Quarterly Report for Quarter Ending November 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Information in this Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and elsewhere in this Form 10-Q that does not consist of historical facts are "forward-looking statements." Statements accompanied or qualified by, or containing, words such as "may," "will," "should," "believes," "expects," "intends," "plans," "projects," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," and "assume" constitute forward-looking statements and, as such, are not a guarantee of future performance. These statements involve factors, risks and uncertainties, the impact or occurrence of which can cause actual results to differ materially from the expected results described in such statements. Risks and uncertainties can include, among others: reductions in capital budgets by our customers and potential customers; changing product demand and industry capacity; increased competition and pricing pressures; advances in technology that can reduce the demand for the Company's products; the kind, frequency and intensity of natural disasters that affect demand for the Company's products; and other factors, many or all of which are beyond the Company's control. Consequently, investors should not place undue reliance on forward-looking statements as predictive of future results. Except as may be required by law, the Company disclaims any obligation to release publicly any updates or revisions to the forward-looking statements herein to reflect any change in the Company's expectations with regard thereto, or any changes in events, conditions or circumstances on which any such statement is based.

Results of Operations

A summary of the period-to-period changes in the principal items included in the condensed consolidated statements of income is shown below:

Summary comparison of the six months ended November 30, 2025 and November 30, 2024
		Increase /
		(Decrease)
Sales, net		$1,355,000
Cost of goods sold		$847,000
Research and development costs		$123,000
Selling, general and administrative expenses		$(241,000)
Other income		$123,000
Income before provision for income taxes		$749,000
Provision for income taxes		$273,000
Net income		$476,000

Sales under certain fixed-price contracts, in which the product has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date, inclusive of profit, are recognized over time whereby revenues are based on estimates of completion prepared on a ratio of cost to total estimated cost basis. Costs include all material and direct and indirect charges related to specific contracts.

Adjustments to cost estimates are made periodically and any losses expected to be incurred on contracts in progress are charged to operations in the period such losses are determined. However, any profits expected on contracts in progress are recognized over the life of the contract.

For financial statement presentation purposes, the Company nets progress billings against the total costs incurred and estimated earnings recognized on uncompleted contracts. The asset, "costs and estimated earnings in excess of billings," represents revenues recognized in excess of amounts billed. The liability, "billings in excess of costs and estimated earnings," represents billings in excess of revenues recognized.

For the six months ended November 30, 2025 (All figures discussed are for the six months ended November 30, 2025, as compared to the six months ended November 30, 2024).

	Six months ended		Change
	November 30, 2025	November 30, 2024	Amount		Percent
Net Revenue	$21,522,000	$20,167,000	$1,355,000		7%
Cost of goods sold	11,624,000	10,777,000	847,000		8%
Gross profit	$9,898,000	$9,390,000	$508,000		5%
… as a percentage of net revenue	46%	47%

The Company's consolidated results of operations showed a 7% increase in net revenue and a 13% increase in net income. Revenue recorded in the six-month period ended November 30, 2025 for long-term projects was 9% lower than the level recorded in the prior year. The Company had 31 long-term projects in process during the six-month period ended November 30, 2025 as compared to 27 during the same period last year. Revenue recorded in the six-month period ended November 30, 2025 for other-than long-term projects was 34% higher than the level recorded in the prior year. Total sales within the U.S. during the six-month period ended November 30, 2025 increased 15% from the same period last year. Total sales outside the U.S. during the six-month period ended November 30, 2025 decreased 32% from the same period of the prior year. The shift in domestic and international sales concentration from the prior year is attributable to normal changes in structural project activity. Sales increases were recorded over the same period last year to customers involved in construction of buildings and bridges (4%) and aerospace / defense (9%) as well as industrial customers (1%). The increase in sales from the prior year is attributable to differences in the timing of backlog conversion to revenue.

The gross profit as a percentage of net revenue of 46% in the six-month period ended November 30, 2025 is one percentage point lower than the same period of the prior year (47%).

