What changed in this filing

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Item 1A. Risk Factors

2026-03-26 compared with 2025-03-31 · 275 added, 201 removed, 291 unchanged (62% of the section changed)

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adversely affect us.

customer accounted for at 27.7% of net sales for the year ended December 31, 2024, and two customers, individually, accounted for 25.7%

and 10.3%, respectively, of net sales for the year ended December 31, 2023.

The loss of a substantial portion of net sales to our largest

customers could have a material adverse effect on us.

customer accounted for at 32.2% of net sales for the year ended December 31, 2025, and 27.7% of net sales for the year ended December

The loss of a substantial portion of net sales to our largest customers could have a material adverse effect on us.

are dependent on suppliers for components and raw materials and may experience shortages, extended lead times, cost premiums and shipment

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purchase raw materials, commodities and components for use in our production process.

Increased costs of these materials could have

an adverse effect on our production costs if we are unable to pass along price increases or reduce the other cost of goods produced

through cost improvement initiatives.

Increased costs of these materials, including tariffs,

could have an adverse effect on our production costs if we are unable to pass along price increases or reduce the other cost of goods

produced through cost improvement initiatives.

Fuel and energy cost increases could also adversely affect our freight and operating costs.

Due to customer specifications and requirements, we are dependent on suppliers to provide critical electronic and other components

and materials for our operations that could result in shortages of some of the components needed for production.

Component shortages

may result in an inability to deliver products on time or at all, expedited freight, overtime premiums and increased component

In addition to the financial impact on operations from lost net sales and increased cost, there could potentially be harm to

our customer relationships.

To reduce the effects of supply chain disruption for our customers, we purchase and hold raw material

and finished goods inventory, which results in a reduction of cash available.

If we are unable to sell such inventory or sell such

inventory within a reasonable timeframe, it may adversely affect our operations and financial results.

customers cancel orders, change order quantity, timing and specifications that if not managed would have an adverse effect on the timing

of net sales and inventory carrying costs.

face, through the normal course of business, customer cancellations and rescheduled orders and are not always successful in

recovering the costs of such cancellations or rescheduling.

With every new product or substantial redesign of a product, we utilize

our new product introduction process.

Such process is intended to improve the manufacturability, compliance with customer

specifications and quality standards relating to the product but may result in delays in commencement of production impacting the

timing of net sales.

In addition, excess and obsolete inventory losses as a result of customer order changes, cancellations, product

changes and contract termination could have an adverse effect on our operations.

We record inventory at the lower of cost or net

realizable value in accordance with generally accepted accounting principles in the United States of America (“U.S.

Due to customer specifications and requirements, we are dependent on suppliers to provide critical electronic and other components and

materials for our operations that could result in shortages of some of the components needed for production.

Component shortages may

result in an inability to deliver products on time or at all, expedited freight, overtime premiums and increased component costs.

addition to the financial impact on operations from lost net sales and increased cost, there could potentially be harm to our customer

relationships.

To reduce the effects of supply chain disruption for our customers, we purchase and hold raw material and finished goods

inventory, which results in a reduction of cash available.

If we are unable to sell such inventory or sell such inventory within a reasonable

timeframe, it may adversely affect our operations, financial results and liquidity.

customers cancel orders, change order quantity, timing and product specifications that if not managed would have an adverse effect on

the timing of net sales and inventory carrying costs.

face, through the normal course of business, customer cancellations and rescheduled orders and are not always successful in recovering

the costs of such cancellations or rescheduling.

With every new product or substantial redesign of a product, we utilize our new product

introduction process.

Such process is intended to improve the manufacturability, compliance with customer specifications and quality

standards relating to the product but may result in delays in commencement of production impacting the timing of net sales.

excess and obsolete inventory losses as a result of customer order changes, cancellations, changes to the components required to produce

products, and contract termination could have an adverse effect on our operations, financial results and liquidity.

We record inventory

at the lower of cost or net realizable value in accordance with generally accepted accounting principles in the United States of America

GAAP”) for exposures related to the estimated impact from these possibilities.

To reduce the impact of canceled or

charged orders, our terms and conditions require customers to purchase excess inventory.

depend heavily on our people and may from time to time have difficulty attracting and retaining skilled employees and the cost of labor

may continue to increase.

