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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in">Note 1.
Nature of operations</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">Espey Mfg. & Electronics Corp. (the
Company) is a manufacturer of electronic equipment used primarily in military and industrial applications. 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.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0; text-align: justify">Note 4. Contracts in Process</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in">Contracts
in process at June 30, 2016 and 2015 are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify">Gross contract value </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">39,061,415</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">36,424,194</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">Costs related to contracts in process, net of progress payments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">   of $18,313 and $19,626 in fiscal 2016 and 2015</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">8,810,145</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">9,542,423</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">Included in costs relating to contracts
in process at June 30, 2016 and 2015 are costs of <font style="color: windowtext">$3,944,035 </font>and $<font style="color: windowtext">3,515,008</font>,
respectively, relative to contracts that may not be completed within the ensuing year. Under the units-of-delivery method, the
related sale and cost of sales will not be reflected in the statement of comprehensive income until the units under contract are
shipped.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 5. Property, Plant and Equipment</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Property, plant and equipment at June
30, 2016 and 2015 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Land</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">45,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">45,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Building and improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,259,266</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,252,354</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Machinery and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,735,432</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,506,662</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Furniture and fixtures</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">159,951</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">160,867</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">13,199,649</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,964,883</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Accumulated depreciation</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(10,851,124</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(10,466,020</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt">Property, plant and equipment, net</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,348,525</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,498,863</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">Depreciation expense was $434,401 and
$445,687 during the years ended June 30, 2016 and 2015, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in">Note 6.
Pension Expense</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Under terms of a negotiated union contract
which expires on June 30, 2018, the Company is obligated to make contributions to a union-sponsored International Brotherhood of
Electrical Workers Local 1799 defined benefit pension plan (Plan identifying number is 14-6065199) covering eligible employees.
Such contributions and expenses are based upon hours <font style="color: windowtext">worked at a specified rate and amounted to
$97,336 in fiscal 2016 and $89,198 in fiscal 2015. These contributions represent more than five percent of the total plan contributions.
For the years beginning January 1, 2016 and 2015, the Plan was in the “green zone” which means it is neither endangered
nor critical status. A Funding Improvement Plan, entered into by Plan Trustees in fiscal 2013, when the plan was in “critical
status,” calls for an increase in contributions starting January 1, 2016 of $0.04 per hour for each year for five years thereafter.
The increase did not and will not have a material impact on the Company’s financial statements.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt">The Company sponsors a 401(k) plan for non-union workers
with employee and employer matching contributions. The employer match is 10% of the employee contribution and was $47,175 and $37,703,
for fiscal years 2016 and 2015, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in">Note 8.
Significant Customers</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">A significant portion of the Company's
business is the production of military and industrial electronic equipment for use by the U.S. and foreign governments and certain
<font style="color: windowtext">industrial customers. Sales to two domestic customers accounted for approximately 49% total sales
in fiscal 2016. Sales to three domestic customers accounted for approximately 61% of total sales in fiscal 2015. </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">Export sales in fiscal 2016 and fiscal
2015 were approximately $2,125,000 and $2,384,000, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 9. Stock Rights Plan</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company has a Shareholder Rights
Plan that expires on <font style="color: windowtext">December 31, 2019</font>. Under this plan, common stock purchase rights were
distributed as a dividend at the rate of one right for each share of common stock outstanding as of or issued subsequent to April
14, 1989. Each right entitles the holder thereof to buy one-half share of common stock of the Company at an exercise price of $25
per share subject to adjustment. The rights are exercisable only if a person or group acquires beneficial ownership of 15% or more
of the Company's common stock or commences a tender or exchange offer which, if consummated, would result in the offeror individually
or, together with all affiliates and associates thereof, being the beneficial owner of 15% or more of the Company's common stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">If a 15% or larger shareholder should
engage in certain self-dealing transactions or a merger with the Company in which the Company is the surviving corporation and
its shares of common stock are not changed or converted into equity securities of any other person, or if any person were to become
the beneficial owner of 15% or more of the Company's common stock, then each right not owned by such shareholder or related parties
of such shareholder (all of which will be void) will entitle its holder to purchase, at the right's then current exercise price,
shares of the Company's common stock having a value of twice the right's exercise price. In addition, if the Company is involved
in any other merger or consolidation with, or sells 50% or more of its assets or earning power to another person, each right will
entitle its holder to purchase, at the right's then current exercise price, shares of common stock of such other person having
a value of twice the right's exercise price.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company generally is entitled to
redeem the rights at one cent per right at any time until the 15th day (or 25th day if extended by the Company's Board of Directors)
following public announcement that a 15% position has been acquired or the commencement of a tender or exchange offer which, if
consummated, would result in the offeror, together with all affiliates and associates thereof, being the beneficial owner of 15%
or more of the Company's common stock.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt">Note 2. Summary of Significant Accounting Policies</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt">Inventory Valuation, Cost Estimation and Revenue Recognition</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Raw materials are valued at the lower
of weighted average cost or market.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Inventoried work relating to contracts
in process and work in process is valued at actual production cost, including factory overhead incurred to date.  Work in
process represents spare units; parts and other inventory items acquired or produced to service units previously sold or to meet
anticipated future orders.  The cost elements of contracts in process and work in process consist of production costs of goods
and services currently in process and overhead.  Provision for losses on contracts is made when the existence of such losses
becomes probable and estimable.  The provision for losses on contracts is included in other accrued expenses on the Company’s
balance sheet.  The costs attributed to units delivered under contracts are based on the estimated average cost of all units
expected to be produced.  Certain contracts are expected to extend beyond twelve months.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Revenue is recognized on contracts in
the period in which the units are delivered and billed (units-of-delivery method).  A significant portion of our business
is comprised of development and production contracts.  Generally, revenues on long-term fixed-price contracts are recorded
on a percentage of completion basis using units of delivery as the measurement basis for progress toward completion. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Percentage of completion accounting requires
judgment relative to expected sales, estimating costs and making assumptions related to technical issues and delivery schedules. 
Contract costs include material, subcontract costs, labor, and an allocation of overhead costs.  The estimation of cost at
completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete
the contract.  Given the significance of the estimation processes and judgments described above, it is possible that materially
different amounts of expected sales and contract costs could be recorded if different assumptions were used, based on changes in
circumstances, in the estimation process.  When a change in expected sales value or estimated cost is determined, changes
are reflected in current period earnings.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Depreciation</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Depreciation of plant and equipment is
computed on a straight-line basis over the estimated useful lives of the assets. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Estimated useful lives of depreciable
assets are as follows:</p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 50%; text-align: left">Buildings and improvements</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 47%; text-align: right">10 – 40 years</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Machinery and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3 – 20 years</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Furniture and fixtures</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7 – 10 years</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0; text-align: justify">Income Taxes</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company follows the provisions of
Accounting Standards Codification (“ASC”) Topic 740-10, "Accounting for Income Taxes."</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Under the provisions of ASC 740-10, deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled.  The effect on deferred taxes and liabilities of a change in tax rates is recognized in earnings
in the period that includes the enactment date.  In addition, ASC 740-10 requires that the tax benefit of tax-deductible dividends
on unallocated ESOP shares be recorded as a direct addition to retained earnings rather than as a reduction of income tax expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Cash and Cash Equivalents</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Cash and cash equivalents consist of
cash and money market funds.  The Company considers all highly liquid investments with original maturities of three months
or less to be cash equivalents. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Investment Securities</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company accounts for its investment
securities in accordance with ASC 320-10-25, “Accounting for Certain Investments in Debt and Equity Securities.” 
Investment securities at June 30, 2016 and June 30, 2015 consist of certificates of deposit and municipal bonds.  The Company
classifies investment securities as available-for-sale.  Unrealized holding gains and losses, net of related tax effect, on
available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders’ equity
until realized.  Realized gains and losses for securities classified as available-for-sale are included in earnings and are
determined using the specific identification method.  Interest income is recognized when earned.  Fair values are based
on quoted market prices available as of the balance sheet date, and are therefore considered a Level 1 valuation. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Fair Value of Financial Instruments</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">ASC 820 establishes a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value.  The standard describes three levels of inputs that may be used to measure fair value:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="font-family: Wingdings">§</font>          Level
1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as
of the measurement date.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="font-family: Wingdings">§</font>          Level
2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="font-family: Wingdings">§</font>          Level
3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants
would use in pricing an asset or liability.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The carrying amounts of financial instruments,
including cash and cash equivalents, short term investments, accounts receivable, accounts payable and accrued expenses, approximated
fair value as of June 30, 2016 and 2015 because of the immediate or short-term maturity of these financial instruments. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Accounts receivable and allowance for
doubtful accounts</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">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.  Accounts receivable are reported
net of an allowance for doubtful accounts.  The Company estimates the allowance based on its analysis of specific balances. 
