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Item 1A. Risk Factors

2023-05-16 compared with 2022-03-25 · 447 added, 478 removed, 14 unchanged (99% of the section changed)

The purchase of our common

stock involves a very high degree of risk.

In evaluating our common stock

and our business, you should carefully consider the risks and uncertainties described below and the other information and our consolidated

financial statements and related notes included herein.

If any of the events described in the risks below actually occurs, our financial

condition or operating results may be materially and adversely affected, the price of our common stock may decline, perhaps significantly,

and you could lose all or a part of your investment.

The risks below can be characterized

into four groups:

Risks related to global events such as COVID-19 and the war in Ukraine;

Risks related to our business, including risks specific to the defense and aerospace industry;

Risks arising from our indebtedness;

Risks related to our common stock.

The financial statements contained

in this Report, as well as the description of our business contained herein, unless otherwise indicated, principally reflect the status

of our business and the result of operations as of December 31, 2021.

Risks Related to Global Events

The COVID-19 pandemic and the resulting

macroeconomic disruption have affected how we, our customers and our suppliers are operating and disrupted supply chains in our industry.

In March 2020, the World Health

Organization announced that infections caused by the coronavirus disease of 2019 (“COVID-19”) had become pandemic and the

President announced a National Emergency relating to the disease.

National, state and local authorities, including those in which

our offices and manufacturing facilities are located, have adopted various regulations and orders, including “shelter in place”

rules, restrictions on travel, mandates on the number of people that may gather in one location and closing non-essential businesses.

The global impact of the outbreak is continually evolving.

The measures adopted by

various governments and agencies, as well as the decision by many individuals and businesses to voluntarily shut down or

self-quarantine, and the tendency of many individuals to continue to work from home, had and are expected to continue to have

serious adverse impacts on domestic and foreign economies of uncertain severity and duration.

The effectiveness of economic

stabilization efforts adopted by governments and their willingness to adopt further measures is uncertain.

The likely overall

economic impact of the COVID-19 pandemic and changes in business practices which resulted from COVID-19, has been and will continue

to be highly negative to the general economy.

While we continue to operate substantially in the normal course of business, we have

implemented procedures to promote employee safety including more frequent and enhanced cleaning and adjusted schedules and

work-flows to support physical distancing and have adjusted our sales and marketing practices.

These actions resulted in increased

operating costs.

Our facilities did not operate with full staff or with normal efficiency during portions of 2020 and 2021 primarily

due to employee absenteeism and supplier disruptions.

Although business has substantially returned to pre-COVID-19 operating levels

in the latter half of 2021, an increase in COVID-19 infections or changes in governmental regulations may force us to close or

reduce operations or otherwise adversely impact our operations in future periods.

The future economic impact

of COVID-19 and changes in business practices which resulted from COVID-19, cannot be predicted with certainty.

COVID continues to cause

significant disruption to the commercial travel and aerospace industries.

Although domestic air travel in the United States has increased,

it may take several years for overall economic conditions to return to normal and, particularly in the aerospace industry, for air travel

and the resulting demand for new and refurbished aircraft to return to normal.

If conditions do not improve, or if they worsen, it could

make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities

and repay debt on a timely basis.

Although the impact of reduced air travel may be disproportionately felt in the commercial as opposed

to the defense aerospace industry, it should be expected that manufacturers in the commercial sector with excess capacity will increase

their efforts to win projects in the defense aerospace industry.

We cannot forecast with any

certainty whether the disruptions caused by the COVID-19 pandemic will increase, or the extent to which any recovery may be negatively

impacted by an increase in cases as a result of the spread of a new variant and restrictions imposed by various governments in response

to any such increase.

Any such disruption may materially impact our business and our consolidated financial position, results of operations,

and cash flows.

The Russian invasion of Ukraine and the

retaliatory measures imposed by the United States, United Kingdom, European Union and other countries and the responses of Russia to such

measures have caused significant disruptions to domestic and foreign economies.

The invasion of Ukraine by

the Russian Federation had an immediate impact on the global economy resulting in higher prices for oil and other commodities.

States, United Kingdom, European Union and other countries responded to Russia’s invasion of Ukraine by imposing various economic

sanctions and bans.

Russia has responded with its own retaliatory measures.

These measures have impacted the availability and price of

certain raw materials.

The invasion and retaliatory measures also disrupted economic markets.

The global impact of these measures is

continually evolving and cannot be predicted with certainty and there is no assurance that Russia’s invasion of Ukraine and responses

thereto will not further disrupt the global economy and supply chain.

Further, there is no assurance that even when the invasion of Ukraine

ceases, that nations will not continue to impose sanctions and bans on other nations.

While these events have not interrupted our operations

or materially impacted our ability to obtain raw materials, these or future developments resulting from the invasion of Ukraine such as

a cyberattack on the United States, us or our suppliers, could make it difficult for or increase the cost of certain raw materials, or

make it difficult to access debt and equity capital on attractive terms, if at all, and impact our ability to fund business activities

and repay debt on a timely basis.

Russia’s invasion of Ukraine may alter

countries’ willingness to rely on others as the source of certain products and material.

Historically, prime contractors

and OEMs in the United States A & D industry have relied upon suppliers outside the United States for products and raw materials.

Russia’s invasion of Ukraine and the economic disruption resulting from retaliatory measures may cause many of these companies to

rethink these strategies and seek sources of supply within the United States.

To the extent they do so, it could disrupt domestic markets

for raw materials and supplies, and the market for the skilled laborers we need to manufacture our products.

We cannot forecast with any

certainty whether the disruptions caused by the Russian invasion of Ukraine, restrictions imposed by various governments in response thereto

and resulting changes in business practices, may materially impact our business and our consolidated financial position, results of operations,

and cash flows.

In reading the remaining risk

factors set forth below, in each case, consider the additional uncertainties caused by Global events such as COVID-19 and the war in Ukraine.

purchase of our common stock involves a very high degree of risk.

evaluating our common stock and our business, you should carefully consider the risks and uncertainties described below and the other

information and our consolidated financial statements and related notes included herein.

If any of the events described in the risks

below actually occurs, our financial condition or operating results may be materially and adversely affected, the price of our common

stock may decline, perhaps significantly, and you could lose all or a part of your investment.

risks below can be characterized into four groups:

Risks related to disruptive

global events such as a widespread public health crisis, the outbreak of an international conflict, a terrorist event or a banking

crisis, such as Covid-19 and the war in Ukraine, and responses to such events;

Risks related to our business,

We may need additional financing .

including risks specific to the defense and aerospace industry;

Risks arising from our

indebtedness;

Risks related to our common

financial statements contained in this Report, as well as the description of our business contained herein, unless otherwise indicated,

principally reflect the status of our business and the result of operations as of December 31, 2022.

