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Item 1A. Risk Factors

2026-09-24 compared with 2025-09-17 · 58 added, 55 removed, 256 unchanged (31% of the section changed)

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“Quantitative and Qualitative Disclosures about Market Risk” and elsewhere in this Annual Report on Form 10-K.

RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS

The following risks and uncertainties could affect our actual results and could cause results to differ materially from past results or those contemplated by our forward-looking statements.

When used herein, the words “expects,” “believes,” “anticipates” and other similar expressions are intended to identify forward-looking statements.

RISKS RELATED TO OUR BUSINESS AND STRATEGY

Our operations may be subject to certain risks.

We manufacture product in facilities located in Mexico, China, Vietnam and the United States.

We manufacture and/or source product in facilities located in Mexico, China, Vietnam, and the United States.

These operations may be subject to a number of risks, including:

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

• general macroeconomic economic factors, such as periods of inflation

• longer customer payment cycles and difficulty collecting accounts receivable;

• cash liquidity, the ability to acquire new debt capacity, and capital constraints;

• cash liquidity, the ability to acquire new debt capacity and related interest expenses, and capital constraints;

• export duties, import controls and trade barriers (including quotas);

• rising costs to store and transport manufactured goods, such as fuel prices.

• governmental restrictions on the transfer of funds;

• burdens of complying with a wide variety of foreign laws and labor practices;

subject to trade wars and tariffs;

• our locations are subject to physical and operational risks from natural disasters, severe weather events, and climate change

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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.

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

Component procurement, production schedules, personnel and other resource requirements are based on estimates of customer requirements.

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

The products which we manufacture for our customers have relatively short product lifecycles.

The products which we manufacture for our customers have relatively

short product lifecycles.

Therefore, our business, operating results and financial condition are dependent in a significant way on our ability to obtain orders from new customers and new product programs from existing customers.

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We are exposed to general economic conditions, which could have a material adverse impact on our business, operating results and financial condition.

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 or delaying orders as well as a decline in forecasts which could adversely affect our sales in future periods.

These conditions have, and may continue to result in further tightening of our credit availability consequentially causing suppliers to require cash in advance or further tightening of terms in our supply agreements.

This could result in manufacturing delays to our existing or expected demand, or an inability to meet obligations as they become due.

Unfavorable economic conditions could also 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.

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

The ongoing wind-down of our China-based manufacturing operations may adversely affect our business, results of operations and financial condition.

On December 19, 2025, the Company committed to a plan to modify its China-based operations and cease manufacturing activities at its China-based facility.

The manufacturing wind-down has been substantially completed, and the Company has refocused its China operations on sourcing and procurement activities intended to support its remaining global locations.

Although only limited transition and administrative activities remain, the Company may identify additional obligations, costs, or adjustments associated with the wind-down that were not previously anticipated.

Further, the timing and resolution of these remaining matters may be affected by factors outside of the Company’s control.

If actual costs or obligations differ from current estimates, our results of operations and financial condition could be adversely affected.

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.

Although we maintain significant manufacturing capacity in the U.S.

and have substantially completed our manufacturing operations in China, the majority of our manufacturing operations are currently located outside the U.S (in countries such as Vietnam and Mexico).

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

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

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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.

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.

For example, we incurred significant one-time expenses in the second quarter of 2026 related to the wind-down of our China manufacturing operations.

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.

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

In February 2026, the U.S.

Supreme Court ruled that tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") were unauthorized.

In March 2026, the U.S.

Court of International Trade ordered U.S.

Customs and Border Protection to refund IEEPA tariffs collected;

however, the refund process and timing remain uncertain, and the order may be subject to further government action or challenge.

Accordingly, we only record refunds at the time of receipt.

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

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

We have manufacturing and other 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.

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As part of our hedging strategy, we currently use Mexican Peso forward contracts to hedge future foreign currency fluctuations for a portion of our Mexican Peso denominated expenses.

We currently do not hedge expenses denominated in RMB and have occasionally also been unable to hedge expenses denominated in Mexican Peso.

We currently do not hedge expenses denominated in RMB or the Vietnamese dong, and have occasionally also been unable to hedge expenses denominated in Mexican Peso.

Losses have occurred from increases in the value of these currencies relative to the United States dollar and further losses could occur, which could be material to our business, financial results or operations.

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We cannot provide assurances that any changes of management personnel will not cause disruption to operations or customer relationships or a decline in our operating results.

Start-up costs and inefficiencies related to new or transferred programs can adversely affect our operating results and such costs may not be recoverable if such new programs or transferred programs are canceled or don’t meet expected sales volumes.

Start-up costs, the management of labor and equipment resources in connection with the establishment of new programs and new customer relationships, and the need to obtain required resources in advance can adversely affect our gross margins and operating results.

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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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Our customers are required to indemnify us against liability associated with designing products to meet their specifications.

However, if our

customers are responsible for the defects, they may not, or may not have resources to, assume responsibility for any costs or liabilities arising from these defects, which could expose us to additional liability claims.

However, if our customers are responsible for the defects, they may not, or may not have resources to, assume responsibility for any costs or liabilities arising from these defects, which could expose us to additional liability claims.

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

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In addition, we, along with our suppliers and customers, rely on various energy sources in our transportation activities.

While significant uncertainty currently exists about the future levels of energy prices, a significant increase, such as the increased fuel prices experienced in fiscal year 2022, is possible.

