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Item 7. Management’s Discussion and Analysis

2025-09-04 compared with 2024-09-05 · 173 added, 206 removed, 179 unchanged (68% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion

of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the

notes thereto contained elsewhere in this report, as well as the Risk Factors included in Item 1A of this report.

The following discussion

contains forward-looking statements.

(See “Cautionary Note Regarding Forward-Looking Statements” included in Part I of this

The following discussion and analysis

provides information that management believes is relevant to an assessment and understanding of our results of operations and financial

condition for the fiscal years ended June 30, 2024 and 2023.

We specialize in the design, development,

and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily in the orthopedic,

thoracic, and CMF markets.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of

our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes

thereto contained elsewhere in this report, as well as the Risk Factors included in Item 1A of this report.

The following discussion contains

forward-looking statements.

(See “Cautionary Note Regarding Forward-Looking Statements” included in Part I of this report.)

The following discussion and

analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and

financial condition for the fiscal years ended June 30, 2025 and 2024.

We specialize in the design,

development, and manufacture of autoclavable, battery-powered and electric, multi-function surgical drivers and shavers used primarily

in the orthopedic, thoracic, and CMF markets.

Additionally, we provide engineering, quality, and regulatory consulting

services to our customers.

We also sell rotary air motors.

Our products are found in hospitals, medical engineering labs, scientific

research facilities, and high-tech manufacturing operations around the world.

We also sell rotary air motors to a wide range of industries;

however, these motors comprise a de minimis

portion of our business.

Our products are found in hospitals, medical engineering labs, scientific research facilities, and high-tech

manufacturing operations around the world.

We are headquartered in Irvine, California.

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Revenue Recognition

Under Accounting Standards Update

(“ASU”) 2014-09, (Topic 606) “ Revenue From Contracts with Customers ,” we recognize revenue from the sales

of products and services by applying the following steps:

Under Accounting Standards

Update (“ASU”) 2014-09, (Topic 606) “ Revenue From Contracts with Customers ,” we recognize revenue from

the sales of products and services by applying the following steps:

(1) identify the contract with a customer;

(2) identify the performance obligations

in the contract;

(2) identify the performance

obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to each performance obligation in the contract;

(4) allocate the transaction price to each performance obligation in

the contract;

and (5) recognize revenue when each performance obligation is satisfied.

We primarily sell finished products and recognize revenue at

point of sale or delivery.

However, we also perform services when we are engaged to design a product for a customer and there is more

judgment involved in determining the amount and timing of revenue recognition under those types of contracts.

In fiscal 2024, the revenue

from NRE and prototype services represents approximately 1% of total revenue.

We primarily sell finished products and recognize

revenue at point of sale or delivery.

However, we also perform services when we are engaged to design a product for a customer and there

is more judgment involved in determining the amount and timing of revenue recognition under those types of contracts.

In fiscal 2025,

the revenue from NRE and prototype services represents approximately 1% of total revenue.

Returns of our product for

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accordingly, we do not establish a reserve for product returns at the time of sale.

Estimated Losses on Product Development Services

and revenue estimates related to the product development service portions of development and supply contracts are reviewed and updated

An expected loss on development service contracts is recognized immediately in cost of sales.

Losses recorded in fiscal 2024

and 2023 related to these services totaled $118,000 and $108,000, respectively.

to the complexity of many of the contracts we have undertaken, the cost estimation process requires significant judgment.

upon the knowledge and experience of our project managers, engineers, and finance professionals.

Factors that are considered in estimating

the cost of work to be completed and ultimate profitability of the fixed price product development portion of development and supply contracts

include the nature and complexity of the work to be performed, availability and productivity of labor, the effect of change orders, the

availability of materials, performance of subcontractors, and expected costs for specific regulatory approvals.

Most of our products are

sold with a warranty that provides for repairs or replacement of any defective parts for a period, generally one to two years, after the

At the time of the sale, we accrue an estimate of the cost of providing the warranty based on prior experience with such factors

as return rates and repair costs, which factors are reviewed quarterly.

Warranty expenses, including

changes of estimates, are included in cost of sales in our statements of operations.

Inventories are stated

at the lower of cost (first-in, first-out method) or net realizable value.

Reductions to estimated net realizable value are recorded,

and charged to cost of sales, when indicated based on a formula that compares on-hand quantities to both historical usage and estimated

demand from the measurement date.

