What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-07 compared with 2025-05-13 · 134 added, 192 removed, 342 unchanged (49% of the section changed)

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Forward-looking statements also include other passages that are relevant to expected future events, performances, and actions or that can only be fully evaluated by events that will occur in the future.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements.

Forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected

in the forward-looking statements.

Risks and uncertainties that might cause such differences include, but are not limited to those outlined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Risks and Uncertainties that May Affect Future Results.” Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management’s opinions only as of the date hereof.

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Our domestic and international production capability provides our customers with benefits of improved supply-chain management, reduced inventories, lower transportation costs, and reduced product fulfillment time.

We continue to make investments in all of our operating facilities to give us the production capacity, capabilities and logistical advantages to continue to win new business.

We continue to make investments in our operating facilities to give us the production capacity, capabilities and logistical advantages to continue to win new business.

The following information should be read in conjunction with the consolidated financial statements included herein and with Part II Item 1A, Risk Factors included as part of this filing.

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Executive Summary

During the third quarter of fiscal year 2025, we won new programs involving telecommunications, pest control, energy storage, medical technology, and temperature controlled shipping solutions.

We reported net sales of $112.0 million, down 21.4 percent from $142.4 million in the same period of fiscal year 2024 .

Net sales in the third quarter of fiscal year 2025 were adversely impacted by the worldwide economic disruptions and uncertainty caused by the recent escalation and fluctuations in global tariffs.

This resulted in delays, increased costs, and reduced demand from many customers.

Gross margin increased to 7.7 percent in the third quarter of fiscal year 2025, compared to 5.7 percent in the same period of the prior fiscal year.

The increase in gross margin is primarily attributed to benefits realized from reducing costs and strategic reductions in headcount over the past three quarters partially offset by increases as a result of the global tariff escalation and fluctuations.

Operating income (loss) as a percentage of net sales remained flat at (0.4) percent in the third quarter of fiscal year 2025 and (0.4) percent in the third quarter of fiscal year 2024.

The concentration of our top three customers’ net sales increased to 33.5 percent of total sales in the third quarter of fiscal year 2025 from 25.4 percent in the same period of the prior fiscal year.

During the first quarter of fiscal 2026, we won new programs in medical technology, industrial equipment, and recent cost reduction efforts continued to take hold, helping to drive improved gross margins.

We reported net sales of $98.8 million the first quarter of fiscal year 2026, down 24.9 percent from $131.6 million in the same period of fiscal year 2025 .

Net sales in the first quarter of fiscal year 2026 was adversely impacted by reductions in demand from one longstanding customer and delays to new program launches as we believe customers continue to face uncertainties in the global economy.

In addition, the Company started ramping a consigned materials program that was announced last quarter.

As this large program ramps, the Company anticipates less revenue when compared to traditional turnkey programs, but an increase in its gross margin.

Gross margin was 8.4 percent in the first quarter of fiscal year 2026, compared to 6.2 percent in the previous quarter and 10.1 percent in the same period of fiscal year 2025.

The sequential quarterly increase in gross margin is primarily related to operational efficiencies gained from the recent reductions in workforce.

The year-over-year decreases in gross margin in the first quarter of fiscal 2026 largely reflects reduced revenue, as well as inventory and receivable write-offs of approximately $1.6 million in the first quarter of fiscal 2026 due to a customer bankruptcy.

Operating margin for the first quarter of fiscal year 2026 was (0.6) percent, down from 3.4% for the same period of fiscal year 2025.

The concentration of our top three customers’ net sales decreased to 30.4 percent of total sales in the first quarter of fiscal year 2026 from 37.5 percent in the same period of the prior fiscal year.

As new customer programs ramp, we expect that concentration to our top three customers will decrease.

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In addition, our capacity and core competencies for printed circuit board assemblies, precision molding, sheet metal fabrication, tool making, assembly, and engineering can be applied to a wide variety of products.

Net loss for the third quarter of fiscal year 2025 was $0.6 million or $0.06 per diluted share, as compared to net loss of $2.2 million or $0.21 per diluted share for the third quarter of fiscal year 2024.

The year-over-year increase in earnings was a result of the factors discussed above, primarily increases in margins attributed to benefits realized from reducing costs and strategic reductions in headcount over the past three quarters.

Moving into the fourth quarter of fiscal year 2025, while we continue to see a favorable trend of contract manufacturing returning to North America, continued increases in Mexican wages, particularly along the US-Mexico border, and potential tariffs, have reduced the competitive advantage of Mexico-based manufacturing compared to U.S.-based manufacturing.

In response to this sustained and ongoing trend, the Company is restructuring its Juarez facility to focus on higher volume manufacturing, while lower volume products with higher service level requirements will migrate to our other sites.

This restructuring resulted in a significant headcount reduction starting in the third quarter of fiscal year 2024 with a follow on reduction in the third quarter of fiscal year 2025, and further reductions expected through the first quarter of fiscal year 2026.

Additionally, global logistics problems, the wars in Europe, China-U.S.

Net loss for the first quarter of fiscal year 2026 was $(2.3) million or $(0.21) per diluted share, as compared to net income of $1.1 million or $0.10 per diluted share for the first quarter of fiscal year 2025.

The year-over-year decrease in earnings was a result of the factors discussed above, primarily reduced revenue and balance sheet write-offs due to a customer bankruptcy

Moving into the second quarter of fiscal year 2026, we continue to see a favorable trend of contract manufacturing returning to North America, as well as continued increases in Mexican wages, and continued market uncertainty related to current and future potential tariffs.

In response to these sustained and ongoing trends, the Company is restructuring its Juarez facility to focus on higher volume manufacturing, while lower volume products with higher service level requirements will migrate to our

This restructuring resulted in a significant headcount reduction starting in the third quarter of fiscal year 2024 with a follow on reduction in the third quarter of fiscal year 2025, and smaller further reductions expected throughout fiscal year 2026.

Additionally, global logistics problems, China-U.S.

geopolitical tensions and related tariff increases may continue to drive Original Equipment Manufacturers (“OEMs”) to examine their traditional outsourcing strategies.

We believe these customers increasingly realize they have become overly dependent on their China-based contract manufacturers not only for products, but also for design and logistics services.

