ESP 10-K & 10-Q changes, risk factors and insider trading

Management expects revenues in fiscal year 2026 to be higher than2027 revenues recognizedto duringoutpace fiscal year 2025.2026. NetWhile income per sharerevenue is anticipatedgrowing, the current sales mix is expected to fallshift belowand fiscalinclude 2025new results driven primarily by orders already in our backlog that will be shipped in fiscal year 2026products with higherheavier anticipatedengineering aggregateinvestments. Although these upfront costs thanmay temporarily compress near-term gross profits, they have the product mixpotential shippedto duringbuild fiscala 2025.foundation for long-term production revenue. Manufacturing scaling and efficiency initiatives are expected to help offset these initial costs and support gross margins. As market factors, including competition and product costs impact gross profit margins, management will continue to evaluate our sales strategy, employment levels, and facility costs.

The Company currentlyexpects expectsfiscal year 2027 new orders in to meet or exceed fiscal year 2026 to be lower than those received in fiscal year 2025.levels. During fiscal year 2025,2026, the Company received $86.4 approximately $41.4 million in new orders which included two significant, multi-year contract awards in an aggregate sum of $49.4 million.orders. In addition to the backlog, the Company currently has outstanding opportunities representing approximately $163$173 million in the aggregate as of AugustSeptember 31,5, 2025,2026, for both repeat and new programs. Outstanding opportunities encompass various new and previously manufactured power supplies, transformers, and subassemblies. The stated amount includes only those opportunities that we believe are likely to be awarded based on factors which include: quotation status, communicated award dates, historical ordering, public information on defense programs and program funding, discussion with customers, and our cost competitiveness. However, there can be no assurance that the Company will acquire any of the outstanding opportunities described above, many of which are subject to allocations of the United States defense spending and elements affecting the defense industry. Many solicitations we receive for the procurement of goods and services takes place by competitive bidding.

Net sales for the years ended June 30, 20252026 and 2024 2025 were $43,950,872$46,124,325 and $38,736,319,$43,950,872, respectively, ana approximate 13.5%4.95% increase. In general, sales fluctuations within product categories will occur during a comparable fiscal period as the direct result of product mix, influenced by the duration of specific programs and the contractual terms of firm orders placed for product and services under those programs including contract value, scope of work and contract delivery schedules. Deliverables within firm contracts are often subject to delivery schedules which also contributes to sales fluctuations between comparable periods. SalesFiscal year 2026 sales increased year-over-year, driven primarily by growth in fiscalour yearmagnetics 2025programs wereand higherfield whenservice work. This growth was partially offset by lower sales in our power supply programs, resulting from contract completions and planned customer delivery schedules that led to fewer active orders compared to the prior year primarily attributable to (i) several large multi-year contracts for shipboard transformers and power distribution panels, (ii) power systems for combat vehicles, and (iii) power systems for aircraft radar and missile platforms. Additionally, the Company saw increases on build to print sales. These increases were partially offset by a slight decrease in sales related to our magnetics programs where various contracts had fewer or no sales in the current reporting period as compared to the same period last year due to order completion or planned customer delivery schedules.year.

Gross profits for the years ended June 30, 2025 2026 and 20242025 were $12,684,631$16,284,133 and $10,653,060,$12,684,631, respectively. Gross profit as a percentage of sales was 28.9%35.3% and 27.5%,28.9%, for the same periods, respectively. The primary factors in determining the change in gross profit and net income are overall sales levels and product mix. The gross profits on mature products and build to print contracts are typically higher as compared to products which are still in the engineering development stage or in early stages of production. In the case of the latter, the Company can incur what it refers to as “loss contracts,” primarily on engineering design contracts in which the Company invests with the objective of developing future product sales. In any given accounting period, the mix of product shipments between higher margin programs and less mature programs, and expenditures associated with loss contracts, has a significant impact on gross profit and net income. Gross profit for the fiscal year ended June 30, 2026, increased year-over-year, driven primarily by higher sales volume and a favorable product mix. This growth was further supported by higher-than-average profit margins on completed milestone sales and the utilization of lower-cost labor groups than originally budgeted.