The loss of key management or an ineffective transition of leadership could adversely affect our operations

and strategic direction.

operations depend upon the continued contributions of our key management, marketing, technical, financial, accounting, product development

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reduce our profitability.

senior leadership team possess significant industry knowledge, operational expertise, strategic vision and relationships with customers,

lenders, suppliers and other stakeholders that are important to the operation and growth of our business.

our Board of Directors, the Nominating and Corporate Governance Committee and the Compensation and Talent Committee periodically evaluate

succession planning for senior management positions, there can be no assurance that we will be able to effectively manage the transition

of responsibilities if one or more of these executives were to depart, retire, become unable to serve, or otherwise be replaced.

loss of any member of senior management could result in disruption to our operations, delays in executing our strategic plans, loss of

institutional knowledge, and uncertainty among employees, customers, suppliers or investors.

addition, the process of identifying, recruiting, hiring and integrating qualified executive leadership may be time-consuming and costly,

and we may not be able to attract and retain suitable candidates with the necessary experience and industry expertise on acceptable terms

or within an acceptable timeframe.

Any leadership transition that is not effectively managed could adversely affect our business, financial

condition, results of operations and cash flows.

engineering net sales depend on our ability to deliver quality value-added engineering services required by our customers.

markets for our engineering services are characterized by rapidly changing technology and evolving process development.

continued success of our business to generate engineering net sales will depend upon our ability to hire and retain qualified

engineering personnel and maintain and enhance our technological leadership.

Although we believe that we currently can provide the

value-added engineering services that are required by our customers, there is no certainty that we will develop the capabilities

required by our customers in the future.

The emergence of new technology, industry standards or customer requirements may render the

engineering services we currently provide obsolete or uncompetitive.

The acquisition and implementation of new engineering

knowledge, technical skills and related equipment may require significant expense that could adversely affect our operating results,

as could our failure to anticipate and adapt to our customers’ changing technological requirements.

The continued

success of our business to generate engineering net sales will depend upon our ability to hire and retain qualified engineering personnel

and maintain and enhance our technological leadership.

Although we believe that we currently can provide the value-added engineering

services that are required by our customers, there is no certainty that we will develop the capabilities required by our customers in

The emergence of new technology, industry standards or customer requirements may render the engineering services we currently

provide obsolete or uncompetitive.

The acquisition and implementation of new engineering knowledge, technical skills and related equipment

may require significant expense that could adversely affect our operating results, as could our failure to anticipate and adapt to our

customers’ changing technological requirements.

operate in highly competitive industries, and we depend on continuing outsourcing by Original Equipment Manufacturers (“OEM”).

compete against many companies that engineer and manufacture complex electromedical and electromechanical medical

device, medical imaging, aerospace and defense, and industrial products.

The larger global competitors have more resources and greater

economies of scale and have more geographically diversified international operations.

We also compete with OEM operations that are continually

evaluating manufacturing products internally against the advantages of outsourcing or delaying their decision to outsource.

be at a competitive disadvantage with respect to price when compared to manufacturers with excess capacity, lower cost structures and

availability of lower cost labor.

factors in our targeted markets are believed to be product and service pricing, quality, the ability to meet delivery schedules,

customer service, value-added engineering, technology solutions and geographic location.

We also expect that our competitors will

continue to improve the performance of their current products or services, to reduce their current products or service sales prices

and improve services that may be offered.

Any of these could cause a decline in net sales, loss of market share, or lower profit

compete against many companies that engineer and manufacture complex electromedical and electromechanical medical device, medical imaging,

aerospace and defense, and industrial products.

The larger global competitors have more resources and greater economies of scale and

have more geographically diversified international operations.

We also compete with OEM operations that are continually evaluating manufacturing

products internally against the advantages of outsourcing or delaying their decision to outsource.

We may also be at a competitive disadvantage

with respect to price when compared to manufacturers with excess capacity, lower cost structures and availability of lower cost labor.

factors in our targeted markets are believed to be manufacturing capabilities, product and service pricing, quality, the ability to

meet delivery schedules, customer service, value-added engineering, technology solutions and geographic location.

We also expect

that our competitors will continue to improve the performance of their current products or services, to reduce their current

products or service sales prices and improve services that may be offered.

Any of these could cause a decline in net sales, loss of

market share, or lower profit margin.

customers may also change their geographic manufacturing preferences based on factors such as tariffs, supply chain resiliency initiatives,

geopolitical developments, regulatory requirements, or proximity to end markets.