Related to Global Events

Disruptive national and international events,

such as the outbreak of a public health crisis, an international conflict, a terrorist event, a banking crisis, the possibility of default

by the United States on its obligations due to its debt ceiling or the actuality of such an event, and the response of the United States,

other countries and the public to such events, and the resulting macroeconomic disruption to the financial markets and the businesses

of our customers and suppliers, could have a negative impact on our results of operation and financial condition.

The outbreak of the Covid-19

pandemic, the invasion of Ukraine by the Russian Federation and the measures adopted by various governments and agencies, as well as the

decision by many individuals and businesses to voluntarily shut down or self-quarantine and work from home in response to the outbreak

of Covid-19 had serious adverse impacts on domestic and foreign economies, the financial markets and our ability, as well as the ability

of some of our customers and suppliers, to operate in the ordinary course.

While we continued to operate substantially in the normal course

of business since the outbreak of Covid-19, we were forced to adjust our sales and marketing practices due to difficulties encountered

in contacting our customers to maintain existing programs and win new orders and did not receive new contracts during 2021 and 2022 at

a rate consistent with historical levels.

Although business has substantially returned to pre-Covid-19 operating levels and our ability

to win new orders appears to be returning to historical levels, there is no assurance that there will not be another event, such as a

public health crisis, an international conflict, a terrorist event, a banking crisis or the possibility of a default by the United States

on its obligations due to its debt ceiling or the actuality of such an event, which will have a material adverse impact on our industry,

operations or financial condition.

Moreover, although our industry appears to be operating in the normal course, employees of certain

customers continue to work from home impacting our ability to communicate with them and the future economic impact of changes in business

practices which resulted from Covid-19 or which might result from a future event, cannot be predicted with certainty.

Covid-19 caused

significant disruption to the commercial travel and aerospace industries.

Although air travel has increased, it may take several years

for overall economic conditions to return to normal, particularly in the aerospace industry, for air travel and the resulting demand for

new and refurbished aircraft to return to normal.

If conditions do not improve, or if they worsen, it could make it difficult for us to

access debt and equity capital on attractive terms, or at all, and impact our ability to fund business activities and repay debt on a

timely basis.

invasion of Ukraine, continued tensions between the US and the European Union with China and Russia, may alter countries’

willingness to rely on others as the source of certain products and material.

Historically, prime contractors and OEMs in the United States A &

D industry have relied upon suppliers outside the United States for products and raw materials, including suppliers in Russia and China.

Supply chain disruptions resulting from China’s initial response to Covid-19, Russia’s invasion of Ukraine and the economic

disruption resulting from retaliatory measures, continued tensions between the US and other countries, may cause many companies in the

A&D industry and the governments of the countries in which they are located, including the United States, to rethink these strategies

and seek or mandate that such companies obtain more reliable sources of supply.

To the extent they do so, it could disrupt the markets

for raw materials and supplies, our ability and the ability of our suppliers to obtain raw materials and supplies and the market for the

skilled laborers we need to manufacture our products.

cannot forecast with any certainty whether such disruptions, restrictions imposed by various governments in response thereto and resulting

changes in business practices, may materially impact our ability and the ability of our suppliers to obtain necessary raw material, our

business and our consolidated financial position, results of operations, and cash flows.

reading the remaining risk factors set forth below, in each case, consider the additional uncertainties caused by the potential for disruptive

global events such as a widespread public health crisis, the outbreak of an international conflict, terrorist event or banking crisis

and continued rivalries between various countries.

Related to Our Business

may need additional financing .

We may need to obtain additional

financing to fund acquisitions of capital items necessary for our growth and to upgrade equipment to remain competitive.

We may also need

to obtain the agreement of holders of portions of our debt to extend or otherwise refinance such debt.

We may need to offer these holders

increases in the rates of interest they receive or otherwise compensate them through payments of cash or issuances of our equity securities.

Future financings or refinancing may involve the issuance of debt, equity and/or securities convertible into or exercisable or exchangeable

for our equity securities.

need to obtain the agreement of holders of portions of our debt to extend or otherwise refinance such debt.

We may need to offer these

holders increases in the rates of interest they receive or otherwise compensate them through payments of cash or issuances of our equity

Future financings or refinancings may involve the issuance of debt, equity and/or securities convertible into or exercisable

or exchangeable for our equity securities.

Additional funding may not be available to us on reasonable terms, if at all.

If we are able to consummate

such financings or re-financings, the trading price of our common stock could be adversely affected and the terms of such financings may

adversely affect the interests of our existing stockholders.

Any failure to obtain additional working capital when required would have

a material adverse effect on our business and financial condition and may result in a decline in our stock price.

Any issuances of our

common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our

capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.

A reduction in government spending on defense could materially

adversely impact our revenues, results of operations and financial condition.

A large percentage of our

revenue is derived from products for US military aviation.

There are risks associated with programs that are subject to appropriation

by Congress, which could be potential targets for reductions in funding.

Reductions in United States Government spending on defense or

future changes in the mix of defense products required by United States Government agencies could limit demand for our products, and may

have a materially adverse effect on our operating results and financial condition.

For the past several years, our operations have been

impacted by volatility in government procurement cycles and spending patterns.

There can be no assurance that our financial condition

and results of operations will not be materially adversely impacted by future volatility in defense spending or a change in the mix of

products purchased by defense departments in the United States or other countries, or the perception on the part of our customers that

such changes are about to occur.

We depend on revenues from a few significant

relationships.

Any loss, cancellation, reduction, or interruption in these relationships could harm our business.

We derive most of our revenues

from a small number of customers.

Three customers represented approximately 75% and 74% of total sales for the years ended December 31,

2021 and 2020, respectively.

The markets in which we sell our products are dominated by a relatively small number of customers which have

contracts with United States governmental agencies, thereby limiting the number of potential customers.

Our success depends on our ability

to develop and manage relationships with significant customers.

We cannot be sure that we will be able to retain our largest customers

or that we will be able to attract additional customers, or that our customers will continue to buy our products in the same amounts as

in prior years.

The loss of one or more of our largest customers, any reduction or interruption in sales to these customers, our inability

to successfully develop relationships with additional customers or future price concessions that we may have to make, could significantly

If we are able

to consummate such financings or re-financings, the trading price of our common stock could be adversely affected and the terms of such

financings may adversely affect the interests of our existing stockholders.

Any failure to obtain additional working capital when required

would have a material adverse effect on our business and financial condition and may result in a decline in our stock price.

Any issuances

of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable

for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.

reduction in government spending on defense could materially adversely impact our revenues, results of operations and financial condition.

large percentage of our revenue is derived from products for US military aviation.

There are risks associated with programs that are

subject to appropriation by Congress, which could be potential targets for reductions in funding.

Reductions in United States Government

spending on defense or future changes in the mix of defense products required by United States Government agencies could limit demand

for our products and may have a materially adverse effect on our operating results and financial condition.