Selling, general and administrative expenses were $4,557,945 $4,689,449 for the fiscal year ended June 30, 2025,2026, an increase of $444,337$131,504 compared to the fiscal year ended June 30, 2024.2025. The increase in spending for the year ended June 30, 20252026 compared to the same period in 20242025 mainly arose from the temporaryan increase in employee compensationsalaries costsand relatedincentive topay, aan brief overlapincrease in ahealth fewbenefit positionscosts, requiringan aincrease trainingin transfer agent fees, and transition period due to retirements that occurred during 2025. In addition, the Company had an increase in ESOP contributions,contribution facility costs due to the completion of the new building, and travel and entertainment expenses.expense. These increases were offset, in part, by a decrease in the cost of insurance, conference andexpenses, trainingemployee recruitment costs, andoutside marketingselling expenses, and advertisingstock costs.option expense.

Other income for the fiscal years ended June 30, 2026 and 2025 and 2024 was $1,601,978$1,720,652 and $755,562,$1,601,978, respectively. The increasegrowth iswas duedriven toby the increase inhigher interest incomeincome, resulting from an increase inexpanded investment securitiessecurities, elevated cash balances, and ana higher fixed-rate environment. This increase inwas fixedpartially interestoffset rates. The Company also receivedby a one-time $300,000 Capital Investment Grant recognized in thefiscal amount of $300,0002025 related to the construction completion of the newMagnetics buildingCenter inof fiscal 2025.Excellence. Interest income is a function of the level of investments and investment strategies that generally tend to be conservative.

The Company’s effective tax rate was approximately 16.0% in the fiscal year 2026 and approximately 16.3% in fiscal year 2025 and approximately 20.3% in fiscal year 2024.2025. The effective tax raterates infor both fiscal year 2026 and 2025 isare less than the statutory tax rate mainly due to the benefit received from stock option exercises, dividends paid on allocated ESOP shares, and a benefit from foreign derived intangible income, offset in part by permanent differences related to incentive stock options. The effective tax rate in fiscal 2024 is less than the statutory tax rate mainly due to the benefit received from ESOP dividends paid on allocated shares and a benefit from foreign derived intangible income, offset in part by permanentthe differencesdifference relatedin toESOP incentivecosts stockand options.fair market value.

The Company generated net income for fiscal year 2025 2026 of $11,179,759 or $4.04 and $3.89 per share, basic and diluted, compared to net income of $8,142,954 or $3.14 and $3.02 per share, basic and diluted, compared to net income of $5,815,140 or $2.34 and $2.29 per share, basic and diluted, for fiscal year 2024.2025. The increase in net income in the year ended June 30, 20252026 compared to the same period in 2024 2025 is primarily attributable to higher sales, a higher gross profit margin percentage,margins, an increase in other income, offset in part, by an increase in selling, general, and administrative expenses and an increase in the provision for income taxes.

The Company's working capital is an appropriate indicator of the liquidity of its business, and during the past two fiscal years, the Company, when possible, has funded all of its operations with cash flows resulting from operating activities and when necessary, from its existing cash and investments. The Company did not borrow any funds during the last two fiscal years. Management has available a $3,000,000 line of credit to help fund further growth or working capital needs, if necessary, but does not anticipate the need for any borrowed funds in the foreseeable future. Contingent liabilities on outstanding standby letters of credit agreements aggregated to zero at June 30, 20252026 and 2024.2025. The existing line of credit was extended and expires FebruaryMarch 28,31, 2026.2027.

The Company's working capital as of June 30, 2025 and 2024 was approximately $46.9 million and approximately $38 million, respectively. The Company may at times be required to repurchase shares at the ESOP participants’ request at the fair market value. During the years ended June 30, 20252026 and 2024,2025, the Company did not repurchase any shares held by the ESOP. Under existing authorizations from the Company's Board of Directors, as of June 30, 2025, 2026, management is authorized to purchase an additional $783,460 of Company stock.

Net cash provided by operating activities fluctuates between periods primarily as a result of differences in sales and net income, provision for income taxes, the timing of the collection of accounts receivable, purchase of inventory, and payment of accounts payable. The increasedecrease in cash provided by operating activities compared to the prior year primarily relates to an increaseincreases in contract liabilities and a decrease in inventory, offset in part, by an increase ininventories, accounts receivable, increase in prepaid expenses and other current assets, and a decrease in income taxes payable, offset in part, by an increase in accounts payable.payable, contract liabilities, and accrued salaries and wages. Net cash used in investing activities decreased in the year ended June 30, 20252026 as compared to the same period in 20242025 due to a decrease in proceeds received from grant awards and a decrease in additions to property, plant and equipment. This was partially offset by aan decreaseincrease in the purchase of investment securities net of proceeds from the sale and maturity of investment securities and an increase in proceeds from the sale and maturity of investments when compared to the same period last year. Cash used in financing activities increase for the year ended June 30, 20252026 relateswhen primarilycompared to the same period in the prior year as a result of the increase in dividend payments on common stock, offset by a decrease in full, by proceeds from the exercise of stock options.