The decision to onshore or near shore production appears to be becoming more widely accepted as a smart long-term strategy.

The Company's international and domestic manufacturing footprint provides flexibility to respond to market conditions.

This is expected to help mitigate tariff implications and optimize pricing for customers.

As previously announced, the Company is also planning to significantly increase its production capacity in its Arkansas and Vietnam facilities in order to continue to benefit from the growing customer demand for rebalancing their contract manufacturing.

This expansion is also expected to help mitigate the adverse impact and uncertainties surrounding any current and potential tariffs on goods manufactured in China and Mexico.

As previously announced, the Company has increased its production capacity and capabilities in its Arkansas and Vietnam facilities in order to continue to benefit from this growing customer demand for rebalancing their contract manufacturing.

All of these changes to the Company's international and domestic manufacturing footprint and cost structure, provide flexibility to respond to market conditions.

We expect this will allow us to mitigate tariff implications and optimize pricing for our customers.

As a result, we see opportunities for growth moving forward.

We maintain a strong balance sheet with a current ratio of 2.7 and a debt-to-equity ratio of 0.9 as of March 29, 2025.

Total cash provided by operating activities as defined on our cash flow statement was $10.1 million for the nine months ended March 29, 2025.

We believe we maintain sufficient liquidity for our expected future operations and as of March 29, 2025, had $79.5 million in borrowings under our asset-based revolving credit facility with $20.4 million remaining available and $2.5 million of cash on hand.

We maintain a strong balance sheet with a current ratio of 2.4 and a debt-to-equity ratio of 0.9 as of September 27, 2025.

Total cash provided by operating activities as defined on our cash flow statement was $7.6 million for the three months ended September 27, 2025.

We believe we maintain sufficient liquidity for our expected future operations and as of September 27, 2025, had $64.5 million in borrowings under our asset-based revolving credit facility with $20.9 million remaining available and $1.1 million of cash on hand.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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RESULTS OF OPERATIONS

Comparison of the Three Months Ended March 29, 2025 with the Three Months Ended March 30, 2024

Comparison of the Three Months Ended September 27, 2025 with the Three Months Ended September 28, 2024

The financial information and discussion below should be read in conjunction with the Consolidated Financial Statements and Notes.

The following table sets forth certain information regarding the components of our condensed consolidated statements of operations for the three months ended March 29, 2025 as compared to the three months ended March 30, 2024.

The following table sets forth certain information regarding the components of our condensed consolidated statements of operations for the three months ended September 27, 2025 as compared to the three months ended September 28, 2024.

It is provided to assist in assessing differences in our overall performance (in thousands):

Three Months Ended

March 29, 2025 % of

net sales March 30, 2024 % of

September 27, 2025 % of

net sales September 28, 2024 % of

net sales $ change % point

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Income tax provision (benefit) (1,105) (1.1) % 57 — % (1,162) (1.1) %

Net (loss) $ (604) (0.5) % $ (2,221) (1.6) % $ 1,617 1.1 %

Net (loss) income $ (2,255) (2.3) % $ 1,124 0.9 % $ (3,379) (3.2) %

Effective income tax rate 32.9 % 4.8 %

Net sales of $112.0 million for the third quarter of fiscal year 2025 decreased by 21.4 percent as compared to net sales of $142.4 million for the third quarter of fiscal year 2024.

The $30.5 million decrease was primarily due to adverse impacts caused by the worldwide economic disruptions and uncertainty related to the recent escalation and fluctuations in global tariffs.

This resulted in delays, increased costs, and reduced demand from many customers.

Further contributing to this reduction is lowered demand from certain long-standing programs or sun-setting programs causing decreases in backlog throughout fiscal year 2025, which are not yet being offset by recent program wins that are either in the early stages or not fully ramped.

Gross profit as a percentage of net sales for the three months ended March 29, 2025 was 7.7 percent compared to 5.7 percent for the three months ended March 30, 2024.

The increase in gross margin is primarily attributed to benefits realized from reducing costs and strategic reductions in headcount that have occurred over the past three quarters.

Net sales of $98.8 million for the first quarter of fiscal year 2026 decreased by 24.9 percent as compared to net sales of $131.6 million for the first quarter of fiscal year 2025.

The $32.8 million decrease was primarily due to reductions in demand of approximately $23 million from two longstanding customers as well as approximately $7 million due to delays related to new program launches, as our customers face continued uncertainties in the global economy.

In addition, we started ramping a new manufacturing services contract with a large data processing OEM that consigns its material and components for new production in our Corinth, Mississippi manufacturing facility.

This program has the potential to ramp significantly during fiscal year 2026 and is estimated to grow over time to potentially exceed $20 million in annual revenue.

Gross profit as a percentage of net sales for the three months ended September 27, 2025 was 8.4 percent compared to 10.1 percent for the three months ended September 28, 2024.

The year-over-year decrease in gross margin in the first quarter of fiscal 2026 largely reflects reduced revenue, as well as inventory and receivable provisions of approximately $1.6 million in the first quarter of fiscal 2026 due to a customer bankruptcy.

The level of gross margin is additionally impacted by facility utilization, product mix, timing, severity and steepness of new program ramps, pricing within the electronics industry and material costs, which can fluctuate significantly from quarter to quarter.

Included in gross profit are charges related to reductions in the carrying value of our inventory due to obsolescence.

We did not record any significant impairment for obsolete inventory during the three months ended March 29, 2025 or March 30, 2024.

We adjust the carrying value for estimated obsolescence as necessary in an amount equal to the difference between the cost of inventory and its net realizable value based on assumptions as to future demand and market conditions.

We recorded an impairment of approximately $1.2 million and $0.3 million for obsolete inventory during the three months ended September 27, 2025 and September 28, 2024, respectively.

We adjust the carrying value for estimated obsolesc ence as necessary in an amount equal to the difference between the cost of inventory and its net realizable value based on assumptions as to future demand and market conditions.

The provisions are established for inventory that we have determined customers are not contractually responsible for and also inventory that we believe customers will be unable to purchase.

Operating Expenses

There were no significant changes to operating expenses during the third quarter of fiscal year 2025.

Total research, development, and engineering (“RD&E”) expenses were $2.3 million during the three months ended March 29, 2025 and $2.2 million during the three months ended March 30, 2024, respectively.