Accounts Receivable

Trade receivables are stated

at their original invoice amounts, less an allowance for credit losses.

Management determines the allowance for credit losses based on

facts and circumstances related to specific accounts, and on historical experience related to the age of accounts.

Trade receivables are

written off when deemed uncollectible.

Recoveries of trade receivables previously reserved are offset against the allowance when received.

Deferred Costs

Deferred costs reflect

costs incurred related to NRE services under the terms of the related development and supply contracts.

These costs get recorded to cost

of sales in the period that the revenue is recognized.

Investments consist

of marketable equity securities of publicly held companies and, as of June 30, 2023, a warrant (the “Monogram Warrant”) to

purchase common stock of a publicly held company (which we exercised in the second quarter of fiscal 2024).

The investments were made

to realize a reasonable return, although there is no assurance that positive returns will be realized.

Investments are marked to market

at each measurement date, with unrealized gains and losses presented in other income (expense) in our consolidated income statements.

Some of our investments include the common stock of public companies that are thinly traded.

Certain of these investments are classified

as long-term in nature, as we may not be able to liquidate the investments in a timely manner even if we wish to sell them.

investments were subject to a valuation analysis as of June 30, 2024 and 2023.

Inventories are stated at

the lower of cost (first-in, first-out method) or net realizable value.

Reductions to estimated net realizable value are recorded, and

charged to cost of sales, when indicated based on a formula that compares on-hand quantities to both historical usage and estimated demand

from the measurement date.

Investments consist of marketable

equity securities of publicly held companies.

The investments were made to realize a reasonable return, although there is no assurance

that positive returns will be realized.

Investments are marked to market at each measurement date, with unrealized gains and losses presented

in other income (expense) in our consolidated income statements.

Some of our investments include the common stock of public companies

that are thinly traded.

Certain of these investments are classified as long-term in nature, as we may not be able to liquidate the investments

in a timely manner even if we wish to sell them.

All of our investments were subject to a valuation analysis as of June 30, 2025 and 2024.

Long-lived Assets

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Shorter of the remaining life of the underlying building, lease term, or the asset’s estimated useful life

intangibles consist of legal fees incurred in connection

with patent applications.

The legal fees will be amortized over the estimated life of the product(s) that will be utilizing the technology

or expensed immediately in the event the patent office denies the issuance of the patent.

The expense associated with the amortization

of the patent costs is recognized in research and development costs.

We recognize deferred tax

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June 30, 2025 Compared to the Fiscal Year Ended June 30, 2024

The following tables set

forth results from operations for the fiscal years ended June 30, 2024 and 2023:

The following tables set forth

results from operations for the fiscal years ended June 30, 2025 and 2024:

Ended June 30,

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Income tax expense

majority of our revenue is derived from designing, developing, manufacturing and\ repairing

powered surgical instruments for medical device original equipment manufacturers.

We also manufacture

and sell rotary air motors to a wide range of industries.

The proportion of total sales by product/service

type is as follows:

The majority of our revenue is derived from designing, developing,

manufacturing and repairing powered surgical instruments for medical device original equipment manufacturers.

We also manufacture and

sell rotary air motors to a wide range of industries.

The proportion of total sales by product/service type is as follows:

Ended June 30,

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Discounts & Other

sales in fiscal 2024 increased by $7.8 million, or 17%, as compared to fiscal 2023, due primarily to an increase in repair revenue of

$3.9 million and an increase in medical device revenue of $6.2 million offset by a decrease in NRE and prototype services of $1.9 million.

sales in fiscal 2025 increased by $12.7 million, or 24%, as compared to fiscal 2024, due primarily to an increase in medical device revenue

of $10.8 million and an increase in repair revenue of $2.1 million.

Details of our medical device sales by type is as follows:

Ended June 30,

% of Net Sales

Medical device sales:

of our medical device products increased $10.8 million, or 29%, during fiscal 2025 as compared to fiscal 2024.

During fiscal 2024, thoracic

sales increased by $460,000 to $3.0 million, up from $2.6 million in fiscal 2023, due to a product launch for a second distributor in

the first quarter of fiscal 2024.

Recurring revenue from distributors of CMF drivers increased $1.8 million in fiscal 2024 compared

to fiscal 2023.