During the fiscal yearsyear ended June 30, 2025 and 2024,2026, the Company expended $4,365,404 and $5,164,165, respectively,$3,108,908 for plant improvements and new equipment.equipment, Ofof which $2,029,608 was reimbursed under the total$3.4 million award that was received by the Company in the second quarter of fiscal year 2025. During the fiscal year ended June 30, 2025, the Company expended amount,$4,365,404 for plant improvements and new equipment, of which $3,260,000 was reimbursed in fiscal year 2025 and $4,228,722 was reimbursed in fiscal year 2024 under a not-to-exceedthe $7.4 million award received by the Company.Company Additionally,in during the fiscal year ended June 30, 2025 there was $1,731,042 for plant improvements and new equipment eligible for reimbursement under a not-to-exceed $3.4 million award received by the Company.2023. The awardawards received by the Company isare in support of facility and capital equipment upgrades for testing and qualification for the United States Navy. ThisThese funding awardawards isare part of the Navy’s investment to improve and sustain the Surface Combatant Industrial Base. Separately, the Company has budgeted approximately $850,000$500,000 for new equipment and plant improvements in fiscal year 2026,2027, not reimbursable under theany funding award. A majority of these expenditures will be made to maintain and upgrade our operations facility, stay competitive in the marketplace and to meet the needs of current contracts.

The preparation of our consolidated financial statements in accordance with generally accepted accounting principles requires management to make certain judgments, estimates, and assumptions that affect the reported amounts as presented on the face of the financial statements. These critical accounting policies and estimates are those that are most important to the portrayal of our financial condition and results of operations. We base our estimates on historical experience and other assumptions that we believe to be reasonable. Management continually reviews and evaluates these critical accounting policies and estimates in light of evolving business conditions, regulatory developments, and changes in the economic environment. As future events cannot be determined and their impact on the financial statements are uncertain, actual results may differ from our estimates and could be material to the consolidated financial statements. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from established estimates. The critical accounting policies and estimates that we believe have the most significant effect on our financial statements are revenue recognition, inventory valuation, and deferred taxes.

The total backlog at DecemberMarch 31, 20252026 was $134.7approximately $137.1 million, which included approximately $88.8$92.7 million from three significant customers, compared to approximately $120.1$138 million at December March 31, 2024, 2025, which included $78.3approximately $97.7 million from three significant customers. A single customer may participate in multiple active programs. Therefore, the loss of one program does not necessarily result in the loss of the customer relationship. For this reason, management believes that the customer backlog concentration poses minimal risk to the Company. The Company’s total backlog represents the estimated remaining sales value of work to be performed under firm contracts. It is not uncommon to receive orders which include delivery schedules extending beyond a year from the contract origination date. Accordingly, a customer’s future reorder point may vary. The backlog at DecemberMarch 31, 20252026 is fully funded, with the exception of $25.3approximately $14.5 million, the majority of which represents amounts under multiple orders orders from a single customer. While there is no guarantee that future budgets and appropriations will provide funding for individual programs, programs, management has included in the unfunded backlog only those programs that it believes are likely to receive funding based on program status and discussions with customers. Contracts are subject to modification, change or cancellation, and the Company accounts for these changes as they are probable and estimable. The Company evaluates the impact of any scope modifications and will adjust reserves to the extent information is known or estimable. Contracts are generally not cancellable without penalty or recourse.

Management continues to expectexpects higher revenues infor fiscal year 2026 when compared to fiscal year 2025. This expectation is driven primarily by orders already in our backlog that are planned to ship before the end of fiscal year 2026. Although the first-half fiscal 2026 sales for the first nine months were lighterlower when compared to the first-halffirst nine months of the prior year, management isanticipates encouragedthe byvolume currentof trendssales for the fourth quarter to be consistent when compared to the volume of sales in the previous two quarters and expects stablethe performancefourth forquarter the remainderresults ofto thebe higher when compared to prior year. Further, management believes that net income for fiscal year 2026 will approximateexceed net income from fiscal year 2025. The recent government shutdowns have had some impact on short term deliverables but based on current information management does not believe there will be a material impact on the fiscal year-end results. The ultimate impact of such events is inherently uncertain and beyond the Company’s control, and actual results could differ from current expectations.