For the past several years,

our operations have been impacted by volatility in government procurement cycles and spending patterns.

There can be no assurance that

our financial condition and results of operations will not be materially adversely impacted by future volatility in defense spending

or a change in the mix of products purchased by defense departments in the United States or other countries, or the perception on the

part of our customers that such changes are about to occur.

depend on revenues from a few significant relationships.

Any loss, cancellation, reduction, or interruption in these relationships could

harm our business.

We depend on revenues from components for

a few aircraft platforms and the cancellation or reduction of either production or use of these aircraft platforms could harm our business.

We derive a significant portion

of our revenues from components for a few aircraft platforms, specifically the Sikorsky BlackHawk helicopter, the Northrop Grumman E-2

Hawkeye naval aircraft, the F-18 Hornet and the Pratt & Whitney Geared TurboFan Jet engine.

A reduction in demand for our products

as a result of either a reduction in the production of new aircraft or a reduction in the use of existing aircraft in the fleet (reducing

after-market demand) would have a material adverse effect on our operating results and financial condition.

Intense competition in our markets may lead to a reduction in

our revenues and market share.

The defense and aerospace

component manufacturing market is highly competitive and we expect that competition will increase and perhaps intensify.

In particular,

we anticipate that manufacturers which have historically operated predominately in the commercial sector may seek to increase the revenue

derived in the defense aerospace market to utilize excess capacity.

Many competitors have significantly greater technical, manufacturing,

financial and marketing resources than we do.

We may not be able to compete successfully against either current or future competitors.

Increased competition could result in reduced revenue, lower margins or loss of market share, any of which could significantly harm our

business, our operating results and financial condition.

We may lose sales if we fail to timely meet the needs of any

of our customers.

Our customers incorporate

our products into larger aircraft assemblies or completed aircraft.

They rely upon us to deliver products meeting their specifications

on a timely basis to ensure smooth operation of their assembly lines.

If a customer were to conclude that it could not rely upon us for

timely delivery of quality products, it could look to dual source a product or rely upon another party altogether.

Any decision by a customer

to rely upon an alternate supplier for some or all of its needs could significantly harm our business, our operating results and our financial

We may lose sales if our suppliers fail to meet our needs or

shipments of raw materials are not timely made.

Although we procure most of

our parts and components from multiple sources and rely upon a number of subcontractors to perform detailed services, or believe that

these components and services are readily available from numerous sources, certain components and services are available only from a sole

or limited number of sources.

While we believe that substitute components or assemblies and subcontractors could be obtained, use of substitutes

would require development of new suppliers or would require us to re-engineer our products, or both, which could delay shipment of our

products and could have a materially adverse effect on our operating results and financial condition.

In the past, due to our liquidity

problems, we had difficulties in securing timely shipments of raw materials from and the timely performance of services by certain vendors

which negatively impacted our results of operations.

Any delays in the shipment of raw materials or the performance of subcontracted services

could significantly harm our business, our operating results and our financial condition.

There are risks associated with the bidding processes in which

We obtain many contracts through

a competitive bidding process.

We must devote substantial time and resources to prepare bids and proposals and may not have contracts

awarded to us.

Even if we win contracts, there can be no assurance that the prices that we have bid will be sufficient to allow us to

generate a profit from any particular contract.

There are significant costs involved with producing a small number of initial units of

any new product and it may not be possible to recoup such costs on later production runs.

Due to fixed contract pricing, increasing

contract costs expose us to reduced profitability and the potential loss of future business.

The cost estimation process

requires significant judgment and expertise.

Reasons for cost growth may include unavailability and productivity of labor, the nature

and complexity of the work to be performed, the effect of change orders, the availability of materials, the effect of any delays in performance,

availability and timing of funding from the customer, natural disasters, and the inability to recover any claims included in the estimates

A significant change in cost estimates on one or more programs could have a material effect on our consolidated financial

position or results of operations.

The prices of raw materials we use are volatile.

The prices of raw materials

used in our manufacturing processes are volatile.

Our contracts generally allow us to increase our prices due to increases in the price

of raw materials.

Many contracts, however, require that we absorb all or a portion of the increase in expense resulting from inflation

before passing the increase on to the customer.

If the prices of raw materials rise, we may not be able to pass along all of such increases

to our customers and this could have an adverse impact on our consolidated financial position and results of operations.

It is possible

that some of the raw materials we use might become subject to new or increased tariffs.

Significant increases in the prices of raw materials

could adversely impact our customers’ demand for certain products which could lead to a reduction in our revenues and have a material

adverse impact on our revenues and on our consolidated financial position and results of operations.

Some of the products we produce have long lead times.

Some of the products we produce

require months to produce and we sometimes produce products in excess of the number ordered intending to sell the excess as spares when

orders arise.

As a result, our inventory turns slowly and ties up our working capital.

Our inventory represented approximately 55% of

our assets as of December 31, 2021.

Any requirement to write down the value of our inventory due to obsolescence or a drop in the price

of materials could have a material adverse effect on our consolidated financial position, results of operations and could result in a

breach of the financial covenants in our Loan Facility with Webster Bank.

We do not own the intellectual property rights to products we

Nearly all the parts and subassemblies

we produce are built to customer specifications and the customer owns the intellectual property, if any, related to the product.

Consequently,

if a customer desires to use another manufacturer to fabricate its part or subassembly, it would be free to do so, which could have a

material adverse effect on our business, our operating results and financial condition.

There are risks associated with new programs.

New programs typically carry

risks associated with design changes, acquisition of new production tools, funding commitments, imprecise or changing specifications,

timing delays and the accuracy of cost estimates associated with such programs.

In addition, any new program may experience delays for

a variety of reasons after significant expenditures are made.

If we were unable to perform under new programs to the customers’

satisfaction or if a new program in which we had made a significant investment was terminated or experienced weak demand, delays or other

problems, then our business, financial condition and results of operations could be materially adversely affected.

This could result in

low margin or forward loss contracts, and the risk of having to write-off costs and estimated earnings in excess of billings on uncompleted

contracts if it were deemed to be unrecoverable over the life of the program.

To perform on new programs,

we may be required to incur material up-front costs which may not have been separately negotiated and may not be recoverable.

and the loss of up-front costs could have a material impact on our liquidity.

The need to control our expenses

will place a significant strain on our management and operational resources.

If we are unable to control our expenses effectively, our

business, results of operations and financial condition may be adversely affected.

There are risks associated with offering

new services.

To reduce our dependence on

subcontractors we may offer new services to our customers, such as painting and finishing products we manufacture.

There are risks associated

with offering new services and even if such services are performed timely and correctly, it is likely that our margins will be low in

the initial phases when volume is low.

Attracting and retaining executive talent and other key

personnel is an essential element of our future success.

Our future success depends

to a significant extent upon our ability to attract executive talent, as well as the continued service of our existing executive officers

and other key management and technical personnel.

