[PART I](index=3&type=section&id=PART%20I) [Business](index=3&type=section&id=Item%201.%20Business) Espey Mfg. & Electronics Corp. is a military power electronics OEM, with **13.5% sales growth in FY2025**, managing customer concentration and supply chain risks - Espey Mfg. & Electronics Corp. is a power electronics design and original equipment manufacturing (OEM) company, providing highly reliable products for military and severe environment applications. The company is **ISO 9001:2015 and AS9100:2016 certified**[12](index=12&type=chunk)[13](index=13&type=chunk) Total Sales (FY2024-2025) | Fiscal Year | Total Sales | | :------------ | :------------ | | 2025 | $43,950,872 | | 2024 | $38,736,319 | | **Change** | **+13.5%** | - Sales to six customers accounted for **74% of total sales in 2025** (16%, 13%, 12%, 12%, 11%, 10% respectively), and sales to five customers accounted for **81% of total sales in 2024** (20%, 18%, 16%, 16%, 11% respectively), indicating significant customer concentration risk[15](index=15&type=chunk) Sales Backlog (June 30, 2024-2025) | Backlog Category | June 30, 2025 | June 30, 2024 | | :--------------- | :------------ | :------------ | | Total Sales Backlog | $139.7 million | $97.2 million | | Funded Portion | $106.6 million | N/A | | Unfunded Backlog | $33 million | $2.3 million | | **Change (Total)** | **+43.7%** | | - Approximately **$49.1 million** of the June 30, 2025 backlog is anticipated to be filled during the fiscal year ending June 30, 2026[22](index=22&type=chunk) - The Company's business is not seasonal, but is exposed to risks from its concentration in the rail industry and military/industrial applications, including dependence on government appropriations and potential contract terminations[25](index=25&type=chunk) Research and Development Expenditures (FY2024-2025) | Fiscal Year | R&D Expenditures | | :------------ | :----------------- | | 2025 | $71,074 | | 2024 | $86,714 | - As of August 31, 2025, the Company had **152 employees**, with approximately **34%** represented by the International Brotherhood of Electrical Workers under a collective bargaining agreement expiring June 30, 2028[29](index=29&type=chunk) [Cybersecurity](index=6&type=section&id=Item%201C.%20Cybersecurity) The company prioritizes robust cybersecurity, managing complex threats as a defense contractor through NIST-compliant assessments and DFARS compliance - The Company faces complex cybersecurity threats as a defense contractor, including malware, ransomware, phishing, Denial of Service attacks, and Advanced Persistent Threats[36](index=36&type=chunk) - A security team, comprising senior management, IT, human resources, and program management, performs routine risk assessments in accordance with **NIST 800-30**, with oversight from the Audit Committee of the Board of Directors[36](index=36&type=chunk) - The Company is required to adhere to rigorous regulations like **DFARS** for protecting controlled unclassified information (CUI) and mandatory reporting of cybersecurity incidents to the Department of Defense (DoD)[36](index=36&type=chunk) [Property](index=6&type=section&id=Item%202.%20Property) All company operations are housed in an owned, vertically integrated **174,000 sq ft** facility in Saratoga Springs, New York - The Company's entire operation, including administrative, manufacturing, and engineering facilities, is located in Saratoga Springs, New York[37](index=37&type=chunk) - The Saratoga Springs plant, owned by the Company, consists of two buildings on a 22-acre site, with approximately **174,000 square feet** of in-service floor space (**113,000 sq ft for manufacturing**)[38](index=38&type=chunk) - The manufacturing operation includes a complete machine shop with welding and sheet metal fabrication facilities, and a sophisticated on-site environmental test facility, which are also available to other companies on a contract basis[38](index=38&type=chunk) [Legal Proceedings](index=6&type=section&id=Item%203.%20Legal%20Proceedings) The company faces ordinary course litigation, but management believes no pending matters will materially impact its financial condition - The Company is party to various litigation matters and claims arising from time to time in the ordinary course of business[39](index=39&type=chunk) - Management believes that the final outcome of such matters will not have a material adverse effect on the Company's business, financial condition, results of operations or cash flows[39](index=39&type=chunk) - Currently, there are **no legal matters pending**[39](index=39&type=chunk) [Mine Safety Disclosures](index=6&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company [PART II](index=7&type=section&id=PART%20II) [Market for the Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities](index=7&type=section&id=Item%205.%20Market%20for%20the%20Registrant's%20Common%20Equity%20and%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details common stock market activity, including price ranges, dividend payments, and equity compensation plan information Common Stock Price Range (High/Low) by Quarter | Quarter | 2025 High | 2025 Low | 2024 High | 2024 Low | | :------------- | :-------- | :------- | :-------- | :------- | | First Quarter | $32.00 | $20.50 | $18.00 | $14.74 | | Second Quarter | $33.00 | $26.38 | $19.29 | $14.69 | | Third Quarter | $30.29 | $25.16 | $27.32 | $17.97 | | Fourth Quarter | $48.71 | $24.85 | $26.31 | $20.20 | - The approximate number of holders of record of the common stock was **53** on September 12, 2025[43](index=43&type=chunk) Cash Dividends Paid on Common Stock | Fiscal Year | Regular Dividend per Share | Special Dividend per Share | | :------------ | :------------------------- | :------------------------- | | 2025 | $1.00 | $0.75 | | 2024 | $0.675 | — | Equity Compensation Plan Information (June 30, 2025) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of Securities remaining available for future issuance under equity compensation plan (excluding securities reflected in column (a)) (c) | | :---------------------------------- | :------------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------------------------------------------------------------------- | | Equity compensation plans approved by security holders | 228,146 | $19.26 | 12,469 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 228,146 | | 12,469 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=8&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses FY2025 financial performance, including **13.5% sales growth** and improved net income, alongside FY2026 outlook and critical accounting policies [Business Outlook](index=8&type=section&id=Business%20Outlook) Management projects higher FY2026 revenues but lower net income per share due to backlog costs, while navigating supply chain issues and pursuing strategic growth - Management expects revenues in fiscal year 2026 to be higher than fiscal year 2025, but net income per share is anticipated to fall below fiscal 2025 results due to higher anticipated aggregate costs for products in the backlog[49](index=49&type=chunk) - Ongoing demand in the power electronics industry continues to create shortages and extended lead times, with some components requiring a year or more. The Company factors these into planning and quotations[50](index=50&type=chunk) - The Company expects new orders in fiscal year 2026 to be lower than the **$86.4 million** received in fiscal year 