Successful conversion of engineering program backlog into sales is largely dependent on the execution and completion of our engineering design efforts. It is not uncommon to experience technical or scheduling delays as a result of, among other reasons, design complexity, the availability of personnel with the requisite expertise, and the requirements to obtain customer approval at various milestones. Cost overruns arising from technical challenges, scheduling delays, and increased raw material costs could negatively impact the timing of the conversion of backlog into sales, or the profitability of those sales. Engineering programs in both the funded and unfunded portions of the current backlog aggregate $14.6$15.5 million. It is presently anticipated that approximately $15.1 million of orders comprising the March 31, 2026 backlog will be filled during the fiscal year ending June 30, 2026, subject to the impact of the factors identified above which, can affect the actual order amount fulfilled by the end of fiscal year 2026. In addition, we may make shipments against orders received subsequently to March 31, 2026, prior to the end of the current fiscal year.

The Company currently expects new orders in fiscal year year 2026 to be lower than those received in fiscal year 2025. During fiscal year 2025, the Company received $86.4 million in new orders which included two significant, multi-year contract awards in an aggregate sum of $49.4 million. New orders received in the first sixnine months of fiscal year 2026 were approximately $16.3$30 million as compared to approximately $46.9$75.1 million of new orders received in the first sixnine months of fiscal year 2025. TheManagement believes that the Company’s current pipeline and ongoing efforts to secure strategic opportunities position uspositions the Company well for positive long-term results. The Company currently has outstanding opportunities representing approximately $167.1 $152.5 million in the aggregate as of FebruaryMay 5,7, 2026, for both repeat and new programs. Outstanding opportunities have grown by roughly 8% when compared to December 31, 2024, highlighting the Company’s continued focus on converting opportunities into tangible results.

The majority of our sales are generated from military contracts from defense companies, the Department of Defense, other agencies of the government of the United States and foreign governments. Additionally, there is a small portion of sales derived from the rail industry. We provide our products and design and development services under fixed-price contracts. Under fixed-price contracts we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, our generated profit will fluctuate or a loss could be incurred.

The Company extends credit to its customers in the normal course of business and collateral is generally not required for trade receivables. Exposure to credit risk is controlled through the use of credit approvals, credit limits, and monitoring procedures. The accounts receivable balance is reported net of an allowance for credit losses. The Company estimates the allowance based on its analysis of historical experience, current economic market conditions, performance of specific account reviews, and other factored considerations to include, but not limited to, contracts covered by government funding and the overall health of the industry. Interest is not charged on past due balances. Based on these factors, there was an allowance for credit losses of $3,000 at DecemberMarch 31, 20252026 and June 30, 2025. Changes to the allowance for credit losses are charged to expense and reduced by charge-offs, net of recoveries. The opening accounts receivable balance, net of allowance for credit losses of $3,000, at July 1, 2024 and July 1, 2025 were $6,635,490 and $7,598,888, respectively.

Net sales for the three months ended DecemberMarch 31, 31,2026 and 2025 and 2024 were $12,136,903$11,422,655 and $13,608,740,$10,302,719, respectively. Net sales for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 were $32,652,434 $21,229,779 and $24,051,958,$34,354,677, respectively. In general, sales fluctuations may occur during comparable fiscal periods as the direct result of sales backlog levels, product mix, and specific contractual terms of those firm orders placed including contract value, scope of work, and contract delivery schedules. The subtle declineincrease in sales during the three and six months ended DecemberMarch 31, 20252026 when compared to the same period last year reflectswas entirely theattributable changeto an increase in timing of shipments and milestone completionsales on selecta few key magnetics programs and isan notincrease indicative ofin our sales related to a sustainedspecific changefield service job, offset in overallpart by a decrease in sales trendsrelated orto orderthree volume.main Certainpower factorssupply outside of the Company’s control, including government approval timelinesprograms and vendorone related issues can adversely affect our abilitybuild to meetprint deliveries that were originally scheduled within any given quarter. Given the non-seasonal nature of our business, these results are not indicative of management’s current anticipated year-over-year results.program.