Total RD&E expenses as a percent of net sales were 2.1 percent during the three months ended March 29, 2025 and 1.6 percent during the three months ended March 30, 2024.

Total selling, general and administrative (“SG&A”) expenses were $6.8 million during the three months ended March 29, 2025 compared to $6.4 million for the three months ended March 30, 2024.

Total SG&A expenses as a percentage of net sales were 6.0 percent for the three months ended March 29, 2025 and 4.5 percent for the three months ended March 30, 2024.

These increases are attributable to increases in the estimated provision for credit losses.

Interest expense was $2.6 million during the three months ended March 29, 2025 and $2.8 million during the three months ended March 30, 2024.

This decrease is largely attributable to lower interest costs as a result of refinancing our debt with a new lender, as described in Note 4 of the “Notes to Consolidated Financial Statements.”

The effective tax rate for the three months ended March 29, 2025 was 80.1 percent compared to 34.2 percent for the three months ended March 30, 2024.

The increase was primarily due to federal research and development tax credits and permanent book-to-tax differences relative to the respective pretax income (or loss) amounts of each period.

For the three months ended March 30, 2024, the company departed from the annual effective tax rate method for determining interim income tax expense.

The existence of significant permanent book-to-tax differences in several jurisdictions, the impact of the tax holiday in Vietnam, and significant tax benefits related to federal research and development tax credits resulted in an inability to reliably estimate the annual effective tax rate applicable to projected full-year worldwide consolidated pre-tax income.

Accordingly, the company determined income tax expense for the quarter ended March 30, 2024, and the nine months ended March 30, 2024, based on actual year-to-date results.

There were no significant changes to operating expenses during the first quarter of fiscal year 2026.

Total research, development, and engineering (“RD&E”) expenses were $2.1 million during the three months ended September 27, 2025 and $2.3 million during the three months ended September 28, 2024, respectively.

Total RD&E expenses as a percent of net sales were 2.1 percent during the three months ended September 27, 2025 and 1.7 percent during the three months ended September 28, 2024.

Total selling, general and administrative (“SG&A”) expenses were $6.8 million during the three months ended September 27, 2025 compared to $6.6 million for the three months ended September 28, 2024.

Total SG&A expenses as a percentage of net sales were 6.8 percent for the three months ended September 27, 2025 and 5.0 percent for the three months ended September 28, 2024.

This increase in percentage is attributable to increases in the estimated provision for credit losses along with decreased revenues.

Interest expense was $2.8 million during the three months ended September 27, 2025 and $3.3 million during the three months ended September 28, 2024.

This decrease is largely attributable to lower interest costs as a result of refinancing our debt with a new lender, and a reduction in amounts borrowed, as described in Note 4 of the “Notes to Consolidated Financial Statements.”

The effective tax rate for the three months ended September 27, 2025 was 32.9 percent compared to 4.8 percent for the three months ended September 28, 2024.

The increase was primarily due to federal research and development tax credits and permanent book-to-tax differences, including new safe harbor transfer pricing adjustments in Mexico, relative to the respective pretax income (or loss) amounts of each period.

Our judgments regarding deferred tax assets and liabilities may change due to changes in market conditions, changes in estimates, changes in tax laws or other factors.

If assumptions and estimates change in the future, the deferred tax assets and liability will be adjusted accordingly and any increase or decrease will result in an additional deferred income tax expense or benefit in subsequent periods.

For further information on taxes see Note 5 - “Income Taxes” of the Notes to Consolidated Financial Statements.

Comparison of the Nine Months Ended March 29, 2025 with the Nine Months Ended March 30, 2024

The financial information and discussion below should be read in conjunction with the Consolidated Financial Statements and Notes.

The following table sets forth certain information regarding the components of our condensed consolidated statements of operations for the nine months ended March 29, 2025 as compared to the nine months ended March 30, 2024.

It is provided to assist in assessing differences in our overall performance (in thousands):

Nine Months Ended

March 29, 2025 % of

net sales March 30, 2024 % of

net sales $ change % point

Net sales $ 357,385 100.0 % $ 440,386 100.0 % $ (83,001) — %

Cost of sales 327,769 91.7 % 409,680 93.0 % (81,911) (1.3) %

Gross profit 29,616 8.3 % 30,706 7.0 % (1,090) 1.3 %

Research, development and engineering 6,917 1.9 % 6,233 1.4 % 684 0.5 %

Selling, general and administrative 19,835 5.6 % 18,263 4.1 % 1,572 1.5 %

Gain on insurance proceeds, net of losses — — % (431) (0.1) % 431 0.1 %

Total operating expenses 26,752 7.5 % 24,065 5.4 % 2,687 2.1 %

Operating income 2,864 0.8 % 6,641 1.5 % (3,777) (0.7) %

Interest expense, net 9,748 2.7 % 8,772 2.0 % 976 0.7 %

Income (loss) before income taxes (6,884) (1.9) % (2,131) (0.5) % (4,753) (1.4) %

Income tax provision (benefit) (2,490) (0.7) % (1,329) (0.3) % (1,161) (0.4) %

Net (loss) $ (4,394) (1.2) % $ (802) (0.2) % $ (3,592) (1.0) %

Effective income tax rate 36.2 % 62.4 %

Net sales of $357.4 million for the nine months ended March 29, 2025 decreased by 18.8 percent as compared to net sales of $440.4 million for the nine months ended March 30, 2024.

The $83.0 million decrease is due to a number of factors including adverse impacts from the worldwide economic disruptions and uncertainty caused by the recent escalation and fluctuations in global tariffs.

This resulted in delays, increased costs, and reduced demand from many customers.

In addition there have been other unexpected component shortages along with softening of demand from certain long-standing programs experienced throughout fiscal year 2025.

Finally, excess inventory and scrap sales decreased by approximately $44 million during the first three quarters of 2025 as certain large programs went end of life in 2024 and their final shipments of product, inventory, and any scrap were recorded at that time.

Gross profit as a percentage of net sales for the nine months ended March 29, 2025 was 8.3 percent compared to 7.0 percent for the nine months ended March 30, 2024.

These results were largely due to benefits realized from restructuring in the third quarter of fiscal year 2024 and a weakening of the Mexican Peso.