We do not have much visibility into our customers’ distribution networks, but we surmise the increase relates to

a replenishment of customer inventory.

Our orthopedic sales increased $3.9 million in fiscal 2024 compared to fiscal 2023, due to continued

demand from our largest customer.

Our medical device revenue

to our largest customer, included in orthopedic sales above, increased $10.1 million, compared to the prior fiscal year due primarily

to the launch of that customer’s next generation handpiece.

As previously disclosed, late in the third quarter of fiscal 2025 the

customer requested we hold off on next generation handpiece shipments in favor of continued shipments and enhanced repair of the legacy

During the fourth quarter of fiscal 2025, the customer requested that we resume production and shipments of the next generation

While this pause negatively impacted our fourth quarter results, we do not anticipate any additional delays in shipment of

the next generation handpiece.

During fiscal 2025, thoracic sales increased by $1.3 million to $4.3

million, up from $3.0 million in fiscal 2024.

Recurring revenue from distributors of CMF drivers decreased $391,000 in fiscal 2025

compared to fiscal 2024.

We do not have much visibility into our customers’ distribution networks, but these fluctuations are within

expected levels.

of our industrial and scientific products, which consist primarily of our compact pneumatic air

motors, decreased $100,000, or 12%, for fiscal 2024 compared to fiscal 2023.

The revenue decrease is expected as these are legacy products

with no substantive marketing or sales efforts.

of our NRE & prototype services decreased $1.9 million or 71% compared to fiscal 2023 and relates to a reduction in the number of

billable engagements during fiscal 2024 compared to fiscal 2023.

motors, increased $96,000, or 13%, for fiscal 2025 compared to fiscal 2024.

These are legacy products with no substantive marketing or

sales efforts.

of our NRE & prototype services decreased $88,000, or 11%, during fiscal 2025 as compared to fiscal 2024 and relates to a reduction

in the number of billable engagements for various NRE projects undertaken for our customers.

of our dental products and components in fiscal 2025 decreased $7,000, or 4%, as compared to fiscal 2024.

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fiscal 2025 repair revenue increased approximately $2.1 million, or 13%, to $18.6 million, as compared to fiscal 2024, due to increased

repairs of the orthopedic handpiece we sell to our largest customer.

We expected repair revenue to increase based upon the customer’s

requested refurbishments to upgrade previously purchased handpieces to the next generation, which we collectively term “enhanced

We are rapidly refurbishing these handpieces and we believe that our largest customer will request enhanced repairs for

a similar volume or number of handpieces in fiscal 2025;

however, there are no assurances as to the number of enhanced repairs that will

ultimately be requested from this client in fiscal 2025 or thereafter.

repairs of the legacy orthopedic handpiece we sold to our largest customer.

This increase relates to the continuation of the previously

disclosed enhanced repair program.

We anticipate that repair revenue may decline in future periods as this customer transitions to the

next generation handpiece in lieu of enhancements of the legacy handpiece.

At June 30, 2025, we

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among other reasons, the launch of new products, the timing of customer orders based on end-user demand, and customer inventory levels.

We do not expect a reduction in fiscal 2025 revenue as compared to fiscal 2024 revenue and believe that the decline in backlog at June

30, 2024 compared to June 30, 2023 is related to timing of customer orders, although there can be no assurance that there will not be

a decline in future revenue.

Additionally, $10.2 million of our backlog at June 30, 2023 related to orders expected to be delivered in

We do not typically experience seasonal fluctuations in our shipments and revenues.

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Ended June 30,

Increase (Decrease)

Cost of sales:

% of Net Sales

Costs of sales

Product costs

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Total cost of sales

Cost of sales in fiscal 2024 increased

$6.0 million, or 18%, from fiscal 2023, primarily due to the increase in product costs, consistent with the 17% increase in net sales.

During fiscal 2024, we experienced $74,000 of over-absorption of manufacturing costs compared to $1.7 million of under-absorption in fiscal

2023, due primarily to an increase in our standard labor and overhead rate recorded in the fourth

quarter of fiscal 2024 .

Costs related to inventory and warranty charges increased $154,000 in fiscal 2024 compared to fiscal 2023,

primarily due to increased inventory reserves .

Cost of sales in fiscal 2025

increased $7.8 million, or 20%, from fiscal 2024, primarily due to the increase in product costs, consistent with the 24% increase

in net sales.