An account is generally considered past due after thirty (30) days from the invoice date.  Interest is not charged on
past due balances.  Based on these factors, there was an allowance for doubtful accounts of $3,000 at June 30, 2016 and 2015. 
Changes to the allowance for doubtful accounts are charged to expense and reduced by charge-offs, net of recoveries.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Per Share Amounts</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">ASC 260-10 “Earnings Per Share”
requires the Company to calculate net income (loss) per share based on basic and diluted net income (loss) per share, as defined. 
Basic EPS excludes dilution and is computed by dividing net income (loss) by the weighted average number of shares outstanding
for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock.  The dilutive effect of outstanding options issued by the Company are
reflected in diluted EPS using the treasury stock method.  Under the treasury stock method, options will only have a dilutive
effect when the average market price of common stock during the period exceeds the exercise price of the options.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Comprehensive Income</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Comprehensive income consists of net
income and other comprehensive income.  Other comprehensive income for fiscal years ended June 30, 2016 and 2015 consists
of unrealized holding gains and losses on available-for-sale securities. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Use of Estimates</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Investment Tax Credits</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Investment tax credits are accounted
for as a reduction of income tax expense in the year taxes payable are reduced.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Reclassifications</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Certain reclassifications may have been
made to the prior year financial statements to conform to the current year presentation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Recently Issued Accounting Standards</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In July 2015, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, “Inventory (Topic
330): Simplifying the Measurement of Inventory.”  ASU No. 2015-11 requires inventory measured using any method other
than last-in, first out or the retail inventory method to be subsequently measured at the lower of cost and net realizable value,
rather than at the lower of cost or market.  Net realizable value is defined as the estimated selling price, less the estimated
costs to complete, dispose, and transport such inventory.  ASU No. 2015-11 will be effective for fiscal years and interim
periods beginning after December 15, 2016.  ASU No. 2015-11 is required to be applied prospectively and early adoption is
permitted.  The Company’s adoption of ASU No. 2015-11 is not expected to have a material impact on the Company’s
financial position or results of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In May 2014, the FASB issued ASU No.
2014-09, “Revenue from Contracts with Customers,<i>”</i> which supersedes nearly all existing revenue recognition guidance
under U.S. GAAP.  The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred
to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. 
ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be
required within the revenue recognition process than are required under existing U.S. GAAP.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In subsequent periods, the FASB issued
additional ASUs intended to clarify specific aspects related to the interpretation and implementation of ASU No. 2014-09. In March
2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers – Principal versus Agent Considerations
(Reporting Revenue Gross versus Net)” to provide guidance on principal versus agent considerations by an entity as discussed
in ASU No. 2014-09. ASU No. 2016-08 provides criteria to be assessed by an entity when determining whether it is the principal
or agent in relation to the goods or services which the company is contractually obligated to provide to the customer. Among these
considerations are; identifying the unit of account at which the entity should assess whether it is a principal or an agent, identifying
the nature of the good or service provided to the customer; applying the control principle to certain types of transactions; and,
interaction of the control principle with the indicators provided to assist in the principle versus agent evaluation. In April
2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers – (Topic 606): Identifying Performance
Obligations and Licensing” to provide implementation guidance related to the necessary judgements required in identifying
performance obligations of a contract and guidance related to recognition of licensing revenues. In May 2016, the FASB issued ASU
No. 2016-12, “Revenue from Contracts with Customers – (Topic 606): Narrow-Scope Improvements and Practical Expedients”
to provide guidance related to the implementation of ASU No. 2014-09 in the following areas; assessing collectability for contracts
that do not meet Step 1 of revenue recognition, presentation of sales taxes, noncash consideration, contract modifications at transition,
and completed contracts at transition.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">These standards are effective for annual
periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a
full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect
certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09
recognized at the date of adoption (which includes additional footnote disclosures).  Early adoption is permitted for annual
periods beginning after December 15, 2016 and interim periods therein.  We are currently evaluating the impact of our pending
adoption of ASU No. 2014-09 on our financial statements and have not yet determined the method by which we will adopt the standard
in fiscal 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In November 2015, the FASB issued ASU
No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. The guidance requires
the classification of deferred tax assets and liabilities as non-current in a classified balance sheet. The current requirement
that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not
affected by this update. ASU No. 2015-17 will be effective for annual periods beginning after December 15, 2016, and interim periods
within those annual periods. ASU No. 2015-17 may be applied prospectively or retrospectively, and early adoption is permitted.
Adoption of ASU No. 2015-17 would have the following impact on the Company’s financial statements at June 30, 2016; a decrease in current assets of $252,558,
a decrease in non-current liabilities of $203,237 and an increase in non-current assets of $49,321.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In January 2016, the FASB issued ASU
No. 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities”. The amendments in this Update address certain aspects of recognition, measurement, presentation and
disclosure of financial instruments (primarily equity securities) in order to enhance the reporting model for financial instruments
to provide users of financial statements with more decision-useful information. ASU No. 2016-01 will be effective for annual periods
beginning after December 15, 2017, and interim periods within those annual periods. The Company is evaluating the impact that ASU
No. 2016-01 will have on the Company's financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In March 2016, the FASB issued ASU No.
2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”.
The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including
the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash
flows. Additionally, this ASU allows an entity to make an accounting policy election to either estimate the number of awards that
are expected to vest (current GAAP) or account for forfeitures as they occur. ASU No. 2016-09 will be effective for annual periods
beginning after December 15, 2016, and interim periods within those annual periods. ASU No. 2016-09 may be applied prospectively
or retrospectively, and early adoption is permitted. The Company is evaluating the impact that ASU No. 2016-09 will have on the
Company's financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Impairment of Long-Lived Assets</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Long-lived assets, including property,
plant, and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the asset.  There were no impairments of long-lived assets in fiscal 2016 and 2015. 
Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair
value less costs to sell, and no longer depreciated.  The assets and liabilities of a disposed group classified as held for
sale are presented separately in the appropriate asset and liability sections of the balance sheet, if applicable.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Concentrations of Risk</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The market for our defense electronics
products is largely dependent on the availability of new contracts from the United States and foreign governments to prime contractors
to which we provide components.  Any decline in expenditures by the United States or foreign governments may have an adverse
effect on our financial performance. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Generally, U.S. Government contracts
are subject to procurement laws and regulations.  Some of the Company’s contracts are governed by the Federal Acquisition
Regulation (FAR), which lays out uniform policies and procedures for acquiring goods and services by the U.S. Government, and agency-specific
acquisition regulations that implement or supplement the FAR.  For example, the Department of Defense implements the FAR through
the Defense Federal Acquisition Regulation (DFAR).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The FAR also contains guidelines and
regulations for managing a contract after award, including conditions under which contracts may be terminated, in whole or in part,
at the government’s convenience or for default.  If a contract is terminated for the convenience of the government,
a contractor is entitled to receive payments for its allowable costs and, in general, the proportionate share of fees or earnings
for the work done.  If a contract is terminated for default, the government generally pays for only the work it has accepted. 