Gross profits for the three months ended DecemberMarch 31, 20252026 and 20242025 were $4,212,581$4,229,345 and $3,163,712, respectively.$2,948,384. Gross profit as a percentage of sales was 34.7%37.0% and approximately28.6%, 23.2%,for the same periods, respectively. Gross profits for the nine months ended March 31, 2026 and 2025 were $11,658,928 and $8,912,978. Gross profit as a percentage of sales was 35.7% and 25.9%, for the same periods, respectively. Gross profits forhave thecontinued six months ended December 31, 2025 and 2024 were $7,429,583 and $5,964,594, respectively. Gross profit as a percentage of sales was 35.0% and approximately 24.8%, for the same periods, respectively. We continue to seeimprove improvements in gross profits inthrough the first halfthree quarters of fiscal year 2026 compared towith the prior yearyear. which is being driven by product mix, continued labor cost efficiencies, and further process improvements. The increase inStrong gross profits are beingdriven slightlyby product mix, labor efficiencies, and process improvements, partially offset by unanticipated costsunforeseen oninvestments in certain fixed-price engineering designcontracts. contracts forSpecific power suppliessupply whereprograms more testing and effort is beinghave needed additional than originally anticipatedtesting as a result of additionalfurther design considerations identified during the development process.

Selling, general and administrative expenses were were $1,141,440$1,245,975 for the three months ended DecemberMarch 31, 2025,2026, an increase of $2,165,$48,713, compared to the three months ended DecemberMarch 31, 2024. 2025. Selling, general and administrative expenses were $2,292,706$3,538,681 for the sixnine months ended DecemberMarch 31, 2025,2026, an increase of $71,762 $120,475 compared to the six nine months ended DecemberMarch 31, 2024.2025. The slight increase in spending for both the three and nine months ended DecemberMarch 31, 2025 2026 as compared to the same period last year relateswas todriven by an increase in employee health benefits, ESOP contributionscontributions, facility costs, and professional services. These increases were partially offset by a decrease in employee health expenses, payroll taxes, and stock option expense for the quarter. The increase in selling, general, and administrative expenses for the six months ended December 31, 2025 compared to the same period last year was driven by an increase in total salaries, ESOP contribution expense, facilities expenses, and professional services. These increases were offset in part by a decrease in stock option expense, marketingoutside selling expenses, travel and entertainment expenses, and advertising costs,costs for both the three and outbound freight.nine months ended March 31, 2026.

Other income for the three months ended DecemberMarch 31, 20252026 and 20242025 was $444,694$408,050 and $268,425,$336,306, respectively. Other income for the sixnine months ended DecemberMarch 31, 20252026 and 20242025 was $936,476$1,344,526 and $546,833,$883,139, respectively. The primary reason for the increase forduring the three and sixnine months ended DecemberMarch 31, 20252026 is due to the increase in interest income resulting from an increase in cash held in money market accounts and investment securities. Interest income is a function of the level of investments and investment strategies that generally tend to be conservative.

The Company’s effective tax rate for the the three and sixnine months ended DecemberMarch 31, 20252026 was approximately 20.2%15.5% and 18.1%17.2% respectively, compared to approximately 16.8% and 18.3% for the three and sixnine months ended DecemberMarch 31, 2024.2025. The effective tax rate in fiscal year 2026 is slightly less than the statutory tax rate mainly due to the benefit received from ESOP dividends paid on allocated shares, the benefit derived from stock-based compensation, and FDII deductions, offset in part by the permanent difference in ESOP fair market value and cost which is not deductible for tax purposes. The effective tax rate for the three months ended DecemberMarch 31, 20252026 was higherlower than the same period last year, primarily due to the increase in net income and the decrease inincreased tax benefit for stock forfeitures and ISOstock option exercises within the quarter. The lower effective tax rate for the sixnine months ended DecemberMarch 31, 20252026 compared to the same period in 20242025 is primarily due to an increased foreign-derived intangible income deduction, partially offset by anthe increase in nettax income.benefit for stock forfeitures and stock option exercises. In July 2025, the One Big Beautiful Bill Act (the "Tax Act") was enacted, introducing a series of corporate tax changes in the U.S., including 100% bonus depreciation on qualified property and full expensing for research and development expenditures. The impacts of the Tax Act are reflected in our results for the three and sixnine months ended DecemberMarch 31, 2025,2026 and there was no material impact to our income tax expense or effective tax rate.

