.7 million is expected, based on expected due dates, to be

recognized in the following fiscal years:

35 % in 2026, 19 % in 2027, 15 % in 2028, and 31 % thereafter.

The nature of the contracts that

make up the Company’s backlog are enforceable and include cancellation clauses.

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.

Significant Customers

& Accounts Receivable Concentrations:

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 six domestic customers accounted for 74 % of total sales in 2025.

Each of the six customers accounted

for 16 %, 13 % 12 %, 12 %, 11 % and 10 % of sales in fiscal year 2025.

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

Each of those five customers accounted for 20 %, 18 %, 16 %, 16 % and 11 %, respectively, of total sales in 2024.

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

The related accounts receivable balance, as a percentage of the Company's total trade accounts receivable balance, was 51%

represented by three customers at June 30, 2025.

Each of the three customers accounted for 26 %, 14 %, and 11 % of accounts

receivable in fiscal year 2025.

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.

Each of the five customers accounted for 38 %, 20 %, 10 %,

7 %, and 4 % of accounts receivable in fiscal year 2024.

& Electronics Corp.

Notes to Financial Statements

Export shipments in fiscal years 2025 and 2024

were $ 3,124,820 and $ 2,350,087 , respectively.

Investment Securities

Investment securities at June 30, 2025 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:

of certificates of deposit and municipal bonds and at June 30, 2024, consisted of certificates of deposit, municipal bonds and U.S.

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, 2025 and June 30,

2024 are as follows:

June 30, 2025

3 unchanged sentences

Total investment securities

& Electronics Corp.

Notes to Financial Statements

Investment Securities, Continued

June 30, 2024

14 unchanged sentences

Available-for-sale

& Electronics Corp.

Notes to Financial Statements

Contracts in Process

1 unchanged sentence

Unrecognized gross contract value

$ 139,673,288

Costs related to contracts in process

14 unchanged sentences

Property, plant and equipment, net

& Electronics Corp.

Notes to Financial Statements

Property, Plant and Equipment, Continued

Depreciation expense was $ 453,517

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

Depreciation expense was $ 451,523 and $ 453,517

for the years ended June 30, 2025 and 2024, respectively.

The Company was awarded $ 7.4 million in

3 unchanged sentences

Combatant Industrial Base.

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 work is being conducted on the Company’s property in Saratoga Springs, NY, which was completed

in April 2025.

The Company received payment related to the third and final submission of milestone invoices.

The Company recorded

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

The Company will have an initial cash outlay

The Company incurred an initial cash outlay

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

5 unchanged sentences

deferred tax asset includes a deferred tax asset of $ 1,298,291 associated with milestone reimbursements received totaling

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

Under terms of a negotiated union contract

which expires on June 30, 2025, the Company is obligated to make contributions to a union-sponsored International Brotherhood of

Electrical Workers Local 1799 defined benefit pension plan (Plan identifying number is 14-6065199) covering eligible employees.

contributions and expenses are based upon hours worked at a specified rate and amounted to $ 102,745 in fiscal year 2024 and $ 102,612

in fiscal year 2023.

These contributions represent more than five percent of the total contributions made into the Plan.

years beginning January 1, 2024 and 2023, the Plan was in the “green zone” which means it is neither endangered nor

critical status.

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.

$ 7,488,722 .

As of June 30, 2025 no portion of the property, plant, and equipment balance was related to facility and capital upgrades

pending reimbursement under the funding award, compared to $ 965,392 in spending that was not yet reimbursed and included in

property, plant, and equipment at June 30, 2024.

As of June 30, 2025 no portion of the accounts payable balance was related to

capital upgrades eligible for reimbursement under this funding award compared to approximately $ 272,560 included in accounts payable

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.

All assets related to this award were placed in service at June 30, 2025.

The Company received an additional award for

$ 3.4 million in funding during the second quarter of fiscal year 2025 in support of continued facility and capital equipment

upgrades for testing and qualification for the United States Navy.

The funding is part of the Navy’s investment to improve and

sustain the Surface Combatant Industrial Base.

Work is being conducted on the Company’s property in Saratoga Springs, NY,

which is anticipated to be completed by the end of fiscal year 2026.

The Company will receive payment related to submission of

The first two milestones are achieved upon placement of all purchase orders and subsequently submitted for

reimbursement.

The final milestone and final reimbursement is dependent on completion of all work to be performed and assets

purchased to be placed in service.

To receive full reimbursement for the $ 3.4 million award, the Company must invest approximately

15 % or $ 508,000 in relation to these facility improvements and capital equipment upgrades.