These regulations also subject the Company to financial audits and other reviews by the government of its costs, performance, accounting
and general business practices relating to its contracts, which may result in adjustment of the Company’s contract-related
costs and fees.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 7. Provision for Income Taxes</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">A summary of the components of the provision
for income taxes for the years ended June 30, 2016 and 2015 is as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Current tax expense - federal</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,230,367</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,402,033</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Current tax (benefit) - state</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,396</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(20,386</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1pt">Deferred tax expense (benefit)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">57,735</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(66,958</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 2.5pt">          Provision for income taxes</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,286,706</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,314,689</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Deferred income taxes reflect the impact
of "temporary differences" between the amount of assets and liabilities for financial reporting purposes and such amounts
measured by tax laws and regulations. These "temporary differences" are determined in accordance with ASC 740-10.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The combined U.S. federal and state effective
income tax rates of 28.8% and 29.2%, for 2016 and 2015 respectively, differed from the statutory U.S. federal income tax rate for
the following reasons:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">U.S. federal statutory income tax rate</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">34.0</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">34.0</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Increase (reduction) in rate resulting from:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          State franchise tax, net of federal income tax benefit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.1</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          ESOP cost versus Fair Market Value</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.5</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.5</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Dividend on allocated ESOP shares</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(3.2</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(6.7</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Qualified production activities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2.7</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2.7</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Stock-based compensation</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(0.2</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(0.3</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">          Other</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(0.6</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">3.3</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt">Effective tax rate</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">28.8</td><td style="padding-bottom: 2.5pt; text-align: left">%</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">29.2</td><td style="padding-bottom: 2.5pt; text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the years ended June 30, 2016 and 2015
deferred income tax expense (benefit) of $57,735 and ($66,958), respectively, result from the changes in temporary differences
for each year. The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities as of
June 30, 2016 and 2015 are presented as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Deferred tax assets:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 76%; text-align: justify">          Accrued expenses</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">151,210</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">295,673</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          ESOP</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">90,072</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">102,355</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Stock-based compensation</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">74,287</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">23,602</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Inventory - effect on uniform capitalization</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">27,266</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,407</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Unrealized (gain)/loss on investment securities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(513</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,361</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1pt">          Other</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">308</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">638</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">                    Total deferred tax assets </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">342,630</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">437,036</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Deferred tax liability:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Property, plant and equipment - principally due</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1pt">            to differences in depreciation methods</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">293,309</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">327,106</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">                    Total deferred tax liability</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">293,309</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">327,106</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt">                    Net deferred tax asset</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">49,321</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">109,930</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="color: windowtext">In assessing</font>
the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the
deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal
of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon
the level of historical taxable income and projection for future taxable income over the period in which the deferred tax assets
are deductible, management believes it is more likely than not that the Company will realize the benefits of these temporary differences
without consideration of a valuation allowance.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">As of June 30, 2016 and 2015, the Company
has no unrecognized tax benefits.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company recognizes interest and penalties
related to uncertain tax positions, if any, in general and administrative expense. As of June 30, 2016, the Company has not recorded
any provision for accrued interest and penalties related to uncertain tax positions.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">By federal and state tax statue, federal
and state tax returns are subject to audit for three years from date of filing, unless the return was audited within that period.
As such, federal returns for tax years ending June 30, 2016, 2015, 2014, and 2013 remain open to examination by the IRS. State
returns for tax years ending June 30, 2016, 2015 and 2014 remain open to examination by the State of New York.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in">Note 10.
Employee Stock Ownership Plan</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in">The Company sponsors a leveraged
employee stock ownership plan (the "ESOP") that covers all nonunion employees who work 1,000 or more hours per year and
are employed on June 30. The Company makes annual contributions to the ESOP equal to the ESOP's debt service less dividends on
unallocated shares received by the ESOP. All dividends on unallocated shares received by the ESOP are used to pay debt service.
Dividends on allocated ESOP shares are recorded as a reduction of retained earnings. As the debt is repaid, shares are released
and allocated to active employees, based on the proportion of debt service paid in the year. The Company accounts for its ESOP
in accordance with FASB ASC 718-40. Accordingly, the shares purchased by the ESOP are reported as Unearned ESOP Shares in the statement
of financial position. As shares are released or committed-to-be-released, the Company reports compensation expense equal to the
current average market price of the shares, and the shares become outstanding for earnings-per-share (EPS) computations. ESOP compensation
expense was $443,668 and $457,643 for the years ended June 30, 2016 and 2015, respectively. The ESOP shares as of June 30, 2016
and 2015 were as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify; text-indent: 0in">Allocated shares</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">441,095</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">459,864</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">Unreleased shares</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">61,667</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">79,167</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt">Total shares held by the ESOP</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">502,762</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">539,031</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt">     Fair value of unreleased shares</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,603,959</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,058,342</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 1in; text-indent: -1in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">During the twelve months ended June
30, 2016, the Company repurchased 14,303 shares previously held in the ESOP for $355,418. During the twelve months ended June 30,
2015 the Company repurchased 13,553 shares previously held by the ESOP for $320,504.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 13. Related Parties</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">The administration of the shares of
common stock held by the ESOP Trust is subject to the Second Amended and Restated Plan, effective as of July 1, 2002, creating
the Trust, and a Trust Agreement dated July 15, 2005. The Trustees’ rights with respect
to the disposition of shares are governed by the terms of the Plan and the Trust Agreement. As to shares that have been allocated
to the accounts of participants in the ESOP Trust, the Plan provides that the Trustees are required to vote such shares in accordance
with instructions received from the participants. As to unallocated shares and allocated shares for which voting instructions have
not been received from participants, the Plan provides that the Trustees are required to vote such shares in accordance with the
direction of a Committee, appointed by the Board of Directors of the Company under the terms of the Plan and Trust Agreement. See
Note 10 for additional information regarding the ESOP.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in">Note 14.
Commitments and Contingencies</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">The Company at certain times enters
into standby letters of credit agreements with financial institutions primarily relating to the guarantee of future performance
on certain contracts. Contingent liabilities on outstanding standby letters of credit agreements aggregated to zero at June 30,
2016 and 2015. The Company, as a U.S. Government contractor, is subject to audits, reviews, and investigations by the U.S. Government
related to its negotiation and performance of government contracts and its accounting for such contracts. Failure to comply with
applicable U.S. Government standards by a contractor may result in suspension from eligibility for award of any new government
contract and a guilty plea or conviction may result in debarment from eligibility for awards. The government may, in certain cases,
also terminate existing contracts, recover damages, and impose other sanctions and penalties. As a result of contract audits the
Company will determine a range of possible outcomes and in accordance with ASC 450 “Contingencies” the Company will
accrue amounts within a range that appears to be its best estimate of a possible outcome. Adjustments are made to accruals, if
any, periodically based on current information.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 15. Stockholders' Equity</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Reservation of Shares</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company has reserved common shares
for future issuance as follows as of June 30, 2016:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: justify">Stock options outstanding</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">170,450</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">Stock options available for issuance</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">193,600</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt">Number of common shares reserved</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">364,050</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The following table sets forth the reconciliation
of the numerators and denominators of the basic and diluted earnings per share computations for continuing operations for the years
ended June 30:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap">Numerator:</td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="width: 76%; text-align: left; padding-bottom: 2.5pt">     Net Income</td><td nowrap="nowrap" style="width: 1%; padding-bottom: 2.5pt"> </td>
<td nowrap="nowrap" style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="width: 9%; border-bottom: Black 2.5pt double; text-align: right">3,175,801</td><td nowrap="nowrap" style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td nowrap="nowrap" style="width: 1%; padding-bottom: 2.5pt"> </td>
<td nowrap="nowrap" style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="width: 9%; border-bottom: Black 2.5pt double; text-align: right">3,183,127</td><td nowrap="nowrap" style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap">     Denominator:</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="text-align: left">     Basic EPS:</td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace"> </td>
<td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: left"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: right"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: left"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace"> </td>
<td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: left"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: right"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: left">          Common shares outstanding, beginning of period</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">2,362,687</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">2,368,110</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap">          Unearned ESOP shares</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">(79,167</td><td nowrap="nowrap" style="text-align: left">)</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">(97,500</td><td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap">          Weighted average common shares issued during the period</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">5,975</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3,364</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">          Weighted average common shares purchased during the period</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">(10,395</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">(9,442</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt">          Weighted average ESOP shares earned during the period</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">6,586</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">6,894</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Denominator for basic earnings per common shares –</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt">               Weighted average common shares</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,285,686</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,271,426</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: none; text-align: left; padding-bottom: 2.5pt">     Diluted EPS:</td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>          Common shares outstanding, beginning of period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,362,687</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,368,110</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>          Unearned ESOP shares</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(79,167</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(97,500</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>          Weighted average common shares issued during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,975</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,364</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>          Weighted average common shares purchased during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(10,395</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(9,442</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>          Weighted average ESOP shares earned during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,586</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,894</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1pt">          Weighted average dilutive effect of stock options</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">16,348</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">19,116</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">          Denominator for diluted earnings per common shares –</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt">               Weighted average common shares</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,302,034</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,290,542</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Not included in this computation of earnings
per share for the year ended June 30, 2016 and 2015 were options to purchase 113,250 and 25,250 shares, respectively, of the Company’s
common stock. These options were excluded because their inclusion would have been anti-dilutive due to the average strike price
exceeding the average market price of those shares.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">The Company paid cash dividends on common
stock of $1.00 per share for the fiscal year ended June 30, 2016 and 2015 (of which $0.25 per share was accrued at June 30, 2015).