2025, which included two significant multi-year contract awards totaling **$49.4 million**[53](index=53&type=chunk) - As of August 31, 2025, the Company has outstanding opportunities representing approximately **$163 million** for both repeat and new programs[53](index=53&type=chunk) - Capital expenditures for fiscal year 2026 are not expected to exceed **$850,000**, primarily for machinery and equipment and facility upgrades, in addition to grant-funded projects[57](index=57&type=chunk) [Results of Operations](index=9&type=section&id=Results%20of%20Operations) FY2025 net sales grew **13.5% to $43.95 million**, driving a **40% increase in net income to $8.14 million**, with improved gross profit margins Key Financial Performance Indicators (FY2024-2025) | Metric | FY2025 | FY2024 | Change (%) | | :-------------------------------------- | :------------ | :------------ | :--------- | | Net Sales | $43,950,872 | $38,736,319 | +13.5% | | Cost of Sales | $31,266,241 | $28,083,259 | +11.3% | | Gross Profit | $12,684,631 | $10,653,060 | +19.1% | | Gross Profit as % of Sales | 28.9% | 27.5% | +1.4 pp | | Selling, General and Administrative Expenses | $4,557,945 | $4,113,608 | +10.8% | | Operating Income | $8,126,686 | $6,539,452 | +24.3% | | Other Income | $1,601,978 | $755,562 | +112.0% | | Income before Provision for Income Taxes | $9,728,664 | $7,295,014 | +33.4% | | Provision for Income Taxes | $1,585,710 | $1,479,874 | +7.1% | | Net Income | $8,142,954 | $5,815,140 | +40.0% | | Basic EPS | $3.14 | $2.34 | +34.2% | | Diluted EPS | $3.02 | $2.29 | +31.9% | - The increase in net sales in FY2025 was primarily attributable to several large multi-year contracts for shipboard transformers and power distribution panels, power systems for combat vehicles, and power systems for aircraft radar and missile platforms, as well as increases in build-to-print sales[59](index=59&type=chunk) - The increase in gross profit for FY2025 was primarily due to higher sales levels, favorable product mix, higher than average profit margins on completed milestone sales, and non-recurring cost savings from labor efficiencies and material purchases. FY2024 gross profit was negatively impacted by unanticipated costs on fixed-price engineering design contracts[61](index=61&type=chunk) - Other income increased significantly due to higher interest income from increased investment securities and fixed interest rates, and a one-time Capital Investment Grant of **$300,000** related to the completion of a new building in fiscal 2025[63](index=63&type=chunk) Effective Tax Rate (FY2024-2025) | Fiscal Year | Effective Tax Rate | | :------------ | :----------------- | | 2025 | 16.3% | | 2024 | 20.3% | - The lower effective tax rate in fiscal 2025 was mainly due to benefits from stock option exercises, dividends paid on allocated ESOP shares, and foreign derived intangible income[64](index=64&type=chunk) [Liquidity and Capital Resources](index=10&type=section&id=Liquidity%20and%20Capital%20Resources) Working capital increased to **$46.9 million**, and operating cash flow significantly rose to **$20.99 million in FY2025**, supported by Navy grants Working Capital (June 30, 2024-2025) | Fiscal Year | Working Capital | | :------------ | :-------------- | | 2025 | $46.9 million | | 2024 | $38 million | Summary of Cash Flow Information (FY2024-2025) | Cash Flow Activity | FY2025 | FY2024 | | :-------------------------------- | :------------ | :------------ | | Net cash provided by operating activities | $20,991,372 | $10,595,200 | | Net cash used in investing activities | $(6,938,966) | $(7,840,277) | | Net cash provided by (used in) financing activities | $458,268 | $(1,151,708) | - The increase in cash provided by operating activities in FY2025 compared to the prior year primarily relates to an increase in contract liabilities and a decrease in inventory, partially offset by increases in accounts receivable and prepaid expenses[68](index=68&type=chunk) - The Company has an uncommitted and unused **$3,000,000** line of credit, expiring February 28, 2026, and does not anticipate needing borrowed funds in the foreseeable future[66](index=66&type=chunk)[168](index=168&type=chunk) Capital Expenditures and Grant Reimbursements (FY2024-2025) | Metric | FY2025 | FY2024 | | :-------------------------------------- | :------------ | :------------ | | Total expended for plant improvements and new equipment | $4,365,404 | $5,164,165 | | Reimbursed from $7.4M Navy award | $3,260,000 | $4,228,722 | | Eligible for reimbursement under $3.4M Navy award | $1,731,042 | N/A | [Critical Accounting Policies and Significant Estimates](index=11&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Estimates) Key accounting policies involve significant estimates for revenue recognition on fixed-price contracts, inventory valuation, and deferred taxes - Critical accounting policies include revenue recognition, inventory valuation, and deferred taxes, which involve significant management judgments, estimates, and assumptions[72](index=72&type=chunk) - Revenue recognition for fixed-price military contracts involves determining performance obligations and transaction prices using an expected cost plus a margin approach, as standalone observable prices are not available[73](index=73&type=chunk)[74](index=74&type=chunk) - Inventory, including raw materials and contracts in process, is valued at the lower of cost (average cost) or net realizable value, with provisions for losses made when probable and estimable, based on estimated total cost at completion[75](index=75&type=chunk)[76](index=76&type=chunk)[77](index=77&type=chunk) - Deferred tax assets and liabilities are recognized for future tax consequences of temporary differences between financial statement and tax bases, measured using enacted tax rates[79](index=79&type=chunk) [Financial Statements and Supplementary Data](index=12&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes audited financial statements, the independent auditor's unqualified opinion, and detailed notes on accounting policies and financial performance [Report of Independent Registered Public Accounting Firm](index=12&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Freed Maxick, P.C. issued an **unqualified opinion** on the company's FY2025 and FY2024 financial statements, affirming U.S. GAAP conformity - Freed Maxick, P.C. issued an **unqualified opinion** on the financial statements of Espey Mfg. & Electronics Corp. for the fiscal years ended June 30, 2025 and 2024[82](index=82&type=chunk) - The audit was conducted in accordance with **PCAOB standards**, assessing risks of material misstatement and evaluating accounting principles and significant management estimates[84](index=84&type=chunk)[85](index=85&type=chunk) [Critical Audit Matters](index=12&type=section&id=Critical%20Audit%20Matters) Inventory valuation for contracts in process is a critical audit matter due to its magnitude and the subjectivity of cost estimates - The valuation of inventory and accruals related to contracts in process and work in process was identified as a **critical audit matter**[87](index=87&type=chunk) - This matter is critical due to the magnitude of the inventory and the subjectivity involved in estimating the total cost at completion of a contract, which requires a high degree of auditor judgment[88](index=88&type=chunk) - Audit procedures included understanding management's estimation process, retrospective