The Company will record the receipt of

milestone payments 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, 2025, net deferred tax asset includes

a deferred tax asset of $ 386,808 associated with items that will be reimbursed under this grant.

As of June 30, 2025 the Company has

received $ 0 in milestone reimbursements.

Included in property, plant, and equipment at June 30, 2025 was approximately $ 1,731,042

not yet reimbursed for facility and capital upgrades under this funding award, which includes $ 63,029 related to assets that have been placed in service.

Included in accounts payable at June 30, 2025 was

approximately $ 108,306 for facility and capital upgrades eligible to be reimbursed under this funding award.

& Electronics Corp.

Notes to Financial Statements

Pension Expense

In the last quarter of the 2024 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.

This outstanding amount was 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 July 2024.

Final withdrawal calculations were provided to the Company on April 11, 2025 resulting in a final

payment of $ 534,583 which was paid on May 8, 2025.

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

8 unchanged sentences

$ 60,301 , for fiscal years 2025 and 2024, respectively.

& Electronics Corp.

Notes to Financial Statements

Provision for Income Taxes

9 unchanged sentences

and regulations.

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

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

The combined U.S.

9 unchanged sentences

Stock-based compensation

Foreign derived intangible income

Effective tax rate

& Electronics Corp.

Notes to Financial Statements

Provision for Income Taxes, Continued

For the years ended June 30, 2025 and 2024 deferred

income tax benefit of $ 306,865 and $ 1,032,981 , 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

effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of June 30, 2025 and 2024 are presented

Deferred tax assets:

5 unchanged sentences

Deferred tax liability:

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

Inventory - effect of uniform capitalization

2 unchanged sentences

Net deferred tax asset (liability)

$ ( 137,827 )

& Electronics Corp.

Notes to Financial Statements

Provision for Income Taxes, Continued

In assessing the realization of deferred tax assets,

23 unchanged sentences

returns for tax years ending June 30, 2025, 2024, and 2023 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.

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

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

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 30.

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

unallocated shares received by the ESOP.

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.

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

the shares purchased by the ESOP are reported as Unearned ESOP Shares in the statement of financial position.

As shares are released

or committed-to-be-released, the Company reports compensation expense equal to the current average market price of the shares, and the

shares become outstanding for earnings-per-share (EPS) computations.

The ESOP borrowed from the Corporation an amount equal to the purchase

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

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.

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 “Compensation-Stock Compensation”.

Accordingly, the shares purchased by the ESOP are

reported as Unearned ESOP Shares in the statement of financial position.

As shares are released or committed-to-be-released, the

Company reports compensation expense equal to the current average market price of the shares, and the shares become outstanding for

earnings-per-share (EPS) computations.

The ESOP borrowed from the Corporation an amount equal to the purchase price.

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

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

11 unchanged sentences

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

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

did not repurchase shares previously held by the ESOP.

During the years ended June 30, 2025 and 2024, the Company did

not repurchase shares previously held by the ESOP.

The ESOP allows for eligible participants to take

3 unchanged sentences

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

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

instruments or that may be settled by the issuance of those equity instruments.

ASC 718 requires that the cost resulting from all share-based

payment transactions be recognized in the financial statements based on the fair value of the share-based payment.

ASC 718 establishes

fair value as the measurement objective in accounting for share-based payment transactions with employees, except for equity instruments

held by employee share ownership plans.

Included as a reduction to the cost recognized for share-based payments is an estimate for option

It is the Company’s policy to estimate expected option forfeitures based on historical experience.

Actual forfeitures

are adjusted prior to the vesting date if the impact is material.

The Company follows FASB ASC 718-40 “Compensation-Stock

Compensation” 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 instruments or that may be settled by the issuance of those equity instruments.

requires that the cost resulting from all share-based payment transactions be recognized in the financial statements based on the fair

value of the share-based payment.

ASC 718 establishes fair value as the measurement objective in accounting for share-based payment transactions

with employees, except for equity instruments held by employee share ownership plans.

Included as a reduction to the cost recognized for

share-based payments is an estimate for option forfeitures.

It is the Company’s policy to estimate expected option forfeitures based

on historical experience.

Actual forfeitures are adjusted prior to the vesting date if the impact is material.

Total stock-based compensation expense recognized

4 unchanged sentences

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 (“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

$ 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.

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.

as of June 30, 2025 and 2024 was $ 6,750 and $ 7,330 , respectively.

The remaining stock option expense, in each year, related 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, 2025, there was $ 233,094 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 $ 212,609

relates to ISOs and $ 20,485 relates to NQSOs.