Net income for the three months ended DecemberMarch 31, 31, 20252026 was $2,805,109$2,864,662 or $1.02$1.03 and $0.99 per share, basic and diluted, respectively, compared to net income of $1,908,499$1,704,487 or $0.74$0.66 and $0.71$0.63 per per share, basic and diluted, respectively, for the three months ended DecemberMarch 31, 2024.2025. Net income for the sixnine months ended DecemberMarch 31, 2025 2026 was $4,974,945 $7,839,607 or $1.82$2.85 and $1.75$2.74 per share, basic and diluted, respectively, compared to net income of $3,506,816$5,211,303 or $1.37$2.03 and $1.32 $1.95 per share, basic and diluted, respectively, for the sixnine months ended DecemberMarch 31, 2024.2025. The increase in net income in the three and six nine months ended DecemberMarch 31, 20252026 when compared to the same period last year resulted primarily from the increase in gross profit and increase in interest income which was offset in part by the increase in selling, general, and administrative expenses and the provision for income taxes discussed in detail above.

The Company's working capital is an appropriate appropriate indicator of the liquidity of its business. During the past two fiscal years, the Company has funded all of its operations with cash flows resulting from operating activities and when necessary, from its existing cash and investments. The Company did not borrow any funds during the last two fiscal years. Management has a $3,000,000 line of credit available to help fund further growth or working capital needs but does not anticipate the need for any borrowed funds in the foreseeable future. Contingent liabilities related to outstanding standby letters of credit were zero as of DecemberMarch 31, 20252026 and 2024.2025. The existing line of credit was renewed in February 2025.2026.

The Company's working capital as of DecemberMarch 31, 20252026 and 20242025 was approximately $48.9$50.5 million and approximately $40.2$39.9 million, respectively.respectively, including the reclassification disclosed in Note 1. The Company may at times be required to repurchase shares at the ESOP participants’ request at fair market value. During the three and sixnine months ended DecemberMarch 31, 20252026 and 2024, 2025, the Company did not repurchase any shares held by the ESOP. Under existing authorizations from the Company's Board of Directors, as of December March 31, 2025,2026, management is authorized to purchase an additional $783,460 of Company stock.

Net cash provided by operating activities fluctuates between periods primarily as a result of differences in sales and net income, provision for income taxes, the timing of the collection of accounts receivable, purchase of inventory, and payment of accounts payable. The decrease in cash provided by operating activities compared to the prior year primarily relates to an increase in inventories, anprepaid increaseexpenses inand accountsother receivable,current a decrease in accrued expenses,assets, and a decrease in theaccounts ESOP payable.receivable. This is offset in part by an increase in accounts payable and an increase in contract liabilities for cash advances received from customers. Net cash used in investing activities decreased in the sixnine months ended DecemberMarch 31, 20252026 as compared to the same period in 20242025 due to an increase in proceeds collected from awarded grants, and proceeds from the sale and maturity of investment securities offset by ana slight increase in inadditions to property, plant, and equipment. Net cash used in financing activities increased solely due to the increase in dividends dividends paid when compared to the same period last year offset in part by the proceeds collected from the exercise of stock options. The Company currently believes that the cash flow generated from operations and when necessary, from cash and cash equivalents will be sufficient sufficient to meet its long-term funding requirements for the foreseeable future.

During the sixnine months ended DecemberMarch 31, 2025,2026, the Company expended $2,612,276$2,800,998 for plant improvements and new equipment, of which $2,029,608 was reimbursed under the $3.4 million award that was received by the Company in the second quarter of fiscal year 2025. During the sixnine months ended DecemberMarch 31, 2024,2025, the Company expended $1,547,922$2,509,088 for plant improvements and new equipment, of which $1,346,396$2,346,233 was eligible to be reimbursed under the $7.4 million award received by the Company in fiscal year 2023. The awards received by the Company are in support of facility and capital equipment upgrades for testing and qualification for the United States Navy. These funding awards are part of the Navy’s investment to improve and sustain the Surface Combatant Industrial Base. The Company hasinitially budgetedallocated approximately $850,000 for new equipment and plant improvements in fiscal year 2026, which are not reimbursable under the funding awards received. AActual majorityspending at the end of the thesethird expendituresquarter willsurpassed bethis madebudget. Excluding any further investments during the fourth quarter, year-to-date additions to property upgradeplant ourand facilities,equipment staytotaled competitiveapproximately $855,000 which were directed towards essential investments in thefacility marketplace,upgrades, expenditures to maintaining market competitiveness, and items needed to meet the needs offulfill current contracts.contractual requirements.