During fiscal 2025, we experienced $2.5 million of under-absorption of manufacturing costs compared to $74,000 of over-absorption

in fiscal 2024, due primarily to an increase in our indirect manufacturing costs in fiscal 2025.

Costs related to inventory and warranty charges decreased $180,000 in fiscal 2025 compared to fiscal 2024, primarily due to decreased

inventory reserves .

Operating Expenses

Ended June 30,

Increase (Decrease)

% of Net Sales

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Research and development costs

Selling expenses consist

of salaries and other personnel-related expenses related to our business development department, as well as trade show attendance, advertising

Selling expenses consist of

salaries and other personnel-related expenses related to our business development department, as well as trade show attendance, advertising

and marketing expenses, and travel and related costs incurred in generating and maintaining customer relationships.

Selling expenses decreased

$38,000, or 25%, compared to fiscal 2023, primarily due to decreased sales commissions in the amount of $74,000 offset by increased recruiting

and advertising of $20,000 and $10,000, respectively.

Selling expenses increased

$227,000, or 194%, compared to fiscal 2024, primarily due to recruiting fees and personnel costs related to our new Director of Business

Development who we hired in December 2024 as well as increased advertising and related expenses.

General and administrative

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associated with being a public company.

The $44,000 increase in G&A expenses from fiscal 2023 to 2024 is due primarily to increased

audit and consulting fees in the amount of $323,000 and increased recruiting fees of $100,000 offset by reduced patent related legal fees

of $233,000 and non-cash compensation expense related to stock compensation in the amount of $161,000 due primarily to forfeitures caused

by employee turnover.

Research and development

costs generally consist of salaries, employer-paid benefits, and other personnel- related costs of our engineering and support personnel,

as well as allocated facility and information technology costs, professional and consulting fees, patent-related fees, lab costs, materials,

The $769,000 increase in G&A expenses from fiscal 2024 to 2025 is due primarily to $441,000

in increased bonus accruals, $249,000 in increased personnel costs, and $270,000 in increased legal and information technology expenses,

offset by $157,000 in decreased audit fees.

Research and development costs

generally consist of salaries, employer-paid benefits, and other personnel- related costs of our engineering and support personnel, as

well as allocated facility and information technology costs, professional and consulting fees, patent-related fees, lab costs, materials,

and travel and related costs incurred in the development and support of our products.

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include, but are not limited to, end-of-life component replacement, especially in electronic components found in our printed circuit board

assemblies, analysis of customer complaint data to improve process and design, replacement and enhancement of tooling and fixtures used

in the machine shop, assembly operations, and inspection areas to improve efficiency and through-put.

assemblies, analysis of customer complaint data to improve process and design, and replacement and enhancement of tooling and fixtures

used in the machine shop, assembly operations, and inspection areas to improve efficiency and through-put.

Other Income (Expense)

Interest and Dividend Income

Our interest and dividend income

earned in fiscal 2024 and 2023 includes income earned from our interest-bearing money market accounts and portfolio of equity investments.

Our interest and dividend

income earned in fiscal 2025 and 2024 includes income earned from our interest-bearing money market accounts and portfolio of equity investments.

Unrealized gain (loss)

on investments

The unrealized gain (loss) on

investments relates to our investment portfolio.

The unrealized gain (loss)

on investments relates to our investment portfolio.

Additional information related to the nature of our investments is more fully described

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Gain on Sale of Investments

During fiscal 2024, our investment

sales were immaterial.

During fiscal 2023, we liquidated some of the investments in our portfolio of equity investments receiving proceeds

of $89,000 and recording a gain of $6,000.

During fiscal 2025, we liquidated

some of the investments in our portfolio of equity investments receiving proceeds of $1.9 million and recording a gain of $595,000.

fiscal 2024, our investment sales were immaterial.

Interest Expense

Interest expense incurred in fiscal

2024 and 2023 consists primarily of interest expense related to our debt with Minnesota Bank & Trust (“MBT”) described

more fully in Note 7 to the consolidated financial statements contained elsewhere in this report.

The effective tax rate

for the fiscal years ended June 30, 2024 and 2023 was 19% and 25%, respectively, slightly less than our combined expected federal and

applicable state corporate income tax rates due primarily to federal and state research credits.