Sales of the Company's products are made to three general groups of customers: industrial, structural and aerospace / defense. A breakdown of sales to the three general groups of customers is as follows:

	Six months ended
	November 30, 2025	November 30, 2024
Industrial	10%	12%
Structural	29%	29%
Aerospace / Defense	61%	59%

At November 30, 2024, the Company had 156 open sales orders in its backlog with a total sales value of $34.5 million. At November 30, 2025, the Company had 134 open sales orders in its backlog with a total sales value of $25.1 million. The Company expects to recognize revenue for the majority of the backlog during fiscal years 2026 and 2027.

The Company's backlog, revenues, gross profits, and net income fluctuate from period to period. The changes in the six-month period ended November 30, 2025, compared to the same period in the prior year, are not necessarily representative of future results.

Net revenue by geographic region, as a percentage of total net revenue for the six-month periods ended November 30, 2025 and November 30, 2024, is as follows:

	Six months ended
	November 30, 2025	November 30, 2024
U.S.	88%	82%
Asia	7%	11%
Other	5%	7%

Research and Development Costs

	Six months ended		Change
	November 30, 2025	November 30, 2024	Amount		Percent
R & D	$ 295,000	$ 172,000	$ 123,000		72%
… as a percentage of net revenue	1.4%	0.9%

Research and development costs increased $123,000 from the same period in the prior year.

Selling, General and Administrative Expenses

	Six months ended		Change
	November 30, 2025	November 30, 2024	Amount		Percent
S G & A	$ 5,128,000	$ 5,369,000	$ (241,000)		-4%
… as a percentage of net revenue	24%	27%

Selling, general and administrative expenses during the six-month period ended November 30, 2025 decreased by 4% from the same period in the prior year. This change is primarily due to lower employee incentive compensation accruals. The Company expenses stock options using the fair value recognition provisions of the Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC"). The Company recognized $800,000 (47,850 options granted) and $731,000 (46,800 options granted) of compensation cost for the six-month periods ended November 30, 2025 and November 30, 2024, respectively.

Operating Income

Operating income was $4,475,000 for the six-month period ended November 30, 2025, higher than $3,849,000 in the same period of the prior year. The increase in operating income is attributable to higher gross margin associated with increased revenue.

Other Income

Other income was $808,000 for the six-month period ended November 30, 2025, an 18% increase from the same period of the prior year. This increase was driven by short-term investment interest income.

Summary comparison of the three months ended November 30, 2025 and November 30, 2024
		Increase /
		(Decrease)
Sales, net		$3,054,000
Cost of goods sold		$1,481,000
Research and development costs		$111,000
Selling, general and administrative expenses		$177,000
Other income		$116,000
Income before provision for income taxes		$1,401,000
Provision for income taxes		$449,000
Net income		$952,000

For the three months ended November 30, 2025 (All figures discussed are for the three months ended November 30, 2025 as compared to the three months ended November 30, 2024).

	Three months ended		Change
	November 30, 2025	November 30, 2024	Amount		Percent
Net Revenue	$11,603,000	$8,549,000	$3,054,000		36%
Cost of goods sold	6,144,000	4,663,000	1,481,000		32%
Gross profit	$5,459,000	$3,886,000	$1,573,000		40%
… as a percentage of net revenue	47%	45%

The Company's consolidated results of operations showed a 36% increase in net revenue and 90% increase in net income. Revenue recorded in the quarter ended November 30, 2025 for long-term projects was 7% higher than the level recorded in the prior year. The Company had 25 long-term projects in process during the quarter ended November 30, 2025 as compared to 22 during the same period last year. Revenue recorded in the quarter ended November 30, 2025 for other-than long-term projects was 91% higher than the level recorded in the prior year. Total sales within the U.S. during the quarter ended November 30, 2025 increased 45% from the same period last year. Total sales outside the U.S. during the quarter ended November 30, 2025 decreased 30% from the same period of the prior year. The shift in domestic and international sales concentration from the prior year is attributable to normal changes in structural project activity. Sales to customers involved in the construction of buildings and bridges decreased 6% while sales increases were recorded over the same period last year to customers in aerospace / defense (58%), and industrial customers (29%). The increases in sales from the prior year is attributable to differences in the timing of backlog conversion to revenue.

