What changed in this filing

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Item 1A. Risk Factors

2024-04-08 compared with 2023-04-14 · 105 added, 179 removed, 333 unchanged (46% of the section changed)

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Government, if our reputation

or relationship with individual federal agencies were impaired, whether due to the recent restatements and errors in our financial

statements or otherwise, or if the U.S.

Government otherwise ceased doing business with us or significantly decreased the amount

of business it does with us, our business, prospects, financial condition, and operating results would be materially adversely

or relationship with individual federal agencies were impaired, or if the U.S.

Government otherwise ceased doing business with

us or significantly decreased the amount of business it does with us, our business, prospects, financial condition, and operating

results would be materially adversely affected.

face risks relating to government contracts.

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Appropriations are driven by numerous factors, including geopolitical events, macroeconomic conditions, the ability

Government to enact relevant legislation, such as appropriations bills and continuing resolutions, and the threat

or existence of a government shutdown.

Government appropriations for our programs and for defense spending generally may

be impacted or delayed by the COVID-19 pandemic as governmental priorities and finances change.

We cannot predict the extent to

which total funding and/or funding for individual programs will be included, increased or reduced in budgets approved by

Congress or be included in the scope of separate supplemental appropriations.

In the event that appropriations for any of

our programs becomes unavailable, or is reduced or delayed, our contract or subcontract under such program may be terminated or

adjusted by the U.S.

Government, which could have a material adverse effect on our future sales under such program, and on

our financial position, results of operations and cash flows.

Government to enact relevant legislation, such as appropriations bills and continuing resolutions, the threat or existence

of a government shutdown and potential downgrades of the United States’ credit rating, and risks relating to the upcoming

presidential election.

We cannot predict the extent to which total funding and/or funding for individual programs will be

included, increased or reduced in budgets approved by Congress or be included in the scope of separate supplemental appropriations.

the event that appropriations for any of our programs becomes unavailable, or is reduced or delayed, our contract or subcontract

under such program may be terminated or adjusted by the U.S.

Government, which could have a material adverse effect on our

future sales under such program, and on our financial position, results of operations and cash flows.

also cannot predict the impact of potential changes in priorities due to military transformation and planning and/or the nature

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In the bidding process, we face the following risks:

we must bid on programs

in advance of their completion, which may result in unforeseen technological difficulties or cost overruns;

we must devote substantial

time and effort to prepare bids and proposals for competitively awarded contracts that may not be awarded to us;

awarded contracts

may not generate sales sufficient to result in profitability.

must bid on programs in advance of their completion, which may result in unforeseen technological

difficulties or cost overruns;

must devote substantial time and effort to prepare bids and proposals for competitively

awarded contracts that may not be awarded to us;

contracts may not generate sales sufficient to result in profitability.

consolidation in the aerospace industry could adversely affect our business and financial results.

aerospace and defense industry has experienced significant consolidation, including among our customers, competitors, and suppliers.

While we believe we have positioned our Company to take advantage of opportunities to market to a broad customer base, which we

believe will reduce the potential impact of industry consolidation, there can be no assurance that industry consolidation will

not impact our business.

Consolidation among our customers may result in delays in the awarding of new contracts and losses of

existing business.

Consolidation among our competitors may result in larger competitors with greater resources and market share,

which could adversely affect our ability to compete successfully.

Consolidation among our suppliers may result in fewer sources

of supply and increased costs to us.

A&D industry has experienced significant consolidation, including among our customers, competitors, and suppliers.

believe we have positioned our Company to take advantage of opportunities to market to a broad customer base, which we believe

will reduce the potential impact of industry consolidation, there can be no assurance that industry consolidation will not impact

our business.

Consolidation among our customers may result in delays in the awarding of new contracts and losses of existing business.

Consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely

affect our ability to compete successfully.

Consolidation among our suppliers may result in fewer sources of supply and increased

depend upon a select base of large prime defense contractors for the majority of our revenue, which subjects us to unique risks

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Our revenues from these customers are diversified over several

different aerospace and defense products, programs, and subsidiaries within these customers, however, any significant change in

production rates by any of these customers would have a material effect on our results of operations and cash flows.

no assurance that our current significant customers will continue to buy products from us at current levels, that we will retain

any or all our existing significant customers, or that we will be able to form new relationships with other customers upon the

loss of one or more of our existing significant customers.

different A&D products, programs, and subsidiaries within these customers, however, any significant change in production rates

by any of these customers would have a material effect on our results of operations and cash flows.