review of prior period estimates, brainstorming for fraud/error susceptibility, testing management's estimates, and reviewing job loss accruals[89](index=89&type=chunk) [Consolidated Balance Sheets](index=14&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$79.12 million in 2025**, driven by higher cash, investments, and contract liabilities, boosting stockholders' equity Consolidated Balance Sheet Highlights (June 30, 2024-2025) | Asset/Liability/Equity Category | June 30, 2025 | June 30, 2024 | | :------------------------------ | :------------ | :------------ | | Cash and cash equivalents | $18,862,645 | $4,351,970 | | Investment securities | $24,717,245 | $18,878,631 | | Total current assets | $75,156,408 | $53,236,656 | | Total assets | $79,116,564 | $56,542,931 | | Contract liabilities | $22,886,404 | $9,043,422 | | Total current liabilities | $28,267,564 | $15,268,959 | | Total liabilities | $28,267,564 | $15,268,959 | | Total stockholders' equity | $50,849,000 | $41,273,972 | - Cash and cash equivalents increased significantly from **$4.35 million in 2024 to $18.86 million in 2025**[90](index=90&type=chunk) - Contract liabilities saw a substantial increase from **$9.04 million in 2024 to $22.89 million in 2025**[90](index=90&type=chunk) [Consolidated Statements of Comprehensive Income](index=15&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) FY2025 saw net sales rise **13.5% to $43.95 million**, with net income increasing **40% to $8.14 million** and basic EPS at **$3.14** Consolidated Statements of Comprehensive Income (FY2024-2025) | Metric | FY2025 | FY2024 | | :-------------------------------------- | :------------ | :------------ | | Net sales | $43,950,872 | $38,736,319 | | Gross profit | $12,684,631 | $10,653,060 | | Operating income | $8,126,686 | $6,539,452 | | Total other income | $1,601,978 | $755,562 | | Income before provision for income taxes | $9,728,664 | $7,295,014 | | Provision for income taxes | $1,585,710 | $1,479,874 | | Net income | $8,142,954 | $5,815,140 | | Unrealized gain on investment securities | $5,052 | $8,973 | | Total comprehensive income | $8,148,006 | $5,824,113 | | Net income per share: Basic | $3.14 | $2.34 | | Net income per share: Diluted | $3.02 | $2.29 | - Net income increased by **40.0%** from **$5,815,140 in FY2024 to $8,142,954 in FY2025**[91](index=91&type=chunk) - Basic EPS increased from **$2.34 in FY2024 to $3.14 in FY2025**, and Diluted EPS increased from **$2.29 to $3.02**[91](index=91&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=16&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Total stockholders' equity increased to **$50.85 million in 2025**, driven by net income and stock option exercises, despite dividend payments Key Changes in Stockholders' Equity (FY2024-2025) | Item | FY2025 Change | FY2024 Change | | :---------------------------------- | :------------ | :------------ | | Net income | $8,142,954 | $5,815,140 | | Stock options exercised | $3,055,622 | $526,362 | | Stock-based compensation | $346,281 | $283,673 | | Dividends paid on common stock | $(2,597,354) | $(1,678,070) | | Reduction of unearned ESOP shares | $622,473 | $438,136 | | Total Stockholders' Equity (End of Period) | $50,849,000 | $41,273,972 | - Total stockholders' equity increased by **$9,575,028** from June 30, 2024, to June 30, 2025[95](index=95&type=chunk) [Consolidated Statements of Cash Flows](index=18&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow nearly doubled to **$20.99 million in FY2025**, leading to a **$14.51 million increase** in cash and cash equivalents Consolidated Statements of Cash Flows (FY2024-2025) | Cash Flow Activity | FY2025 | FY2024 | | :-------------------------------- | :------------ | :------------ | | Net cash provided by operating activities | $20,991,372 | $10,595,200 | | Net cash used in investing activities | $(6,938,965) | $(7,840,277) | | Net cash provided by (used in) financing activities | $458,268 | $(1,151,708) | | Increase in cash and cash equivalents | $14,510,675 | $1,603,215 | | Cash and cash equivalents, end of the year | $18,862,645 | $4,351,970 | - Net cash provided by operating activities increased by approximately **98%** in FY2025, primarily due to an increase in contract liabilities and a decrease in inventory[96](index=96&type=chunk) - Cash flows from financing activities shifted from a net use of **$1.15 million in FY2024** to a net provision of **$0.46 million in FY2025**, largely due to increased proceeds from stock option exercises[96](index=96&type=chunk) [Notes to Financial Statements](index=19&type=section&id=Notes%20to%20Financial%20Statements) These notes provide detailed disclosures on accounting policies, revenue, investments, PPE, taxes, ESOP, stock compensation, and other financial specifics [Note 1. Nature of Operations](index=19&type=section&id=Note%201.%20Nature%20of%20Operations) Espey Mfg. & Electronics Corp. manufactures electronic equipment primarily for military and industrial applications globally - Espey Mfg. & Electronics Corp. is a manufacturer of electronic equipment used primarily in military and industrial applications[97](index=97&type=chunk) - The principal markets for the Company's products are companies that provide electronic support to both military and industrial applications across the United States and at some international locations[97](index=97&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=19&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) This note details key accounting policies for revenue recognition, inventory, depreciation, income taxes, investments, and segment reporting - Revenue from fixed-price military and industrial contracts is recognized based on performance obligations, with transaction prices determined using an expected cost plus a margin approach[98](index=98&type=chunk)[100](index=100&type=chunk) - Inventory (raw materials, contracts in process, work in process) is valued at the lower of cost (average cost) or net realizable value, with provisions for losses on contracts made when probable and estimable[101](index=101&type=chunk)[102](index=102&type=chunk) - The Company adopted **ASU 2023-07**, 'Segment Reporting', effective June 30, 2025, which did not materially impact its segment-related disclosures[119](index=119&type=chunk) - The Company's defense electronics products market is largely dependent on new contracts from the United States and foreign governments, exposing it to concentration of risk related to government expenditures and procurement regulations (**FAR, DFAR**)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Note 3. Revenue](index=23&type=section&id=Note%203.%20Revenue) Revenue is recognized over time from military and industrial contracts, with a **$139.7 million backlog** and high customer concentration - Revenue is recognized over time using the output method, based on units delivered or milestones achieved, as control of products or services is transferred to customers[127](index=127&type=chunk) Revenue Recognition by Method (FY2024-2025) | Revenue Source | FY2025 | FY2024 | | :------------------ | :------------ | :------------ | | Units delivered | $35,343,557 | $33,403,833 | | Milestones achieved | $8,607,314 | $5,332,486 | Contract Liabilities (June 30, 2024-2025) | Fiscal Year | Contract Liabilities | | :------------ | :------------------- | | 2025 | $22,886,404 | | 2024 | $9,043,422 | | **Change** | **+153.1%** | - The total sales backlog at June 30, 2025, was approximately **$139.7 million**, with **35%** expected to be recognized in fiscal year 2026, **19%** in 2027, **15%** in 2028, and **31%** thereafter[131](index=131&type=chunk) - Sales to six domestic customers accounted for **74% of total sales in 2025**, and sales to five domestic customers accounted for **81% of total sales in 2024**, highlighting significant customer concentration[132](index=132&type=chunk) Export Shipments (FY2024-2025) | Fiscal Year | Export Shipments | | :------------ | :--------------- | | 2025 | $3,124,820 | | 2024 | $2,350,087 | | **Change** | **+32.97%** | [Note 4. Investment Securities](index=24&type=section&id=Note%204.