Included in gross profit are charges related to reductions in the carrying value of our inventory due to obsolescence.

We did not record any significant impairment for obsolete inventory during the nine months ended March 29, 2025 or March 30, 2024.

The provisions are established for inventory that we have determined customers are not contractually responsible for and also inventory that we believe customers will be unable to purchase.

Operating Expenses

There were no significant changes to operating expenses during the first nine months of fiscal year 2025 .

T otal research, development, and engineering (“RD&E”) expenses were $6.9 million during the nine months ended March 29, 2025 and $6.2 million during the nine months ended March 30, 2024, respectively.

Total RD&E expenses as a percent of net sales were 1.9 percent during the nine months ended March 29, 2025 and 1.4 percent during the nine months ended March 30, 2024.

Total selling, general and administrative (“SG&A”) expenses were $19.8 million during the nine months ended March 29, 2025 compared to $18.3 million for the nine months ended March 30, 2024.

Total SG&A expenses as a percentage of net sales were 5.6 percent for the nine months ended March 29, 2025 and 4.1 percent for the nine months ended March 30, 2024.

These increases are attributable to estimated provisions for credit losses, and indirect labor.

Interest expense was $9.75 million during the nine months ended March 29, 2025 and $8.8 million during the nine months ended March 30, 2024.

This increase is largely attributable to the write-off of approximately $1.0 million of unamortized loan fees related to refinancing our debt with a new lender in the second quarter of fiscal year 2025.

In connection with this refinancing, we expect our interest charges to decrease in future periods.

The effective tax rate for the nine months ended March 29, 2025 was 36.2 percent compared to 62.4 percent for the nine months ended March 30, 2024.

The decrease was primarily due to federal research and development tax credits and permanent book-to-tax differences relative to the respective pretax income (or loss) amounts of each period.

For the nine months ended March 30, 2024, the company departed from the annual effective tax rate method for determining interim income tax expense.

Accordingly, the company determined income tax expense for the quarter ended March 30, 2024, and the nine months ended March 30, 2024, based on actual year-to-date results.

For further information on taxes see Note 5 - “Income Taxes” of the Notes to Consolidated Financial Statements.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), we use certain non-GAAP financial measures, adjusted net loss and adjusted net loss per share, diluted.

We provide these non-GAAP financial measures because we believe they provide greater transparency related to our core operations and represent supplemental information used by management in its financial and operational decision making.

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Our non-GAAP financial measures may be different from those reported by other companies.

See the table below for reconciliations of adjusted net loss to the most directly comparable GAAP measure, which is GAAP net loss, and the computation of adjusted net loss per share, diluted.

Three Months Ended Nine Months Ended

(in thousands, except per share amounts) March 29, 2025 March 30, 2024 March 29, 2025 March 30, 2024

GAAP net loss $ (604) $ (2,221) $ (4,394) $ (802)

Gain on insurance proceeds (net of losses) — — — (431)

See the table below for reconciliations of adjusted net income (loss) to the most directly comparable GAAP measure, which is GAAP net income (loss), and the computation of adjusted net income (loss) per share, diluted.

Three Months Ended

(in thousands, except per share amounts) September 27, 2025 September 28, 2024

GAAP net income (loss) $ (2,255) $ 1,124

Severance expenses 1,212 2,027

Stock-based compensation expense 221 67

Write-off of unamortized loan fees — — 1,012 —

Income tax effect of non-GAAP adjustments (1) (287) (419)

Adjusted net loss:

Adjusted net income (loss):

$ (1,109) $ 2,799

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(1) Income tax effects are calculated using an effective tax rate of 20%, which approximates the effective statutory tax rate for the presented periods.

On March 29, 2025, we had an order backlog of approximately $138.1 million.

This compares with a backlog of approximately $275.8 million on March 30, 2024.

The decrease in order backlog is related to softening of demand for a number of our Mexico-based programs, partially offset by an increase in demand for our U.S.

based facilities.

We expect backlog to increase in the coming periods due to recent sizeable program wins.

On September 27, 2025, we had an order backlog of approximately $139.9 million.

This compares with a backlog of approximately $210.8 million on September 28, 2024.

The decrease in order backlog is primarily related to softening of demand for a number of existing programs.

We expect backlog to increase in the coming periods due to recent sizable program wins.

Order backlog consists of purchase orders received for products expected to be shipped within the next 12 months, although shipment dates are subject to change due to design modifications or changes in other customer requirements.

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Operating Cash Flow

Net cash provided by operating activities for the nine months ended March 29, 2025 was $10.1 million.

Net cash provided by operating activities was $6.1 million for the nine months ended March 30, 2024.

The $10.1 million of net cash provided by operating activities for the nine months ended March 29, 2025 was primarily related to $4.4 million in net loss for the period adjusted for $7.9 million of depreciation and amortization, a $5.8 million decrease in inventory, a $19.6 million decrease in accounts receivable, a $2.2 million decrease in contract assets partially offset by a $14.1 million decrease in accounts payable, a $7.3 million increase in other assets, a $0.4 million decrease in other liabilities, and a $0.7 million decrease in accrued compensation and vacation.

The $6.1 million of net cash provided by operating activities for the nine months ended March 30, 2024 was primarily related to $0.8 million in net loss for the period adjusted for $8.2 million of depreciation and amortization, a $22.8 million decrease in inventory, a $1.3 million decrease in contract assets, a $14.9 million decrease in accounts receivable partially offset by a $0.8 million decrease in other liabilities, a $1.5 million increase in other assets, a $33.7 million decrease in accounts payable, and a $2.4 million decrease in accrued compensation and vacation.

Net cash provided by operating activities for the three months ended September 27, 2025 was $7.6 million.

Net cash provided by operating activities was $9.9 million for the three months ended September 28, 2024.

The $7.6 million of net cash provided by operating activities for the three months ended September 27, 2025 was primarily related to $2.3 million in net loss for the period adjusted for $2.5 million of depreciation and amortization, a $14.7 million decrease in accounts receivable, and a $2.1 million increase in other liabilities partially offset by a $4.9 million increase in contract assets, a $2.7 million decrease in accounts payable, a $0.8 million increase in other assets, and a $1.3 million decrease in accrued compensation and vacation.