There is no assurance that

our current significant customers will continue to buy products from us at current levels, that we will retain any or all our

existing significant customers, or that we will be able to form new relationships with other customers upon the loss of one or

more of our existing significant customers.

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

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customers’ needs and may have a material adverse effect upon our profitability.

For example, the COVID-19 pandemic has impacted,

and continues to impact, our supply chain, as described below.

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

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Cancellations of pending

contracts or terminations or reductions of contracts in progress would have a material adverse effect on our business, prospects,

contracts or terminations or reductions of contracts in progress could have a material adverse effect on our business, prospects,

financial condition, or results of operations.

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are subject to the cyclical nature of the commercial aerospace industry, and any future downturn in the commercial aerospace industry

or general economic conditions, including related to COVID-19 and inflation could adversely impact the demand for our products.

or general economic conditions, including inflation could adversely impact the demand for our products.

business may be affected by certain characteristics and trends of the commercial aerospace industry or general economic conditions

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and the resultant impacts

on the supply chain, the labor market and the general economy, as well as persistent or new impacts related to COVID-19 as referred

to elsewhere in this Annual Report on Form 10-K, fluctuations in the aerospace industry’s business cycle, varying fuel and

labor costs, intense price competition and regulatory scrutiny, certain trends, including a possible decrease in aviation activity

and a decrease in outsourcing by aircraft manufacturers, or the failure of projected market growth to materialize or continue.

If these characteristics and trends adversely affect customers in the commercial aerospace industry, they may reduce the overall

demand for our products.

on the supply chain, the labor market and the general economy, as well as fluctuations in the aerospace industry’s business

cycle, varying fuel and labor costs, intense price competition and regulatory scrutiny, certain trends, including a possible decrease

in aviation activity and a decrease in outsourcing by aircraft manufacturers, or the failure of projected market growth to materialize

If these characteristics and trends adversely affect customers in the commercial aerospace industry, they may reduce

the overall demand for our products.

working capital requirements may negatively affect our liquidity and capital resources.

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as may be required under a specific contract.

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

security attacks, internal system or service failures and technological changes, including the use of machine learning and generative

artificial intelligence, 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

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Our property and business interruption insurance may be inadequate to compensate us for all losses that may

occur because of any system or operational failure or disruption which would adversely affect our business, results of operations,

occur because of any system or operational failure or disruption which could adversely affect our business, results of operations,

and financial condition.

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an “ownership change”.

of December 31, 2022, we had approximately $88.3 million of gross net operating losses (“NOLs”) for federal tax purposes

and approximately $25.0 million of post-apportionment NOLs for state tax purposes.

As a result of the Tax Cuts and Jobs Act of

2017 and the Coronavirus Aid, Relief, and Economic Security Act of 2020, NOLs arising before January 1, 2018, and NOLs arising

after January 1, 2018, are subject to different rules.

Our pre-2018 NOLs totaled approximately $78.9 million;

these NOLs will

expire in varying amounts from 2034 through 2039, if not utilized, and can offset 100% of future taxable income for regular tax

Our NOLs arising in 2018, 2019 and 2020 can generally be carried back five years, carried forward indefinitely and can

offset 100% of taxable income for tax years before January 1, 2021 and up to 80% of taxable income for tax years after December

Any NOLs arising on or after January 1, 2021, cannot be carried back, can generally be carried forward indefinitely

and can offset up to 80% of future taxable income.

As of December 31, 2023, we had approximately

$74.7 million of gross net operating losses (“NOLs”) for federal tax purposes and approximately $17.3 million of post-apportionment

NOLs for state tax purposes.

As a result of the Tax Cuts and Jobs Act of 2017 and the Coronavirus Aid, Relief, and Economic Security Act

of 2020, NOLs arising before January 1, 2018, and NOLs arising after January 1, 2018, are subject to different rules.

Our pre-2018 NOLs

totaled approximately $60.3 million;

these NOLs will expire in varying amounts from 2034 through 2039, if not utilized, and can offset

100% of future taxable income for regular tax purposes.

Our NOLs arising in 2018, 2019 and 2020 can generally be carried back five years,

carried forward indefinitely and can offset 100% of taxable income for tax years before January 1, 2021 and up to 80% of taxable income

for tax years after December 31, 2020.