Liquidity and Capital

Interest expense incurred

in fiscal 2025 and 2024 consists primarily of interest expense related to our debt with Minnesota Bank & Trust (“MBT”)

described more fully in Note 8 to the consolidated financial statements contained elsewhere in this report.

The effective tax rate for

the fiscal years ended June 30, 2025 and 2024 was 26% and 19%, respectively, slightly less than our combined expected federal and applicable

state corporate income tax rates due primarily to federal and state research credits.

Our pre-tax income in fiscal 2025 was $12.0 million

compared to $2.6 million in fiscal 2024.

The impact of our tax credits is more significant when pre-tax income is lower.

Liquidity and Capital Resources

The following table is a summary

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Cash Flows from Operating Activities

Cash provided by

operating activities totaled $6.2 million during fiscal 2024.

Our net income was $2.1 million, which includes $4.1 million of

unrealized losses on certain equity investments, as well as non-cash stock compensation expense and depreciation and amortization

expense in the amount of $605,000 and $1.2 million, respectively.

Additionally, our accounts payable and accrued expenses increased

by $2.4 million and our inventory decreased by $898,000.

Offsetting these inflows of cash, our accounts receivable and deferred tax

assets grew by $3.9 million and $1.6 million, respectively.

Cash used in operating activities

during fiscal 2025 totaled $1.7 million.

Our net income was $9.0 million, which includes $1.5 million of unrealized gains on certain equity

investments, $595,000 of realized gains on the sale of certain equity investments as well as $1.2 million of depreciation and amortization

and $555,000 of non-cash stock compensation.

Additionally, at June 30, 2025 compared to June 30, 2024, our accounts receivable increased

by $2.5 million corresponding with our increased revenue, our income tax accounts reflect a $1.5 million outlay of cash mostly related

to higher estimated income tax payments, and our inventory increased by $6.9 million in anticipation of increased sales to support our

largest customer’s release of their next generation orthopedic handpiece.

Cash provided by operating

activities during fiscal 2023 totaled $5.5 million.

Our net income was $7.1 million, which includes $3.9 million of unrealized gains on

certain equity investments, as well as $857,000 of depreciation and amortization and $766,000 of non-cash stock compensation.

Additionally,

our accounts receivable decreased by $5.4 million due to the variability in the timing of shipments and our prepaid expenses and deferred

income taxes decreased by $494,000 and $264,000, respectively.

Offsetting this net inflow of cash, inventory increased by $3.5 million

and our accounts payable and accrued expenses and deferred revenue decreased by $1.1 million and $1.0 million, respectively.

activities totaled $6.2 million during fiscal 2024.

Our fiscal 2024 net income was $2.1 million, which includes $4.1 million of unrealized

losses on certain equity investments, as well as non-cash stock compensation expense and depreciation and amortization expense in the

amount of $605,000 and $1.2 million, respectively.

Additionally, our accounts payable and accrued expenses at June 30, 2024 increased

by $2.4 million and our inventory decreased by $898,000 as compared to June 30, 2023.

Offsetting these inflows of cash, our accounts receivable

and deferred tax assets at June 30, 2024 grew by $3.9 million and $1.6 million, respectively, compared to June 30, 2023.

Cash Flows from Investing Activities

Net cash used in investing

activities in fiscal 2024 was $2.2 million and related to the exercise of the Monogram Warrant for cash in the amount of $1,250,000 (See

Note 4 to the consolidated financial statements contained elsewhere in this report) as well as equipment and improvements purchases in

the amount of $983,000.

Net cash used in investing

activities in fiscal 2025 was $238,000.

During the 2023 fiscal year, we made capital expenditures in the amount of $974,000 primarily

for the Franklin Property and we received proceeds of $89,000 from the sales of marketable equity securities.

During the 2025 fiscal year, we made capital expenditures in the amount of $1.2 million and exercised

warrants to purchase common stock and preferred stock of Monogram Technologies, Inc., formerly Monogram Orthopaedics Inc.

for cash in the amount of $899,000 (See Note 4 to the consolidated financial statements contained elsewhere in this report) offset by

proceeds of $1.9 million from the sales of marketable equity securities.