The $9.9 million of net cash provided by operating activities for the three months ended September 28, 2024 was primarily related to $1.1 million in net income for the period adjusted for $3.0 million of depreciation and amortization, a $9.0 million decrease in inventory, a $2.2 million increase in other liabilities, a $4.4 million increase in accounts payable, and a $0.4 million increase in accrued compensation and vacation partially offset by a $6.7 million increase in other assets, a $1.6 million increase in accounts receivable, and a $2.4 million increase in contract assets.

Accounts receivable fluctuates based on the timing of shipments, terms offered, and collections that occurred during the quarter.

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Investing Cash Flow

Cash used in investing activities was $3.0 million during the nine months ended March 29, 2025 as compared to cash used in investing activities of $1.0 million during the nine months ended March 30, 2024.

Our primary investing activities during the nine months ended March 29, 2025 and March 30, 2024, related to purchasing equipment to support increased production levels for new programs.

Cash used in investing activities was $3.2 million during the three months ended September 27, 2025 as compared to cash used in investing activities of $0.4 million during the three months ended September 28, 2024.

Our primary investing activities during the three months ended September 27, 2025 and September 28, 2024, related to purchasing equipment to support increased production levels for new programs.

Leases are often utilized when potential technical obsolescence and funding requirement advantages outweigh the benefits of equipment ownership.

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Financing Cash Flow

Cash used in financing activities was $9.4 million during the nine months ended March 29, 2025 as compared to $3.4 million used in financing activities in the same period of the previous fiscal year.

Our primary financing activities during the nine months ended March 29, 2025, and March 30, 2024, were borrowings and repayments under our asset-based revolving line of credit facility with Bank of Montreal, our Prior Credit Facility with Bank of America, and term loans.

Cash used in financing activities was $4.7 million during the three months ended September 27, 2025 as compared to $7.8 million used in financing activities in the same period of the previous fiscal year.

Our primary financing activities during the three months ended September 27, 2025, and September 28, 2024, were borrowings and repayments under our asset-based credit agreement with BMO Bank, N.A.

that provides for an asset-based senior secured revolving credit facility (the “Credit Facility”) of up to $115 million, maturing on December 3, 2029, our prior loan and security agreement, as amended, with Bank of America, N.A.

and term loans.

Our cash requirements are affected by the level of current operations and new programs.

If we are unable to meet projected operating results, we may need to delay the purchase of raw materials or require our customers to fund inventory raw material costs ahead of production.

The Company further notes projected cash from operations from increased demand from certain customers will be partially offset by an anticipated slowdown in collections from other customers and increasing inventory levels in efforts to mitigate supply chain constraint risks.

Other options to increase our liquidity include factoring receivables or leveraging foreign owned assets for additional borrowing capacity.

As discussed in Note 4 – “Long Term Debt” of the Notes to the Consolidated Financial Statements, on December 3, 2024, we entered into an asset-based credit agreement with BMO Bank, N.A that provides for an asset-based senior secured revolving credit facility (the "Credit Facility") of up to $115 million, maturing on December 3, 2029.

We also entered into a $28 million term loan (the "Term Loan") credit agreement with Callodine Commercial Finance, LLC.

We believe that projected cash from operations, funds available under the Credit Facility, Term Loan, Banorte line of credit, and leasing capabilities will be sufficient to meet our working and fixed capital requirements for at least the next 12 months.

As of March 29, 2025, we had approximately $2.8 million of cash held by foreign subsidiaries.

As discussed in Note 4 – “Long Term Debt” of the Notes to the Consolidated Financial Statements, we entered the Credit Facility, and also entered into a $28 million term loan (the "Term Loan") credit agreement with Callodine Commercial Finance, LLC.

We believe that projected cash from operations, funds available under the Credit Facility, Term Loan, the line of credit with Banorte Financial Group, and leasing capabilities will be sufficient to meet our working and fixed capital requirements for at least the next 12 months.

As of September 27, 2025, we had approximately $1.1 million of cash held by foreign subsidiaries.

If cash is to be repatriated in the future from these foreign subsidiaries, the Company would be subject to certain withholding taxes in the foreign jurisdictions.

The total amount of tax payments required for the amount of foreign subsidiary cash on hand as of March 29, 2025 would approximate $29,000.

The total amount of tax payments required for the amount of foreign subsidiary cash on hand as of September 27, 2025 would approximate $26,000.

We have accrued withholding taxes for expected future repatriation of foreign earnings as discussed in Note 5 of the “Notes to Consolidated Financial Statements.”

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We have included a summary of our Contractual Obligations in our Annual Report on Form 10-K for the fiscal year ended June 28, 2025.

There have been no material changes in contractual obligations outside the ordinary course of business since June 29, 2024 except as it relates to the refinancing of our line of credit with a new lender, which now matures on December 3, 2029.

There have been no material changes in contractual obligations outside the ordinary course of business since June 28, 2025.

See Note 4 - “Long-Term Debt” of the Notes to Consolidated Financial Statements for additional information.

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• political and economic instability (including acts of terrorism, pandemics, civil unrest, forms of violence and outbreaks of war), which could impact our ability to ship, manufacture, and/or receive product;

• impact of potential tariffs assessed on countries in which we may manufacture product or from which we may buy components;

• impact of tariffs assessed or threatened on countries in which we may manufacture product or from which we may buy components;

• unexpected changes in regulatory requirements and laws, including those related to climate change;

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and global macroeconomic environment, volatility in overall demand for our customers’ products, success of customers’ programs, timing of new programs, new product introductions or technological advances by us, our customers and our competitors, and changes in pricing policies by us, our customers, our suppliers, and our competitors.

Our customer base is diverse in the markets they serve, however, decreases in demand, particularly from customers in certain industries could affect future quarterly results.

Our customer base is diverse in the markets they serve, however, decreases in demand, particularly from customers in certain industries, have affected our results and could affect future quarterly results.

Additionally, our customers could be adversely impacted by illiquidity in the credit markets which could directly impact our operating results.

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Occasionally, our customers may request accelerated production that can stress resources and reduce operating margins.

Conversely, our customers may abruptly lower or cancel production which may lead to a sudden, unexpected increase in inventory or accounts receivable for which we may not be reimbursed even when under contract with customers.