Any NOLs arising on or after January 1, 2021, cannot be carried back, can generally be carried

forward indefinitely and can offset up to 80% of future taxable income.

ability to fully recognize the benefits from our NOLs is dependent upon our ability to generate sufficient income prior to their

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relevant lookback period.

The Company has completed a Section 382 analysis for the year ended December 31, 2022, and believes

that no ownership change occurred during the relevant lookback period that would limit our ability to use our NOLs.

The Company completed a Section 382 analysis for the year ended December 31, 2022, and believes that

no ownership change occurred during the relevant lookback period through December 31, 2023 that would limit our ability to use

liability claims in excess of insurance could adversely affect our financial results and financial condition .

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and cash flows.

scrutiny from investors, lenders, and other market participants regarding our environmental, social, and governance, or sustainability

responsibilities could expose us to additional costs and adversely impact our liquidity, results of operations, reputation, employee

retention, and stock price.

scrutiny from investors, lenders, regulators and other market participants regarding our environmental, social, governance, sustainability

or climate responsibilities could expose us to additional costs and adversely impact our liquidity, results of operations, reputation,

employee retention, and stock price.

is an increasing focus from certain investors, customers, and other key stakeholders concerning corporate responsibility, specifically

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(“BankUnited”) for the quarter ended March 31, 2022,

the year ended December 31, 2021, and the quarter ended March 31, 2022, and financial statement submission covenants for the quarters

ended March 31, 2021, June 30, 2021, and September 30, 2021, the year ended December 31, 2021, and the quarters ended March 31,

2022 and June 30, 2022 and obtained amendments to and received waivers of and consents to the non-compliance, as described in

more detail in Note 8 to our consolidated financial statements included in Part II Item 8 of this Annual Report on Form 10-K.

There can be no assurance that we will be in compliance with our covenants in the future or that BankUnited will grant further

waivers if we fall out of compliance or consents to future non-compliance.

If we fall out of compliance with our banking covenants,

BankUnited may declare a default under the BankUnited Facility and, among other remedies, could declare the full amount of the

BankUnited Facility immediately due and payable and could foreclose against our collateral.

If this were to occur, we may

be unable to secure outside financing, if needed, to fund ongoing operations and for other capital needs.

Any sources of financing

that may be available to us could also be at higher costs and require us to satisfy more restrictive covenants, which could limit

or restrict our operations, cash flows, and earnings.

We cannot ensure that additional financing would be available to us or be

sufficient or available on satisfactory terms.

and financial statement submission covenants for the quarters ended March 31, 2022 and June 30, 2022 and obtained amendments to

and received waivers of and consents to the non-compliance, as described in more detail in Note 8 to our consolidated financial

statements included in Part II Item 8 of this Annual Report on Form 10-K.

There can be no assurance that we will be in compliance

with our covenants in the future or that BankUnited will grant further waivers if we fall out of compliance or consents to future

non-compliance.

If we fall out of compliance with our banking covenants, BankUnited may declare a default under the BankUnited

Facility and, among other remedies, could declare the full amount of the BankUnited Facility immediately due and payable and could

foreclose against our collateral.

If this were to occur, we may be unable to secure outside financing, if needed, to fund

ongoing operations and for other capital needs.

Any sources of financing that may be available to us could also be at higher costs

and require us to satisfy more restrictive covenants, which could limit or restrict our operations, cash flows, and earnings.

We cannot ensure that additional financing would be available to us or be sufficient or available on satisfactory terms.

capital requirements, liquidity and financial condition raise significant risks as to our ability to continue as a going concern .

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central banks, such as the U.S.

Federal Reserve, effected multiple interest rate increases in 2022 and have implemented and signaled

that further rate increases are likely to be implemented in 2023.

Increases in interest rates increase our cost of borrowing and/or

potentially make it more difficult to refinance our existing indebtedness.

Related to the Restatement of our Prior Period Consolidated Financial Statements and Material Weaknesses in our Internal Control

restated our consolidated financial statements for the nine months ended September 30, 2018 and the years ended December 31, 2018,

2019, and 2020.

These restatements have affected and may continue to affect investor confidence, our stock price, our ability

to raise capital in the future, and our reputation with our customers, have resulted and may continue to result in stockholder

litigation and may reduce customer confidence in our ability to complete new contract opportunities.