%20Investment%20Securities) Investment securities, primarily certificates of deposit and municipal bonds, increased to **$24.72 million in 2025**, with most maturing within one year Investment Securities Fair Value (June 30, 2024-2025) | Security Type | June 30, 2025 Fair Value | June 30, 2024 Fair Value | | :-------------------- | :----------------------- | :----------------------- | | Certificates of deposit | $23,539,000 | $17,651,000 | | Municipal bonds | $1,178,245 | $711,570 | | U.S. Treasury bills | — | $516,061 | | **Total** | **$24,717,245** | **$18,878,631** | - The investment portfolio is diversified, highly liquid, and primarily consists of investment grade fixed income instruments[134](index=134&type=chunk) Contractual Maturities of Available-for-Sale Debt Securities (June 30, 2024-2025) | Fiscal Year | Less than One Year | One to Five Years | Total | | :------------ | :----------------- | :---------------- | :------------ | | June 30, 2025 | $22,933,933 | $1,783,312 | $24,717,245 | | June 30, 2024 | $17,889,582 | $989,049 | $18,878,631 | [Note 5. Contracts in Process](index=25&type=section&id=Note%205.%20Contracts%20in%20Process) Unrecognized gross contract value for contracts in process increased to **$139.67 million in 2025**, with associated costs of **$15.04 million** Contracts in Process (June 30, 2024-2025) | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Unrecognized gross contract value | $139,673,288 | $97,216,542 | | Costs related to contracts in process | $15,040,253 | $15,904,588 | - The unrecognized gross contract value increased by approximately **43.7%** from 2024 to 2025[136](index=136&type=chunk) - Costs related to contracts in process include material, subcontract costs, labor, and an allocation of overhead costs, and are not reflected in comprehensive income until units are shipped[136](index=136&type=chunk) [Note 6. Property, Plant and Equipment](index=25&type=section&id=Note%206.%20Property%2C%20Plant%20and%20Equipment) Net PPE increased to **$3.96 million in 2025**, supported by **$7.4 million** and an additional **$3.4 million** in Navy funding for upgrades Property, Plant and Equipment, Net (June 30, 2024-2025) | Category | June 30, 2025 | June 30, 2024 | | :------------------------ | :------------ | :------------ | | Land | $45,000 | $45,000 | | Building and improvements | $6,137,629 | $5,472,156 | | Machinery and equipment | $11,887,737 | $11,509,018 | | Furniture and fixtures | $165,651 | $165,651 | | Total | $18,236,017 | $17,191,825 | | Accumulated depreciation | $(14,275,861) | $(13,885,550) | | **Net PPE** | **$3,960,156**| **$3,306,275**| - Depreciation expense was **$451,523** for the year ended June 30, 2025, and **$453,517** for 2024[137](index=137&type=chunk) - The Company received **$7.4 million** in Navy funding for facility and capital equipment upgrades, completed in April 2025, with all related assets placed in service by June 30, 2025[138](index=138&type=chunk) - An additional **$3.4 million** Navy award was received in fiscal year 2025 for continued upgrades, with approximately **$1,731,042** in unreimbursed spending included in property, plant, and equipment at June 30, 2025[139](index=139&type=chunk) [Note 7. Pension Expense](index=26&type=section&id=Note%207.%20Pension%20Expense) The company paid a **$772,157** pension withdrawal obligation in FY2025 and made contributions to NEBF and a 401(k) plan - The Company recorded a termination withdrawal obligation of **$772,157** at June 30, 2024, for withdrawing from the IBEW Local 1799 Pension Fund, which was paid in full during fiscal year 2025[140](index=140&type=chunk) Pension and 401(k) Contributions (FY2024-2025) | Plan | FY2025 | FY2024 | | :---------------------------------- | :---------- | :---------- | | National Electrical Benefit Fund (NEBF) | $79,739 | $79,429 | | 401(k) employer matching contributions | $66,617 | $60,301 | [Note 8. Provision for Income Taxes](index=26&type=section&id=Note%208.%20Provision%20for%20Income%20Taxes) The FY2025 income tax provision was **$1.59 million**, with a lower effective tax rate of **16.3%** due to various tax benefits Provision for Income Taxes (FY2024-2025) | Component | FY2025 | FY2024 | | :-------------------- | :------------ | :------------ | | Current tax expense - federal | $1,882,969 | $2,515,865 | | Current tax (benefit) expense - state | $9,606 | $(3,010) | | Deferred tax benefit | $(306,865) | $(1,032,981) | | **Total Provision** | **$1,585,710**| **$1,479,874**| Effective Income Tax Rates and Reconciliation (FY2024-2025) | Item | FY2025 | FY2024 | | :-------------------------------------- | :------ | :------ | | U.S. federal statutory income tax rate | 21.0% | 21.0% | | State franchise tax, net of federal income tax benefit | 0.1 | — | | ESOP cost versus Fair Market Value | 0.5 | 0.1 | | Dividend on allocated ESOP shares | (0.6) | (0.3) | | Stock-based compensation | (3.8) | 0.2 | | Foreign derived intangible income | (0.9) | (0.8) | | Other | (0.0) | 0.1 | | **Effective tax rate** | **16.3%** | **20.3%** | Deferred Tax Assets and Liabilities (June 30, 2024-2025) | Category | June 30, 2025 | June 30, 2024 | | :---------------------------- | :------------ | :------------ | | Total deferred tax assets | $1,272,246 | $974,091 | | Total deferred tax liability | $70,227 | $78,937 | | **Net deferred tax asset (liability)** | **$1,202,019**| **$895,154** | [Note 9. Employee Stock Ownership Plan](index=27&type=section&id=Note%209.%20Employee%20Stock%20Ownership%20Plan) The company sponsors a leveraged ESOP, with compensation expense of **$622,472 in 2025** and **595,299 total shares** held - The Company sponsors a leveraged Employee Stock Ownership Plan (ESOP) covering all nonunion employees who meet eligibility criteria[149](index=149&type=chunk) ESOP Compensation Expense (FY2024-2025) | Fiscal Year | ESOP Compensation Expense | | :------------ | :------------------------ | | 2025 | $622,472 | | 2024 | $438,136 | ESOP Shares (June 30, 2024-2025) | Share Category | June 30, 2025 | June 30, 2024 | | :---------------- | :------------ | :------------ | | Allocated shares | 405,482 | 451,132 | | Unearned shares | 189,817 | 211,487 | | **Total shares held by the ESOP** | **595,299** | **662,619** | | Fair value of unearned shares | $8,676,535 | $4,494,099 | [Note 10. Stock-based Compensation](index=28&type=section&id=Note%2010.