Subsequent to June 30, 2016, the Board of Directors has authorized the payment of a fiscal 2017 first quarter dividend of $0.25
payable September 29, 2016 to shareholders of record on September 22, 2016.<font style="color: red"> </font> Our Board of Directors
assesses the Company’s dividend policy periodically. There is no assurance that the Board of Directors will either maintain
the amount of the regular cash dividend or declare a special dividend during any future years.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 16. Line of Credit</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">At June 30, 2016, the Company has an
uncommitted and unused Line of Credit with a financial institution. The agreement provides that the Company may borrow up to $3,000,000.
The line provides for interest payments equal to the LIBOR Daily Floating Rate plus 2.00%. Any borrowing under the line of credit
will be collateralized by accounts receivable. The line will be reviewed annually for renewal. All outstanding balances are payable
no later than the expiration date of the agreement, unless other terms are agreed to by the lender.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in">Note 17.
Quarterly Financial Information (Unaudited)</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">First</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Second</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Third</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Fourth</td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">2016</td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Quarter</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Quarter</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Quarter</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Quarter</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%; text-align: left">Net sales</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,279,436</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7,242,020</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7,217,922</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,731,987</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">               Gross profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,968,320</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,588,043</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,148,223</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,667,096</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">               Net income</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">878,530</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">614,427</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">972,468</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">710,376</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Net income per share -</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Basic</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.38</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.27</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.43</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.31</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Diluted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.38</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.27</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.43</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.30</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font-weight: bold; text-align: left; vertical-align: bottom">2015</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Net sales</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">5,693,472</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">5,697,083</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">6,470,286</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">8,970,864</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">               Gross profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,810,079</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,258,735</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,437,534</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,635,225</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">               Net income</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">911,221</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,219,082</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">506,369</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">546,455</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Net income per share -</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Basic</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.54</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.22</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.24</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Diluted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.54</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.22</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.23</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt">Inventory Valuation, Cost Estimation and Revenue Recognition</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Raw materials are valued at the lower
of weighted average cost or market.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Inventoried work relating to contracts
in process and work in process is valued at actual production cost, including factory overhead incurred to date.  Work in
process represents spare units; parts and other inventory items acquired or produced to service units previously sold or to meet
anticipated future orders.  The cost elements of contracts in process and work in process consist of production costs of goods
and services currently in process and overhead.  Provision for losses on contracts is made when the existence of such losses
becomes probable and estimable.  The provision for losses on contracts is included in other accrued expenses on the Company’s
balance sheet.  The costs attributed to units delivered under contracts are based on the estimated average cost of all units
expected to be produced.  Certain contracts are expected to extend beyond twelve months.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Revenue is recognized on contracts in
the period in which the units are delivered and billed (units-of-delivery method).  A significant portion of our business
is comprised of development and production contracts.  Generally, revenues on long-term fixed-price contracts are recorded
on a percentage of completion basis using units of delivery as the measurement basis for progress toward completion. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Percentage of completion accounting requires
judgment relative to expected sales, estimating costs and making assumptions related to technical issues and delivery schedules. 
Contract costs include material, subcontract costs, labor, and an allocation of overhead costs.  The estimation of cost at
completion of a contract is subject to numerous variables involving contract costs and estimates as to the length of time to complete
the contract.  Given the significance of the estimation processes and judgments described above, it is possible that materially
different amounts of expected sales and contract costs could be recorded if different assumptions were used, based on changes in
circumstances, in the estimation process.  When a change in expected sales value or estimated cost is determined, changes
are reflected in current period earnings.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Depreciation</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Depreciation of plant and equipment is
computed on a straight-line basis over the estimated useful lives of the assets. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Estimated useful lives of depreciable
assets are as follows:</p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 50%; text-align: left">Buildings and improvements</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 47%; text-align: right">10 – 40 years</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Machinery and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3 – 20 years</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Furniture and fixtures</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7 – 10 years</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0; text-align: justify">Income Taxes</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company follows the provisions of
Accounting Standards Codification (“ASC”) Topic 740-10, "Accounting for Income Taxes."</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Under the provisions of ASC 740-10, deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled.  The effect on deferred taxes and liabilities of a change in tax rates is recognized in earnings
in the period that includes the enactment date.  In addition, ASC 740-10 requires that the tax benefit of tax-deductible dividends
on unallocated ESOP shares be recorded as a direct addition to retained earnings rather than as a reduction of income tax expense.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Cash and Cash Equivalents</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Cash and cash equivalents consist of
cash and money market funds.  The Company considers all highly liquid investments with original maturities of three months
or less to be cash equivalents. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Investment Securities</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company accounts for its investment
securities in accordance with ASC 320-10-25, “Accounting for Certain Investments in Debt and Equity Securities.” 
Investment securities at June 30, 2016 and June 30, 2015 consist of certificates of deposit and municipal bonds.  The Company
classifies investment securities as available-for-sale.  Unrealized holding gains and losses, net of related tax effect, on
available-for-sale securities are excluded from earnings and are reported as a separate component of stockholders’ equity
until realized.  Realized gains and losses for securities classified as available-for-sale are included in earnings and are
determined using the specific identification method.  Interest income is recognized when earned.  Fair values are based
on quoted market prices available as of the balance sheet date, and are therefore considered a Level 1 valuation. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Accounts receivable and allowance for
doubtful accounts</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">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.  Accounts receivable are reported
net of an allowance for doubtful accounts.  The Company estimates the allowance based on its analysis of specific balances. 
An account is generally considered past due after thirty (30) days from the invoice date.  Interest is not charged on
past due balances.  Based on these factors, there was an allowance for doubtful accounts of $3,000 at June 30, 2016 and 2015. 
Changes to the allowance for doubtful accounts are charged to expense and reduced by charge-offs, net of recoveries.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Fair Value of Financial Instruments</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">ASC 820 establishes a fair value hierarchy
which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value.  The standard describes three levels of inputs that may be used to measure fair value:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="font-family: Wingdings">§</font>          Level
1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as
of the measurement date.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="font-family: Wingdings">§</font>          Level
2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted
prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="font-family: Wingdings">§</font>          Level
3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants
would use in pricing an asset or liability.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The carrying amounts of financial instruments,
including cash and cash equivalents, short term investments, accounts receivable, accounts payable and accrued expenses, approximated
fair value as of June 30, 2016 and 2015 because of the immediate or short-term maturity of these financial instruments. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Per Share Amounts</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">ASC 260-10 “Earnings Per Share”
requires the Company to calculate net income (loss) per share based on basic and diluted net income (loss) per share, as defined. 
Basic EPS excludes dilution and is computed by dividing net income (loss) by the weighted average number of shares outstanding
for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock.  The dilutive effect of outstanding options issued by the Company are
reflected in diluted EPS using the treasury stock method.  Under the treasury stock method, options will only have a dilutive
effect when the average market price of common stock during the period exceeds the exercise price of the options.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Comprehensive Income</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Comprehensive income consists of net
income and other comprehensive income.  Other comprehensive income for fiscal years ended June 30, 2016 and 2015 consists
of unrealized holding gains and losses on available-for-sale securities. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Use of Estimates</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make estimates and assumptions that affect
the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those
estimates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Investment Tax Credits</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Investment tax credits are accounted
for as a reduction of income tax expense in the year taxes payable are reduced.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Reclassifications</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Certain reclassifications may have been
made to the prior year financial statements to conform to the current year presentation.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Recently Issued Accounting Standards</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In July 2015, the Financial Accounting
Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, “Inventory (Topic
330): Simplifying the Measurement of Inventory.”  ASU No. 2015-11 requires inventory measured using any method other
than last-in, first out or the retail inventory method to be subsequently measured at the lower of cost and net realizable value,
rather than at the lower of cost or market.  Net realizable value is defined as the estimated selling price, less the estimated
costs to complete, dispose, and transport such inventory.  ASU No. 2015-11 will be effective for fiscal years and interim
periods beginning after December 15, 2016.  ASU No. 2015-11 is required to be applied prospectively and early adoption is
permitted.  The Company’s adoption of ASU No. 2015-11 is not expected to have a material impact on the Company’s
financial position or results of operations.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In May 2014, the FASB issued ASU No.