Conversely, our customers may abruptly lower, cancel, or delay production or new production launch which may lead to a sudden, unexpected increase in inventory or accounts receivable for which we may not be reimbursed even when under contract with customers.

In addition, because many of our operating expenses are relatively fixed, a reduction in customer demand can harm our gross profit and operating results.

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Adverse economic conditions and uncertainty in the global economy such as unstable global financial and credit markets, changing trade policies, inflation, and recession can negatively impact our business.

Unfavorable economic conditions could affect the demand for our customers’ products by triggering a reduction in orders as well as a decline in forecasts which could adversely affect our sales in future periods.

Unfavorable economic conditions could affect the demand for our customers’ products by triggering a reduction or delaying orders as well as a decline in forecasts which could adversely affect our sales in future periods.

Additionally, the financial strength of our customers and suppliers and their ability to obtain and rely on credit financing may affect their ability to fulfill their obligations to us and have an adverse effect on our financial results.

Adverse macroeconomic conditions have and may continue to affect our business.

The conditions affect the Company’s ability to predict and plan for future supply chain disruptions, fluctuations in customer demand and costs, and the ability to operate as there is uncertainty over future temporary closures.

The conditions affect the Company’s ability to predict and plan for future supply chain disruptions and fluctuations in customer demand and costs.

Inflation has also risen globally to historically high levels.

If inflation rate continues to increase, the costs of labor and other expenses may continue to increase.

Continuing high levels of inflation have increased the costs of labor and other expenses, and may continue to increase.

We may not be able to increase our product prices enough to offset these increased costs.

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Inflation may further exacerbate other risk factors discussed in this Quarterly Report on Form 10-Q, including disruptions to international operations.

Current and future U.S.

trade policy could adversely affect our business and results of operations.

Although we maintain significant manufacturing capacity in the U.S., the majority of our manufacturing operations are currently located outside the U.S (in countries such as Vietnam, China, and Mexico).

We also source certain components and materials for our products from various countries.

has imposed tariffs impacting certain components and products imported from these countries by us into the U.S.

These tariffs apply to both components imported into the U.S.

from these countries for use in the manufacture of products at our U.S.

plants and to certain of our customers’ products that we manufacture for them in these countries and that are then imported into the U.S.

Changes in tariffs and other trade policies can be announced with little or no advance notice.

The recent broad increase in tariffs on imported products and components from certain countries, including higher tariff levels on those imported from China and Mexico have resulted, and are expected to further result, in retaliatory measures on U.S.

goods by those countries and others.

If maintained, these tariffs, and the potential escalation of trade disputes, could pose a risk to our business that could affect our revenue and cost of sourcing materials.

We are currently shielded from Mexico related tariffs under the United States-Mexico-Canada Agreement, but there is no assurance that this agreement will not be amended or cancelled in the future.

Actions we take to adapt to new tariffs or trade restrictions may increase our costs or may cause us to modify our operations, and could drive up our prices to customers.

Any decision by a large number of our customers to cease using our manufacturing services due to the application of tariffs could materially reduce our revenue and net income.

In addition, tariffs or other trade restrictions have caused, and may continue to cause, adverse changes and uncertainty in U.S.

and global financial and economic conditions, which adversely impacts the demand for our products.

The majority of our sales come from a small number of customers, and a decline in sales to any of these customers could adversely affect our business.

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Financial difficulties experienced by one or more of our customers could negatively affect our business by decreasing demand from such customers and through the potential inability of these companies to make full payment on amounts owed to us.

For example, in the first quarter of fiscal 2026, our financial results were affected by inventory and receivable write-offs due to a customer bankruptcy.

Customer bankruptcies also entail the risk of potential recovery by the bankruptcy estate of amounts previously paid to us that are deemed a preference under bankruptcy laws.

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In addition, our suppliers' facilities may also experience closures or limited production due to macroeconomic conditions, natural disasters or other reasons, which may cause a shortage of components.

This can result in longer lead times and the inability to meet our customers' requests for flexible production and extended shipment dates.

If demand for components outpaces supply, capacity

delays could affect future operations.

This can result in longer lead times and the inability to meet our

customers' requests for flexible production and extended shipment dates.

If demand for components outpaces supply, capacity delays could affect future operations.

Delays in deliveries from suppliers or the inability to obtain sufficient quantities of components and raw materials have and may continue to cause delays or reductions in shipment of products to our customers which could adversely affect our operating results and damage customer relationships.

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Fluctuations in foreign currency exchange rates have increased and could continue to increase our operating costs.

We have manufacturing operations located in Mexico and China.

A significant portion of our operations are denominated in the Mexican Peso and the Chinese currency, the renminbi ("RMB").

We have manufacturing operations located in Mexico, China, and Vietnam.

A significant portion of our operations are denominated in the Mexican Peso, the Chinese currency, the renminbi ("RMB"), and the Vietnamese dong.

Currency exchange rates fluctuate daily as a result of a number of factors, including changes in a country's political and economic policies.

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Global economic and political events or significant currency exchange fluctuations, can occur, and cause further unexpected losses.

Future temporary closures of production facilities in Mexico could also cause significant changes in our ability to qualify for hedge accounting treatment of our forward contracts to hedge foreign currency fluctuations.

Future headcount reductions or decrease in manufacturing capacity in Mexico could also cause significant changes in our ability to qualify for hedge accounting treatment of our forward contracts to hedge foreign currency fluctuations.

Our success will continue to depend to a significant extent on our key personnel and our ability to execute our management succession plans.

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Consequently, our exposure to these factors is consistently elevated.

In addition, if any of these new programs or new customer relationships were terminated, our operating results could be harmed, particularly in the short term.

In addition, if any of these new programs or new customer relationships were

terminated, our operating results could be harmed, particularly in the short term.

We may not be able to recoup these start-up costs or replace anticipated new program revenues.

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This makes it difficult to schedule production and maximize utilization of our manufacturing capacity.

We must determine the levels of business that we will seek and accept from customers, set production schedules, commit to procuring inventory, and

allocate personnel and resources, based on our estimates of our customers' requirements.