%20Stock-based%20Compensation) Stock-based compensation expense increased to **$346,281 in FY2025**, with **228,146 options outstanding** and an aggregate intrinsic value of **$6.03 million** Total Stock-based Compensation Expense (FY2024-2025) | Fiscal Year | Total Stock-based Compensation Expense | | :------------ | :------------------------------------- | | 2025 | $346,281 | | 2024 | $283,673 | - As of June 30, 2025, there was **$233,094** of unrecognized compensation cost related to stock option awards, expected to be recognized as expense over the next **1.75 years**[154](index=154&type=chunk) Stock Option Activity (FY2024-2025) | Activity | Shares Subject to Option (2025) | Weighted Average Exercise Price (2025) | Shares Subject to Option (2024) | Weighted Average Exercise Price (2024) | | :------------------------ | :------------------------------ | :------------------------------------- | :------------------------------ | :------------------------------------- | | Balance at July 1 | 322,056 | $18.41 | 296,331 | $19.15 | | Granted | 79,000 | $21.79 | 80,900 | $16.78 | | Exercised | (162,410) | $18.81 | (31,325) | $16.80 | | Forfeited or expired | (10,500) | $18.90 | (23,850) | $24.30 | | **Outstanding at June 30**| **228,146** | **$19.26** | **322,056** | **$18.41** | - The aggregate intrinsic value of outstanding options at June 30, 2025, was **$6,033,634**[158](index=158&type=chunk)[159](index=159&type=chunk) [Note 11. Concentration of Credit Risk](index=30&type=section&id=Note%2011.%20Concentration%20of%20Credit%20Risk) The company faces significant credit risk concentration, with **six customers accounting for 70%** of trade accounts receivable - Financial instruments, including cash and cash equivalents, short-term investments, and accounts receivable, subject the Company to concentrations of credit risk[161](index=161&type=chunk) - At June 30, 2025, **70%** of the Company's total trade accounts receivable balance was represented by six customers (26%, 14%, 11%, 7%, 7%, and 6% respectively)[161](index=161&type=chunk) - The Company manages credit risk through credit approvals, credit limits, monitoring procedures, and establishing an allowance for credit losses based on various factors[162](index=162&type=chunk) [Note 12. Related Parties](index=30&type=section&id=Note%2012.%20Related%20Parties) This note details the administration and voting rights of common stock shares held by the ESOP Trust - The administration of common stock shares held by the ESOP Trust is governed by the Espey Mfg. & Electronics Corp. Employee Retirement Plan and Trust and a Trust Agreement[163](index=163&type=chunk) - Allocated shares are voted according to participant instructions, while unallocated shares and those without instructions are voted in the same proportion as instructions received on allocated shares, as directed by the Board of Directors[163](index=163&type=chunk) [Note 13. Commitments and Contingencies](index=31&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) The company faces government contractor audits and ordinary course litigation, but no material adverse effects are currently anticipated - Contingent liabilities on outstanding standby letters of credit agreements aggregated to **zero** at June 30, 2025 and 2024[164](index=164&type=chunk) - As a U.S. Government contractor, the Company is subject to audits, reviews, and investigations, with potential risks including contract termination, damages, and debarment for non-compliance[164](index=164&type=chunk) - The Company is party to various litigation matters and claims arising in the ordinary course of business, but currently, there are **no matters pending** that are expected to have a material adverse effect[165](index=165&type=chunk) [Note 14. Stockholders' Equity](index=31&type=section&id=Note%2014.%20Stockholders'%20Equity) This note details stockholders' equity, including **240,615 reserved common shares**, EPS reconciliation, and dividend payments Common Shares Reserved for Future Issuance (June 30, 2025) | Category | Number of Shares | | :---------------------------- | :--------------- | | Stock options outstanding | 228,146 | | Stock options available for issuance | 12,469 | | **Total common shares reserved** | **240,615** | Earnings Per Share (EPS) Reconciliation (FY2024-2025) | Metric | FY2025 | FY2024 | | :-------------------------------------- | :------------ | :------------ | | Net income (Numerator) | $8,142,954 | $5,815,140 | | Denominator for basic EPS (Weighted average common shares) | 2,591,036 | 2,489,165 | | Denominator for diluted EPS (Weighted average common shares) | 2,696,192 | 2,536,967 | - The Company paid regular cash dividends on common stock of **$1.00 per share** for fiscal year 2025 and **$0.675 per share** for fiscal year 2024[167](index=167&type=chunk) [Note 15. Line of Credit](index=32&type=section&id=Note%2015.%20Line%20of%20Credit) The company has an unused **$3 million** line of credit expiring **February 28, 2026**, and does not anticipate needing borrowed funds - The Company has an uncommitted and unused Line of Credit with a financial institution, allowing borrowing up to **$3,000,000**[168](index=168&type=chunk) - The line of credit bears interest at the SOFR Daily Floating Rate plus **2 percentage points**, is collateralized by accounts receivable, and expires on **February 28, 2026**[168](index=168&type=chunk) - The Company did not borrow any funds during the last two fiscal years and does not anticipate the need for borrowed funds in the foreseeable future[168](index=168&type=chunk) [Note 16. Quarterly Financial Information (Unaudited)](index=32&type=section&id=Note%2016.%20Quarterly%20Financial%20Information%20%28Unaudited%29) This note presents unaudited quarterly financial data for FY2025 and FY2024, including net sales, gross profit, and net income Quarterly Financial Information (Unaudited) - FY2025 | 2025 Quarter | Net Sales | Gross Profit | Net Income | Basic EPS | Diluted EPS | | :----------- | :----------- | :----------- | :----------- | :-------- | :---------- | | First | $10,443,218 | $2,800,882 | $1,598,317 | $0.63 | $0.61 | | Second | $13,608,740 | $3,163,712 | $1,908,499 | $0.74 | $0.71 | | Third | $10,302,719 | $2,948,384 | $1,704,487 | $0.66 | $0.63 | | Fourth | $9,596,194 | $3,771,652 | $2,931,651 | $1.10 | $1.05 | Quarterly Financial Information (Unaudited) - FY2024 | 2024 Quarter | Net Sales | Gross Profit | Net Income | Basic EPS | Diluted EPS | | :----------- | :----------- | :----------- | :----------- | :-------- | :---------- | | First | $8,568,214 | $2,245,377 | $1,094,544 | $0.44 | $0.44 | | Second | $10,302,541 | $3,142,575 | $1,795,370 | $0.73 | $0.72 | | Third | $8,254,653 | $2,064,191 | $1,031,930 | $0.41 | $0.40 | | Fourth | $11,610,911 | $3,200,917 | $1,893,296 | $0.76 | $0.73 | [Note 17. Segment Reporting](index=32&type=section&id=Note%2017.%20Segment%20Reporting) The company adopted ASU 2023-07 and operates as a single segment, with domestic revenue consistently exceeding **90% of total revenue** - As of June 30, 2025, the Company adopted **FASB's ASU 2023-07**, 'Segment Reporting', which provides enhancements to qualitative and quantitative reportable segment disclosure requirements[170](index=170&type=chunk) - Espey operates as a **single operating segment**, with the Chief Executive Officer serving as the Chief Operating Decision Maker (CODM)[170](index=170&type=chunk) - The CODM evaluates performance and makes operating decisions based on consolidated financial data, focusing on significant expenses like Cost of Sales and Selling, General and Administrative costs[170](index=170&type=chunk) - Domestic revenue accounted for **more than 90%** of total revenue during the years ended June 30, 2025 and 2024[170](index=170&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=33&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were **no changes** in and disagreements with accountants on accounting and financial disclosure - There were **no changes** in and disagreements with accountants on accounting and financial disclosure[171](index=171&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal controls over financial reporting were **effective as of June 30, 2025** - The Company's management, with the participation of the CEO and Principal Financial Officer, concluded that disclosure controls and procedures were **effective as of June 30, 2025**[171](index=171&type=chunk) - There have been **no material changes** in internal controls over financial reporting during the period covered by this report[172](index=172&type=chunk) - Management concluded that the internal control over financial reporting was **effective as of June 30, 2025**, based on the **COSO Internal Control-Integrated Framework (2013)**[174](index=174&type=chunk) [Other information](index=33&type=section&id=Item%209B.