KEY TRONIC CORP 10-Q

Item 1. Legal Proceedings We are a party to certain lawsuits or claims in the ordinary course of business. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flow, although an adverse resolution against the Company in a fiscal quarter or year could have a material adverse effect on the Company’s results of operations in a particular quarter or year. For further details on claims, if applicable, see Note 8. Commitments and Contingencies in the Notes to Consolidated Financial Statements. SEC Settlement On April 20, 2026, the Company, its CEO Brett R. Larsen, and employee, Nicholas S. Fasciana, reached a settlement with the Securities and Exchange Commission (“SEC”) that fully resolves the previously disclosed SEC inquiries related to an internal investigation completed in 2021 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. The investigation did not result in a restatement of the Company’s previously filed financial statements. Under the terms of the SEC Order, each of the Company, Mr. Larsen, and Mr. Fasciana agreed to cease-and-desist from committing or causing any violations or any future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act, and Mr. Fasciana also agreed to cease-and-desist from committing or causing any violations or any future violations of Section 13(b)(5) of the Exchange Act. The Company was not required to pay any civil penalty or other payments in connection with the settlement. Item 1A. Risk Factors Information regarding risk factors appear in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 3, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-Q.