We must determine the levels of business that we will seek and accept from customers, set production schedules, commit to procuring inventory, and allocate personnel and resources, based on our estimates of our customers' requirements.

Customers can require sudden increases and decreases in production which can put added stress on resources and reduce margins.

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We are subject to a variety of domestic and foreign environmental regulations relating to the use, storage, and disposal of materials used in our manufacturing processes.

In addition, increasing governmental focus on climate change may result in new environmental regulations that may negatively affect us, our vendors or our customers.

In addition, governmental focus on climate change may result in new environmental regulations that may negatively affect us, our vendors or our customers.

As a result, we may incur additional costs or obligations in complying with any new environmental and reporting requirements, as well as increased indirect costs resulting from our vendors or suppliers that get passed on to us.

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If we do not manage our growth effectively, our profitability could decline.

When our business is experiencing growth, such growth can place considerable additional demands upon our management team and our operational, financial and management information systems.

When our business or manufacturing capacity is experiencing growth, such as the expansion currently occurring in our Arkansas and Vietnam facilities, such growth can place considerable additional demands upon our management team and our operational, financial and management information systems.

Our ability to manage growth effectively requires us to continue to implement and improve these systems;

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In addition, any increase in our product prices may reduce our future customer orders and profitability.

Current and future U.S.

trade policy could adversely affect our business and results of operations.

Although we maintain significant manufacturing capacity in the U.S., the majority of our manufacturing operations are currently located outside the U.S (in countries such as China and Mexico).

We also source certain components and materials for our products from various countries.

In the past, the U.S.

has imposed tariffs impacting certain components and products

imported from these countries by us into the U.S.

These tariffs apply to both components imported into the U.S.

from these countries for use in the manufacture of products at our U.S.

plants and to certain of our customers’ products that we manufacture for them in these countries and that are then imported into the U.S.

Changes in tariffs and other trade policies can be announced with little or no advance notice.

The current U.S.

presidential administration recently announced a broad increase in tariffs on imported products and components from certain countries, including higher tariff levels on those imported from China and Mexico.

These actions have resulted, and are expected to further result, in retaliatory measures on U.S.

goods by those countries and others.

If maintained, these recently announced tariffs, and the potential escalation of trade disputes could pose a risk to our business that could affect our revenue and cost of sourcing materials.

Actions we take to adapt to new tariffs or trade restrictions may increase our costs or may cause us to modify our operations, and could drive up our prices to customers.

Any decision by a large number of our customers to cease using our manufacturing services due to the application of tariffs could materially reduce our revenue and net income.

In addition, tariffs or other trade restrictions have caused, and may continue to cause, adverse changes and uncertainty in U.S.

and global financial and economic conditions, which adversely impacts the demand for our products.

TECHNOLOGY RISKS

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and increased costs to prevent, respond to or mitigate cybersecurity incidents.

In addition, our investigation of the Previously Disclosed Cyber Incident is ongoing, and we may discover other impacts or new events related to this incident that could affect the Company, including our business, financial condition or results of operations.

Any of these risks could harm our reputation and our relationships with employees, vendors and customers and may result in claims or enforcement actions and investigations against us.

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The introduction of products embodying new technologies or the emergence of new industry standards can render existing products obsolete or unmarketable.

Our success will depend upon our customers’ ability to enhance existing products and to develop and introduce, on a timely and cost-effective basis, new products that keep pace with technological developments and emerging industry standards and address evolving and increasingly sophisticated customer requirements.

increasingly sophisticated customer requirements.

Failure of our customers to do so could substantially harm our customers’ competitive positions.

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We have restrictive covenants with our financial institutions that impact how we manage our business.

We have not always met these covenants in the past and have had to obtain waivers and amend the Loan Agreement under our Prior Credit Facility, including for events of default related to breaches of the fixed charge coverage ratio for fiscal quarter ended March 30, 2024 and the periods ended June 29, 2024 and July 27, 2024.

We also breached a covenant in the Loan Agreement under our Prior Credit Facility requiring us to deliver audited financial statements to the lender within 90 days of the Company’s fiscal year-end, which required us to further amend the Loan Agreement on October 9, 2024.

Our new asset-based senior secured revolving credit facility (the “Credit Facility”), which replaced the Prior Credit Facility also includes minimum earnings before interest, taxes, depreciation, amortization and other adjustments, minimum availability and, if triggered, a minimum fixed charge coverage ratio, and other covenants.

We have not always met these covenants in the past and have had to obtain waivers and amend the Loan Agreement under our Term Loan, including for an event of default related to a breach of non-compliance with minimum required earnings before interest, depreciation, amortization, and other adjustments for the period ending March 29, 2025.

The amendment permanently adds an additional reporting requirement, and requires minimum earnings before interest, taxes, depreciation, amortization, and other adjustments only if average daily availability for the applicable fiscal quarter is less than 12.5% of the combined borrowing base.

Our asset-based senior secured revolving credit facility (the “Credit Facility”), also includes certain financial covenants, including average and daily availability and, if triggered, earnings before interest, taxes, depreciation, amortization and other adjustments and a fixed charge coverage ratio covenant will apply.

We may not meet such covenants in the future and may not be able to obtain waivers or amendments from the relevant lenders on terms acceptable to us, or at all.

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These fluctuations may be due to factors specific to us such as our stock's thinly traded nature, variations in quarterly operating results, changes in earnings estimates, matters arising from the subject matter of the Audit Committee's internal investigation, or to factors relating to the contract manufacturing industry or to the securities markets in general, which, in recent years, have experienced significant price fluctuations.

These fluctuations often have been unrelated to the operating performance of the specific companies whose stocks are traded.

These fluctuations often have been unrelated to the operating

performance of the specific companies whose stocks are traded.

In addition, holders of our common stock will suffer immediate dilution to the extent outstanding equity awards are exercised to purchase common stock.

RISKS RELATED TO OUR CONTROLS AND PROCEDURES AND THE INTERNAL INVESTIGATION

We have concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of June 29, 2024 due to material weaknesses, which has adversely affected our ability to report our financial results in a timely and accurate manner and could have a material adverse impact our business and financial condition.

In the past, we have concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective due to the existence of material weaknesses, which has adversely affected our ability to report our financial results in a timely and accurate manner and similar recurrences could have a material adverse impact our business and financial condition.