2014-09, “Revenue from Contracts with Customers,<i>”</i> which supersedes nearly all existing revenue recognition guidance
under U.S. GAAP.  The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred
to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. 
ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be
required within the revenue recognition process than are required under existing U.S. GAAP.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In subsequent periods, the FASB issued
additional ASUs intended to clarify specific aspects related to the interpretation and implementation of ASU No. 2014-09. In March
2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers – Principal versus Agent Considerations
(Reporting Revenue Gross versus Net)” to provide guidance on principal versus agent considerations by an entity as discussed
in ASU No. 2014-09. ASU No. 2016-08 provides criteria to be assessed by an entity when determining whether it is the principal
or agent in relation to the goods or services which the company is contractually obligated to provide to the customer. Among these
considerations are; identifying the unit of account at which the entity should assess whether it is a principal or an agent, identifying
the nature of the good or service provided to the customer; applying the control principle to certain types of transactions; and,
interaction of the control principle with the indicators provided to assist in the principle versus agent evaluation. In April
2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers – (Topic 606): Identifying Performance
Obligations and Licensing” to provide implementation guidance related to the necessary judgements required in identifying
performance obligations of a contract and guidance related to recognition of licensing revenues. In May 2016, the FASB issued ASU
No. 2016-12, “Revenue from Contracts with Customers – (Topic 606): Narrow-Scope Improvements and Practical Expedients”
to provide guidance related to the implementation of ASU No. 2014-09 in the following areas; assessing collectability for contracts
that do not meet Step 1 of revenue recognition, presentation of sales taxes, noncash consideration, contract modifications at transition,
and completed contracts at transition.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">These standards are effective for annual
periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a
full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect
certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09
recognized at the date of adoption (which includes additional footnote disclosures).  Early adoption is permitted for annual
periods beginning after December 15, 2016 and interim periods therein.  We are currently evaluating the impact of our pending
adoption of ASU No. 2014-09 on our financial statements and have not yet determined the method by which we will adopt the standard
in fiscal 2019.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In November 2015, the FASB issued ASU
No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. The guidance requires
the classification of deferred tax assets and liabilities as non-current in a classified balance sheet. The current requirement
that deferred tax assets and liabilities of a tax-paying component of an entity be offset and presented as a single amount is not
affected by this update. ASU No. 2015-17 will be effective for annual periods beginning after December 15, 2016, and interim periods
within those annual periods. ASU No. 2015-17 may be applied prospectively or retrospectively, and early adoption is permitted.
Adoption of ASU No. 2015-17 would have the following impact on the Company’s financial statements at June 30, 2016; a decrease in current assets of $252,558,
a decrease in non-current liabilities of $203,237 and an increase in non-current assets of $49,321.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In January 2016, the FASB issued ASU
No. 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities”. The amendments in this Update address certain aspects of recognition, measurement, presentation and
disclosure of financial instruments (primarily equity securities) in order to enhance the reporting model for financial instruments
to provide users of financial statements with more decision-useful information. ASU No. 2016-01 will be effective for annual periods
beginning after December 15, 2017, and interim periods within those annual periods. The Company is evaluating the impact that ASU
No. 2016-01 will have on the Company's financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">In March 2016, the FASB issued ASU No.
2016-09, “Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”.
The areas for simplification in this update involve several aspects of the accounting for share-based payment transactions, including
the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash
flows. Additionally, this ASU allows an entity to make an accounting policy election to either estimate the number of awards that
are expected to vest (current GAAP) or account for forfeitures as they occur. ASU No. 2016-09 will be effective for annual periods
beginning after December 15, 2016, and interim periods within those annual periods. ASU No. 2016-09 may be applied prospectively
or retrospectively, and early adoption is permitted. The Company is evaluating the impact that ASU No. 2016-09 will have on the
Company's financial statements.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Impairment of Long-Lived Assets</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Long-lived assets, including property,
plant, and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount
of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount
of the asset exceeds the fair value of the asset.  There were no impairments of long-lived assets in fiscal 2016 and 2015. 
Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair
value less costs to sell, and no longer depreciated.  The assets and liabilities of a disposed group classified as held for
sale are presented separately in the appropriate asset and liability sections of the balance sheet, if applicable.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Concentrations of Risk</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The market for our defense electronics
products is largely dependent on the availability of new contracts from the United States and foreign governments to prime contractors
to which we provide components.  Any decline in expenditures by the United States or foreign governments may have an adverse
effect on our financial performance. </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Generally, U.S. Government contracts
are subject to procurement laws and regulations.  Some of the Company’s contracts are governed by the Federal Acquisition
Regulation (FAR), which lays out uniform policies and procedures for acquiring goods and services by the U.S. Government, and agency-specific
acquisition regulations that implement or supplement the FAR.  For example, the Department of Defense implements the FAR through
the Defense Federal Acquisition Regulation (DFAR).</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The FAR also contains guidelines and
regulations for managing a contract after award, including conditions under which contracts may be terminated, in whole or in part,
at the government’s convenience or for default.  If a contract is terminated for the convenience of the government,
a contractor is entitled to receive payments for its allowable costs and, in general, the proportionate share of fees or earnings
for the work done.  If a contract is terminated for default, the government generally pays for only the work it has accepted. 
These regulations also subject the Company to financial audits and other reviews by the government of its costs, performance, accounting
and general business practices relating to its contracts, which may result in adjustment of the Company’s contract-related
costs and fees.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 50%; text-align: left">Buildings and improvements</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 47%; text-align: right">10 – 40 years</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Machinery and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3 – 20 years</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Furniture and fixtures</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7 – 10 years</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify"></p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="6" style="border-bottom: Black 1pt solid; text-align: center">Years to Maturity</td>
<td colspan="4" style="text-align: center"> </td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Less than</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">One to</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">One Year</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Five Years</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Total</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: underline; text-align: left; vertical-align: bottom">2016</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 64%; padding-bottom: 1pt; text-align: left; vertical-align: bottom">Available-for-sale</td><td style="width: 1%; padding-bottom: 1pt"> </td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1pt solid; text-align: right">4,811,511</td><td style="width: 1%; padding-bottom: 1pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 1pt"> </td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1pt solid; text-align: right">768,548</td><td style="width: 1%; padding-bottom: 1pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 1pt"> </td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1pt solid; text-align: right">5,580,059</td><td style="width: 1%; padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: underline; text-align: left; vertical-align: bottom">2015</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left; vertical-align: bottom">Available-for-sale</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">3,522,728</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">636,329</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">4,159,057</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify">Gross contract value </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">39,061,415</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">36,424,194</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">Costs related to contracts in process, net of progress payments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">   of $18,313 and $19,626 in fiscal 2016 and 2015</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">8,810,145</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">9,542,423</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Land</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">45,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">45,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Building and improvements</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,259,266</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4,252,354</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Machinery and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,735,432</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,506,662</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Furniture and fixtures</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">159,951</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">160,867</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">13,199,649</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,964,883</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 1pt">Accumulated depreciation</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(10,851,124</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(10,466,020</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt">Property, plant and equipment, net</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,348,525</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,498,863</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Current tax expense - federal</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,230,367</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,402,033</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Current tax (benefit) - state</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,396</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(20,386</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1pt">Deferred tax expense (benefit)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">57,735</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(66,958</td><td style="padding-bottom: 1pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 2.5pt">          Provision for income taxes</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,286,706</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,314,689</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">U.S. federal statutory income tax rate</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">34.0</td><td style="width: 1%; text-align: left">%</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">34.0</td><td style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Increase (reduction) in rate resulting from:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          State franchise tax, net of federal income tax benefit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">—</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.1</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          ESOP cost versus Fair Market Value</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.5</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1.5</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Dividend on allocated ESOP shares</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(3.2</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(6.7</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Qualified production activities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2.7</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2.7</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Stock-based compensation</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(0.2</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(0.3</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">          Other</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(0.6</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">3.3</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 2.5pt">Effective tax rate</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">28.8</td><td style="padding-bottom: 2.5pt; text-align: left">%</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">29.2</td><td style="padding-bottom: 2.5pt; text-align: left">%</td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Deferred tax assets:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 76%; text-align: justify">          Accrued expenses</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">151,210</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">295,673</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          ESOP</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">90,072</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">102,355</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Stock-based compensation</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">74,287</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">23,602</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Inventory - effect on uniform capitalization</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">27,266</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,407</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Unrealized (gain)/loss on investment securities</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(513</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,361</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1pt">          Other</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">308</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">638</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">                    Total deferred tax assets </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">342,630</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">437,036</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Deferred tax liability:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Property, plant and equipment - principally due</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1pt">            to differences in depreciation methods</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">293,309</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">327,106</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">                    Total deferred tax liability</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">293,309</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">327,106</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt">                    Net deferred tax asset</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">49,321</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">109,930</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0in"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify; text-indent: 0in">Allocated shares</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">441,095</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">459,864</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">Unreleased shares</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">61,667</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">79,167</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt">Total shares held by the ESOP</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">502,762</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">539,031</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt">     Fair value of unreleased shares</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,603,959</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,058,342</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 1in; text-indent: -1in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="text-align: justify"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="15" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Employee Stock Options Plan</td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Weighted</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Number of</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Weighted</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Average</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Shares</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Average</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Remaining</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Aggregate</td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Subject</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Exercise</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Contractual</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Intrinsic</td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">to Option</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Price</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Term</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Value</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="width: 52%">Balance at July 1, 2015</td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">187,500</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left">$</td><td nowrap="nowrap" style="width: 9%; text-align: right">23.38</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">6.26</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right"> </td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap">Granted</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3,000</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left">$</td><td nowrap="nowrap" style="text-align: right">25.12</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">9.69</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap">Exercised</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">(16,300</td><td nowrap="nowrap" style="text-align: left">)</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left">$</td><td nowrap="nowrap" style="text-align: right">18.22</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">—</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: left; padding-bottom: 1pt">Forfeited or expired</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">(3,750</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left">)</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">26.02</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">—</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid"> </td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: right; border-bottom: Black 1pt solid"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="padding-bottom: 2.5pt">Outstanding at June 30, 2016</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">170,450</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">23.84</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">5.73</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">469,132</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: left; padding-bottom: 2.5pt">Vested or expected to vest at June 30, 2016</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">163,794</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">23.75</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">5.60</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">457,193</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="padding-bottom: 2.5pt">Exercisable at June 30, 2016</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">124,650</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">23.00</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">4.56</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">469,132</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Weighted</td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Number of</td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Average</td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Shares</td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Grant Date</td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Subject</td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Fair Value</td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">to Option</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">(per Option)</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="width: 76%">Non-Vested at July 1, 2015</td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">69,300</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left">$</td><td nowrap="nowrap" style="width: 9%; text-align: right">4.310</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap">Granted</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3,000</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3.866</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap">Vested</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">(25,250</td><td nowrap="nowrap" style="text-align: left">)</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3.777</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: left; padding-bottom: 1pt">Forfeited or expired</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">(1,250</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">4.710</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="padding-bottom: 2.5pt">Non-Vested at June 30, 2016</td><td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">45,800</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td><td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">4.564</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.75in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: justify">Stock options outstanding</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">170,450</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify; padding-bottom: 1pt">Stock options available for issuance</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">193,600</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 2.5pt">Number of common shares reserved</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">364,050</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2016</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">2015</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap">Numerator:</td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="width: 76%; text-align: left; padding-bottom: 2.5pt">     Net Income</td><td nowrap="nowrap" style="width: 1%; padding-bottom: 2.5pt"> </td>
<td nowrap="nowrap" style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="width: 9%; border-bottom: Black 2.5pt double; text-align: right">3,175,801</td><td nowrap="nowrap" style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td nowrap="nowrap" style="width: 1%; padding-bottom: 2.5pt"> </td>
<td nowrap="nowrap" style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="width: 9%; border-bottom: Black 2.5pt double; text-align: right">3,183,127</td><td nowrap="nowrap" style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap">     Denominator:</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="text-align: left">     Basic EPS:</td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace"> </td>
<td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: left"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: right"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: left"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace"> </td>
<td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: left"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: right"> </td><td nowrap="nowrap" style="font-family: Courier New, Courier, Monospace; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: left">          Common shares outstanding, beginning of period</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">2,362,687</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">2,368,110</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap">          Unearned ESOP shares</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">(79,167</td><td nowrap="nowrap" style="text-align: left">)</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">(97,500</td><td nowrap="nowrap" style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap">          Weighted average common shares issued during the period</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">5,975</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3,364</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">          Weighted average common shares purchased during the period</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">(10,395</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">(9,442</td><td style="width: 1%; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt">          Weighted average ESOP shares earned during the period</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">6,586</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">6,894</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Denominator for basic earnings per common shares –</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 2.5pt">               Weighted average common shares</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,285,686</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,271,426</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: none; text-align: left; padding-bottom: 2.5pt">     Diluted EPS:</td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>          Common shares outstanding, beginning of period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,362,687</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,368,110</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>          Unearned ESOP shares</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(79,167</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(97,500</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>          Weighted average common shares issued during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">5,975</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,364</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>          Weighted average common shares purchased during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(10,395</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(9,442</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>          Weighted average ESOP shares earned during the period</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,586</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,894</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1pt">          Weighted average dilutive effect of stock options</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">16,348</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">19,116</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">          Denominator for diluted earnings per common shares –</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 2.5pt">               Weighted average common shares</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,302,034</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2,290,542</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">First</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Second</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Third</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Fourth</td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="font-weight: bold">2016</td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Quarter</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Quarter</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Quarter</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Quarter</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%; text-align: left">Net sales</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,279,436</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7,242,020</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7,217,922</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">6,731,987</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">               Gross profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,968,320</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,588,043</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,148,223</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,667,096</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">               Net income</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">878,530</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">614,427</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">972,468</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">710,376</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td>Net income per share -</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Basic</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.38</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.27</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.43</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.31</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Diluted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.38</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.27</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.43</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.30</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="font-weight: bold; text-align: left; vertical-align: bottom">2015</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left">Net sales</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">5,693,472</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">5,697,083</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">6,470,286</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">8,970,864</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">               Gross profit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,810,079</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,258,735</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,437,534</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,635,225</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">               Net income</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">911,221</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,219,082</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">506,369</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">546,455</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Net income per share -</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: justify">          Basic</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.54</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.22</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.24</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">          Diluted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.54</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.22</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.23</td><td style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.75in; text-align: justify; text-indent: -0.75in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Note 3. Investment Securities</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">Investment securities at June 30, 2016
and June 30, 2015 consist of certificates of deposit and municipal bonds which are classified as available-for-sale securities
and have been determined to be level 1 assets. The cost, gross unrealized gains, gross unrealized losses and fair value of available-for-sale
securities by major security type at June 30, 2016 and June 30, 2015 are as follows:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Gross</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Gross</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Amortized</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Unrealized</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Unrealized</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Fair</td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Cost</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Gains</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Losses</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Value</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: underline; text-align: left; vertical-align: bottom">2016</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 52%; padding-bottom: 0; text-align: left; vertical-align: bottom">Certificates of deposit</td><td style="width: 1%; padding-bottom: 0"> </td>
<td style="width: 1%; padding-bottom: 0; text-align: left">$</td><td style="width: 9%; padding-bottom: 0; text-align: right">4,871,000</td><td style="width: 1%; padding-bottom: 0; text-align: left"> </td><td style="width: 1%; padding-bottom: 0"> </td>
<td style="width: 1%; padding-bottom: 0; text-align: left">$</td><td style="width: 9%; padding-bottom: 0; text-align: right">—</td><td style="width: 1%; padding-bottom: 0; text-align: left"> </td><td style="width: 1%; padding-bottom: 0"> </td>
<td style="width: 1%; padding-bottom: 0; text-align: left">$</td><td style="width: 9%; padding-bottom: 0; text-align: right">—</td><td style="width: 1%; padding-bottom: 0; text-align: left"> </td><td style="width: 1%; padding-bottom: 0"> </td>
<td style="width: 1%; text-align: left; padding-bottom: 0">$</td><td style="width: 9%; text-align: right; padding-bottom: 0">4,871,000</td><td style="width: 1%; padding-bottom: 0; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1pt; vertical-align: bottom">Municipal bonds</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">707,593</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,466</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">709,059</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; vertical-align: bottom">2016 Total investment securities</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,578,593</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,466</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">—</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,580,059</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: underline; text-align: left; vertical-align: bottom">2015</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 0; text-align: left; vertical-align: bottom">Certificates of deposit</td><td style="padding-bottom: 0"> </td>
<td style="padding-bottom: 0; text-align: left">$</td><td style="padding-bottom: 0; text-align: right">3,272,000</td><td style="padding-bottom: 0; text-align: left"> </td><td style="padding-bottom: 0"> </td>
<td style="padding-bottom: 0; text-align: left">$</td><td style="padding-bottom: 0; text-align: right">—</td><td style="padding-bottom: 0; text-align: left"> </td><td style="padding-bottom: 0"> </td>
<td style="padding-bottom: 0; text-align: left">$</td><td style="padding-bottom: 0; text-align: right">—</td><td style="padding-bottom: 0; text-align: left"> </td><td style="padding-bottom: 0"> </td>
<td style="text-align: left; padding-bottom: 0">$</td><td style="text-align: right; padding-bottom: 0">3,272,000</td><td style="padding-bottom: 0; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1pt; vertical-align: bottom">Municipal bonds</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">893,804</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,288</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(8,035</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">887,057</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; vertical-align: bottom">2015 Total investment securities</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">4,165,804</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,288</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(8,035</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">4,159,057</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 6pt 0; text-align: justify">The portfolio is diversified and highly
liquid and primarily consists of investment grade fixed income instruments. At June 30, 2016, the Company did not have any investments
in individual securities that have been in a continuous loss position considered to be other than temporary.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">As of June 30, 2016 and June 30, 2015,
the contractual maturities of available-for-sale securities were as follows:</p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="6" style="border-bottom: Black 1pt solid; text-align: center">Years to Maturity</td>
<td colspan="4" style="text-align: center"> </td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Less than</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">One to</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">One Year</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Five Years</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Total</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: center"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: underline; text-align: left; vertical-align: bottom">2016</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 64%; padding-bottom: 1pt; text-align: left; vertical-align: bottom">Available-for-sale</td><td style="width: 1%; padding-bottom: 1pt"> </td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1pt solid; text-align: right">4,811,511</td><td style="width: 1%; padding-bottom: 1pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 1pt"> </td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1pt solid; text-align: right">768,548</td><td style="width: 1%; padding-bottom: 1pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 1pt"> </td>
<td style="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</td><td style="width: 9%; border-bottom: Black 1pt solid; text-align: right">5,580,059</td><td style="width: 1%; padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: underline; text-align: left; vertical-align: bottom">2015</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 1pt; text-align: left; vertical-align: bottom">Available-for-sale</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">3,522,728</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">636,329</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left">$</td><td style="border-bottom: Black 1pt solid; text-align: right">4,159,057</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Gross</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Gross</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom"> </td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Amortized</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Unrealized</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Unrealized</td><td style="text-align: right; vertical-align: bottom"> </td><td style="text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; vertical-align: bottom">Fair</td><td> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: left; vertical-align: bottom"> </td><td style="padding-bottom: 1pt"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Cost</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Gains</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Losses</td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td><td style="padding-bottom: 1pt; text-align: right; vertical-align: bottom"> </td>
<td colspan="2" style="text-align: right; border-bottom: Black 1pt solid; vertical-align: bottom">Value</td><td style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: underline; text-align: left; vertical-align: bottom">2016</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="width: 52%; padding-bottom: 0; text-align: left; vertical-align: bottom">Certificates of deposit</td><td style="width: 1%; padding-bottom: 0"> </td>
<td style="width: 1%; padding-bottom: 0; text-align: left">$</td><td style="width: 9%; padding-bottom: 0; text-align: right">4,871,000</td><td style="width: 1%; padding-bottom: 0; text-align: left"> </td><td style="width: 1%; padding-bottom: 0"> </td>
<td style="width: 1%; padding-bottom: 0; text-align: left">$</td><td style="width: 9%; padding-bottom: 0; text-align: right">—</td><td style="width: 1%; padding-bottom: 0; text-align: left"> </td><td style="width: 1%; padding-bottom: 0"> </td>
<td style="width: 1%; padding-bottom: 0; text-align: left">$</td><td style="width: 9%; padding-bottom: 0; text-align: right">—</td><td style="width: 1%; padding-bottom: 0; text-align: left"> </td><td style="width: 1%; padding-bottom: 0"> </td>
<td style="width: 1%; text-align: left; padding-bottom: 0">$</td><td style="width: 9%; text-align: right; padding-bottom: 0">4,871,000</td><td style="width: 1%; padding-bottom: 0; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1pt; vertical-align: bottom">Municipal bonds</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">707,593</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,466</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">—</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">709,059</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; vertical-align: bottom">2016 Total investment securities</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,578,593</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,466</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">—</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,580,059</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-decoration: underline; text-align: left; vertical-align: bottom">2015</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="padding-bottom: 0; text-align: left; vertical-align: bottom">Certificates of deposit</td><td style="padding-bottom: 0"> </td>
<td style="padding-bottom: 0; text-align: left">$</td><td style="padding-bottom: 0; text-align: right">3,272,000</td><td style="padding-bottom: 0; text-align: left"> </td><td style="padding-bottom: 0"> </td>
<td style="padding-bottom: 0; text-align: left">$</td><td style="padding-bottom: 0; text-align: right">—</td><td style="padding-bottom: 0; text-align: left"> </td><td style="padding-bottom: 0"> </td>
<td style="padding-bottom: 0; text-align: left">$</td><td style="padding-bottom: 0; text-align: right">—</td><td style="padding-bottom: 0; text-align: left"> </td><td style="padding-bottom: 0"> </td>
<td style="text-align: left; padding-bottom: 0">$</td><td style="text-align: right; padding-bottom: 0">3,272,000</td><td style="padding-bottom: 0; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1pt; vertical-align: bottom">Municipal bonds</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">893,804</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">1,288</td><td style="padding-bottom: 1pt; text-align: left"> </td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">(8,035</td><td style="padding-bottom: 1pt; text-align: left">)</td><td style="padding-bottom: 1pt"> </td>
<td style="border-bottom: Black 1pt solid; text-align: left"> </td><td style="border-bottom: Black 1pt solid; text-align: right">887,057</td><td style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td style="text-align: left; padding-bottom: 2.5pt; vertical-align: bottom">2015 Total investment securities</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">4,165,804</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,288</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(8,035</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td>
<td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">4,159,057</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-indent: 0in">Note 11. Stock-based Compensation</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company follows ASC 718 in establishing
standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services, as well
as transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the
entity’s equity instruments or that may be settled by the issuance of those equity instruments. ASC 718 requires that the
cost resulting from all share-based payment transactions be recognized in the financial statements based on the fair value of the
share-based payment. ASC 718 establishes fair value as the measurement objective in accounting for share-based payment transactions
with employees, except for equity instruments held by employee share ownership plans.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Total stock-based compensation expense
recognized in the statement of comprehensive income for the fiscal years ended June 30, 2016 and 2015, was $97,045 and $62,416,
respectively, before income taxes. The related total deferred tax benefit was approximately $7,971 and $5,779, for the same periods.