February 2019, we filed an amended Quarterly Report on Form 10-Q/A for the nine months ended September 30, 2018, which included

a restatement of our financial statements for the period then ended.

The restatement of such financial statements corrected an

overstatement of revenue in such period due to the miscoding of an invoice in the Company’s records (the “Coding Error”).

In August 2020, we filed an Annual Report on Form 10-K for the year ended December 31, 2019, which included a restatement of our

financial statements for the year ended December 31, 2018 to correct certain errors relating to our recognition of revenue, which

errors resulted from an incorrect application of U.S.

GAAP (the “Revenue Recognition Error”).

In November 2021, we

filed a comprehensive Form 10-K/A (the “Comprehensive Form 10-K/A”) which included a restatement of our (i) consolidated

balance sheet as of December 31, 2020 and December 31, 2019, and the related consolidated statements of operations, cash flows,

and shareholders’ deficit for the years ended December 31, 2020 and December 31, 2019, and (ii) consolidated balance sheets

and statements of shareholders’ deficit as of March 31, 2020, June 30, 2020, and September 30, 2020, the related consolidated

statements of operations for the three months ended March 31, 2020, the three and six months ended June 30, 2020, and the three

and nine months ended September 30, 2020, and the consolidated statements of cash flows for the three, six, and nine month periods

ended March 31, 2020, June 30, 2020, and September 30, 2020, respectively, and related disclosures to correct errors in such financial

statements relating to the recording and reporting of inventory costing and related internal controls (the “Inventory Costing

Errors”) and resulting deficiencies in reserves (the “Insufficient Reserves”).

The Inventory Costing Errors

resulted from software processing and coding errors, inconsistent units of measure being used for quantities ordered and quantities

received of certain purchased parts, incorrect accruals to accounting periods of the cost of certain goods received, and the Company

not having a procedure to address over or under absorbed overhead costs at the end of accounting periods.

The Insufficient Reserves

resulted from insufficient inventory reserves and provisions for loss contracts.

The existence of the Coding Error, Revenue Recognition

Error, the Inventory Costing Errors, and the Insufficient Reserves, along with the related restatements, have had and may continue

to have the effect of eroding investor confidence in the Company and our financial reporting and accounting practices and processes,

have negatively impacted and may continue to negatively impact the trading price of our common stock, have resulted and may continue

to result in stockholder litigation, may make it more difficult for us to raise capital on acceptable terms, if at all, and may

negatively impact our reputation with our customers and cause customers to place new orders with other companies.

have identified material weaknesses in our internal control over financial reporting which did and could continue to adversely

affect our ability to report our financial condition and results of operations in a timely and accurate manner.

described in Item 9A of this Annual Report on Form 10-K, we identified material weaknesses in our internal control over financial

The occurrence of any future errors, misstatements, or failures in internal control may also cause us to fail to meet

reporting obligations, negatively affect investor and customer confidence in our management and the accuracy of our financial

statements and disclosures, result in events of default under our banking agreements, or result in adverse publicity and concerns

from investors and customers, any of which could have a negative effect on the price of our common stock, subject us to regulatory

investigations and penalties or additional stockholder litigation, and have a material adverse impact on our business and financial

face litigation relating to the Revenue Recognition Error .

Company and certain of our current and former executive officers and directors are defendants in litigation arising out of the

Revenue Recognition Error in and restatements of our financial statements for the year ended December 31, 2018, and quarters ended

March 31, 2018, June 30, 2018, September 30, 2018, March 31, 2019, June 30, 2019, and September 30, 2019.

Please see Part I, Item

3, Legal Proceedings.

These proceedings may result in significant expenses and the diversion of management attention from our

We cannot ensure that additional litigation or other claims by shareholders will not be brought in the future arising

out of the same subject matter.

are currently ineligible to file a registration statement on Form S-3 to register the offer and sale of securities, which could

adversely affect our ability to raise future capital.

did not file our Quarterly Reports for the three months ended March 31, 2021, June 30, 2021, and September 30, 2021, our 2021

Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for the three months ended March 31, 2022 (the “2022 Q1 Form

10-Q”), and our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2022 (the “2022 Q2 Form

10-Q”) within the timeframes required by the SEC.

