Note 6. Property, Plant and Equipment

Property, plant and equipment at June 30, 2026 and 2025 is as follows:

Depreciation expense was $512,341 and $451,523 for the years ended June 30, 2026 and 2025, respectively. Construction in progress consists of assets under construction or development that have not yet been placed in service. Construction in progress was $1,547,867 as of June 30, 2026 and $1,767,576 as of June 30, 2025.

The Company was awarded $7.4 million in funding during fiscal year 2023 in support of facility and capital equipment upgrades for testing and qualification for the United States Navy. The work conducted under this grant was completed in fiscal year 2025. As of June 30, 2025 no portion of the property, plant, and equipment or accounts payable balances were related to facility and capital upgrades pending reimbursement under this funding award. All assets related to this award were placed in service as of June 30, 2025.

The Company received an award for $3.4 million in funding during the second quarter of fiscal year 2025 in support of continued facility and capital equipment upgrades for testing and qualification for the United States Navy. The funding is part of the Navy’s investment to improve and sustain the Surface Combatant Industrial Base. Work is being conducted on the Company’s property in Saratoga Springs, NY, which is anticipated to be completed by the end of calendar year 2026. The Company will receive payments related to submission of milestone achievements. The first two milestones were achieved upon placement of all purchase orders and subsequently submitted for reimbursement. The final milestone and reimbursement are dependent on completion of all work to be performed and assets purchased to be placed in service. To receive full reimbursement of the $3.4 million award, the Company must invest approximately 15% or $508,000 of company funds over and above the $3.4 million award in relation to these facility improvements and capital equipment upgrades. The Company will record the receipt of milestone payments as a reduction from the cost of the assets. The Company will have an initial cash outlay to satisfy income tax obligations arising from the value of the milestone payments received. The cash outlay arising from federal income tax obligations is expected to be recaptured in future periods. Until recaptured, estimated tax obligations associated with the receipt of milestone payments are recorded on the balance sheet and included in deferred tax assets. As of June 30, 2026, the Company has received $2,029,608 in milestone reimbursements. Included in property, plant, and equipment at June 30, 2026 was $1,925,133, net of reimbursements to date under this funding award. As of June 30, 2026, assets totaling $385,717 have been placed in service relative to this grant. Included in accounts payable at June 30, 2026 was $287,748 for facility and capital upgrades of which $227,656 is eligible to be reimbursed under this funding award.