%20Other%20information) **No other information** was reported for this item - **No other information** was reported for this item[175](index=175&type=chunk) [PART III](index=34&type=section&id=PART%20III) This section incorporates by reference information from the **2025 Annual Meeting of Shareholders** proxy statement for Items 10 through 14 - Information for Items 10 through 14 is incorporated by reference from the Company's definitive proxy statement relating to the **2025 Annual Meeting of Shareholders**[177](index=177&type=chunk) [PART IV](index=34&type=section&id=PART%20IV) [Exhibits, Financial Statement Schedules, Signatures](index=34&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules%2C%20Signatures) This section lists filed exhibits and includes required signatures from key officers and directors, affirming report accuracy - This section lists various exhibits, including the Certificate of Incorporation, By-Laws, Description of Capital Stock, Stock Option Plans, Employment Agreements, Code of Ethics, and Certifications[179](index=179&type=chunk)[180](index=180&type=chunk) - The report is duly signed by the President and Chief Executive Officer, Chairman of the Board, other Directors, and the Principal Financial Officer, affirming compliance with Securities Exchange Act requirements[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)

Core Points - Espey Mfg. & Electronics Corp. has declared a special cash dividend of $0.75 per share in addition to a regular quarterly dividend of $0.25 per share [1] - The dividends will be payable on September 26, 2025, to all shareholders of record on September 19, 2025 [1] Company Overview - Espey's primary business involves the development, design, and production of specialized military and industrial power supplies and transformers [2]

Core Insights - WEBUY GLOBAL LTD. has launched an innovative AI Travel Assistant, a wearable device designed to enhance the travel experience for global travelers [1][3]. Group 1: Product Features - The AI Travel Assistant weighs 30 grams and is powered by DeepSeek's V3 AI model, providing real-time multilingual support in 21 languages [3]. - It features a single-button interface allowing users to communicate in their native language and receive instant responses in their preferred language [3]. - The device is integrated with Webuy's SkyBear ERP system, offering personalized itinerary updates, destination insights, and real-time alerts [4]. Group 2: Strategic Collaborations - Webuy is collaborating with China Tourism Group to improve global travel standards and create an AI-driven service ecosystem for travelers and service providers [5]. Group 3: Technological Infrastructure - The AI Travel Assistant utilizes the ESP32-C SoC chip from Espressif Systems, ensuring robust global performance with 5G and WiFi connectivity [6]. Group 4: Future Developments - Webuy plans to enhance the AI Travel Assistant with built-in camera functionality and IoT sensors for richer contextual interactions throughout the travel journey [7]. Group 5: Company Overview - WEBUY GLOBAL LTD. focuses on transforming community e-commerce and travel in Southeast Asia, utilizing predictive AI and personalized recommendations to improve user experiences [8].

Core Insights - U Power Limited has officially entered the Singapore market by signing an Electric Service Provider (ESP) agreement to deploy UOTTA smart battery-swapping stations and facilitate the sale of compatible electric vehicles (EVs) [1][2][4] Group 1: Market Entry and Partnerships - The ESP agreement marks U Power's second market entry, following its first agreement in Macau in June 2025 [2] - The local ESP partner will handle the promotion, installation, and maintenance of UOTTA battery-swapping stations, as well as the sale and after-sale maintenance of compatible passenger cars and commercial vans [2][3] Group 2: Sales and Operations - Over the next three years, the ESP partner plans to purchase and sell approximately 5,000 compatible battery-swapping vehicles and retrofit 300 existing MG EP taxis into battery-swapping compatible EVs [3] - The ESP partner will also operate U Power's UOTTA battery-swapping stations and provide battery-swapping services for the vehicles sold [3] Group 3: Company Strategy and Vision - The CEO of U Power expressed excitement about expanding the company's global footprint and establishing a mature battery-swapping ecosystem in Southeast Asia [4] - U Power aims to replicate its ESP model to capture market share by collaborating with reputable local partners [4] Group 4: Technology and Services - U Power is a provider of comprehensive EV battery-swapping solutions using its proprietary UOTTA technology [5] - The company is investing in next-generation technologies to become a comprehensive solutions provider for smart energy grids, integrating AI-driven solutions to transform EVs into dynamic energy assets [6]

Core Insights - U Power Limited has signed its first agreement with an Electric Service Provider (ESP) in Macau to deploy UOTTA battery-swapping stations and sell compatible electric vehicles [1][4] - The ESP will handle the installation and maintenance of the battery-swapping stations and cabinets, while U Power will collaborate with the ESP to facilitate sales and after-sale maintenance of battery-swapping vehicles [2][3] - Over the next three years, the ESP partner anticipates purchasing approximately 600 four-wheeled and 5,000 two-wheeled battery-swapping vehicles [3] Company Overview - U Power is a provider of electric vehicle (EV) battery-swapping solutions, utilizing its proprietary UOTTA technology [5] - The company manufactures and sells various models of UOTTA battery-swapping stations and offers battery-swapping services for vehicle drivers [5][6] - U Power aims to become a comprehensive solutions provider for smart energy grids, investing in next-generation technologies to create intelligent ecosystems [6]