Experienced management and technical, marketing and support personnel in the defense

and aerospace industries are in demand and competition for their talents is intense.

Our failure to attract executive talent, or retain

our existing executive officers and key personnel, could have a material adverse effect on our business, financial condition and results

derive most of our revenues from a small number of customers.

Four customers represented approximately 77% and three customers represented

75% of total sales for the years ended December 31, 2022 and 2021, respectively.

The markets in which we sell our products are dominated

by a relatively small number of customers which have contracts with United States governmental agencies, thereby limiting the number

of potential customers.

Our success depends on our ability to develop and manage relationships with significant customers.

be sure that we will be able to retain our largest customers or that we will be able to attract additional customers, or that our customers

will continue to buy our products in the same amounts as in prior years.

The loss of one or more of our largest customers, any reduction

or interruption in sales to these customers, our inability to successfully develop relationships with additional customers or future

price concessions that we may have to make, could significantly harm our business.

depend on revenues from components for a few aircraft platforms and the cancellation or reduction of either production or use of these

aircraft platforms could harm our business.

derive a significant portion of our revenues from components for a few aircraft platforms, specifically the Sikorsky BlackHawk helicopter,

the Northrop Grumman E-2 Hawkeye naval aircraft, the F-18 Hornet and the Pratt & Whitney Geared TurboFan Jet engine.

in demand for our products as a result of either a reduction in the production of new aircraft or a reduction in the use of existing

aircraft in the fleet (reducing after-market demand) would have a material adverse effect on our operating results and financial condition.

competition in our markets may lead to a reduction in our revenues and market share.

defense and aerospace component manufacturing market is highly competitive and we expect that competition will increase and perhaps intensify.

In particular, we anticipate that manufacturers which have historically operated predominately in the commercial sector may seek to increase

the revenue derived in the defense aerospace market to utilize excess capacity.

Many competitors have significantly greater technical,

manufacturing, financial and marketing resources than we do.

We may not be able to compete successfully against either current or future

Increased competition could result in reduced revenue, lower margins or loss of market share, any of which could significantly

harm our business, our operating results and financial condition.

may lose sales if we fail to timely meet the needs of any of our customers.

customers incorporate our products into larger aircraft assemblies or completed aircraft.

They rely upon us to deliver products meeting

their specifications on a timely basis to ensure smooth operation of their assembly lines.

If a customer were to conclude that it could

not rely upon us for timely delivery of quality products, it could look to dual source a product or rely upon another party altogether.

A customer could reach such a conclusion even if our failure to timely deliver product was the result of events beyond our control, such

as the failure of the customer to place an order for a long lead time product on a timely basis or supply us with agreed upon raw materials

for processing.

Any decision by a customer to rely upon an alternate supplier for some or all of its needs could significantly harm our

business, our operating results and our financial condition.

may lose sales if our suppliers fail to meet our needs or shipments of raw materials are not timely made.

we procure most of our raw materials, parts and components from multiple sources and rely upon a number of subcontractors to perform

detailed services, or believe that these materials, components and services are readily available from numerous sources, certain materials,

components and services are available only from a sole or limited number of sources and often need to be sourced by our customer.

we believe that substitute supplies, components or assemblies and subcontractors could be obtained, use of substitutes would require

development of new suppliers or would require us to re-engineer our products, or both, which could delay shipment of our products and

could have a materially adverse effect on our operating results and financial condition.

Any delays in the shipment of raw materials

or the performance of subcontracted services could significantly harm our business, our operating results and our financial condition.

reduction in our revenues could have a disproportionate effect on our gross profit as a percentage of sales.

Our operations have a large

percentage of fixed factory overhead relative to our overall expenses.

As a result, our gross profit as a percentage of sales is highly

linked with sales volume.

Any reduction in our sales volume causes us to absorb the fixed overhead costs over a smaller base of sales,

likely causing our profit margin to decrease.

Any reduction in our profit margin adversely impacts our reported performance and would

have a material adverse impact on results of operation and consolidated financial position.

are risks associated with the bidding processes in which we compete.

obtain many contracts through a competitive bidding process.

We must devote substantial time and resources to prepare bids and proposals

and may not have contracts awarded to us.

Even if we win contracts, there can be no assurance that the prices that we have bid will be

sufficient to allow us to generate a profit from any particular contract.

There are significant costs involved with producing a small

number of initial units of any new product and it may not be possible to recoup such costs on later production runs.

to fixed contract pricing, increasing contract costs expose us to reduced profitability and the potential loss of future business.

cost estimation process requires significant judgment and expertise.

Reasons for cost growth may include unavailability and productivity

of labor, the nature and complexity of the work to be performed, the effect of change orders, the availability of materials, the effect

of any delays in performance, availability and timing of funding from the customer, natural disasters, and the inability to recover any

claims included in the estimates to complete.

A significant change in cost estimates on one or more programs could have a material effect

on our consolidated financial position or results of operations.

prices of raw materials we use are volatile.

prices of raw materials used in our manufacturing processes are volatile.

Our contracts generally allow us to increase our prices due

to increases in the price of raw materials.

Many contracts, however, require that we absorb all or a portion of the increase in expense

resulting from inflation before passing the increase on to the customer.

If the prices of raw materials rise, we may not be able to pass

along all of such increases to our customers and this could have an adverse impact on our consolidated financial position and results

of operations.

We are subject to intense competition for

the skilled machinists necessary to manufacture our products.

We are subject to intense

competition for the services of skilled machinists necessary to manufacture our products and those of other companies in the A & D

We are currently seeking to hire machinists for our Long Island and Connecticut manufacturing facilities to expand our business.

The demand for these individuals may increase as other manufacturers seek to bring to the United States manufacturing processes currently

outsourced overseas.

If the United States economy undergoes a period of inflation, our labor costs may increase which could have a material

adverse effect on our business, financial condition and results of operations.

We are subject to strict governmental regulations

relating to the environment, which could result in fines and remediation expense in the event of non-compliance.

We are required to comply

with extensive and frequently changing environmental regulations at the federal, state and local levels.

Among other things, these regulatory

bodies impose restrictions to control air, soil and water pollution, to protect against occupational exposure to chemicals, including

health and safety risks, and to require notification or reporting of the storage, use and release of certain hazardous substances into

the environment.

It is possible that some of the raw materials we use might become subject to new or increased tariffs.

Significant increases

in the prices of raw materials could adversely impact our customers’ demand for certain products which could lead to a reduction

in our revenues and have a material adverse impact on our revenues and on our consolidated financial position and results of operations.

of the products we produce have long lead times.

Some of the products we produce require months to produce and we sometimes

produce products in excess of the number ordered intending to sell the excess as spares when orders arise.

As a result, our inventory

turns slowly and ties up our working capital.