Increased energy prices could cause an increase to our raw material costs and transportation costs.

While significant uncertainty currently exists about the future levels of energy prices, current fuel levels are at all-time highs.

Further increases in energy prices could also cause continued increases to our raw material and transportation costs.

In addition, increased transportation costs related to certain suppliers and customers could be passed along to us.

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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 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 new 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.

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 have in the past failed to meet certain covenants, and 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.

In the event we breach any covenant that results in an event of default, we may be required to amend the Credit Facility on terms that would be less favorable to us, such as an increase in the interest rate.

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Our ability to secure and maintain sufficient credit arrangements is key to our continued operations.

There is no assurance that we will be able to retain, renew, or refinance our credit arrangements in the future.

There is no assurance that we will be able to retain, renew, or refinance our credit arrangements in the future or to maintain sufficient collateral to support our borrowing capacity.

In the event that our business grows rapidly, or there is uncertainty in the macroeconomic climate, additional financing resources could be necessary in the current or future fiscal years.

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Our stock price has and may continue to be subject to wide fluctuations and possible rapid increases or declines over a short time period.

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 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, 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.

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

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

Controls and Procedures of our Annual Report on Form 10-K, 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.

RISKS RELATED TO OUR CONTROLS AND PROCEDURES

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, 2025, 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 Securities Exchange Act of 1934 (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.

Further and continued determinations that there are deficiencies in the effectiveness of the Company’s internal control over financial reporting could result in another restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations, reduce our ability to obtain financing, negatively affect investor confidence in our management and the accuracy of our financial statements and disclosures, or result in adverse publicity and concerns from investors, any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties or stockholder litigation, and materially adversely impact our business, financial condition, results of operations and cash flows.

For the fiscal year ended June 29, 2024, 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 completed a remediation plan designed to address the material weaknesses, and such material weaknesses are considered remediated.

Our internal control over financial reporting and disclosure controls and procedures were effective as of June 28, 2025 and June 27, 2026 but there is no assurance that similar material weaknesses could arise from future changes in systems, personnel, or processes.

Further or continued determinations that there are deficiencies in the effectiveness of the Company’s internal control over financial reporting could result in another restatement of our consolidated financial statements, cause us to fail to meet our reporting obligations, reduce our ability to obtain financing, negatively affect investor confidence in our management and the accuracy of our financial statements and disclosures, or result in adverse publicity and concerns from investors, any of which could have a negative effect on the price of our common stock, subject us to regulatory investigations and penalties or stockholder litigation, and materially adversely impact our business, financial condition, results of operations and cash flows.

Due to inherent limitations, there can be no assurance that our system of disclosure and internal controls and procedures will be successful in preventing all errors, theft and fraud, or in informing management of all material information in a timely manner.

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Due to the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

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.

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.

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 such investigation.

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.

Further, we, our officers and members of our Board of Directors could be named as defendants in lawsuits asserting claims arising out of the subject matter of the Audit Committee’s internal investigation.

As a result of any legal proceedings and any related indemnification requirements to our officers and directors, we could be required to pay monetary damages that may be in excess of our insurance coverage or may have additional penalties or other remedies imposed against us or our officers and directors.

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

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We may incur substantial defense costs regardless of the outcome of any litigation or regulatory investigation, and such events might cause a diversion of our management’s time and attention.

If we do not prevail in any litigation or regulatory action, we could be required to pay substantial damages, penalties or settlement costs.

If we do not prevail in any litigation or regulatory action, we could be required to pay substantial damages, penalties or settlement

In addition, the restatement and revisions may lead to a loss of investor confidence and have negative impacts on the trading price of our common stock.

We are involved in various legal proceedings.

Legal proceedings and government investigations could affect our financial condition or results of operations.

In the past, we have been notified of claims relating to various matters including contractual matters, intellectual property rights or other issues arising in the ordinary course of business.

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Accordingly, the resolution or adjudication of such disputes, even those encountered in the ordinary course of business, could have a material effect on our business, consolidated financial conditions and results of operations.

In addition, from time to time we, or our officers and members of our Board of Directors, may be involved in lawsuits and regulatory actions relating to our business and operations.

As discussed in more detail under “Legal Proceedings,” we reached a settlement with the SEC in April 2026 that fully resolved an inquiry by the SEC related to the subject matter of our 2021 internal investigation.

If we are subject in the future to lawsuits or regulatory action, we could be required to pay monetary damages that may be in excess of our insurance coverage or may have additional penalties or other remedies imposed against us or our officers and directors.

Any such expenses, the potential diversion of the attention of management and other personnel as a result of such legal proceedings, or negative publicity arising from any such matters could adversely affect our business, financial condition, results of operations and cash flows.

Changes in securities laws and regulations will increase our costs and risk of noncompliance.

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federal securities laws, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

The Sarbanes-Oxley and Dodd-Frank Acts required or will require changes in some of our corporate governance, securities disclosure and compliance practices.

The Sarbanes-Oxley and Dodd-Frank Acts required certain changes in some of our corporate governance, securities disclosure and compliance practices.

The SEC and NASDAQ Global Market have promulgated new rules over time, resulting in increased legal, financial and accounting costs as well as a potential risk of noncompliance.

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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-K

Item 1A. Risk Factors