Company Overview - Espey Mfg. & Electronics (ESP) specializes in rugged power electronics primarily used in defense systems, focusing on reliability and long-term performance [1] Investment Focus - Stork Research, a private investor with four years of experience, targets overlooked and undercovered markets, particularly in micro-cap and small-cap equities that demonstrate strong growth at reasonable valuations (GARP) [1] - The research emphasizes deep, fundamentals-based analysis in sectors such as industrials and technology, which are historically rich in multi-bagger potential [1] Market Strategy - Stork Research typically avoids highly cyclical industries but occasionally seeks recovery-phase opportunities or contrarian plays in severely overvalued names where market sentiment diverges from long-term value [1] - The geographic focus includes the U.S., Canada, and select European markets, specifically Poland and Germany [1] Background and Expertise - The founder of Stork Research holds a BSc in Computer Science and an MSc in International Economics, with leadership experience in multiple investment clubs [1] - The aim is to enhance investment thesis development while helping readers identify inefficiencies and discover unique, high-conviction investment ideas [1]

Core Points - Espey Mfg. & Electronics Corp. has declared a quarterly dividend of $0.25 per share [1] - The dividend will be payable on June 23, 2025, to shareholders of record on June 16, 2025 [1] - The company specializes in the development, design, and production of military and industrial power supplies and transformers [1]

Core Insights - Espey Mfg. & Electronics Corp. (ESP) shares have increased by 15.9% since the earnings report for the quarter ended March 31, 2025, outperforming the S&P 500's 4% growth during the same period [1] - The stock has gained 19.8% over the past month, compared to the S&P 500's 11.3% growth, indicating strong investor confidence linked to the company's performance and expanding order pipeline [1] Financial Performance - For Q3 of fiscal 2025, Espey reported net income of $0.63 per share, up from $0.40 per share in the same quarter last year [2] - Net sales reached $10.3 million, a 24.8% increase from $8.3 million in the prior-year quarter, with net income rising 65.2% to $1.7 million from $1 million [2] - For the first nine months of fiscal 2025, net sales were $34.4 million, a 26.7% increase from $27.1 million in the same period last year, with net income rising 32.9% to $5.2 million or $1.95 per share from $3.9 million or $1.56 per share [3] Order Pipeline and Backlog - Espey's backlog expanded significantly to $138 million as of March 31, 2025, a 63.9% increase from $84.2 million a year earlier, driven by new orders totaling $75.1 million in the first nine months of fiscal 2025, more than double the $27.8 million in new orders from the previous year [4][5] - The growth in orders was supported by a $19.8 million contract, indicating sustained demand in the defense and industrial power supply markets [5] Management Commentary - President and CEO David O'Neil attributed the year-over-year growth in sales and earnings to strategic margin improvement initiatives and operational execution, highlighting the company's ability to enhance margins on key programs [6] - The growth in backlog is seen as a result of a record year for new orders, reflecting management's optimistic outlook [6] Earnings Drivers - Espey's earnings surge was primarily driven by increased production volume and improved pricing or mix within its power supply and transformer programs [7] - The improvement in earnings reflects the scale benefits of higher sales and effective cost discipline, with indications of enhanced profitability in high-contribution segments [7]

Core Insights - Espey Mfg. & Electronics Corp. reported significant growth in net sales and net income for both the third quarter and the first nine months of fiscal year 2025 compared to the same periods in the previous year [1][2]. Financial Performance - For the third quarter of fiscal year 2025, net sales reached $10,302,719, an increase of approximately 24.8% from $8,254,653 in the same quarter last year. Net income for the quarter was $1,704,487, or $0.63 per diluted share, compared to $1,031,930, or $0.40 per diluted share, in the prior year [1]. - For the first nine months of fiscal year 2025, net sales totaled $34,354,677, up 26.9% from $27,125,408 in the same period of fiscal year 2024. Net income for this period was $5,211,303, or $1.95 per diluted share, compared to $3,921,844, or $1.56 per diluted share, in the previous year [2]. Backlog and Orders - The company's backlog as of March 31, 2025, was $138 million, significantly higher than the $84.2 million backlog reported at the same time last year. New orders for the first nine months of fiscal year 2025 amounted to $75.1 million, a substantial increase from approximately $27.8 million in the same period of fiscal year 2024 [3]. Business Focus - Espey's primary business involves the development, design, and production of specialized military and industrial power supplies and transformers, indicating a strong focus on niche markets within the defense and industrial sectors [4].

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201%20Financial%20Statements) Espey Mfg. & Electronics Corp.'s unaudited consolidated financial statements for periods ended March 31, 2025, reflect significant growth in revenue, net income, and assets [Balance Sheets](index=3&type=section&id=Balance%20Sheets) As of March 31, 2025, total assets grew to **$72.8 million** from **$56.5 million**, driven by increased cash and contract liabilities, boosting stockholders' equity Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | **Total Current Assets** | $67,359 | $53,237 | +$14,122 | | Cash and cash equivalents | $13,859 | $4,352 | +$9,507 | | Investment securities | $24,635 | $18,879 | +$5,756 | | **Total Assets** | **$72,839** | **$56,543** | **+$16,296** | | **Total Current Liabilities** | $26,515 | $15,269 | +$11,246 | | Contract liabilities | $21,018 | $9,043 | +$11,975 | | **Total Stockholders' Equity** | **$46,325** | **$41,274** | **+$5,051** | [Statements of Comprehensive Income](index=4&type=section&id=Statements%20of%20Comprehensive%20Income) Net sales increased **26.7%** to **$34.4 million** for the nine months ended March 31, 2025, with net income growing **32.9%** and strong third-quarter performance Financial Performance (Unaudited) | Metric | Nine Months Ended Mar 31, 2025 | Nine Months Ended Mar 31, 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $34,354,677 | $27,125,408 | +26.7% | | Gross Profit | $8,912,978 | $7,452,143 | +19.6% | | Operating Income | $5,494,772 | $4,407,552 | +24.7% | | Net Income | $5,211,303 | $3,921,844 | +32.9% | | Diluted EPS | $1.95 | $1.56 | +25.0% | | **Metric** | **Three Months Ended Mar 31, 2025** | **Three Months Ended Mar 31, 2024** | **YoY Change** | | Net Sales | $10,302,719 | $8,254,653 | +24.8% | | Net Income | $1,704,487 | $1,031,930 | +65.2% | | Diluted EPS | $0.63 | $0.40 | +57.5% | [Statements of Changes in Stockholders' Equity](index=5&type=section&id=Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Total stockholders' equity increased by **$5.0 million** for the nine months ended March 31, 2025, driven by net income and stock option exercises, partially offset by dividends - Key drivers for the increase in stockholders' equity over the nine-month period were net income of **$5.2 million** and proceeds from stock option exercises of **$1.5 million**, offset by dividend payments of **$1.9 million**[14](index=14&type=chunk) [Statements of Cash Flows](index=9&type=section&id=Statements%20of%20Cash%20Flows) Net cash from operating activities surged to **$18.2 million** for the nine months ended March 31, 2025, primarily due to increased contract liabilities from customer advances Cash Flow Summary (Nine Months Ended March 31) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $18,219,771 | $7,350,662 | | Net cash used in investing activities | ($8,265,308) | ($3,869,358) | | Net cash used in financing activities | ($446,971) | ($673,795) | | **Increase in cash and cash equivalents** | **$9,507,492** | **$2,807,509** | [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20Financial%20Statements) The notes detail a **$138 million** order backlog, **$10.8 million** in U.S. Navy funding, and a **$561,852** liability from a pension plan withdrawal - The company's order backlog was approximately **$138 million** at March 31, 2025, with **7.0%** estimated for fiscal 2025, **35.9%** for 2026, **12.3%** for 2027, and **44.8%** thereafter[50](index=50&type=chunk) - The company was awarded two separate funding grants from the U.S. Navy for facility and capital equipment upgrades, one for **$7.4 million** in fiscal 2023 and another for **$3.4 million** in December 2024[42](index=42&type=chunk)[44](index=44&type=chunk) - In June 2024, the company initiated a withdrawal from the IBEW Local 1799 Pension Fund, resulting in a recorded termination withdrawal obligation of **$561,852** as of March 31, 2025[43](index=43&type=chunk) - Revenue is primarily recognized over time using the output method, based on milestones achieved or units delivered, with **$27.1 million** recognized based on units and **$7.3 million** based on milestones for the nine months ended March 31, 2025[46](index=46&type=chunk)[47](index=47&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses significant financial growth, attributing a **26.7%** increase in nine-month sales to higher deliveries and a surging backlog, expecting higher full-year revenues and EPS for fiscal 2025 [Overview](index=17&type=section&id=Overview) Espey's backlog grew to **$138 million** as of March 31, 2025, driven by **$75.1 million** in new orders, including major U.S. Navy awards, with high customer concentration - The company's total backlog increased to **$138 million** at March 31, 2025, from **$84.2 million** at March 31, 2024, including approximately **$97.7 million** from three significant customers[65](index=65&type=chunk) - New orders received in the first nine months of fiscal 2025 totaled **$75.1 million**, a significant increase from **$27.8 million** in the prior-year period, including two major awards for the U.S. Navy's Columbia class submarines valued at **$29.5 million** and **$19.8 million**[71](index=71&type=chunk) - A high degree of customer concentration exists, with sales to five significant customers representing **82%** of total sales for the three months ended March 31, 2025[72](index=72&type=chunk) [Critical Accounting Policies and Estimates](index=19&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Management identifies revenue recognition and cost estimation on contracts as critical accounting policies, with revenue recognized by output method and cost changes reflected in current earnings - The company's most critical accounting policies are revenue recognition and cost estimation on contracts[74](index=74&type=chunk) - Revenue is recognized using the output method based on appraisal of results achieved, milestones reached, or units delivered[78](index=78&type=chunk) - The estimation of total cost at completion for a contract is subject to numerous variables, and any changes in estimates are reflected in current period earnings[81](index=81&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) For the nine months ended March 31, 2025, net sales rose **26.7%**, while gross margin slightly decreased, but net income increased to **$5.2 million** Sales and Gross Profit Analysis | Period | Net Sales | YoY Change | Gross Profit % | Prior Year GP % | | :--- | :--- | :--- | :--- | :--- | | **Q3 2025** | $10,302,719 | +24.8% | 28.6% | 25.0% | | **9M 2025** | $34,354,677 | +26.7% | 25.9% | 27.5% | - The increase in SG&A expenses for the nine months ended March 31, 2025 was mainly due to higher employee compensation costs, outside selling costs, outbound freight, and employee recruitment fees[90](index=90&type=chunk) - The increase in net income for both the three and nine-month periods was primarily due to higher gross profits and interest income, partially offset by increased SG&A expenses and income tax provisions[93](index=93&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$40.8 million** in working capital and **$18.2 million** in operating cash flow, supported by U.S. Navy funding for capital expenditures - The company has a **$3,000,000** line of credit available but did not borrow any funds during the last two fiscal years and does not anticipate needing to[94](index=94&type=chunk) - Net cash provided by operating activities increased to **$18.2 million** for the nine months ended March 31, 2025, compared to **$7.4 million** in the prior year, primarily due to an increase in contract liabilities from customer cash advances[96](index=96&type=chunk) - During the nine months ended March 31, 2025, the company expended **$2,509,088** for plant improvements and new equipment, of which **$2,346,233** was eligible for reimbursement under Navy funding awards[97](index=97&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=23&type=section&id=Item%203%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Espey Mfg. & Electronics Corp., as a smaller reporting company, is exempt from providing market risk disclosures - The company is not required to provide information for this item as it qualifies as a smaller reporting company[99](index=99&type=chunk) [Controls and Procedures](index=23&type=section&id=Item%204%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal controls - The CEO and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[100](index=100&type=chunk) - There were no changes in internal controls over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[101](index=101&type=chunk) [PART II - OTHER INFORMATION](index=24&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=24&type=section&id=Item%201%20Legal%20Proceedings) The company reports no pending legal matters expected to materially affect its business, financial condition, results of operations, or cash flows - There are no pending legal matters which are expected to have a material adverse effect on the company[103](index=103&type=chunk) [Other Information Items (Items 2, 3, 4, 5, 6)](index=24&type=section&id=Other%20Information%20Items) This section covers standard disclosures, including no unregistered equity sales, no defaults, and an existing stock repurchase authorization, with officer certifications as exhibits - The company has an existing authorization to repurchase up to **$783,460** of its common stock, but no shares were repurchased during the quarter ended March 31, 2025[104](index=104&type=chunk) - The company reports no defaults upon senior securities, no mine safety disclosures, and no other information under Item 5[104](index=104&type=chunk) - Exhibits filed with the report include certifications from the CEO and Principal Financial Officer pursuant to Sarbanes-Oxley Act Sections 302 and 906[105](index=105&type=chunk) [Signatures](index=25&type=section&id=SIGNATURES) The quarterly report was signed by David O'Neil, President and CEO, and Kaitlyn O'Neil, Principal Financial Officer, on May 12, 2025 - The report was signed by David O'Neil (President and CEO) and Kaitlyn O'Neil (Principal Financial Officer) on May 12, 2025[109](index=109&type=chunk)