If our manufacturing capabilities do not align with

these evolving preferences, we may lose existing programs, be unable to secure new business, or incur costs associated with transferring

production between facilities, which could adversely affect our net sales, operating results and cash flows.

availability of excess manufacturing capacity of our competitors also creates competitive pressure on price and winning new business.

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If a product liability claim results in our

being liable, it could have a material adverse effect on our business and financial position.

We have insurance coverage for product

liability claims, but there can be no assurances that the amount of coverage will be adequate or that insurance proceeds will be available

for a particular claim.

Our insurance may not cover claims for non-conformance or defective products that are not product liability claims

from customers.

being liable, it could have a material adverse effect on our business, financial position and liquidity.

We have insurance coverage

for product liability claims, but there can be no assurances that the amount of coverage will be adequate or that insurance proceeds

will be available for a particular claim.

Our insurance may not cover claims for non-conformance or defective products that are not product

liability claims from customers.

Company is majority owned by one group of shareholders, and those shareholders may be able to take actions that do not reflect the will

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operate manufacturing facilities in Mexico and China.

Our operations in those countries are subject to risks that could adversely

impact our financial results and costs, such as economic or political volatility, foreign legal and regulatory requirements, international

trade relations factors (such as tariffs, trade sanctions, duties, export controls and other trade restrictions), protection of our

and our customers’ intellectual property and proprietary technology in certain countries, potentially burdensome taxes, crime,

employee turnover, staffing, managing personnel in diverse culture, labor instability, transportation delays, and foreign currency

fluctuations.

Legal and regulatory requirements in Mexico and China are continually changing which may and has affected our ability

to predict timing and/or whether we will receive applicable tax refunds such as VAT tax refunds.

Our operations in those countries are subject to risks that could adversely impact

our financial results and costs, such as economic or political volatility, foreign legal and regulatory requirements, international trade

relations factors (such as tariffs, trade sanctions, duties, export controls and other trade restrictions), protection of our and our

customers’ intellectual property and proprietary technology in certain countries, potentially burdensome taxes, crime, employee

turnover, staffing, managing personnel in diverse culture, labor instability, transportation delays, and foreign currency fluctuations.

and regulatory requirements in Mexico and China are continually changing which may and has affected our ability to predict timing and/or

whether we will receive applicable tax refunds such as value-added tax (“VAT”) tax refunds.

The changing regulatory environment

may impact negatively the timing and recognition of such net sales and/or whether we ultimately collect cash from these net sales.

particular, our Mexico operations involve significant VAT refund receivables generated from purchasing activities.

The Mexican government

has periodically delayed VAT refund processing, and regulatory changes have made the timing and collectability of such refunds increasingly

difficult to predict.

We currently have exposure related to past due VAT receivables that remain outstanding beyond statutory processing

periods, and future delays or non-collection of these amounts could adversely affect our liquidity, working capital, and operating results.

face risks arising from the restructuring of our operations .

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cost savings.

These initiatives have included reducing the size of our workforce, changing the number and location of our production

facilities in an effort to align our capacity and infrastructure with current and anticipated customer demand.

The process of restructuring

entails, among other activities, moving production between facilities, transferring programs from higher cost geographies to lower cost

geographies, closing facilities, reducing size of our workforce, realigning our business processes and reorganizing our management.

These initiatives have included reducing the size of our workforce, reducing the number of facilities, and changing the

location of certain customer part production to different facilities in an effort to align our capacity and infrastructure with current

and anticipated customer demand.

The process of restructuring entails, among other activities, moving production between facilities,

transferring programs from higher cost geographies to lower cost geographies, closing facilities, reducing size of our workforce, realigning

our business processes and reorganizing our management.

Restructurings

could adversely affect us, including a decrease in employee morale, delays encountered in finalizing the scope of, and implementing,

the restructurings, failure to achieve targeted cost savings, and failure to meet operational targets and customer requirements due to

the restructuring process.

These risks are further complicated by our extensive international operations, which subject us to different

legal and regulatory requirements that govern the extent and speed of our ability to reduce our manufacturing capacity and workforce.

could adversely affect us, including a slower than expected more costly transition of customers between facilities, a decrease in employee

morale, delays encountered in finalizing the scope of, and implementing, the restructurings, failure to achieve targeted cost savings,

and failure to meet operational targets and customer requirements due to the restructuring process.