The gross profit as a percentage of net revenue of 47% in the quarter ended November 30, 2025 is two percentage points higher than the same period of the prior year (45%).

Sales of the Company's products are made to three general groups of customers: industrial, structural and aerospace / defense. A breakdown of sales to the three general groups of customers is as follows:

	Three months ended
	November 30, 2025	November 30, 2024
Industrial	10%	11%
Structural	21%	30%
Aerospace / Defense	69%	59%

Net revenue by geographic region, as a percentage of total net revenue for the three-month periods ended November 30, 2025 and November 30, 2024, is as follows:

	Three months ended
	November 30, 2025	November 30, 2024
U.S.	94%	88%
Asia	4%	7%
Other	2%	5%

Research and Development Costs

	Three months ended		Change
	November 30, 2025	November 30, 2024	Amount		Percent
R & D	$ 214,000	$ 103,000	$ 111,000		108%
… as a percentage of net revenue	1.8%	1.2%

Research and development costs increased $111,000 from the prior year.

Selling, General and Administrative Expenses

	Three months ended		Change
	November 30, 2025	November 30, 2024	Amount		Percent
S G & A	$ 3,016,000	$ 2,839,000	$ 177,000		6%
… as a percentage of net revenue	26%	33%

Selling, general and administrative expenses during the quarter ended November 30, 2025 increased 6% from the same period in the prior year. The Company expenses stock options using the fair value recognition provisions of the FASB ASC. The Company recognized $800,000 (47,850 options granted) and $731,000 (46,800 options granted) of compensation cost for the three-month periods ended November 30, 2025 and November 30, 2024, respectively.

Operating Income

Operating income was $2,229,000 for the three months ended November 30, 2025, higher than $944,000 in the same period of the prior year. The increase in operating income is attributable to higher gross margin associated with increased revenue.

Other Income

Other income was $424,000 for the three months ended November 30, 2025, a 38% increase from the same period of the prior year. This increase was driven by short-term investment interest income.

Liquidity and Capital Resources

The Company's primary liquidity requirements depend on its working capital needs. Working capital consists primarily of cash and short-term investments, inventory, accounts receivable, costs and estimated earnings in excess of billings, accounts payable, accrued expenses and billings in excess of costs and estimated earnings. The Company's primary source of liquidity has been excess cash flow from operations.

Capital expenditures for the six-month period ended November 30, 2025 were $1,491,000 compared to $971,000 in the same period of the prior year. As of November 30, 2025, the Company has commitments for capital expenditures totaling $1,732,000 during the next twelve months. The Company is evaluating additional capital expenditures to expand capacity.

Inventory and Maintenance Inventory

	November 30, 2025		May 31, 2025		Increase /(Decrease)
Raw materials	$516,000		$627,000		$(111,000)		-18 %
Work-in-process	6,963,000		7,223,000		(260,000)		-4 %
Finished goods	388,000		263,000		125,000		48 %
Inventory	7,867,000	87%	8,113,000	88%	(246,000)		-3 %
Maintenance and other inventory	1,163,000	13%	1,108,000	12%	55,000		5 %
Total	$9,030,000	100%	$9,221,000	100%	$(191,000)		-2 %
Inventory turnover	2.5		2.7

NOTE: Inventory turnover is annualized for the six-month period ended November 30, 2025.

Inventory, at $7,867,000 as of November 30, 2025, is $246,000 lower than the prior year-end level of $8,113,000. As of November 30, 2025, approximately 88% of the inventory was work-in-process, 5% was finished goods, and 7% was raw materials.

Maintenance and other inventory represent stock that is estimated to have a product life cycle in excess of twelve months. This stock represents certain items the Company is required to maintain for service of products sold and items that are generally subject to spontaneous ordering. This inventory is particularly sensitive to technological obsolescence in the near term due to its use in industries characterized by the continuous introduction of new product lines, rapid technological advances and product obsolescence. Management of the Company has, from time to time, recorded an allowance for potential inventory obsolescence. The provision for potential inventory obsolescence was $145,000 and zero for the six-month periods ended November 30, 2025 and November 30, 2024, respectively.