We regained status as a current filer when we filed the 2022 Q2 Form 10-Q

and have filed subsequent periodic reports on a timely basis.

However, we will not be considered a timely filer and will not be

eligible to file a short-form registration statement on Form S-3 to register the offer and sale of our securities until September

29, 2023 (twelve full calendar months from the date we regain status as a current filer).

If we wish to register the offer and

sale of our securities to the public prior to such time, we will be required to use the long-form registration statement, Form

S-1, which may increase both our transaction costs and the amount of time required to complete the transaction.

This may adversely

affect our ability to raise funds if we choose to do so.

Federal Reserve, effected multiple interest rate increases in 2022 and 2023.

Increases in interest

rates increase our cost of borrowing and/or potentially make it more difficult to refinance our existing indebtedness.

We have identified material weaknesses in our internal control

over financial reporting over a number of years which adversely affected our ability to report our financial condition and results of

operations in a timely and accurate manner.

The material weaknesses led to multiple restatements of our consolidated financial statements.

The material weaknesses and restatements have resulted in our failure to meet SEC reporting obligations, affected and may continue to

affect investor confidence, our stock price and our ability to raise capital in the future, and have resulted and may continue to result

in stockholder litigation.

We have reported material weaknesses in

internal control over financial reporting and did not maintain effective disclosure controls and procedures for reporting periods

from 2018 through September 2023.

The material weaknesses led to our restatement of our consolidated financial statements for the

nine months ended September 30, 2018 and the years ended December 31, 2018, 2019 and 2020.

Although these material weaknesses have

been remediated as of December 31, 2023, these material weaknesses and restatements have affected investor confidence, our stock

price, and resulted in the past in our failure to meet various SEC reporting requirements and stockholder litigation.

As described in Item 9A of this Annual Report

on Form 10-K, we identified a material weakness in our internal control over financial reporting of income taxes, which led to the restatement

within Note 11 “Income Taxes” of the financial statements within this Annual Report on Form 10-K the Company’s December

31, 2022 deferred tax assets and deferred tax liabilities balances.

The Company is in the process of remediating this material weakness.

If a future failure in internal control should

occur, it may cause us to fail to meet SEC reporting obligations, negatively affect the accuracy of our financial statements and disclosures,

investor and customer confidence, our ability to raise capital in the future and result in events of default under our banking agreement,

any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties and

additional stockholder litigation, and have a material adverse impact on our business and financial condition.

Related to Global Events

impact of the coronavirus (COVID-19) pandemic on our operations, supply chain, and customers has impacted and could continue to

have a material adverse effect on our business, financial position, results of operations and/or cash flows.

March 11, 2020, the World Health Organization announced that COVID-19 infections had become a pandemic, and on March 13, 2020,

President announced a National Emergency relating to the disease.

Federal, state, and local government responses to COVID-19

and our responses to the outbreak have all, at times, disrupted and will likely continue to disrupt our business, the business

of our customers and our supply chain.

Even as efforts to contain the pandemic have made progress and many restrictions have relaxed,

new variants of the virus have arisen globally.

At times, variants of COVID-19 have caused a surge in COVID-19 cases.

impact of new variants that have emerged or could emerge from time to time, cannot be predicted at this time, and could depend

on numerous factors, including the availability of vaccines, vaccination rates among the population, the effectiveness of COVID-19

vaccines, and the responses by governmental bodies to impose or reinstate restrictive measures from time to time.

Any detrimental

impacts of COVID-19 could materially increase our costs, negatively impact our sales, or damage the Company’s financial

condition, results of operations, cash flows and its liquidity position, possibly to a significant degree.

The duration of any

such impacts cannot be predicted because of the sweeping, on-going and uncertain nature of the circumstances involving the COVID-19

pandemic and the differing effects and responses to the pandemic by various governmental entities in the regions and countries

in which we operate.

Russian invasion of Ukraine in 2022 and the retaliatory measures imposed by the U.S., United Kingdom, European Union and other

ongoing war between Russia and Ukraine, and the retaliatory measures imposed by the U.S., United Kingdom, European Union and other

countries and the responses of Russia to such measures have caused significant disruptions to domestic and foreign economies.

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

conflict between Israel and Hamas, rising tensions between China and Taiwan, the ongoing war between Russia and Ukraine, and terrorist

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

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condition and results of operations.

reading the 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 and terrorist acts.

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