The total deferred tax benefit related to the NQSOs in future years will be $ 4,302 .

& Electronics Corp.

1 unchanged sentence

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.

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

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 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 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.

30, 2025, options covering 163,435 shares have been exercised, options covering 224,096 shares are outstanding and options covering 154,473

shares have been cancelled.

As of June 30, 2025, options covering 12,469 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, 2025, 4,050 options were outstanding under such plan of which all are vested and exercisable.

ASC 718 requires the use of a valuation model

7 unchanged sentences

Risk-free interest rate 4.35 % 4.39 %

Expected option life (in years)

Expected option life (in years) 5.1 yrs 5.3 yrs

Weighted average fair value per share of options granted during the period $ 5.37 $ 4.11

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.

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 Company paid regular cash dividends on

common stock of $ 1.00 per share for the fiscal year ended June 30, 2025 and paid regular cash dividends on common stock of $ 0.675

per share for the fiscal year ended June 30, 2024.

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 year ended June 30, 2024:

during the years ended June 30, 2025 and 2024:

Employee Stock Option Plans

8 unchanged sentences

Outstanding at June 30, 2024 322,056 $ 18.41 6.59 $ 1,259,317

Granted 79,000 $ 21.79 9.04

Exercised ( 162,410 ) $ 18.81 —

Forfeited or expired ( 10,500 ) $ 18.90 —

Outstanding at June 30, 2025 228,146 $ 19.26 7.30 $ 6,033,634

Vested or expected to vest at June 30, 2025 214,100 $ 19.21 7.20 $ 5,671,899

Exercisable at June 30, 2025 83,746 $ 19.07 4.99 $ 2,231,351

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 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, 2025 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, 2025.

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,

2025 and 2024 was $ 2,023,198 and $ 195,236 , respectively.

The following table summarizes changes in non-vested stock options

during the year ended June 30, 2024:

during the years ended June 30, 2025 and 2024:

Weighted Number

2 unchanged sentences

Non-vested at June 30, 2024

Forfeited or expired

Non-vested at June 30, 2025

Concentration of Credit Risk

8 unchanged sentences

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.

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.

as a percentage of the Company's total trade accounts receivable balance, was 70 % represented by six customers at June 30, 2025.

of the six customers accounted for 26 %, 14 %, 11 %, 7 %, 7 % and 6 % of accounts receivable in fiscal year 2025.

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.

Each of the five customers accounted for 38 %, 20 %, 10 %, 7 %, and 4 % of accounts receivable in fiscal year 2024.

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 credit losses based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Related Parties

14 unchanged sentences

regarding the ESOP.

and Contingencies

& Electronics Corp.

Notes to Financial Statements

Commitments and Contingencies

The Company at certain times enters into

9 unchanged sentences

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

& Electronics Corp.

Notes to Financial Statements

Commitments and Contingencies, Continued

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.

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 FASB 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.

We are party to various litigation matters and

26 unchanged sentences

Weighted average common shares

& Electronics Corp.

Notes to Financial Statements

Stockholders’ Equity, Continued

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

Not included in this computation of earnings

per share for the years ended June 30, 2025 and 2024 were options to purchase 0 and 62,691 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 $ 0.675 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.

& Electronics Corp.

Notes to Financial Statements

The Company paid regular cash dividends on common

stock of $ 1.00 per share for the fiscal year ended June 30, 2025 and paid regular cash dividends on common stock of $ 0.675 per share for

the fiscal year ended June 30, 2024.

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.

Line of Credit

25 unchanged sentences

Diluted 0.44 0.72 0.40 0.73

Segment Reporting

As of June 30, 2025, the Company adopted FASB’s

ASU 2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”, which provides enhancements to

qualitative and quantitative reportable segment disclosure requirements for all public companies.

Operating segments are clearly defined

components of an entity in which separate financial information is readily available and reviewed by the chief operating decision maker

(“CODM”) when allocating resources and assessing company performance.

Espey’s CODM is the Chief Executive Officer .

is one management team that oversees a single operating segment and reports directly to the CEO.

Our CODM evaluates performance and makes

operating decisions about allocating resources based on financial data presented on a consolidated basis, focusing on significant expenses,

net income, and certain key performance indicators (“KPI”) presented on our internal monthly and weekly management reports.

Significant expenses regularly provided to and reviewed by the CODM are Cost of Sales and Selling, General and Administrative costs which

are each separately presented on the Company’s Consolidated Statement of Income.

During the years ended June 30, 2025 and 2024,

domestic revenue accounted for more than 90% of total revenue.

The Company manages sales on a consolidated basis under one reportable

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