Our inventory represented approximately 60% of our assets as of December 31, 2022.

Any requirement

to write down the value of our inventory due to obsolescence, excess and slow moving, or a drop in the price of materials could have a

material adverse effect on our consolidated financial position, results of operations and could result in a breach of the financial covenants

in our Loan Facility with Webster Bank (“Webster”).

do not own the intellectual property rights to products we produce.

all the parts and subassemblies we produce are built to customer specifications and the customer owns the intellectual property, if any,

related to the product.

Consequently, if a customer desires to use another manufacturer to fabricate its part or subassembly, it would

be free to do so, which could have a material adverse effect on our business, our operating results and financial condition.

are risks associated with new programs.

programs typically carry risks associated with design changes, acquisition of new production tools, funding commitments, imprecise or

changing specifications, timing delays and the accuracy of cost estimates associated with such programs.

In addition, any new program

may experience delays for a variety of reasons after significant expenditures are made.

If we were unable to perform under new programs

to the customers’ satisfaction or if a new program in which we had made a significant investment was terminated or experienced

weak demand, delays or other problems, then our business, financial condition and results of operations could be materially adversely

This could result in low margin or forward loss contracts, and the risk of having to write-off costs and estimated earnings

in excess of billings on uncompleted contracts if it were deemed to be unrecoverable over the life of the program.

perform on new programs, we may be required to incur material up-front costs which may not have been separately negotiated and may not

be recoverable.

Such charges and the loss of up-front costs could have a material impact on our liquidity.

need to control our expenses will place a significant strain on our management and operational resources.

If we are unable to control

our expenses effectively, our business, results of operations and financial condition may be adversely affected.

are risks associated with offering new services.

reduce our dependence on subcontractors we may offer new services to our customers, such as painting and finishing products we manufacture.

There are risks associated with offering new services and even if such services are performed timely and correctly, it is likely that

our margins will be low in the initial phases when volume is low.

and retaining executive talent and other key personnel is an essential element of our future success.

future success depends to a significant extent upon our ability to attract executive talent, as well as the continued service of our

existing executive officers and other key management and technical personnel.

Experienced management and technical, marketing and support

personnel in the defense and aerospace industries are in demand and competition for their talents is intense.

Our failure to attract

executive talent, or retain our existing executive officers and key personnel, could have a material adverse effect on our business,

financial condition and results of operations.

are subject to intense competition for the skilled machinists necessary to manufacture our products.

are subject to intense competition for the services of skilled machinists necessary to manufacture our products and those of other companies

in the A & D industry.

Since the outbreak of COVID-19, the competition for skilled employees has intensified.

Moreover, certain large

employers in our industry in the Northeast are currently seeking to hire a large number of skilled technicians.

We are currently seeking

to hire machinists for our Long Island and Connecticut manufacturing facilities to expand our business.

The demand for these individuals

may increase as other manufacturers seek to bring to the United States manufacturing processes currently outsourced overseas.

United States economy undergoes a period of inflation, our labor costs may increase which could have a material adverse effect on our

business, financial condition and results of operations.

are subject to strict governmental regulations relating to the environment, which could result in fines and remediation expense in the

event of non-compliance.

are required to comply with extensive and frequently changing environmental regulations at the federal, state and local levels.

other things, these regulatory bodies impose restrictions to control air, soil and water pollution, to protect against occupational exposure

to chemicals, including health and safety risks, and to require notification or reporting of the storage, use and release of certain

hazardous substances into the environment.

This extensive regulatory framework imposes significant compliance burdens and risks on us.

In addition, these regulations

may impose liability for the cost of removal or remediation of certain hazardous substances released on or in our facilities without regard

to whether we knew of, or caused, the release of such substances.

Furthermore, we are required to provide a place of employment that is

free from recognized and preventable hazards that are likely to cause serious physical harm to employees, provide notice to employees

regarding the presence of hazardous chemicals and to train employees in the use of such substances.

Our operations require the use of

chemicals and other materials for painting and cleaning that are classified under applicable laws as hazardous chemicals and substances.

If we are found to be in violation of any of these rules, regulations or permits, we may be subject to fines, remediation expenses and

the obligation to change our business practice, any of which could result in substantial costs that would adversely impact our business

operations and financial condition.

We may be subject to fines and disqualification for non-compliance

with Federal Aviation Administration regulations.

We are subject to regulation

by the FAA under the provisions of the Federal Aviation Act of 1958, as amended.

The FAA prescribes standards and licensing requirements

for aircraft and aircraft components.

We are subject to inspections by the FAA and may be subjected to fines and other penalties (including

orders to cease production) for noncompliance with FAA regulations.

Our failure to comply with applicable regulations could result in

the termination of or our disqualification from some of our contracts, which could have a material adverse effect on our operations.

have never been subject to such fines or disqualification.

Cyber security attacks, internal system

or service failures may adversely impact our business and operations.

Any system or service disruptions,

including those caused by projects to improve our information technology systems, if not anticipated and appropriately mitigated, could

disrupt our business and impair our ability to effectively provide products and related services to our customers and could have a material

adverse effect on our business.

We could also be subject to systems failures, including network, software or hardware failures, whether

caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters, power shortages or terrorist attacks.

Cyber security threats are evolving and include, but are not limited to, malicious software, unauthorized attempts to gain access to sensitive,

confidential or otherwise protected information related to us or our products, customers or suppliers, or other acts that could lead to

disruptions in our business.

Any such failures could cause loss of data and interruptions or delays in our business, cause us to incur

remediation costs or require us to pay ransom to a hacker which takes over our systems, or subject us to claims and damage our reputation.

In addition, the failure or disruption of our communications or utilities could cause us to interrupt or suspend our operations or otherwise

adversely affect our business.

Although we utilize various procedures and controls to monitor and mitigate the risk of these threats,

there can be no assurance that these procedures and controls will be sufficient.

Our property and business interruption insurance may

be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption which would

adversely affect our business, results of operations and financial condition.

Moreover, expenditures incurred in implementing cyber security

and other procedures and controls could adversely affect our results of operations and financial condition.

Terrorist acts and acts of war may seriously harm our business,

results of operations and financial condition.

United States and global responses

to actual or potential military conflicts such as Russia’s invasion of Ukraine, terrorism, perceived nuclear, biological and chemical

threats and other global political crises increase uncertainties with respect to the U.S.

and other business and financial markets.

factors associated, directly or indirectly, with actual or potential military conflicts, terrorism, perceived nuclear, biological and

chemical and cyber threats, and other global political crises and responses thereto, may adversely affect the mix of products purchased

by defense departments in the United States or other countries to platforms not serviced by us.

A shift in defense budgets to product

lines we do not produce could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Indebtedness

Our indebtedness may have a material adverse effect on our operations.

We have substantial indebtedness

under our loan facility with Webster Bank (“Loan Facility”).

