Note 5. Significant Risks and Uncertainties

(a) Major Customers.  In the three months ended December 31, 2025 and 2024, approximately 92% and 79%, respectively, of consolidated net sales were derived from two customers. These two customers are in the Company’s Contract Manufacturing Segment and represented approximately 65% and 30% and 60% and 26% in the three months ended December 31, 2025 and 2024, respectively of the Contract Manufacturing Segment net sales.  In the six months ended December 31, 2025 and 2024, approximately 89% and 82% of consolidated net sales, respectively, were derived from the same two customers and net sales to these two customers represented approximately 68% and 25% in the six months ended December 31, 2025 and 64% and 23% of net sales in the six months ended December 31, 2024, respectively, of the Contract Manufacturing Segment net sales. Accounts receivable from these two major customers represented approximately 82% and 76% of total net accounts receivable as of December 31, 2025 and June 30, 2025, respectively.  Two other customers in the Other Business Lines Segment, while not significant customers of the Company’s consolidated net sales, represented approximately 19% and 18% and 58% and 17% of net sales of the Other Business Lines Segment in the three months ended December 31, 2025 and 2024, respectively.  In the six months ended December 31, 2025, three other customers represented 23%, 16% and 15% of net sales of the Other Business Lines Segment and in the six months ended December 31, 2024, two other customers represented 51% and 22% of the net sales of the Other Business Lines Segment.

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The loss of any of these customers could have an adverse effect on the Company’s operations. Major customers are those customers who account for more than 10% of net sales.

(b) Other Business Risks.  Approximately 77% of the Company’s employees are covered by a union contract and are employed in its New Jersey facilities. The contract was renewed effective September 1, 2022 and will expire on August 31, 2026.

The Company has seen a slight negative impact in its margins due to inflation and tightened labor markets as the Company strives to increase prices to customers as its operating costs increase. The Company may not be able to timely increase its selling prices to its customer resulting from price increases from its suppliers due to various economic factors, including tariffs and other inflationary costs, labor and shipping costs and its own increases in shipping, labor and other operating costs. The Company’s results of operations may also be affected by economic conditions, including tariffs and other inflationary pressures, that can impact consumer disposable income levels and spending habits, thereby reducing the orders it may receive from the Company’s significant customers.