These risks are further complicated

by our extensive international operations, which subject us to different legal and regulatory requirements that govern the extent and

speed of our ability to reduce our manufacturing capacity and workforce.

have and may be required to take additional restructuring charges in the future to align our operations and cost structures with global

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Related to our Assets

are dependent on our information technology systems for order, inventory and production management, financial reporting, communications

and other functions.

If our information systems fail or experience major interruptions due to physical damage or loss of power on our

business and our financial results could be adversely affected.

rely on our information technology systems to effectively manage our operational and financial functions.

Our computer systems, web sites,

telecommunications, and data networks are vulnerable to damage or interruption from power loss, natural disasters and other sources of

physical damage or disruption to the equipment which maintains, stores and hosts our information technology systems.

We have taken steps

to protect and create redundancies for the equipment that facilitates the use of our management information systems, but these steps

may not be adequate to ensure that our operations are not disrupted by events within and outside of our control.

to our information systems, including security breaches, losses of data or outages, cyber attacks and other security issues, have and

could in the future adversely affect our operations and/or financial results.

rely on information systems, some of which are managed by third parties, to store, process and transmit confidential information, including

financial reporting, inventory management, procurement, invoicing and electronic communications, belonging to our customers, our suppliers,

our employees and/or us.

We monitor and mitigate our exposure to cybersecurity issues and modify our systems when warranted and we have

implemented certain business continuity items, including leveraging our multiple sites for redundancies, as well as backup and restore

methods inclusive of off-site, secure hosted and cloud based third-party providers.

Nevertheless, these systems are vulnerable to, and

at times have suffered from, among other things, damage from power loss or natural disasters, computer system and network failures, loss

of telecommunication services, physical and electronic loss of data, terrorist attacks, computer viruses, cyberattacks and security breaches,

ranging from uncoordinated individual attempts to gain unauthorized access to our information technology systems to sophisticated and targeted measures.

These include data theft, malware, phishing, ransomware attacks, or other cybersecurity threats or incidents.

The increased use of mobile

technologies and the internet of things can heighten these and other operational risks.

If we, or the third parties who own and operate

certain of our information systems, are unable to prevent such breaches, losses of data and outages, our operations could be disrupted.

Also, the time and funds spent on monitoring and mitigating our exposure and responding to breaches, including the training of employees,

the purchase of protective technologies and the hiring of additional employees and consultants to assist in these efforts could adversely

affect our financial results.

The increasing sophistication of cyberattacks requires us to continually evaluate the threat landscape

and new technologies and processes intended to detect and prevent these attacks.

There can be no assurance that the security measures

and systems configurations we choose to implement will be sufficient to protect the data we manage.

Any theft or misuse of information

resulting from a security breach could result in, among other things, loss of significant and/or sensitive information, litigation by

affected parties, financial obligations resulting from such theft or misuse, higher insurance premiums, governmental investigations,

negative reactions from current and potential future customers (including potential negative financial ramifications under certain customer

contract provisions) and negative publicity and any of these could adversely affect our financial results.

are dependent on our information technology systems for order, inventory procurement and management, production management,

treasury, financial reporting, communications and other functions.

If our information systems fail or experience major interruptions

due to physical damage or loss of power or incur disruptions to our information systems, including security breaches, losses of data

or outages, cyberattacks and other security issues, it could adversely affect our operations and/or financial

rely on our information technology systems to effectively manage our operations, administration and financial functions.

systems, web sites, telecommunications, and data networks are vulnerable to damage or interruption from power loss, natural disasters

and other sources of physical damage or disruption to the equipment which maintains, stores and hosts our information technology systems.

We have taken steps to protect and create redundancies for the equipment that facilitates the use of our management information systems,

but these steps may not be adequate to ensure that our operations are not disrupted by events within and outside of our control.

also rely on information systems, some of which are managed by third parties, to store, process and transmit confidential information,

including financial reporting, inventory management, procurement, invoicing and electronic communications, belonging to our customers,

our suppliers, our employees and/or us.

We monitor and mitigate our exposure to cybersecurity issues and modify our systems when warranted

and we have implemented certain business continuity items, including, to the extent feasible, leveraging our multiple sites for redundancies,

as well as backup and restore methods inclusive of off-site, secure hosted and cloud based third-party providers.