ASC 718 requires the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options
to be classified and reported as both an operating cash outflow and a financing cash inflow.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">As of June 30, 2016, there was approximately
$85,085 of unrecognized compensation cost related to stock option awards that is expected to be recognized as expense over the
next 2 years. The total deferred tax benefit related to these awards is approximately $6,766.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company has one employee stock option
plan under which options may be granted, the 2007 Stock Option and Restricted Stock Plan (the "2007 Plan"). The Board
of Directors may grant options to acquire shares of common stock to employees of the Company at the fair market value of the common
stock on the date of grant. Generally, options granted have a two-year vesting period based on two years of continuous service
and have a ten-year contractual life. Option grants provide for accelerated vesting if there is a change in control. Shares issued
upon the exercise of options are from those held in Treasury. The 2007 Plan was approved by the Company's shareholders at the Company's
Annual Meeting on November 30, 2007 and supersedes the Company's 2000 Stock Option Plan (the "2000 Plan"). Options covering
400,000 shares are authorized for issuance under the 2007 Plan, of which 237,150 have been granted and 163,250 are outstanding
as of June 30, 2016. While no further grants of options may be made under the 2000 Plan, as of June 30, 2016, 7,200 options remain
outstanding, vested, and exercisable from the 2000 Plan.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">ASC 718 requires the use of a valuation
model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option valuation model,
which incorporates various assumptions including those for volatility, expected life, and interest rates.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The table below outlines the weighted average
assumptions that the Company used to calculate the fair value of each option award for the year ended June 30, 2016 and 2015.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="text-align: justify"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid">2016</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid">2015</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="width: 76%; text-align: justify; text-indent: 0in">Dividend yield</td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">3.99</td><td nowrap="nowrap" style="width: 1%; text-align: left">%</td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">3.85</td><td nowrap="nowrap" style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: justify">Expected stock price volatility</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">27.80</td><td nowrap="nowrap" style="text-align: left">%</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">31.27</td><td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="text-align: justify">Risk-free interest rate</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">1.20</td><td nowrap="nowrap" style="text-align: left">%</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">1.34</td><td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: justify">Expected option life (in years)</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"><font style="font-size: 10pt">4.2</font> </td><td nowrap="nowrap" style="text-align: left">  yrs</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"><font style="font-size: 10pt">4.1</font> </td><td nowrap="nowrap" style="text-align: left">  yrs</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="text-align: justify">Weighted average fair value per share</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: justify">   of options granted during the period</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left">$</td><td nowrap="nowrap" style="text-align: right">3.866</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left">$</td><td nowrap="nowrap" style="text-align: right">4.616</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.25in; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The Company pays dividends quarterly
and paid cash dividends totaling $1.00 per share for the twelve months ended June 30, 2016 and 2015. Expected stock price volatility
is based on the historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield available
on U.S. Treasury issues with an equivalent term approximating the expected life of the options. The expected option life (in years)
represents the estimated period of time until exercise and is based on actual historical experience.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The following table summarizes stock
option activity during the twelve months ended June 30, 2016:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="text-align: justify"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="15" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Employee Stock Options Plan</td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Weighted</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Number of</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Weighted</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Average</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Shares</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Average</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Remaining</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Aggregate</td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Subject</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Exercise</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Contractual</td><td nowrap="nowrap"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center">Intrinsic</td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">to Option</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Price</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Term</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td colspan="3" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">Value</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="width: 52%">Balance at July 1, 2015</td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">187,500</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left">$</td><td nowrap="nowrap" style="width: 9%; text-align: right">23.38</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">6.26</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right"> </td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap">Granted</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3,000</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left">$</td><td nowrap="nowrap" style="text-align: right">25.12</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">9.69</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap">Exercised</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">(16,300</td><td nowrap="nowrap" style="text-align: left">)</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left">$</td><td nowrap="nowrap" style="text-align: right">18.22</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">—</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: left; padding-bottom: 1pt">Forfeited or expired</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">(3,750</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left">)</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">26.02</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">—</td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid"> </td>
<td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left; border-bottom: Black 1pt solid"> </td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: right; border-bottom: Black 1pt solid"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="padding-bottom: 2.5pt">Outstanding at June 30, 2016</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">170,450</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">23.84</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">5.73</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">469,132</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: left; padding-bottom: 2.5pt">Vested or expected to vest at June 30, 2016</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">163,794</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">23.75</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">5.60</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">457,193</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="padding-bottom: 2.5pt">Exercisable at June 30, 2016</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">124,650</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">23.00</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">4.56</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">469,132</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.25in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">The aggregate intrinsic value in the
table above represents the total pretax intrinsic value (the difference between the closing sale price of the Company’s common
stock as reported on the NYSE MKT on June 30, 2016 and the exercise price, multiplied by the number of in-the-money options) that
would have been received by the option holders if all option holders had exercised their options on June 30, 2016. This amount
changes based on the fair market value of the Company’s common stock. The total intrinsic values of the options exercised
during the twelve months ended June 30, 2016 and 2015 was $40,981 and $53,936, respectively.</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt">The following table summarizes changes in non-vested stock
options during the twelve months ended June 30, 2016:</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Weighted</td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center"> </td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Number of</td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Average</td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Shares</td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Grant Date</td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Subject</td><td nowrap="nowrap"> </td><td nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center">Fair Value</td><td nowrap="nowrap"> </td></tr>
<tr style="vertical-align: bottom">
<td nowrap="nowrap"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">to Option</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: center; border-bottom: Black 1pt solid">(per Option)</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="width: 76%">Non-Vested at July 1, 2015</td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">69,300</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left">$</td><td nowrap="nowrap" style="width: 9%; text-align: right">4.310</td><td nowrap="nowrap" style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap">Granted</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3,000</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3.866</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap">Vested</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">(25,250</td><td nowrap="nowrap" style="text-align: left">)</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">3.777</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: left; padding-bottom: 1pt">Forfeited or expired</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">(1,250</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left">)</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 1pt solid; text-align: right">4.710</td><td nowrap="nowrap" style="padding-bottom: 1pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="padding-bottom: 2.5pt">Non-Vested at June 30, 2016</td><td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left"> </td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">45,800</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td><td nowrap="nowrap" style="padding-bottom: 2.5pt"> </td>
<td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: left">$</td><td nowrap="nowrap" style="border-bottom: Black 2.5pt double; text-align: right">4.564</td><td nowrap="nowrap" style="padding-bottom: 2.5pt; text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.75in"><font style="text-underline-style: double"> </font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<tr style="vertical-align: bottom">
<td nowrap="nowrap" style="text-align: justify"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid">2016</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td>
<td colspan="2" nowrap="nowrap" style="text-align: right; border-bottom: Black 1pt solid">2015</td><td nowrap="nowrap" style="padding-bottom: 1pt"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="width: 76%; text-align: justify; text-indent: 0in">Dividend yield</td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">3.99</td><td nowrap="nowrap" style="width: 1%; text-align: left">%</td><td nowrap="nowrap" style="width: 1%"> </td>
<td nowrap="nowrap" style="width: 1%; text-align: left"> </td><td nowrap="nowrap" style="width: 9%; text-align: right">3.85</td><td nowrap="nowrap" style="width: 1%; text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: justify">Expected stock price volatility</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">27.80</td><td nowrap="nowrap" style="text-align: left">%</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">31.27</td><td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="text-align: justify">Risk-free interest rate</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">1.20</td><td nowrap="nowrap" style="text-align: left">%</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right">1.34</td><td nowrap="nowrap" style="text-align: left">%</td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: justify">Expected option life (in years)</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"><font style="font-size: 10pt">4.2</font> </td><td nowrap="nowrap" style="text-align: left">  yrs</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"><font style="font-size: 10pt">4.1</font> </td><td nowrap="nowrap" style="text-align: left">  yrs</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td nowrap="nowrap" style="text-align: justify">Weighted average fair value per share</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap" style="text-align: right"> </td><td nowrap="nowrap" style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: White">
<td nowrap="nowrap" style="text-align: justify">   of options granted during the period</td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left">$</td><td nowrap="nowrap" style="text-align: right">3.866</td><td nowrap="nowrap" style="text-align: left"> </td><td nowrap="nowrap"> </td>
<td nowrap="nowrap" style="text-align: left">$</td><td nowrap="nowrap" style="text-align: right">4.616</td><td nowrap="nowrap" style="text-align: left"> </td></tr>
</table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt 0.25in; text-align: justify; text-indent: 0.5in"> </p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt">Note 12. Concentration of Credit Risk</p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 6pt; text-align: justify">Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, short-term investments and
accounts receivable. The Company maintains cash and cash equivalents with various financial institutions. At times such investments
may be in excess of FDIC insurance limits. As disclosed in Note 8, a significant portion of the Company's business is the production
of military and industrial electronic equipment for use by the U.S. and foreign governments and certain industrial customers. The
related accounts receivable balance<font style="color: windowtext">, as a percentage of the Company's total trade accounts receivable
balance, was 40% represented by two customers at June 30, 2016 and 60% represented by three customers at June 30, 2015.</font></p>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">Although the Company's exposure
to credit risk associated with nonpayment of these concentrated balances is affected by the conditions or occurrences within
the U.S. and foreign governments, the Company believes that its trade accounts receivable credit risk exposure is limited.
The Company performs ongoing credit evaluations of its customer's financial conditions and requires collateral, such as
progress payments, in certain circumstances. The Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends and other information.</p>