Net cash used in investing

activities in fiscal 2024 was $2.2 million and related to the exercise of the warrant to purchase Monogram common stock for cash in the

amount of $1,250,000 (See Note 4 to the consolidated financial statements contained elsewhere in this report) as well as equipment and

improvements purchases in the amount of $983,000.

Cash Flows from Financing Activities

Net cash used in financing

activities for fiscal 2025 totaled $292,000 and included $3.5 million in net borrowings on various notes payable to MBT, more fully described

in Note 8 to the consolidated financial statements contained elsewhere in this report, offset by $3.5 million related to the repurchase

of 130,148 shares of our common stock pursuant to our share repurchase program, as well as payment of $305,000 of employee payroll taxes

related to the award of 40,000 shares of common stock to employees under previously granted performance awards.

Net cash used in financing

activities for fiscal 2024 totaled $4.3 million and related primarily to the $3.5 million repurchase of 184,901 shares of our common stock

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described in Note 8 to the consolidated financial statements contained elsewhere in this report.

Net cash used in financing

activities for fiscal 2023 totaled $2.5 million and included $809,000 in net principal payments of various notes payable to MBT, and $1.5

million related to the repurchase of 86,422 shares of our common stock pursuant to our share repurchase program, as well as payment of

$223,000 of employee payroll taxes related to the award of 37,500 shares of common stock to employees under previously granted performance

Liquidity Requirements for the Next 12 Months

As of June 30, 2024, our

working capital was $23.7 million.

We currently believe that our existing cash and cash equivalent balances, together with our account

receivable balances, and anticipated cash flows from operations will provide us sufficient funds to satisfy our cash requirements as our

business is currently conducted for at least the next 12 months.

In addition to our cash and cash equivalent balances, we expect

to derive a portion of our liquidity from our cash flows from operations.

As of June 30, 2025,

our working capital was $32.7 million.

We currently believe that our existing cash and cash equivalent balances, together with our

account receivable balances, and anticipated cash flows from operations will provide us sufficient funds to satisfy our cash requirements

as our business is currently conducted for at least the next 12 months.

We may also liquidate some or all of our investment portfolio

or borrow against our revolving loan with MBT (See Notes 7 and 14 to consolidated financial statements contained elsewhere in this report),

under which we had availability of $4.0 million as of June 30, 2024.

We are focused on preserving our

cash balances by monitoring expenses, identifying cost savings, and investing only in those development programs and products that we

believe will most likely contribute to our profitability.

As we execute our current strategy, however, we may require debt and/or equity

capital to fund our working capital needs and requirements for capital equipment to support our manufacturing and inspection processes.

In particular, we have experienced negative operating cash flow in the past, especially as we procure long-lead time materials to satisfy

our backlog, which can be subject to extensive variability.

We believe that if we need additional capital to fund our operations, we can

borrow against our revolving loan with MBT.

or borrow against our revolving loan with MBT (See Note 8 to consolidated financial statements contained elsewhere in this report), under

which we had availability of $7.3 million as of June 30, 2025.

We are focused on preserving

our cash balances by monitoring expenses, identifying cost savings, and investing only in those development programs and products that

we believe will most likely contribute to our profitability.

As we execute our current strategy, however, we may require additional debt

and/or equity capital to fund our working capital needs and requirements for capital equipment to support our manufacturing and inspection

In particular, we have experienced negative operating cash flow in the past, especially as we procure long-lead time materials

to satisfy our backlog, which can be subject to extensive variability.

Surplus Capital Investment Policy

fiscal 2013, our Board approved a Surplus Capital Investment Policy (the “Policy”) that provides,

During fiscal

2013, our Board approved a Surplus Capital Investment Policy (the “Policy”) that provides,

among other items, for the following:

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year ended June 30, 2024, we repurchased 184,901 shares at an aggregate cost, inclusive of fees under the Plan, of $3.5 million.

On a cumulative

basis, since 2013 we have repurchased a total of 1,381,349 shares under the share repurchase programs at an aggregate cost, inclusive

of fees under the Plan, of $20.7 million.

cumulative basis, since 2013 we have repurchased a total of 1,511,497 shares under the share repurchase programs at an aggregate cost,

inclusive of fees under the Plan, of $24.2 million.

All repurchases under the 10b5-1 Plans were administered through an independent broker.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required

to provide this information.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

As a smaller reporting company, we are

not required to provide this information.

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 7. Management’s Discussion and Analysis