As of December 31, 2021, we had approximately $16,648,000 of

indebtedness outstanding under the Loan Facility.

All of our indebtedness under the Loan Facility is secured by substantially all of

We also have approximately

$6,412,000 of indebtedness outstanding in the form of subordinated notes payable on July 1, 2026.

These notes are held by related parties,

specifically Michael N.

In addition, these regulations may impose liability for the cost of removal or remediation of certain hazardous substances released on

or in our facilities without regard to whether we knew of, or caused, the release of such substances.

Furthermore, we are required to

provide a place of employment that is free from recognized and preventable hazards that are likely to cause serious physical harm to

employees, provide notice to employees regarding the presence of hazardous chemicals and to train employees in the use of such substances.

Our operations require the use of chemicals and other materials for painting and cleaning that are classified under applicable laws as

hazardous chemicals and substances.

If we are found to be in violation of any of these rules, regulations or permits, we may be subject

to fines, remediation expenses and the obligation to change our business practice, any of which could result in substantial costs that

would adversely impact our business operations and financial condition.

may be subject to fines and disqualification for non-compliance with Federal Aviation Administration regulations.

are subject to regulation by the FAA under the provisions of the Federal Aviation Act of 1958, as amended.

The FAA prescribes standards

and licensing requirements for aircraft and aircraft components.

We are subject to inspections by the FAA and may be subjected to fines

and other penalties (including orders to cease production) for noncompliance with FAA regulations.

Our failure to comply with applicable

regulations could result in the termination of or our disqualification from some of our contracts, which could have a material adverse

effect on our operations.

We have never been subject to such fines or disqualification.

security attacks, internal system or service failures may adversely impact our business and operations.

system or service disruptions, including those caused by projects to improve our information technology systems, if not anticipated and

appropriately mitigated, could disrupt our business and impair our ability to effectively provide products and related services to our

customers and could have a material adverse effect on our business.

We could also be subject to systems failures, including network,

software or hardware failures, whether caused by us, third-party service providers, intruders or hackers, computer viruses, natural disasters,

power shortages or terrorist attacks.

Cyber security threats are evolving and include, but are not limited to, malicious software, unauthorized

attempts to gain access to sensitive, confidential or otherwise protected information related to us or our products, customers or suppliers,

or other acts that could lead to disruptions in our business.

Any such failures could cause loss of data and interruptions or delays

in our business, cause us to incur remediation costs or require us to pay ransom to a hacker which takes over our systems, or subject

us to claims and damage our reputation.

In addition, the failure or disruption of our communications or utilities could cause us to interrupt

or suspend our operations or otherwise adversely affect our business.

Although we utilize various procedures and controls to monitor

and mitigate the risk of these threats, there can be no assurance that these procedures and controls will be sufficient.

and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational

failure or disruption which would adversely affect our business, results of operations and financial condition.

Moreover, expenditures

incurred in implementing cyber security and other procedures and controls could adversely affect our results of operations and financial

acts and acts of war may seriously harm our business, results of operations and financial condition.

States and global responses to actual or potential military conflicts such as Russia’s invasion of Ukraine, terrorism, perceived

nuclear, biological and chemical threats and other global political crises increase uncertainties with respect to the U.S.

business and financial markets.

Several factors associated, directly or indirectly, with actual or potential military conflicts, terrorism,

perceived nuclear, biological and chemical and cyber threats, and other global political crises and responses thereto, may adversely

affect the mix of products purchased by defense departments in the United States or other countries to platforms not serviced by us.

A shift in defense budgets to product lines we do not produce could have a material adverse effect on our business, financial condition

and results of operations.

Related to Our Indebtedness

indebtedness may have a material adverse effect on our operations.

have substantial indebtedness under our loan facility with Webster (“Loan Facility”).

As of December 31, 2022, we had

approximately $18,748,000 of indebtedness outstanding under the Loan Facility.

All of our indebtedness under the Loan Facility is secured

by substantially all of our assets.

also have approximately $6,162,000 of indebtedness outstanding in the form of subordinated notes payable on July 1, 2026.

are held by related parties, specifically Michael N.

Taglich (our Chairman) and Robert F.

Taglich (a Director), and their affiliates.

Notes with a principal value

of approximately $2,732,000 carry an interest rate of 6% per annum and are convertible into approximately 1,821,000 shares of common stock

at a conversion price of $1.50 per share.

Notes with a principal value of approximately $2,080,000 carry an interest rate of 7% per annum

and are convertible into approximately 2,237,000 shares of common stock at a conversion price of $0.93 per share.

If we are unable to pay or

refinance the outstanding principal and accrued interest on these notes when due, our operations may be materially and adversely affected.

We may need to offer the holders of this debt increases in the rates of interest they receive or otherwise compensate them through payments

of cash or issuances of our equity securities.

Future financings or re-financings may involve the issuance of debt, equity and/or securities

convertible into or exercisable or exchangeable for our equity securities.

If we are able to consummate such financings or re-financings,

the terms of such financings may adversely affect the trading price of our common stock and the interests of our existing stockholders.

Any failure to obtain additional working capital when required would have a material adverse effect on our business and financial condition

and may result in a decline in our stock price.

Any issuances of our common stock, preferred stock, or securities such as warrants or

notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting and economic

interest of our existing stockholders.

Our leverage may adversely

affect our ability to finance future operations and capital needs, may limit our ability to pursue business opportunities and may make

our results of operations more susceptible to adverse economic conditions.

Our indebtedness may limit our ability to pay dividends in the

with a principal value of approximately $2,732,000 carry an interest rate of 6% per annum and are convertible into approximately 182,000

shares of common stock at a conversion price of $15.00 per share.

Notes with a principal value of approximately $2,080,000 carry an interest

rate of 7% per annum and are convertible into approximately 224,000 shares of common stock at a conversion price of $9.30 per share.

If we are unable to pay amounts due under our Loan Facility or the

subordinated notes when due, our operations may be materially and adversely affected.

We may need to offer the holders of this debt increases

in the rates of interest they receive or otherwise compensate them through payments of cash or issuances of our equity securities.

financings or re-financings may involve the issuance of debt, equity and/or securities convertible into or exercisable or exchangeable

for our equity securities.

If we are able to consummate such financings or re-financings, the terms of such financings may adversely affect

the trading price of our common stock and the interests of our existing stockholders.

Any failure to obtain additional working capital

when required would have a material adverse effect on our business and financial condition and may result in a decline in our stock price.

Any issuances of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or

exchangeable for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.

leverage may adversely affect our ability to finance future operations and capital needs, may limit our ability to pursue business opportunities

and may make our results of operations more susceptible to adverse economic conditions.

interest rate associated with portions of our current debt may increase.