Nevertheless, these

systems are vulnerable to, and at times have suffered from, among other things, damage from power loss or natural disasters, computer

system and network failures, loss of telecommunication services, physical and electronic loss of data, terrorist attacks, computer viruses,

cyberattacks and security breaches, ranging from uncoordinated individual attempts to gain unauthorized access to our information technology

systems to sophisticated and targeted measures.

These include data theft, malware, phishing, ransomware attacks, or other cybersecurity

threats or incidents.

The increased use of mobile technologies and the internet of things can heighten these and other operational risks.

If we, or the third parties who own and operate certain of our information systems, are unable to prevent such breaches, losses of data

and outages, our operations could be disrupted.

Also, the time and funds spent on monitoring and mitigating our exposure and responding

to breaches, including the training of employees, the purchase of protective technologies and the hiring of additional employees and

consultants to assist in these efforts could adversely affect our financial results.

The increasing sophistication of cyberattacks requires

us to continually evaluate the threat landscape and new technologies and processes intended to detect and prevent these attacks.

can be no assurance that the security measures and systems configurations we choose to implement will be sufficient to protect the data

Any theft or misuse of information resulting from a security breach could result in, among other things, loss of significant

and/or sensitive information, litigation by affected parties, financial obligations resulting from such theft or misuse, higher insurance

premiums, governmental investigations, negative reactions from current and potential future customers (including potential negative financial

ramifications under certain customer contract provisions) and negative publicity and any of these could adversely affect our financial

addition, we must comply with increasingly complex regulations intended to protect business and personal data in the U.S.

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are investing in new technologies which are inherently risky .

We have made investments in research and development

(“R&D”) of new technologies that we believe if successful will strengthen our relationships with customers.

is that the Company own intellectual property arising from R&D activities.

To the extent that those investment efforts are unsuccessful,

our competitive position may be harmed, and we may not realize a return on our investments.

To compete more successfully, we believe it is advantageous to maintain an effective R&D program to develop new

products and manufacturing processes that will benefit our customers.

Our R&D efforts are currently funded through investment of capital

generated from operations, and we incurred R&D expenses of approximately $1.2 million in each of the years ended December 31, 2024

We are focusing our R&D efforts across several key areas, including development of fiber optic technologies for a wide range

of applications like active optical cables, expanded beam technology and physical contact cables.

have made investments in R&D of new technologies that we believe if successful will strengthen our relationships with customers.

Our intent is that the Company own intellectual property arising from R&D activities.

To the extent that those investment efforts

are unsuccessful, our competitive position may be harmed, and we may not realize a return on our investments.

compete more successfully, we believe it is advantageous to maintain an effective R&D program to develop new products and manufacturing

processes that will benefit our customers.

Our R&D efforts are currently funded through investment of cash flow generated from operations,

and we incurred R&D expenses of 1,172 and $1,191 in the years ended December 31, 2025 and 2024, respectively.

We are focusing

our R&D efforts across several key areas, including development of fiber optic technologies for a wide range of applications like

active optical cables, expanded beam technology and physical contact cables.

growth strategy in general requires capital to support R&D, working capital, capital expenditures, new program launches and other

strategic initiatives.

If internally generated cash flow and available borrowings are not sufficient, and we are unable to obtain additional

financing on acceptable terms or at all, we may be required to delay, scale back or abandon R&D growth initiatives, which could adversely

affect our competitiveness, results of operations and long-term prospects.

do not expect all our R&D investments to be successful.

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credit agreement contains financial and operating covenants with which we must comply.

Effective as of February 29, 2024, we entered

into a new credit agreement with Bank of America (the “Revolver”.) Our Revolver contains financial and operating

covenants with which we must comply.

Our compliance with these covenants is dependent on our financial results, which are subject to

fluctuation as described elsewhere in these risk factors.

We were not in compliance with financial covenants related to the maximum

operating expense contributions to our Mexican operations in the first and second quarters of 2024.

We received a waiver of the

Mexican operating expenses event of default from the bank in August 2024.

On March 27 , 2025, we amended the Revolver

agreement to waive the leverage ratio and minimum charge coverage ratio events of default as of December 31, 2024 and March 31, 2025

and to further defer the Company’s compliance with these ratios until the third quarter of 2025, and reset compliance

thresholds for our covenant ratios for 2025.