Accounts Receivable, Costs and Estimated Earnings in Excess of Billings ("CIEB"), and Billings in Excess of Costs and Estimated Earnings ("BIEC")

	November 30, 2025		May 31, 2025	Increase /(Decrease)
Accounts receivable	$5,181,000		$5,600,000		$(419,000)		-7%
CIEB	2,424,000		5,360,000		(2,936,000)		-55%
Less: BIEC	1,622,000		4,382,000		(2,760,000)		-63%
Net	$5,983,000		$6,578,000		$(595,000)		-9%
Number of an average day's sales outstanding in accounts receivable

The Company combines the totals of accounts receivable, the current asset, CIEB, and the current liability, BIEC, to determine how much cash the Company will eventually realize from revenue recorded to date. As the accounts receivable figure rises in relation to the other two figures, the Company can anticipate increased cash receipts within the ensuing 30-60 days.

Accounts receivable of $5,181,000 as of November 30, 2025 is net of $394,000 of an allowance for estimated credit losses ("Allowance"). The accounts receivable balance as of May 31, 2025 of $5,600,000 is net of an Allowance of $564,000. The decrease to the Allowance was due to collections against an overdue structural project balance. After discussions with the customer regarding payment of this balance, the overdue balance has been reduced from $751,000 at prior year end to $350,000 at November 30, 2025. The number of an average day's sales outstanding in accounts receivable ("DSO") increased from 32 days at May 31, 2025 to 40 days at November 30, 2025. The DSO is a function of (1) the level of sales for an average day (for example, total sales for the past three months divided by 90 days) and (2) the level of accounts receivable at the balance sheet date. The Company expects to collect the net accounts receivable balance during the next twelve months.

As noted above, CIEB represents revenues recognized in excess of amounts billed. Whenever possible, the Company negotiates a provision in sales contracts to allow the Company to bill, and collect from the customer, payments in advance of shipments. Unfortunately, these contract provisions are often not possible to obtain. The $2,424,000 balance in CIEB at November 30, 2025 is 55% lower than the prior year-end balance. This decrease is the result of normal flow of long-term projects through production with billings to the customers as permitted in the related contracts. 71% of the CIEB balance as of the end of the last fiscal quarter, August 31, 2025, was billed to those customers in the fiscal quarter ended November 30, 2025. The remainder will be billed as the projects progress, in accordance with the terms specified in the various contracts.

The balances in CIEB are comprised of the following components:

	November 30, 2025		May 31, 2025
Costs	$6,314,000		$8,514,000
Estimated Earnings	6,605,000		9,289,000
Less: Billings to customers	10,495,000		12,443,000
CIEB	$2,424,000		$5,360,000
Number of projects in progress

As noted above, BIEC represents billings to customers in excess of revenues recognized. The $1,622,000 balance in BIEC at November 30, 2025 is down 63% from the $4,382,000 balance at the end of the prior year. The balance in BIEC fluctuates in the same manner and for the same reasons as the CIEB, discussed above. Final delivery of product under these contracts is expected to occur during the next twelve months.

The balances in BIEC are comprised of the following components:

	November 30, 2025		May 31, 2025
Billings to customers	$8,174,000		$12,253,000
Less: Costs	3,752,000		3,985,000
Less: Estimated Earnings	2,800,000		3,886,000
BIEC	$1,622,000		$4,382,000
Number of projects in progress

Summary of factors affecting the balances in CIEB and BIEC:

	November 30, 2025		May 31, 2025
Number of projects in progress
Aggregate percent complete	71%		65%
Average total sales value of projects in progress	$1,394,000		$1,846,000
Percentage of total value invoiced to customer	70%		64%

The Company's backlog of sales orders at November 30, 2025 is $25.1 million, down from $27.1 million at the end of the prior year. Of the Company's backlog as of November 30, 2025, $7.0 million was on projects already in progress.

Other Balance Sheet Items

Accounts payable, at $1,617,000 as of November 30, 2025, is 44% higher than the prior year-end. Accrued expenses decreased 38% from the prior year-end, to $2,545,000, due to the payout of fiscal year 2025 incentive compensation. The Company expects the accrued amounts to be paid or applied during the next twelve months.