We are required to evaluate the effectiveness of our disclosure controls and procedures and our internal control over financial reporting on a periodic basis and publicly disclose the results of these evaluations and related matters in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

As described in Item 9A.

Controls and Procedures of our Annual Report on Form 10-K, we identified a material weakness in the design and implementation of effective controls over the accounting for revenue recognition relating to cost recovery of material price variances.

Controls and Procedures of our Annual Report on Form 10-K for the fiscal year ended June 28, 2025, in the previous fiscal year we identified a material weakness in the design and implementation of effective controls over the accounting for revenue recognition relating to cost recovery of material price variances.

We also identified a material weakness in the design and implementation of effective controls over the adoption of new accounting standards.

As a result of these material weaknesses, our management concluded that our internal control over financial reporting and disclosure controls and procedures were not effective as of June 29, 2024.

We are implementing the remediation plan, as described in Item 9A.

Controls and Procedures of our Annual Report on Form 10-K, designed to address the material weaknesses, but our remediation efforts are not complete and are ongoing.

Although we are working to remedy the ineffectiveness of the Company’s internal control over financial reporting, there can be no assurance as to when the remediation plan will be fully developed, when it will be fully implemented or the aggregate cost of implementation.

Until our remediation plan is fully implemented, our management will continue to devote time and attention to these efforts.

If we do not complete our remediation in a timely fashion, or at all, or if our remediation plan is inadequate, there will continue to be an increased risk that we will be unable to timely file future periodic reports with the SEC and that our future consolidated financial statements could contain errors that will be undetected.

If we are unable to report our results in a timely and accurate manner, our stock may be delisted from the NASDAQ Global Market and we will not be able to comply with the applicable covenants in our financing arrangements, including our Loan Agreement, as described in —Risks Related to Capital and Financing—“Our failure to comply with the covenants in our credit arrangements could materially and adversely affect our financial condition.” In addition, we could be subject to regulatory investigations and penalties or stockholder litigation.

We completed a remediation plan, as described in Item 9A.

Controls and Procedures of our Annual Report on Form 10-K for the fiscal year ended June 28, 2025, designed to address the material weaknesses.

Although these material weaknesses are considered remediated and internal control over financial reporting and control disclosures and procedures were effective as of June 28, 2025, there is no assurance that similar material weaknesses could arise from future changes in systems, personnel, or processes.

Any of these risks could have a material adverse impact on our business and financial condition.

If we fail to remediate our material weaknesses, or in the future fail to maintain proper and effective internal controls, our business and financial condition could be materially adversely impacted.

We cannot assure you that we will not discover additional deficiencies in our internal control over financial reporting.

If we fail to maintain proper and effective internal controls, our business and financial condition could be materially adversely impacted.

We cannot assure you that we will not discover deficiencies in our internal control over financial reporting.

Moreover, as discussed in the following risk factor, because of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected on a timely basis, or at all.

As of June 29, 2024, we are a non-accelerated filer under the Exchange Act and are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

We are a non-accelerated filer under the Exchange Act and are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.

Therefore, our internal controls over financial reporting will not receive the level of review provided by the process relating to the auditor attestation included in annual reports of issuers that are subject to the auditor attestation requirements.

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Matters relating to or arising from the subject of the Audit Committee’s internal investigation, including expenses and diversion of personnel and resources, regulatory investigations, and proceedings and litigation matters, could have an adverse effect on our business, results of operations and financial condition.

We have incurred, and may continue to incur, significant expenses related to legal, accounting and other professional services in connection with matters relating to or arising from the subject of the Audit Committee’s internal investigation in fiscal year 2022.

To the extent these steps taken to remediate identified deficiencies in our internal controls over financial reporting were not successful, we may incur significant additional time and expense.

In addition, we continue to cooperate with the SEC regarding matters related to the internal investigation.

The completion of the internal investigation in fiscal year 2022 did not automatically resolve the SEC’s inquiries.

During fiscal year 2021, the Company’s Audit Committee completed an internal investigation arising from a notification from an employee regarding certain alleged accounting irregularities.

In January 2021, the Company determined that improper accounting resulted in an understatement of cost of goods sold and an overstatement of inventories.

Subsequent to the matter identified in January 2021, additional inventory accounting errors unrelated to the investigation were also identified by management.

To the extent the steps taken to remediate identified deficiencies in our internal controls over financial reporting were not successful, we may incur significant additional time and expense.

In addition, we continue to cooperate with the SEC in its inquiries related to the internal investigation.

If the SEC or any other regulator were to commence legal action against us, we could be required to pay significant penalties and become subject to injunctions, cease and desist orders or the SEC could impose other sanctions against us or against our officers and members of our Board of Directors.

We can provide no assurances as to the outcome of any governmental inquiry or investigation.

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All of these expenses, and the diversion of the attention of management and other personnel that has occurred and is expected to continue, could adversely affect our business, financial condition, results of operations and cash flows.

In addition, publicity surrounding the foregoing, or any SEC enforcement action or settlement, even if ultimately resolved favorably for us, could have an adverse impact on our reputation, business, financial condition and results of operations.

LEGAL AND ACCOUNTING RISKS

We restated certain of our prior consolidated financial statements in our 2024 Annual Report on Form 10-K, which resulted in unanticipated costs and may lead to additional risks and uncertainties, including loss of investor confidence, regulatory action or litigation.

As previously disclosed, in our Annual Report on Form 10-K, we have restated or revised certain of our previously issued financial statements.

As previously disclosed, in our 2024 Annual Report on Form 10-K, we restated or revised certain of our previously issued financial statements.

This process was time-consuming and expensive, including unanticipated costs for accounting and legal fees.

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These principles are subject to amendments made primarily by the Financial Accounting Standards Board (“FASB”) and the SEC.

A change in those policies can have a significant effect on our reported results and may affect our

reporting of transactions which are completed before a change is announced.

A change in those policies can have a significant effect on our reported results and may affect our reporting of transactions which are completed before a change is announced.

Changes to accounting rules or challenges to our interpretation or application of the rules by regulators may have a material adverse effect on our reported financial results or on the way we conduct business.

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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-Q

Item 2. Management’s Discussion and Analysis