We have included the Amendment

1 to Credit Agreement, Waiver, and Consent as an exhibit to this filing and any description of that document contained in this

risk factor is only a summary and is qualified by its entirety by the Amendment No.

1 to Credit Agreement, Waiver, and Consent.

If we fail to comply with the covenants in the future or if our lender does not agree to waive any future non-compliance, we may be

unable to borrow funds and any outstanding indebtedness could become immediately due and payable, which could materially harm our

March 20, 2026, we entered into a new Credit and Security Agreement with Associated Bank, National Association, which provides for a

revolving credit facility of up to $15,000, subject to a borrowing base based on eligible accounts receivable and inventory, and a $2,200 term loan (the “Associated Facility”).

The Associated Facility includes a sublimit of $1,500

for letters of credit and is secured by substantially all of our assets in the United States of America, and the facility and term

loan each mature in March 2029.

Borrowings under the Associated Facility bear interest, at our option, at a defined base rate, or at

one-month or three-month Term Secured Overnight Financing Rate (“Term SOFR”), plus 2.00% in the case of revolving credit

borrowings and plus 2.25% in the case of the term loan.

Associated Facility contains customary affirmative and negative covenants that restrict or limit our ability to incur additional indebtedness,

create liens, make investments, sell assets, pay dividends or engage in certain transactions without lender consent.

This agreement also

requires us to comply with financial covenants, including maintaining a Fixed Charge Coverage Ratio of 1.10 to 1.00, which measures the

ratio of earnings before interest, tax, depreciation and amortization (“EBITDA”), as defined to exclude certain other non-cash

items, and less unfunded capital expenditures, to fixed charges such as interest as well as debt and capital lease principal payments.

ability to comply with these covenants depends in part on our ability to generate sufficient EBITDA and operating cash flow.

If our EBITDA

or cash flows declines due to any factor including as described in these risk factors, we may not remain in compliance with our financial

covenants under the Associated Facility.

we fail to comply with the covenants in the future and our lender does not agree to waive or amend such noncompliance, an event of default

Upon an event of default, the lender could terminate its commitments to lend, accelerate repayment of outstanding indebtedness,

require us to cash collateralize outstanding letters of credit, or exercise remedies against the collateral securing the facility.

of these actions could materially and adversely affect our liquidity, financial condition and ability to operate our business.

future growth depends on our ability to generate and sustain customer bookings.

future sales growth depends in significant part on our ability to secure customer bookings and program awards from existing and new customers.

Bookings may fluctuate significantly from period to period due to factors such as customer demand, product life cycles, changes in outsourcing

strategies by OEMs, competitive pricing pressures, economic conditions, program timing, and customer capital spending decisions.

significant portion of our bookings may relate to new programs that require engineering support, qualification processes, tooling, or

production ramp-up periods before generating meaningful sales.

As a result, bookings may not convert into sales within expected timeframes,

or at all, and delays in customer program launches or production schedules could adversely affect the timing of sales and operating results.

addition, our ability to sustain bookings growth depends on our ability to maintain strong customer relationships, demonstrate manufacturing

and engineering capabilities, remain price competitive, and successfully bid for new business opportunities.

If we fail to secure sufficient

new bookings or if customers delay, cancel, or reduce awarded programs, our future net sales, operating results, EBITDA and cash flows

could be adversely affected.

ability to generate positive EBITDA and operating cash flow may fluctuate and may be insufficient to support our operations, service

our debt obligations or satisfy financial covenant requirements.

ability to generate EBITDA and operating cash flow depends on numerous factors, many of which are outside of our control, including demand

from our customers, pricing pressures, supply chain disruptions, cost inflation, labor availability, and the timing of customer orders

and payments.

Our operations also require significant working capital investments, including purchases of raw materials and components,

managed inventory programs for customers, and extended inventory holdings to mitigate supply chain disruptions.

Additionally,

we may experience delays in collecting receivables, including value added tax refunds in Mexico, and may be required to fund inventory

purchases in advance of customer demand.

These factors may reduce operating cash flow and limit our ability to convert earnings into

operating cash flow.

we are unable to generate sufficient EBITDA or free cash flow, we may face challenges meeting our operating needs, funding capital expenditures,

investing in research and development, servicing our indebtedness or complying with the financial covenants in our credit facilities.