Under the terms of the Webster Facility, amounts due to Webster bear

interest at a per annum rate equal to the greater of (i) 3.50% and (ii) a rate per annum equal to the rate per annum published from time

to time in the “Money Rates” table of the Wall Street Journal (or such other presentation within The Wall Street Journal as

may be adopted hereafter for such information) as the base or prime rate for corporate loans at the nation’s largest commercial

bank, less sixty-five hundredths (-0.65%) of one percent per annum.

Consequently, the rate of interest we paid under the Facility did

not increase despite the initial increases in the target rates set by the Federal Reserve, though the more recent increases have resulted

increases in the interest rate we pay under the Webster Facility.

The weighted average interest rate paid during the year-ended December

31, 2022 was 4.50%.

Given current interest rates, the interest rate we pay under the Webster Facility will increase as the Federal Reserve

continues to increase its target rate of interest.

In addition, under the terms of the Webster Facility we are required to maintain a

defined Fixed Charge Coverage Ratio of 1.25 to 1.00 at the end of each fiscal quarter.

If we were to fail to meet such covenant, Webster

would have the right to increase the rate of interest payable on amounts outstanding under the Facility.

The Company was in compliance

with the covenant at December 31, 2022.

The Company was in default of its covenant to provide its audited financial statements to Webster

bank within ninety (90) days of its fiscal year end.

The Company has subsequently received a waiver from the bank for this default.

increase in the rate of interest payable under the Webster Facility would increase our interest expense and have a material adverse impact

on our on our consolidated financial position and results of operations.

indebtedness may limit our ability to pay dividends in the future.

We currently do not pay dividends

1 unchanged sentence

In the future should we decide to pay dividends,

we would need to seek covenant changes under our Loan Facility.

There can be no assurance our lenders would agree to covenant changes

acceptable to us or at all.

In addition, we may in the future incur indebtedness or otherwise become subject to agreements whose terms

restrict our ability to pay dividends in the future.

Even if our lender would agree to allow us to pay a dividend, our Board of Directors

may choose to use the amount which could be paid as a dividend to reduce our outstanding indebtedness.

Risks Related to our common stock

The price of our common stock can fluctuate.

The financial markets have

been impacted in various ways by the reactions to the outbreak of the COVID-19 pandemic and government stimulus programs adopted in response

to the pandemic, and Russia’s invasion of Ukraine and government responses thereto.

The price of our common stock has and is expected

to continue to be volatile.

We cannot forecast with any certainty whether and to what degree the disruption caused by the COVID-19 pandemic,

Russia’s invasion of Ukraine and reactions thereto will continue to adversely impact financial markets and the impact to our common

Likewise, we cannot state with certainty the degree to which financial markets were supported by government stimulus programs and

whether such support will continue as governments elect not to adopt similar measures in the future.

The ownership of our common stock is highly

concentrated, and your interests may conflict with the interests of our existing stockholders.

Two of our directors, Michael

we would need to seek covenant changes or a waiver under our Loan Facility.

There can be no assurance our lenders would agree to covenant

changes or waivers acceptable to us or at all.

In addition, we may in the future incur indebtedness or otherwise become subject to agreements

whose terms restrict our ability to pay dividends in the future.

Even if our lender would agree to allow us to pay a dividend, our Board

of Directors may choose to use the amount which could be paid as a dividend to reduce our outstanding indebtedness.

Related to our common stock

price of our common stock can fluctuate.

financial markets have been impacted in various ways by the reactions to the outbreak of the COVID-19 pandemic and government stimulus

programs adopted in response to the pandemic, and Russia’s invasion of Ukraine and government responses thereto.

The price of our

common stock has and is expected to continue to be volatile.

We cannot forecast with any certainty whether and to what degree the disruption

caused by the COVID-19 pandemic, Russia’s invasion of Ukraine and reactions thereto will continue to adversely impact financial

markets and the impact to our common stock.

Likewise, we cannot state with certainty the degree to which financial markets were supported

by government stimulus programs and whether such support will continue as governments elect not to adopt similar measures in the future.

ownership of our common stock is highly concentrated, and your interests may conflict with the interests of our existing stockholders.

of our directors, Michael N.

Taglich and Robert F.

Taglich, and their affiliates own a significant number of shares of our outstanding common stock as well as a

significant amount of debt convertible into our common stock, which together with their position as directors of our Company, give them

significant influence over the outcome of corporate actions, including those requiring stockholder approval and the terms on which we

complete transactions with their affiliates.

The interests of these directors may be different from the interests of other stockholders

on these and other matters.

This concentration of ownership could also have the effect of delaying or preventing a change in our control

or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could reduce the price of our common

We can provide no assurance that our common

stock will continue to meet NYSE American listing requirements.

If we fail to comply with the continuing listing standards of the NYSE

American, our common stock could be delisted.

If we fail to satisfy the

continued listing requirements of the NYSE American, the NYSE American may take steps to delist our common stock.

The delisting of our

common stock would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase common

stock when you wish to do so.

There is only a limited public market for our common stock.

Our common stock is listed

on the NYSE American.

However, trading volume has been limited and a more active public market for our common stock may not develop or

be sustained over time.

The lack of a robust market may impair a stockholder’s ability to sell shares of our common stock.

absence of a more active trading market, any attempt to sell a substantial number of our shares could result in a decrease in the price

of our stock.

Specifically, you may not be able to resell your shares of common stock at or above the price you paid for such shares or

Moreover, sales of our common

stock in the public market, or the perception that such sales could occur, could negatively impact the price of our common stock.

result, you may not be able to sell your shares of our common stock in short time periods, or possibly at all, and the price per share

of our common stock may fluctuate significantly.

If we fail to meet the expectations of securities analysts or

investors, our stock price could decline significantly.

Our quarterly and annual operating

results fluctuate significantly due to a variety of factors, some of which are outside our control.

Accordingly, we believe period-to-period

comparisons of our results of operations are not meaningful and should not be relied upon as indications of future performance.

the factors that could cause quarterly or annual operating results to fluctuate include conditions inherent in government contracting

and our business such as the timing of cost and expense recognition for contracts, the United States Government contracting and budget

cycles, introduction of new government regulations and standards, contract closeouts, variations in manufacturing efficiencies, our ability

to obtain components and subassemblies from contract manufacturers and suppliers, general economic conditions and economic conditions

specific to the defense market and disruptions caused by global events such as COVID-19 and Russia’s invasion of Ukraine.

we base our operating expenses on anticipated revenue trends and a high percentage of our expenses are fixed in the short term, any delay

in generating or recognizing forecasted revenues could significantly harm our business.

Fluctuations in quarterly

results or announcements of extraordinary events such as an award of a new contract, acquisitions or litigation, may cause earnings to

fall below the expectations of securities analysts and investors.

In this event, the trading price of our common stock could significantly

These fluctuations, as well as general economic and market conditions, may adversely affect the future market price of our common

stock, as well as our overall operating results.