Any such circumstances could materially adversely affect our financial condition, liquidity and results of operations.

exposure to financially troubled customers, start-up businesses or suppliers may adversely affect our financial results.

provide manufacturing services to companies and industries that have in the past, and may in the future, experience financial

provide manufacturing services to companies and industries that have in the past, and may in the future, experience financial difficulty.

Also, we provide services and products to new and high growth companies.

If our customers experience financial

difficulty or lack of funding for operations, we could have difficulty recovering amounts owed to us from these customers, or demand

for our services or products from these customers could decline.

Additionally, if our suppliers experience financial difficulty, we

could have difficulty sourcing supply necessary to fulfill production requirements and meet scheduled shipments.

If one or more of

our customers were to become insolvent or otherwise were unable to pay for the services provided by us on a timely basis, or at all,

our operating results and financial condition could be adversely affected.

Such adverse effects could include one or more of the

an increase in expenses for expected accounts receivable credit losses and inventory write-offs, a reduction in net

sales, and an increase in our working capital requirements due to higher inventory levels and in days our accounts receivables are

If our customers experience financial difficulty or lack of

funding for operations, we could have difficulty recovering amounts owed to us from these customers, or demand for our services or products

from these customers could decline.

Additionally, if our suppliers experience financial difficulty, we could have difficulty sourcing

supply necessary to fulfill production requirements and meet scheduled shipments.

If one or more of our customers were to become insolvent

or otherwise were unable to pay for the services provided by us on a timely basis, or at all, our operating results and financial condition

could be adversely affected.

Such adverse effects could include one or more of the following:

an increase in expenses for expected accounts

receivable credit losses and inventory write-offs, a reduction in net sales, and an increase in our working capital requirements due

to higher inventory levels and in days our accounts receivables are outstanding.

in foreign currency translation rates could adversely impact our net sales and earnings.

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Significant fluctuations in foreign exchange rates between the U.S.

and foreign currencies may adversely affect our results of operations.

dollar and foreign currencies may adversely affect our

results of operations.

Mexico facility operates as a maquiladora, and its financial records are kept in Mexican Pesos.

As the function currency of the

maquiladora is the U.

Dollar, we translate the Mexican Pesos financial records into U.

Dollars and record a currency

translation gain or loss in the statement of operations.

These translation gains or losses may be material to the financial results

of the Company.

For the years ended December 31, 2024 and 2023, we recorded translation losses of $137 thousand and $54 thousand,

respectively.

The majority of these losses were related to the translation of value added tax receivables denominated in Mexican

As the functional currency of the maquiladora

Dollar, we translate the Mexican Pesos financial records into U.S.

Dollars and record a currency translation gain or loss

in the statement of operations.

These translation gains or losses may be material to the financial results of the Company.

For the years

ended December 31, 2025 and 2024, we recorded translation gain of $120 and a translation loss of $137, respectively, in our consolidated

statements of operations.

The majority of these gains and losses were related to the translation of value added tax receivables denominated

in Mexican Pesos into US dollars.

do not expect to pay dividends for the foreseeable future, and we may never pay dividends;

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Although, in general, our contracts with our customers obligate our customers to ultimately purchase inventory ordered to

support their forecasts or orders, we generally finance these purchases initially.

support their forecasts or orders, we generally initially finance these purchases.

In addition, suppliers may require us to purchase

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if we experience component shortages or longer lead-times for certain components in order to maintain a high level of customer service.

In such situations, we may procure components earlier, which leads to an increase in inventory in the short term and may lead to increased

excess or obsolete inventory in the future.

Excess or obsolete inventory, the need to acquire increasing amounts of inventory due to

shortages, customer demand or otherwise, or other failures to manage our working capital, could adversely affect our operating results,

including our return on invested capital.

In such situations, we may procure components earlier, which leads to a short-term increase in inventory and may lead to increased excess

or obsolete inventory in the future.

Excess or obsolete inventory, the need to acquire increasing amounts of inventory due to shortages,

customer demand or otherwise, or other failures to manage our working capital, could adversely affect our operating results, including

our return on invested capital.

addition, we provide managed inventory programs for some of our customers under which we hold and manage finished goods or work-in-process

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our financial exposure with such customers.

In addition, our inventory may be held at a customer’s facility or warehouse, or elsewhere

in a location outside of our control, which may increase the risk of loss.

Even though our customers generally have contractual obligations

to purchase such inventories from us, we remain subject to customers’ credit risks as well as the risk of potential customer default

and the need to enforce those obligations.

In addition, our inventory is infrequently held at a customer’s facility or warehouse,

or elsewhere outside of our control, which may increase the risk of loss.

Even though our customers generally have contractual

obligations to purchase such inventories from us, we remain subject to customers’ credit risks as well as the risk of potential

customer default and the need to enforce those obligations.

of Our Long-Lived Assets Could Adversely Affect Our Results of Operations and Financial Condition.

evaluate long-lived assets, primarily property and equipment, whenever current events or changes in circumstances indicate that the carrying

amount of an asset or asset group may not be recoverable.

Recoverability for assets to be held and used is based on our projection of

the undiscounted future operating cash flows of the underlying assets.

To the extent such projections indicate that future undiscounted

cash flows are not sufficient to recover the carrying amounts of related assets, a charge might be required to reduce the carrying amount

to equal estimated fair value.

of December 31, 2025, the Company’s common stock was trading at a value less than the Company’s net equity value.

the Company evaluated future undiscounted cash flows and determined that no long-lived asset impairment was required as of December 31,

If the fair value of our other long-lived assets is less than their carrying value, we may be required to record a non-cash impairment

charge, which could be material.

Such charges could negatively impact our results of operations, potentially affect our compliance with

debt covenants, and reduce the perceived value of our Company.

There can be no assurance that future reviews of long-lived assets will

not result in impairment charges, particularly in periods of market or economic volatility.

economic conditions around the world could adversely affect demand for our products and services and the financial health of our customers.

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to pay accounts receivable.

Further, an economic downturn may affect our ability to satisfy the financial covenants in our

financing arrangements.

Further, an economic downturn may affect our ability to satisfy the financial covenants in our financing

arrangements.

or disease outbreaks could adversely affect our operations, supply chains, financial condition and results of operations.

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our financial statements.

or changing laws, regulations, policy and standards relating to corporate governance and public disclosure, including SEC and Nasdaq

regulations, domestic or international tax legislation and the implementation of significant changes in U.S.

GAAP, present

challenges due to complexities, assumptions and judgements required to implement.

or changing laws, regulations, governmental orders or mandates, policy and standards relating to corporate governance and public disclosure,

including SEC and NASDAQ regulations, domestic or international tax legislation and the implementation of significant changes in U.S.

GAAP, present challenges due to complexities, assumptions and judgements required to implement.

We apply judgments based on our understanding,

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actual amounts could differ from those estimated at the time the financial statements are issued.

In addition, implementation may

change the financial accounting or reporting standards that govern the preparation of our financial statements or authoritative

entities could reverse their previous interpretations or positions on how various financial accounting or reporting standards should

These changes may be difficult to predict and implement and could materially or otherwise impact how we prepare and

report our estimates, uncertainties, financial statements, operating results and financial condition.

Our efforts to comply with

evolving laws, regulations, accounting policies and standards have resulted in, and are likely to continue to result in, increased

general and administrative expenses and management time and attention from net sales-generating activities to compliance activities

and may have an adverse effect on our financial statements, including cash flows.

In addition, implementation may change

the financial accounting or reporting standards that govern the preparation of our financial statements or authoritative entities could

reverse their previous interpretations or positions on how various financial accounting or reporting standards should be applied.

changes may be difficult to predict and implement and could materially or otherwise impact how we prepare and report our estimates, uncertainties,

financial statements, operating results and financial condition.

Our efforts to comply with evolving laws, regulations, accounting policies

and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses and management

time and attention from net sales-generating activities to compliance activities and may have an adverse effect on our financial statements,

including cash flows.

Anti-Corruption

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may result in substantial fines or other consequences, and either could have a significant impact on our operating results.

we are not able to comply with Department of Defense cybersecurity requirements, our net sales from defense contractors could be

we are not able to comply with Department of Defense cybersecurity requirements, our net sales from defense contractors could be reduced.

2019, the U.S.

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systems and networks.

We are working to comply with CMMC requirements with the intention of seeking CMMC level 2 compliance in 2025.

If we are unsuccessful in our efforts to timely comply with CMMC requirements, our ability to maintain contracts with customers that

are defense contractors and resulting net sales may be impacted negatively.

While we achieved CMMC level 2 certification in 2025, if we cannot maintain compliance with these regulations,

our agreements with defense contractors and the resulting net sales may be impacted negatively.

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