Consequently, our share price may experience significant volatility and may not necessarily

reflect the value of our expected performance.

Future financings or acquisitions may adversely affect the market

price of our common stock.

Future sales or issuances

of our common stock, including upon conversion of our outstanding convertible notes, upon exercise of our outstanding warrants and options,

or as part of future financings or acquisitions, would be substantially dilutive to the outstanding shares of common stock.

or potential dilution may cause our stockholders to sell their shares, which would contribute to a downward movement in the price of common

We incur significant costs as a result of

operating as a public company, and our management is required to devote substantial time to compliance requirements, including establishing

and maintaining internal controls over financial reporting, and we may be exposed to potential risks if we are unable to comply with these

requirements.

As a public company, we incur

significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules implemented by the Securities

and Exchange Commission and applicable market regulators.

These rules impose various requirements on public companies, including requiring

certain corporate governance practices.

Our management and other personnel will need to devote a substantial amount of time to these requirements.

Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming

and costlier.

The Sarbanes-Oxley Act, among

other things, requires that we maintain effective internal controls for financial reporting and disclosure controls and procedures.

particular, we must perform system and process evaluations and testing of our internal controls over financial reporting to allow management

to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act.

Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant management efforts.

may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses.

In the event we identify

significant deficiencies or material weaknesses in our internal controls that we cannot remediate in a timely manner, the market price

of our stock could decline if investors and others lose confidence in the reliability of our financial statements and we could be subject

to sanctions or investigations by the SEC or other applicable regulatory authorities.

Taglich, and their affiliates own a significant number of shares of our outstanding

common stock as well as a significant amount of debt convertible into our common stock, which together with their position as directors

of our Company, give them significant influence over the outcome of corporate actions, including those requiring stockholder approval

and the terms on which we complete transactions with their affiliates.

The interests of these directors may be different from the interests

of other stockholders on these and other matters.

This concentration of ownership could also have the effect of delaying or preventing

a change in our control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which in turn could reduce

the price of our common stock.

can provide no assurance that our common stock will continue to meet NYSE American listing requirements.

If we fail to comply with the

continuing listing standards of the NYSE American, our common stock could be delisted.

we fail to satisfy the continued listing requirements of the NYSE American, the NYSE American may take steps to delist our common stock.

The delisting of our common stock would likely have a negative effect on the price of our common stock and would impair your ability

to sell or purchase common stock when you wish to do so.

is only a limited public market for our common stock.

common stock is listed on the NYSE American.

However, there is only a limited number of our shares available in the public float and

the market capitalization of the shares in our public float is relatively small.

The trading volume for our common stock has been limited

and a more active public market for our common stock may not develop or be sustained over time.

The lack of a robust market may impair

a stockholder’s ability to sell shares of our common stock.

In the absence of a more active trading market, any attempt to sell

our shares could result in a decrease in the price of our stock.

Specifically, you may not be able to resell your shares of common stock

at or above the price you paid for such shares or at all.

sales of our common stock in the public market, or the perception that such sales could occur, could negatively impact the price of our

common stock.

As a result, you may not be able to sell your shares of our common stock in short time periods, or possibly at all, and

the price per share of our common stock may fluctuate significantly.

we fail to meet the expectations of securities analysts or investors, our stock price could decline significantly.

quarterly and annual operating results fluctuate significantly due to a variety of factors, some of which are outside our control.

we believe period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indications

of future performance.

Some of the factors that could cause quarterly or annual operating results to fluctuate include conditions inherent

in government contracting and our business such as the timing of cost and expense recognition for contracts, the United States Government

contracting and budget cycles, introduction of new government regulations and standards, contract closeouts, variations in manufacturing

efficiencies, our ability to obtain components and subassemblies from contract manufacturers and suppliers, general economic conditions

and economic conditions specific to the defense market and disruptions caused by global events such as COVID-19 and Russia’s invasion

Because we base our operating expenses on anticipated revenue trends and a high percentage of our expenses are fixed in the

short term, any delay in generating or recognizing forecasted revenues could significantly harm our business.

in quarterly results or announcements of extraordinary events such as an award of a new contract, acquisitions or litigation, may cause

earnings to fall below the expectations of securities analysts and investors.

In this event, the trading price of our common stock could

significantly decline.

These fluctuations, as well as general economic and market conditions, may adversely affect the future market

price of our common stock, as well as our overall operating results.

Consequently, our share price may experience significant volatility

and may not necessarily reflect the value of our expected performance.

financings or acquisitions may adversely affect the market price of our common stock.

sales or issuances of our common stock, including upon conversion of our outstanding convertible notes, upon exercise of our outstanding

warrants and options, or as part of future financings or acquisitions, would be substantially dilutive to the outstanding shares of common

Any dilution or potential dilution may cause our stockholders to sell their shares, which would contribute to a downward movement

in the price of common stock.

incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance

requirements, including establishing and maintaining internal controls over financial reporting, and we may be exposed to potential risks

if we are unable to comply with these requirements.

a public company, we incur significant legal, accounting and other expenses under the Sarbanes-Oxley Act of 2002, together with rules

implemented by the Securities and Exchange Commission and applicable market regulators.

These rules impose various requirements on public

companies, including requiring certain corporate governance practices.

Our management and other personnel will need to devote a substantial

amount of time to these requirements.

Moreover, these rules and regulations will increase our legal and financial compliance costs and

will make some activities more time-consuming and costlier.

Sarbanes-Oxley Act, among other things, requires that we maintain effective internal controls for financial reporting and disclosure

controls and procedures.

In particular, we must perform system and process evaluations and testing of our internal controls over financial

reporting to allow management to report on the effectiveness of our internal controls over financial reporting, as required by Section

404 of the Sarbanes-Oxley Act.

Compliance with Section 404 may require that we incur substantial accounting expenses and expend significant

management efforts.

Our testing may reveal deficiencies in our internal controls over financial reporting that are deemed to be material

In the event we identify significant deficiencies or material weaknesses in our internal controls that we cannot remediate

in a timely manner, the market price of our stock could decline if investors and others lose confidence in the reliability of our financial

statements and we could be subject to sanctions or investigations by the SEC or other applicable regulatory authorities.

we are unable to effectively maintain a system of internal control over financial reporting, we may not be able to accurately or timely

report our financial results and our stock price could be adversely affected.

management determined that as of December 31, 2022, our disclosure controls and procedures and internal control over financial reporting

were not effective due to certain material weaknesses in our internal control over financial reporting related to our review controls

related to the preparation of our income tax provision, appropriate segregation of duties with respect to and validation of data produced

by certain portions of our financial IT systems and the establishment of appropriate inventory reserves.

Any failure to maintain our

controls or operation of these controls, could harm our operations, decrease the reliability of our financial reporting, and cause us

to fail to meet our financial reporting obligations, which could adversely affect our business and reduce our stock price.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors