What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-31 compared with 2024-03-20 · 690 added, 396 removed, 233 unchanged (82% of the section changed)

1 unchanged sentence

Report of Independent Registered Public Accounting Firm (PCAOB Firm ID 23 )

Consolidated Financial Statements:

Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2023 and 2022

Financial Statements:

Statements of Operations and Comprehensive (Loss) Income for the years ended December 31, 2024 and 2023

Consolidated Balance Sheets as of December 31, 2024 and 2023

2 unchanged sentences

Notes to Consolidated Financial Statements

(The remainder of this page was intentionally left blank.)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the board of directors of Nortech Systems Incorporated and Subsidiaries:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Nortech Systems Incorporated and Subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

remainder of this page was intentionally left blank.)

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the shareholders and the board of directors of Nortech Systems Incorporated and Subsidiaries:

on the Financial Statements

have audited the accompanying consolidated balance sheets of Nortech Systems Incorporated and Subsidiaries (the

“Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive (loss)

income, shareholders’ equity, and cash flows, for the years then ended, and the related notes (collectively referred to as the

“consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all

material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its

cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved or are especially challenging, subjective, or complex judgments.

Audit Matters

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and

(2) involved or are especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Baker Tilly US, LLP

We have served as the Company's auditor since 2017.

Minneapolis, Minnesota

March 20, 2024

NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(IN THOUSANDS, EXCEPT SHARE DATA)

Baker Tilly US, LLP

have served as the Company’s auditor since 2017.

SYSTEMS INCORPORATED AND SUBSIDIARIES

STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

THE YEARS ENDED DECEMBER 31, 2024 AND 2023

THOUSANDS, EXCEPT SHARE DATA)

Cost of goods sold

Operating expenses

Selling Expenses

General and Administrative Expenses

Research and Development Expenses

Gain on Sale of Property and Equipment

General and administrative

Research and development

Restructuring charges

Total operating expenses

Income from Operations

(Loss) income from operations

Other expense

Interest expense

Total Other Expense

Income Before Income Taxes

Income Tax (Benefit) Expense

Income Per Common Share:

Weighted Average Number of Common Shares Outstanding - Basic

Weighted Average Number of Common Shares Outstanding - Dilutive

Other Comprehensive Income

Foreign Currency Translation Loss

Comprehensive Income, Net of Tax

See accompanying notes to consolidated financial statements.

NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS OF DECEMBER 31, 2023 AND 2022

(IN THOUSANDS, EXCEPT SHARE DATA)

(Loss) income before income taxes

Income tax expense (benefit)

Net (loss) income

Net (loss) income per common share:

Basic (in dollars per share)

Weighted average number of common shares outstanding - basic (in shares)

Diluted (in dollars per share)

Weighted average number of common shares outstanding – diluted (in shares)

Other comprehensive (loss) income

Foreign currency translation

Comprehensive (loss) income, net of tax

accompanying notes to consolidated financial statements.

SYSTEMS INCORPORATED AND SUBSIDIARIES

BALANCE SHEETS

OF DECEMBER 31, 2024 AND 2023

THOUSANDS, EXCEPT SHARE DATA)

Current assets:

1 unchanged sentence

Accounts receivable, less allowances of $ 196 and $ 358

Employee Retention Credit Receivable

Inventories, net

8 unchanged sentences

Current liabilities:

Current Portion of Finance Lease Obligations

Current Portion of Operating Leases

Accounts payable

1 unchanged sentence

Customer deposits

Current portion of operating leases

Current portion of finance lease obligations

Other accrued liabilities

2 unchanged sentences

Long-term line of credit

Long-Term Finance Lease Obligations, Net of Current Portion

Long-term operating lease obligations, net of current portion

Long-term finance lease obligations, net of current portion

Other long-term liabilities

13 unchanged sentences

Total liabilities and shareholders’ equity

See accompanying notes to consolidated financial statements.

NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(IN THOUSANDS)

accompanying notes to consolidated financial statements.

SYSTEMS INCORPORATED AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

THE YEARS ENDED DECEMBER 31, 2024 AND 2023

CASH FLOWS FROM OPERATING ACTIVITIES

Adjustments to Reconcile Net Income to Net Cash Provided By (Used In) Operating Activities:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash (used in) provided by

operating activities:

Compensation on stock-based awards

3 unchanged sentences

Gain on disposal of property and equipment

Foreign Currency Transaction Gain

Changes in current operating items

7 unchanged sentences

Other accrued liabilities

Net Cash Provided By Operating Activities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property and equipment

Purchase of Intangible Asset

Purchases of property and equipment

3 unchanged sentences

Payments to line of credit

Proceeds from notes payable

Principal payments on financing leases

Share repurchases

Stock option exercises

Net Cash Used In Financing Activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

10 unchanged sentences

Property and equipment purchases in accounts payable

Property Acquired under Operating Lease

Equipment Acquired under Finance Lease

See accompanying notes to consolidated financial statements.

NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(IN THOUSANDS)

Property acquired under operating leases

Equipment acquired under finance leases

accompanying notes to consolidated financial statements.

SYSTEMS INCORPORATED AND SUBSIDIARIES

STATEMENTS OF SHAREHOLDERS’ EQUITY

THE YEARS ENDED DECEMBER 31, 2024 AND 2023

Preferred Stock

Comprehensive

Shareholders’

Income (Loss)

BALANCE DECEMBER 31, 2021

Balance as of December 31, 2022

Foreign currency translation adjustment

Stock Option Exercises

Compensation on stock-based awards

BALANCE DECEMBER 31, 2022

Foreign Currency Translation Adjustment

Stock option exercises

Cumulative adjustment related to adoption of ASC 326 (current expected credit loss)

Balance as of December 31, 2023

Net income (loss)

Foreign currency translation adjustment

Compensation on stock-based awards

Cumulative Adjustment Related to the Adoption of ASC 326 (CECL)

BALANCE DECEMBER 31, 2023

See accompanying notes to consolidated financial statements.

NORTECH SYSTEMS INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

Stock option exercises

Stock repurchases

Balance as of December 31, 2024

accompanying notes to consolidated financial statements.

SYSTEMS INCORPORATED AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

OF AND FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023

THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements of Nortech Systems Incorporated and Subsidiaries (“the Company”, “we”, “our”) have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Nature of Business

The Company, organized in December 1990, is a provider of engineering design and manufacturing solutions for complex electromedical devices, electromechanical systems, assemblies and components headquartered in Maple Grove, Minnesota, a suburb of Minneapolis, Minnesota.

We maintain facilities and operations in Minnesota in the United States;

of Presentation

accompanying consolidated financial statements of Nortech Systems Incorporated and Subsidiaries (“the Company”,

“we”, “our”) have been prepared in accordance with generally accepted accounting principles in the United

States of America (“U.S.

GAAP”) for financial information and pursuant to the rules and regulations of the Securities

and Exchange Commission (“SEC”).

Company, organized in December 1990, is a provider of engineering design and manufacturing solutions for complex electromedical devices,

electromechanical systems, assemblies and components headquartered in Maple Grove, Minnesota, a suburb of Minneapolis, Minnesota.

maintain facilities and operations in Minnesota in the United States;

Monterrey, Mexico;

and Suzhou, China.

Principles of Consolidation

The consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly-owned subsidiaries, Manufacturing Assembly Solutions of Monterrey, Inc.

and Nortech Systems Hong Kong Company, Limited as well as its wholly-owned subsidiary, Nortech Systems Suzhou Company, Limited.

of Consolidation

consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly-owned subsidiaries, Manufacturing

Assembly Solutions of Monterrey, Inc.

and Nortech Systems Hong Kong Company, Limited as well as its wholly-owned subsidiary, Nortech

Systems Suzhou Company, Limited.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our consolidated financial statements.

Estimates also affect the reported amounts of net sales and expense during the reporting period.

Significant items subject to estimates and assumptions include the valuation allowance for inventories, allowance for doubtful accounts, realizability of deferred tax assets and long-lived asset recovery.

Actual results could differ from those estimates.

Restricted Cash

Cash and cash equivalents classified as restricted cash on our consolidated balance sheets are restricted as to withdrawal or use under the terms of certain contractual agreements.

As of December 31, 2023, we had outstanding letters of credit for $ 200 .

Restricted cash as of December 31, 2023 and December 31, 2022 was $ 715 and $ 1,454 , respectively.

The December 31, 2023 and 2022 restricted cash balance included lockbox deposits that are temporarily restricted due to timing at the period end.

The lockbox deposits are applied against our line of credit the next business day.

Accounts Receivable and Allowance for Expected Losses

We grant credit to customers in the normal course of business.

Accounts receivable is unsecured and presented net of an allowance for doubtful accounts.

The allowance for expected losses was $ 358 and $ 334 as of December 31, 2023 and 2022, respectively.

When we record customer receivables and contract assets arising from net sales transactions, we record an allowance for credit losses for the current expected credit losses (“CECL”) inherent in the asset over its expected life.

The allowance for credit losses is a valuation account deducted from the cost basis of the assets to present their net carrying value at the amount expected to be collected.

Each period, the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives of the assets.

We estimate expected credit losses based on relevant information about past events, including historical write-offs of bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment terms that affect the collectability of the reported amount.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of our consolidated financial statements.

Estimates also affect the reported amounts of net sales and expense

during the reporting period.

Significant items subject to estimates and assumptions include the valuation allowance for inventories,

allowance for doubtful accounts, realizability of deferred tax assets and long-lived asset recovery.

Actual results could differ from

those estimates.

and cash equivalents classified as restricted cash on our consolidated balance sheets are restricted as to withdrawal or use under the

terms of certain contractual agreements.

Restricted cash as of December 31, 2023 was $ 715 .

The December 31, 2023 restricted cash balance

included lockbox deposits that are temporarily restricted due to timing at the period end.

The lockbox deposits are applied against our

line of credit the next business day.

Receivable and Allowance for Expected Losses

grant credit to customers in the normal course of business.

Accounts receivable is unsecured and presented net of an allowance for doubtful

The allowance for expected losses was $ 196

as of December 31, 2024 and 2023, respectively.

we record customer receivables and contract assets arising from net sales transactions, we record an allowance for credit losses for

the current expected credit losses (“CECL”) inherent in the asset over its expected life.

The allowance for credit losses

is a valuation account deducted from the cost basis of the assets to present their net carrying value at the amount expected to be collected.

Each period, the allowance for credit losses is adjusted through earnings to reflect expected credit losses over the remaining lives

of the assets.

estimate expected credit losses based on relevant information about past events, including historical write-offs of bad debts, customer

concentrations, customer creditworthiness, current economic trends and changes in customer payment terms that affect the collectability

of the reported amount.

When measuring expected credit losses, we pool assets with similar country risk and credit risk characteristics.

Changes in the relevant information may significantly affect the estimates of expected credit losses.

Assets are written off when we determine them to be uncollectible.

are written off when we determine them to be uncollectible.

Write-offs are recognized as a deduction from the allowance for credit losses.

Inventories consist of finished goods, raw materials and work-in-process and are stated at the lower of average cost (which approximates first-in, first-out) or net realizable value.

consist of finished goods, raw materials and work-in-process and are stated at the lower of average cost (which approximates first-in,

first-out) or net realizable value.

Costs include material, labor, and overhead required in the production of our products.

Inventory reserves are maintained for inventories that may have a lower value than stated or quantities in excess of future production needs.

We regularly review inventory quantities on-hand for excess and obsolete inventory and, when circumstances indicate, incur charges to write down inventories to their net realizable value.

The determination of a reserve for excess and obsolete inventory involves management exercising judgment to determine the required reserve, considering future demand, product life cycles, introduction of new products and current market conditions.

Inventories are as follows as of December 31:

reserves are maintained for inventories that may have a lower value than stated or quantities in excess of future production needs.

regularly review inventory quantities on-hand for excess and obsolete inventory and, when circumstances indicate, incur charges to write

down inventories to their net realizable value.

The determination of a reserve for excess and obsolete inventory involves management

exercising judgment to determine the required reserve, considering future demand, product life cycles, introduction of new products and

current market conditions.

are as follows as of December 31:

OF INVENTORIES

Raw materials

1 unchanged sentence

Finished goods

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.

Additions, improvements and major renewals are capitalized, while maintenance and minor repairs are expensed as incurred.

When assets are retired or disposed of, the assets and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in operations.

Leasehold improvements are depreciated over the shorter of their estimated useful lives or their remaining lease terms.

All other property and equipment are depreciated by the straight-line method over their estimated useful lives, as follows:

Leasehold Improvements

Manufacturing Equipment

Office and Other Equipment

Property and equipment as of December 31, 2023 and 2022:

and Equipment

and equipment are stated at cost less accumulated depreciation.

Additions, improvements and major renewals are capitalized, while maintenance

and minor repairs are expensed as incurred.

When assets are retired or disposed of, the assets and related accumulated depreciation are

removed from the accounts and the resulting gain or loss is reflected in operations.

Leasehold improvements are depreciated over the

shorter of their estimated useful lives or their remaining lease terms.

All other property and equipment are depreciated by the straight-line

method over their estimated useful lives, as follows:

OF ESTIMATED USEFUL LIVES

Manufacturing

and other equipment

and equipment as of December 31, 2024 and 2023:

OF PROPERTY AND EQUIPMENT

Building and leasehold improvements

3 unchanged sentences

Total property and equipment, net

Long-Lived Asset Impairment

We 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.

As of December 31, 2023, the Company’s common stock was trading at a value less than the Company’s net equity value.

As such, the Company evaluated future undiscounted cash flows and determined that no long-lived asset impairment was required as of December 31, 2023.

No impairment of long-lived assets was recorded during the year ended December 31, 2022.

Preferred Stock

Preferred stock issued is non-cumulative and nonconvertible.

The holders of the preferred stock are entitled to a non-cumulative dividend of 12 % when and if declared.

In liquidation, holders of preferred stock have preference to the extent of $ 1.00 per share plus dividends accrued but unpaid.

Asset Impairment

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.

As of December 31, 2024, the Company’s common stock was trading at a value less than the Company’s

net equity value.

As such, the Company evaluated future undiscounted cash flows and determined that no long-lived asset impairment was

required as of December 31, 2024.

No impairment of long-lived assets was recorded during the years ended December 31, 2024 or 2023.

Held for Sale

classify long-lived assets as held-for-sale when the criteria for such classification are met.

These criteria include management’s commitment

to a plan to sell the asset, the asset being available for immediate sale in its present condition, an active program to locate a buyer,

the sale being probable and expected to be completed within one year, and the asset being actively marketed for sale at a price that

is reasonable in relation to its current fair value.

stock issued is non-cumulative and nonconvertible.

The holders of the preferred stock are entitled to a non-cumulative dividend of 12 %

when and if declared.

In liquidation, holders of preferred stock have preference to the extent of $ 1.00 per share plus dividends declared

No preferred stock dividends were declared or paid during the years ended December 31, 2024 and 2023.

Revenue Recognition

Our net sales are comprised of product, engineering services and repair services.

All net sales is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our net sales being recognized over time including goods produced under contract manufacturing agreements and services net sales.

A performance obligation is a promise in a contract to transfer a distinct product or service to a customer.

net sales are comprised of product, engineering services and repair services.

All net sales are recognized when the Company satisfies

its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as)

our customer obtains control of the product or service, with the majority of our net sales being recognized over time including goods

produced under contract manufacturing agreements and services net sales.

A performance obligation is a promise in a contract to transfer

a distinct product or service to a customer.

A contract’s transaction price is allocated to each distinct performance obligation.

The majority of our contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct.

Net sales are measured as the amount of consideration we expect to receive in exchange for transferring products or providing services.

As such, net sales are recorded net of returns, allowances and customer discounts.

Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from net sales) basis.

Shipping and handling costs are included in cost of goods sold.

The majority of our net sales are derived from the transfer of goods produced under contract manufacturing agreements which have no alternative use, and we have an enforceable right to payment for our performance completed to date.

Our performance obligations within our contract manufacturing agreements are generally satisfied over time as the goods are produced based on customer specifications and we have an enforceable right to payment for the goods produced.

If these requirements are not met, the net sales are recognized at a point in time, generally upon shipment.

Net sales under contract manufacturing agreements that was recognized over time accounted for approximately 79 % and 72 % of our net sales for the years ended December 31, 2023 and 2022, respectively.

Net sales under these agreements are generally recognized over time using an input measure based upon the proportion of actual costs incurred.

Accounting for contract manufacturing agreements involves the use of various techniques to estimate total net sales and costs.

We estimate profit on these agreements as the difference between total estimated net sales and expected costs to complete the performance obligation within the terms of the agreement and recognize the respective profit as the goods are produced.

The estimates to determine the profit earned on the performance obligation are based on contractual selling prices and historical cost of goods sold and represent our best judgement at the time.

Changes in judgements on these above estimates could impact the timing and amount of net sales recognized with a resulting impact on the timing and amount of associated profit.

On occasion our customers provide materials to be used in the manufacturing process and the fair value of the materials is included in net sales as noncash consideration at the point in time when the manufacturing process commences along with the same corresponding amount recorded as cost of goods sold.

The majority of our contracts have a single performance obligation, as the promise to transfer products or services is not separately

identifiable from other promises in the contract and, therefore, not distinct.

sales are measured as the amount of consideration we expect to receive in exchange for transferring products or providing services.

such, net sales are recorded net of returns, allowances and customer discounts.

Sales, value add, and other taxes collected from customers

and remitted to governmental authorities are accounted for on a net (excluded from net sales) basis.

Shipping and handling costs are

included in cost of goods sold.

majority of our net sales are derived from the transfer of goods produced under contract manufacturing agreements which have no alternative

use, and we have an enforceable right to payment for our performance completed to date.

Our performance obligations within our contract

manufacturing agreements are generally satisfied over time as the goods are produced based on customer specifications and we have an

enforceable right to payment for the goods produced.

If these requirements are not met, the net sales are recognized at a point in time,

generally upon shipment.

Net sales under contract manufacturing agreements that was recognized over time accounted for approximately

76 % and 79 % of our net sales for the years ended December 31, 2024 and 2023, respectively.

Net sales under these agreements are generally

recognized over time using an input measure based upon the proportion of actual costs incurred.

for contract manufacturing agreements involves the use of various techniques to estimate total net sales and costs.

We estimate profit

on these agreements as the difference between total estimated net sales and expected costs to complete the performance obligation within

the terms of the agreement and recognize the respective profit as the goods are produced.

The estimates to determine the profit earned

on the performance obligation are based on contractual selling prices and historical cost of goods sold and represent our best judgement

Changes in judgements on these above estimates could impact the timing and amount of net sales recognized with a resulting

impact on the timing and amount of associated profit.

occasion our customers provide materials to be used in the manufacturing process and the fair value of the materials is included in net

sales as noncash consideration at the point in time when the manufacturing process commences along with the same corresponding amount

recorded as cost of goods sold.

The inclusion of noncash consideration has no impact on overall profitability.

Contract Assets

Contract assets, recorded as such in the Consolidated Balance Sheet, consist of unbilled amounts related to net sales recognized over time.

Changes in the contract assets balance during the years ended December 31, 2023 and 2022 was as follows:

assets, recorded as such in the consolidated balance sheets, consist of unbilled amounts related to net sales recognized over time.

in the contract assets balance during the years ended December 31, 2024 and 2023 were as follows:

OF CONTRACT ASSETS

Balance outstanding as of December 31, 2022

1 unchanged sentence

Amounts transferred over time to contract assets

Allowance for current expected credit losses

Amounts invoiced during the period

2 unchanged sentences

Amounts transferred over time to contract assets

Allowance for current expected credit losses

Amounts invoiced during the period

Balance outstanding as of December 31, 2024

We expect substantially all the remaining performance obligations for the contract assets recorded as of December 31, 2023, to be transferred to receivables within 90 days, with any remaining amounts to be transferred within 180 days.

We bill our customers upon shipment with payment terms of up to 120 days.

The following tables summarize our net sales by market for the years ended December 31, 2023 and 2022:

Year Ending December 31, 2023

expect substantially all the remaining performance obligations for the contract assets recorded as of December 31, 2024, to be transferred

to receivables within 90 days, with any remaining amounts to be transferred within 180 days.

We bill our customers upon shipment with

payment terms of up to 120 days.

following tables summarize our net sales by market for the years ended December 31, 2024 and 2023:

OF NET SALES BY MARKET

Product/ Service Transferred

2 unchanged sentences

Total Net Sales by Market

Year Ended December 31, 2024

Product/ Service Transferred

Product Transferred at Point in Time

Noncash Consideration

Total Net Sales by Market

Medical Device

Medical Imaging

Aerospace and Defense

Total net sales

Year Ending December 31, 2022

Product/ Service Transferred

2 unchanged sentences

Total Net Sales by Market

Year Ended December 31, 2023

Product/ Service Transferred

Product Transferred at Point in Time

Noncash Consideration

Total Net Sales by Market

Medical Device

Medical Imaging

Aerospace and Defense

Total net sales

Noncash consideration represents material provided by the customer used in the build of the product.

Product Warranties

We provide limited warranty for the replacement or repair of defective product within a specified time period after the sale at no cost to our customers.

We make no other guarantees or warranties, expressed or implied, of any nature whatsoever as to the goods including, without limitation, warranties to merchantability, fit for a particular purpose or non-infringement of patent or the like unless agreed upon in writing.

We estimate the costs that may be incurred under our limited warranty and provide a reserve based on actual historical warranty claims coupled with an analysis of unfulfilled claims at the balance sheet date.

Our warranty claim costs are not material given the nature of our products and services.

Advertising costs are charged to operations as incurred.

The total amount charged to expense was $ 84 and $ 63 for the years ended December 31, 2023 and 2022, respectively.

We account for income taxes under the asset and liability method.

Deferred income tax assets and liabilities are recognized annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

consideration represents material provided by the customer used in the build of the product.

provide limited warranty for the replacement or repair of defective product within a specified time period after the sale at no cost

to our customers.

We make no other guarantees or warranties, expressed or implied, of any nature whatsoever as to the goods including,

without limitation, warranties to merchantability, fit for a particular purpose or non-infringement of patent or the like unless agreed

upon in writing.

We estimate the costs that may be incurred under our limited warranty and provide a reserve based on actual historical

warranty claims coupled with an analysis of unfulfilled claims at the balance sheet date.

Our warranty claim costs are not material given

the nature of our products and services.

costs are charged to operations as incurred and aggregated to $ 83

for the years ended December 31, 2024 and 2023,

respectively.

account for income taxes under the asset and liability method.

Deferred income tax assets and liabilities are recognized annually for

differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts

in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

We recognize interest and penalties accrued on any unrecognized tax benefits as a component on income tax expense.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution.

Management must also assess whether uncertain tax positions as filed could result in the recognition of a liability for possible interest and penalties if any.

Our estimates are based on the information available to us at the time we prepare the income tax provisions.

Our income tax returns are subject to audit by federal, state, and local governments, generally three years after the returns are filed.

interest and penalties accrued on any unrecognized tax benefits as a component on income tax expense.

recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on

examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the consolidated

financial statements from such positions are measured based on the largest benefit that has a greater than fifty percent likelihood of

being realized upon ultimate resolution.

Management must also assess whether uncertain tax positions as filed could result in the recognition

of a liability for possible interest and penalties if any.

Our estimates are based on the information available to us at the time we

prepare the income tax provisions.

Our income tax returns are subject to audit by federal, state, and local governments, generally three

years after the returns are filed.

These returns could be subject to material adjustments or differing interpretations of the tax laws.

Stock-Based Compensation

We use a Black-Scholes option-pricing model to determine the grant date fair value of our service-based incentive awards and recognize the expense on a straight-line basis over the vesting period.

We determine the grant date fair value of our market-based incentive awards using a lattice simulation model and recognize the expense on a straight-line basis over the vesting period.

The grant date fair value of restricted stock units is determined based on the closing market price of the Company's common stock on the date of grant, with compensation expense recognized ratably over the applicable vesting period.

See Note 8 for additional information.

Net Income Per Common Share

Basic net income per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding.

Dilutive net income per common share assumes the exercise and issuance of all potential common stock equivalents in computing the weighted-average number of common shares outstanding using the treasury stock method, unless their effect is antidilutive.

For the year ended December 31, 2023, treasury stock equivalent stock options of 163,744 were included in the computation of diluted net income per common share as their impact were dilutive.

For the year ended December 31, 2022, treasury stock equivalent stock options of 205,907 were included in the computation of diluted net income per common share as their impact were dilutive.

Fair Value of Financial Instruments

The carrying amounts of all financial instruments approximate their fair values.

The carrying amounts for cash, accounts receivable, ERC receivable, accounts payable, and other assets and liabilities approximate fair value because of the short maturity of these instruments.

Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities, the carrying value of our long-term debt and line of credit approximates its fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value framework requires the categorization of assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability.

Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment.

use a Black-Scholes option-pricing model to determine the grant date fair value of our service-based incentive awards and recognize

the expense on a straight-line basis over the vesting period.

We determine the grant date fair value of our market-based incentive

awards using a lattice simulation model and recognize the expense on a straight-line basis over the vesting period.

The grant date

fair value of restricted stock units is determined based on the closing market price of the Company’s common stock on the date

of grant, with compensation expense recognized ratably over the applicable vesting period.

See Note 8 – “Incentive

Plans” for additional information.

(Loss) Income Per Common Share

Basic net (loss) income per common share

is computed by dividing net income (loss) by the weighted-average number of common shares outstanding.

Dilutive net (loss) income per

common share assumes the exercise and issuance of all potential common stock equivalents in computing the weighted-average number of

common shares outstanding using the treasury stock method, unless their effect is antidilutive.

For the years ended December 31,

2024 and 2023, there were restricted stock units and stock options totaling 477,541

and 81,445 , respectively, excluded from the computation of diluted weighted-average shares outstanding as their inclusion would be anti-dilutive.

For the year ended December 31, 2023, the dilutive effect of outstanding stock options and non-vested restricted stock units were 163,744

equivalent common shares and were included in the computation of diluted net income per common share.

Value of Financial Instruments

carrying amounts of all financial instruments approximate their fair values.

The carrying amounts for cash, accounts receivable, ERC

receivable, accounts payable, and other assets and liabilities approximate fair value because of the short maturity of these instruments.

Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities, the carrying value of

our long-term debt and line of credit approximates its fair value.

value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date.

Valuation techniques used to measure fair value maximize the use of observable inputs and

minimize the use of unobservable inputs.

fair value framework requires the categorization of assets and liabilities into one of three levels based on the assumptions (inputs)

used in valuing the asset or liability.

Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant

management judgment.

The three levels are defined as follows:

1 unchanged sentence

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Unobservable inputs for the asset or liability, reflecting the reporting entity’s own assumptions about the assumptions that market participants would use in pricing.

Our assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

We endeavor to use the best available information in measuring fair value.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Unobservable inputs for the asset or liability, reflecting the reporting entity’s own assumptions about the assumptions that

market participants would use in pricing.

assessment of the significance of a particular input to the fair value measurements requires judgment and may affect the valuation of

the assets and liabilities being measured and their placement within the fair value hierarchy.

We endeavor to use the best available

information in measuring fair value.

Assets and liabilities are classified in their entirety based on the lowest level of input that

is significant to the fair value measurement.

See Note 3 – “Other Intangible Assets”, for more detail.

Enterprise-Wide Disclosures

Our results of operations for the years ended December 31, 2023 and 2022 represent a single operating and reporting segment referred to as Contract Manufacturing within the EMS industry.

Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources.

Export net from our U.S.

domestic operations represent approximately 4.1 % and 4.0 % of consolidated net sales for the years ended December 31, 2023 and 2022, respectively.

Net sales by our major EMS industry markets for the years ended December 31, 2023 and 2022 are as follows:

Aerospace and Defense

Total Net Sales

Noncurrent assets by country are as follows:

United States

December 31, 2023

Property and Equipment, Net

Operating Lease Assets

Deferred Tax Assets

December 31, 2022

Property and Equipment, Net

Operating Lease Assets

Foreign Currency Transactions

The functional currency for our Mexico subsidiary is the US dollar.

Foreign exchange transaction gains and losses attributable to exchange rate movements related to transactions made in the local currency and on intercompany receivables and payables not deemed to be of a long-term investment nature are recorded in other income (expense).

The functional currency for our China subsidiary is the Renminbi (“RMB”).

Assets and liabilities of the China operation are translated from RMB into U.S.

dollars at period-end rates, while income and expense are translated at the weighted-average exchange rates for the period.

The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive loss within shareholders’ equity.

Foreign currency translation losses decreased consolidated shareholders’ equity by $ 162 and $ 426 for the years ended December 31, 2023 and 2022, respectively.

Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the Consolidated Statements of Operations.

Net foreign currency transaction losses included in the determination of net income was $ 54 and $ 42 for the years ended December 31, 2023 and 2022, respectively.

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326).

The ASU introduces a new credit loss methodology, Current Expected Credit Losses (“CECL”), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk.

The CECL methodology utilizes a lifetime “expected credit loss” measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial assets are originated or acquired.

Currency Transactions

functional currency for our Mexico subsidiary is the US dollar.

Foreign exchange transaction gains and losses attributable to exchange

rate movements related to transactions made in the local currency and on intercompany receivables and payables not deemed to be of a

long-term investment nature are recorded in general and administrative expense.

The functional currency for our China subsidiary is the

Renminbi (“RMB”).

Assets and liabilities of the China subsidiary are translated from RMB into U.S.

dollars at period-end rates,

while income and expense are translated at the weighted-average exchange rates for the period.

The related translation adjustments are

reflected as a foreign currency translation adjustment in accumulated other comprehensive loss within shareholders’ equity.

currency translation losses decreased consolidated shareholders’ equity by $ 445 and $ 162 for the years ended December 31, 2024

and 2023, respectively.

gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional

currency are included in the consolidated statements of operations and comprehensive (loss) income.

Net foreign currency

transaction losses included in the determination of net (loss) income was $ 137

for the years ended December 31, 2024 and 2023, respectively.

of New Accounting Standards

June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”)

2016-13, Financial Instruments – Credit Losses (Topic 326).

The ASU introduces a new credit loss methodology, Current Expected

Credit Losses (“CECL”), which requires earlier recognition of credit losses, while also providing additional

transparency about credit risk.

The CECL methodology utilizes a lifetime “expected credit loss” measurement objective

for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial assets

are originated or acquired.

The expected credit losses are adjusted each period for changes in expected lifetime credit losses.

The methodology replaces the multiple existing impairment methods in current GAAP, which generally require that a loss be incurred before it is recognized.

methodology replaces the multiple existing impairment methods in current U.S.

GAAP, which generally require that a loss be incurred

before it is recognized.

On January 1, 2023, we adopted the guidance prospectively with a cumulative adjustment to retained earnings

We have not restated comparative information for 2022 and, therefore, the comparative information for 2022 is reported under the old model and is not comparable to the information presented for 2023.

At adoption, we recognized an allowance for credit losses related to accounts receivable and contract assets of $ 30 , net of tax, and a decrease in retained earnings of $ 30 associated with the increased estimated credit losses.

Recently Issued New Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting Topic (280):

and recognized an allowance for credit losses related to accounts receivable and contract assets of $ 30 ,

net of tax, and a decrease in retained earnings of $ 30 associated

with the increased estimated credit losses.

November 2023, the FASB issued ASU 2023-07, Segment Reporting Topic (280):

Improvements to Reportable Segment Disclosure .

The ASU supplements reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in this ASU are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

ASU supplements reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment

expenses We adopted ASU 2023-07 during the year ended December 31, 2024.

See Note 9 – “Segment Information” in the

accompanying notes to these consolidated financial statements.

Issued New Accounting Standards

December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The ASU enhances the transparency and decision usefulness of income tax disclosures and is effective for annual periods beginning after December 15, 2024 on a prospective basis.

The ASU enhances

the transparency and decision usefulness of income tax disclosures and is effective for annual periods beginning after December 15, 2024

on a prospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements and related disclosures.

The Company is currently evaluating the impact of this ASU on its consolidated financial

statements and related disclosures.

November 2024, the FASB issued ASU No.

2024-03 (Subtopic 220-40), Disaggregation of Income Statement Expenses.

The ASU requires public

entities to disaggregate, in a tabular presentation, certain income statement expenses into different categories, such as purchases of

inventory, employee compensation, depreciation, and intangible asset amortization.

The guidance is effective for fiscal years beginning

after December 15, 2026, with early adoption permitted, and may be applied retrospectively.

The Company is currently evaluating the impact

of adopting the new ASU on its consolidated financial statements and related disclosures.

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable.

We maintain our excess cash balances in checking accounts at two high-credit quality financial institutions.

These accounts may at times exceed federally insured limits.

instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable.

our excess cash balances in checking accounts at two high-credit quality financial institutions.

These accounts may at times exceed federally

insured limits.

We grant credit to customers in the normal course of business and do not require collateral on our accounts receivable.

We have certain customers whose net sales individually represented 10% or more of net sales, or whose accounts receivable balances individually represented 10% or more of total accounts receivable.

Two customers, individually, accounted for at 25.7 % and 10.3 %, respectively, of net sales for the year ended December 31, 2023, and one customer accounted for 26.9 % of net sales for the year ended December 31, 2022.

Two customers, individually, accounted 22.1 % and 12.7 %, respectively, of accounts receivable as of December 31, 2023 and 21.3 % and 13.8 % of accounts receivable as of December 31, 2022.

have certain customers whose net sales individually represented 10% or more of net sales, or whose accounts receivable balances individually

represented 10% or more of total accounts receivable.

One 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.

Two customers, individually, accounted 23.2 % and 12.5 %, respectively, of accounts receivable as of December 31, 2024 and 22.1 % and 12.7 %

of accounts receivable as of December 31, 2023.

OTHER INTANGIBLE ASSETS

Finite life intangible assets as of December 31, 2023 and 2022 are as follows:

life intangible assets as of December 31, 2024 and 2023 are as follows:

OF INTANGIBLE ASSETS

Relationships

2 unchanged sentences

Balance as of December 31, 2024

Intangible assets are amortized on a straight-line basis over their estimated useful lives.

The weighted average remaining amortization period of our intangible assets is 3.2 years.

Of the patents value as of December 31, 2023, $ 80 are being amortized and $ 111 are in process and a patent has not yet been issued.

Amortization expense of finite life intangible assets was $ 159 and $ 150 for the years ended December 31, 2023 and 2022, respectively.

Estimated future annual amortization expense (except projects in process) related to these assets is approximately as follows:

assets are amortized on a straight-line basis over their estimated useful lives.

The weighted average remaining amortization period of

our intangible assets is 5.1 years.

Of the patents value as of December 31, 2024, $ 89 are being amortized and $ 85 are in process as

patents have not yet been issued.

expense of finite life intangible assets was $ 89 and $ 159 for the years ended December 31, 2024 and 2023, respectively.

future annual amortization expense (except projects in process) related to these assets is approximately as follows:

OF ESTIMATED FUTURE ANNUAL AMORTIZATION EXPENSE

FINANCING ARRANGEMENTS

We had a $ 16,000 asset backed line of credit agreement with Bank of America which, as amended, was to expire on June 15, 2026.

Under this credit agreement, line of credit borrowing availability was restricted by a defined asset borrowing base, and interest was based on variations in the Bloomberg Short-Term Bank Yield (BSBY) index rate.

This line of credit weighted-average interest rate was 8.3 % and 5.2 % as of December 31, 2023 and 2022, respectively.

We had borrowings on our line of credit of $ 5,815 and $ 6,853 as of December 31, 2023 and December 31, 2022, respectively.

As of December 31, 2023 and 2022, we had unused availability under our line of credit of $ 9,400 and $ 8,400 , respectively, supported by our borrowing base.

We were in compliance with all the financial covenants related to this agreement as of and for the year ended December 31, 2023.

The line of credit is shown net of debt issuance costs of $ 31 on the consolidated balance sheet for the year ended December 31, 2023.

Subsequent to December 31, 2023, we replaced our asset back line of credit agreement with a $ 15,000 Senior Secured Revolving Line of Credit with Bank of America.

Our China operation has a financing agreement with China Construction Bank which provides for a line of credit arrangement of 10,000,000 Renminbi (RMB) (approximately 1,400 USD) that expires on August 18, 2024.

No amounts were outstanding under this financing arrangement as of December 31, 2023 or 2022.

The interest rate as of 12/31/23 was approximately 4 %.

We have operating leases for certain manufacturing sites, office space, and equipment.

Most leases include the option to renew, with renewal terms that can extend the lease term from one to five years or more.

Right-of-use lease assets and lease liabilities are recognized at the commencement date based on the present value of the remaining lease payments over the lease term which includes renewal periods we are reasonably certain to exercise.

had a $ 16,000 asset backed line of credit agreement with Bank of America which, as amended, was to expire on June 15, 2026 .

credit agreement, line of credit borrowing availability was restricted by a defined asset borrowing base, and interest was based on variations

in the Bloomberg Short-Term Bank Yield (BSBY) index rate.

This line of credit weighted-average interest rate was 8.3 % as of December

We had borrowings on our line of credit of $ 5,815 as of December 31, 2023 and we had unused availability under our line of

credit of $ 9,400 supported by our borrowing base.

The line of credit is shown net of debt issuance costs of $ 31 on the consolidated balance

sheets for the year ended December 31, 2023.

February 29, 2024, we replaced the asset backed line of credit agreement with a $ 15,000 Senior Secured Revolving Line of Credit with

Bank of America (the “Revolver”).

The Revolver allows for borrowings at a defined base rate, or at the one, three or six

month Secured Overnight Finance Rate, also known as “SOFR,” plus a defined margin.

If the Company prepays SOFR borrowings

before their contractual maturity, the Company has agreed to compensate the bank for lost margin, as defined in the Revolver agreement.

The Company is required to quarterly pay a 20-basis point fee on the unused portion of the Revolver.

Revolver requires the Company to maintain no more than 2.5 times leverage ratio and at least a 1.25 times minimum fixed charges

coverage ratio, both of which are defined in the Revolver agreement.

These ratios are calculated based on trailing twelve-month

There are no subjective acceleration clauses under the Revolver that would accelerate the maturity of outstanding

The Revolver contains certain covenants which, among other things, require the Company to adhere to regular reporting

requirements, abide by shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual

capital expenditures.

The Revolver is secured by substantially all the Company’s assets and expires on February 28, 2027.

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 have received a waiver of this event of default from the bank.

On March 27, 2025, we

amended (the “Amendment”) the Revolver to waive our non-compliance with the leverage ratio and minimum fixed charge

ratio as of December 31, 2024, and March 31, 2025.

Further, the Amendment defers the Company’s compliance with these ratios

until the third quarter of 2025 at which time the Company must maintain (a)

a leverage ratio of 3.5 times or less in the third quarter of 2025, and 2.5 times or less for each subsequent quarter;

a minimum fixed charge coverage ratio to 1.25 times for the third quarter of 2025 and each quarter thereafter.

The Company must also maintain EBITDA (earnings before interest, taxes

depreciation and amortization) as of the end of the second quarter and third quarter of at least $1,600.

addition, the Amendment requires the Company to maintain unrestricted cash and Revolver availability of at least $2.5 million at

each month end in the second quarter of 2025, $2.75 million at month end July 2025 and $3.0 million at the end of August and

September 2025.

The Amendment also requires the Company to provide incremental monthly reporting and increased the

Company’s borrowing rate by one percent until the Company is in compliance with the original terms of the

We have included the Amendment No.

1 to Credit Agreement, Waiver, and Consent

as an exhibit to this filing and any description of that document contained herein is only a summary and is qualified by its entirety

by the Amendment No.

1 to Credit Agreement, Waiver, and Consent.

the amended Bank of America credit agreement signed February 29, 2024, the line of credit is subject to variations in the SOFR index

Under the prior asset backed line of credit agreement with Bank of America, the line of credit borrowing availability was

restricted by a defined asset borrowing base, and interest was based on variations in the Bloomberg Short-Term Bank Yield (BSBY)

Our line of credit bears interest at a weighted-average interest rate of 7.7 %

as of December 31, 2024 and 2023, respectively.

We had borrowings on our line of credit of $ 8,695 and

$ 5,846 outstanding

as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, we had unused availability on the line of credit of $ 6,305 .

The line of credit is shown net of debt issuance costs of $ 61 and

the consolidated balance sheets as of December 31, 2024 and December 31, 2023, respectively.

Company has an interim funding agreement as of December 31, 2024 with a bank related to $ 345 of deposits made on equipment purchases

that will be funded through a finance lease when the equipment is received and operational.

As of December 31, we have $ 345 outstanding

on the interim funding agreement for equipment.

China operation has a financing agreement with China Construction Bank which provides for a line of credit arrangement of 10,000,000

Renminbi (RMB) (approximately 1.4 million USD) that expires on September 9, 2025.

No amounts were outstanding under this financing arrangement

as of December 31, 2024 or 2023.

The interest rate as of December 31, 2024 was approximately 4 %.

have operating leases for certain manufacturing sites, office space, and equipment.

Most leases include the option to renew, with renewal

terms that can extend the lease term from one to five years or more.

Right-of-use lease assets and lease liabilities are recognized at

the commencement date based on the present value of the remaining lease payments over the lease term which includes renewal periods we

are reasonably certain to exercise.

Our leases do not contain any material residual value guarantees or material restrictive covenants.

As of December 31, 2024, we do not have material lease commitments that have not commenced.

We have financing leases for certain property and equipment used in the normal course of business.

The components of lease expense were as follows:

We have financing leases for certain property

and equipment used in the normal course of business.

The components of lease expense were as follows for the years ended December 31:

SCHEDULE OF COMPONENTS OF LEASE EXPENSE

Operating lease cost

2 unchanged sentences

Total lease cost

Supplemental balance sheet information related to leases was as follows:

Balance Sheet Location

December 31, 2023

December 31, 2022

Supplemental balance sheets information related to leases was as follows as of December 31:

OF SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION RELATED TO LEASES

Balance Sheets Location

Operating lease assets

12 unchanged sentences

Total lease liabilities

Supplemental cash flow information related to leases was as follows as of December 31, 2023:

cash flow information related to leases was as follows for the years ended December 31:

OF SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION

Operating Leases

1 unchanged sentence

Operating lease assets obtained in exchange for lease obligations

The operating lease assets obtained in exchange in for lease obligations in the years ended December 31, 2023 and 2022 was largely due to leasing of additional space in our Suzhou, China facility.

operating lease assets obtained in exchange for lease obligations in the year ended December 31, 2024 was largely due to the renewal

of our lease in Maple Grove and Milaca, Minnesota, as well as leasing of additional space in our Suzhou, China facility.

maturities of lease liabilities were as follows:

OF FUTURE PAYMENTS OF LEASE LIABILITIES

Operating Leases

Finance Leases

1 unchanged sentence

Present value of lease liabilities

The lease term and discount rate as of December 31, 2023 were as follows:

lease term and discount rate as of December 31, 2024 were as follows:

OF LEASE TERM AND DISCOUNT RATE

Weighted-average remaining lease term (years)

4 unchanged sentences

Finance leases

The income tax expense for the years ended December 31, 2023 and 2022 consists of the following:

Income Tax Expense

The statutory rate reconciliation for the years ended December 31, 2023 and 2022 is as follows:

income tax expense consists of the following for the years ended December 31:

SCHEDULE OF INCOME TAX EXPENSE

Income tax expense (benefit)

statutory rate reconciliation is as follows for the years ended December 31:

SCHEDULE OF INCOME TAX STATUTORY RATE RECONCILIATION

Statutory rate

2 unchanged sentences

Research and development

Change in State Deferred Rate

Valuation allowance

1 unchanged sentence

US permanent differences

Federal Tax Credits

Global intangible low-taxed income effect

Withholding tax

Income and loss from operations before income taxes was derived from the following sources:

Deferred tax (liabilities) assets as of December 31, 2023 and 2022, consist of the following:

Income tax expense (benefit)

and loss from operations before income taxes was derived from the following jurisdictions for the years ended December 31:

SCHEDULE OF INCOME AND LOSS FROM OPERATIONS BEFORE INCOME TAX

United States

tax assets (liabilities) consist of the following for the years ended December 31:

OF DEFERRED TAX ASSETS (LIABILITIES)

Deferred tax assets

Net operating losses

Accrued bonus

Stock-Based Compensation and Equity Appreciation Rights

Stock-based compensation

Other accruals

2 unchanged sentences

Tax credit carryforwards

Valuation Allowance

Deferred Tax Assets

Total deferred tax assets

Deferred tax liabilities

Lease accounting lease asset

2 unchanged sentences

Property and equipment

Deferred Tax Liabilities

Total deferred tax liabilities

Net deferred tax assets

We recorded a valuation allowance of $ 2,563 against our net deferred tax assets as of December 31, 2022.

We regularly assess the need for a valuation allowance related to our deferred income tax assets to determine, based on the weight of the available positive and negative evidence, whether it is more likely than not that some or all of such deferred assets will not be realized.

In our assessments, the Company considers recent financial operating results, potential sources of taxable income, the reversal of existing taxable differences, taxable income in prior carryback years, if permitted under tax law, and tax planning strategies.

Based on our most recent assessment, for the year ended December 31, 2023, we released $ 2,563 of the valuation allowance on our domestic deferred income tax assets as it more likely than not we will realize them, based on our ability to demonstrate an estimate of objectively verifiable future income.

This estimate of future income, along with our assessments of the other positive and negative evidence considered, supports the release of the valuation allowance.

Our consolidated balance sheet as of December 31, 2023 has a deferred tax asset of $ 2,641 related to our US taxable operations and a $ 240 deferred tax liability included other long-term liabilities related to our Chinese taxes, for a net deferred tax asset of $ 2,401 .

As of December 31, 2023, for U.S.

state purposes, we have a Minnesota R&D credit carry forward of $ 120 , which will begin to expire in 2027.

The Tax Cuts and Jobs Act ("TCJA") was enacted on December 22, 2017 and includes the requirement to capitalize and amortize over years research and experimental expenditures beginning in 2022.

Prior to 2022, we expensed these costs as incurred for tax purposes.

The capitalization of the research and experimental expenditures resulted in a deferred tax asset of $ 318 , which was fully offset by a valuation allowance, resulting in no significant impact to income tax expense as of December 31, 2022.

As of December 31, 2023 the deferred tax asset associated with capitalized research and experimental expenditures was $ 1,007 .

The tax effects from uncertain tax positions can be recognized in our consolidated financial statements, only if the position is more likely than not to be sustained on audit, based on the technical merits of the position.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.

For positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The following tables set forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended December 31, 2023 and 2022:

We regularly assess the need for a valuation allowance related to our deferred

income tax assets to determine, based on the weight of the available positive and negative evidence, whether it is more likely than not

that some or all of such deferred assets will not be realized.

In our assessments, the Company considers recent financial operating results,

potential sources of taxable income, the reversal of existing taxable differences, taxable income in prior carryback years, if permitted

under tax law, and tax planning strategies.

Based on our most recent assessment, for the year ended December 31, 2024, we

have concluded that our deferred income tax assets are more likely than not to be realized.

Our consolidated balance sheets as of December 31, 2024 have a deferred tax asset of $ 2,575 related to our US taxable operations

and a $ 219 deferred tax liability included other long-term liabilities related to our Chinese taxes, for a net deferred tax asset of

of December 31, 2024, for U.S.

state purposes, we have a Minnesota research and development credit carry forward of $ 123 , which will begin to expire in

Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22, 2017 and includes the requirement to capitalize and amortize

over years research and experimental expenditures beginning in 2022.

As of December 31, 2024 and 2023 the deferred tax asset

associated with capitalized research and experimental expenditures was $ 928 and $ 1,007 , respectively .

tax effects from uncertain tax positions can be recognized in our consolidated financial statements, only if the position is more likely

than not to be sustained on audit, based on the technical merits of the position.

We recognize the financial statement benefit of a tax

position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.

positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has

a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The following tables

set forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended December 31,

2024 and 2023:

SCHEDULE OF UNRECOGNIZED TAX BENEFIT LIABILITIES

Balance as of January 1, 2023

Tax positions - additions

Tax positions - reductions

Balance as of December 31, 2023

2 unchanged sentences

Balance as of December 31, 2024

Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes.

The liability for accrued interest as of December 31, 2023 and 2022 was not significant.

Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns.

We are subject to income taxes in the U.S.

policy is to accrue interest related to potential underpayment of income taxes with a corresponding increase in income tax expense.

The liability for

accrued interest as of December 31, 2024 and 2023 was not significant.

Interest is computed on the difference between our uncertain tax

benefit positions and the amount deducted or expected to be deducted in our filed tax returns.

are subject to income taxes in the U.S.

federal jurisdiction and various state jurisdictions.

With few exceptions, we are no longer subject to federal and state and local income tax examinations for years before 2019.

With few exceptions, we are no longer subject

to federal and state and local income tax examinations for years before 2020.

401(K) RETIREMENT PLAN

We have a 401(k) profit sharing plan (the “401(k) Plan”), a defined contribution plan, covering substantially all of our U.S.

have a 401(k) profit sharing plan (the “401(k) Plan”), a defined contribution plan, covering substantially all of our U.S.

Employees are eligible to participate in the Plan after completing three months of service and attaining the age of 18 .

Employees are allowed to contribute up to 60 % of their wages to the 401(k) Plan.

We match 37.5 % of the employees’ contributions up to 6 % of covered compensation.

We made contributions, net of forfeitures, of approximately $ 465 and $ 301 during the years ended December 31, 2023 and 2022, respectively.

Employees are allowed to contribute up to 60 %

of their wages to the 401(k) Plan.

We match 50 %

of the employees’ contributions up to 6 %

of covered compensation.

We made contributions, net of forfeitures, of approximately $ 725

during the years ended December 31, 2024 and

2023, respectively.

INCENTIVE PLANS

In May 2017, the shareholders approved the 2017 Stock Incentive Plan which authorized the issuance of 350,000 shares.

An additional 50,000 , 175,000 and 100,000 shares were authorized by the shareholders in March 2020,May 2022 and May 2023, respectively.

There were 116,500 options and restricted stock units and 115,000 options and restricted stock units granted during the years ended December 31, 2023 and 2022, respectively.

Stock Options

We estimate the fair value of share-based awards on the date of grant using an option-pricing model.

The value of the portion of the award that is ultimately expected to vest is recognized as expense in the consolidated statements of operations over the requisite service periods.

Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense will be reduced to account for estimated forfeitures.

We estimate forfeitures at the time of grant and revise the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

We used the Black-Scholes option-pricing model to calculate the fair value of option-based awards.

Our determination of fair value of option-based awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding several subjective variables.

These variables include, but are not limited to, our expected stock price, volatility over the term of the awards, risk-free interest rate, and the expected life of the options.

The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of our stock options.

May 2017, the shareholders approved the 2017 Stock Incentive Plan which authorized the issuance of 350,000

An additional 50,000 ,

shares were authorized by the shareholders in

March 2020, May 2022, May 2023 and May 2024, respectively.

estimate the fair value of share-based awards on the date of grant using an option-pricing model.

The value of the portion of the

award that is ultimately expected to vest is recognized as expense in the consolidated statements of operations and comprehensive

(loss) income over the requisite service periods.

Because share-based compensation expense is based on awards that are ultimately

expected to vest, share-based compensation expense will be reduced to account for estimated forfeitures.

We estimate forfeitures at

the time of grant and revise the estimate, if necessary, in subsequent periods if actual forfeitures differ from those

used the Black-Scholes option-pricing model to calculate the fair value of option-based awards.

Our determination of fair value of option-based

awards on the date of grant using the Black-Scholes model is affected by our stock price as well as assumptions regarding several subjective

These variables include, but are not limited to, our expected stock price, volatility over the term of the awards, risk-free

interest rate, and the expected life of the options.

The risk-free interest rate is based on a treasury instrument whose term is consistent

with the expected life of our stock options.

The expected volatility and holding period are based on our historical experience.

For all grants, the amount of compensation expense recognized has been adjusted for an estimated forfeiture rate, which is based on historical data.

Weighted average stock option fair value assumptions and the weighted average grant date fair value of stock options granted were as follows:

grants, the amount of compensation expense recognized has been adjusted for an estimated forfeiture rate, which is based on historical

Weighted average stock option fair value assumptions and the weighted average grant date fair value of stock options granted were

OF WEIGHTED AVERAGE GRANT DATE FAIR VALUE OF STOCK OPTIONS GRANTED

Stock option fair value assumptions:

Risk-free interest rate

3.83 - 4.40 %

3.45 - 4.34 %

Expected life (years)

2 unchanged sentences

Weighted average grant date fair value of stock options granted

We granted 94,000 service-based options during the twelve months ended December 31, 2023.

There were 73,000 service-based options granted during the year ended December 31, 2022.

We granted 21,000 market condition options to our Chief Executive Officer during the year ended December 31, 2022.

The market condition options vest if certain stock prices are exceeded between February 27, 2024 and February 27, 2028.

The vesting schedule for the market condition options is as follows:

5,000 Shares to vest if the closing price of the Company’s common stock exceeds $20 per share on average over 20 consecutive trading days after February 27, 2024;

5,000 Shares to vest if the closing price of the Company’s common stock exceeds $24 per share on average over 20 consecutive trading days after February 27, 2025;

5,000 Shares to vest if the closing price of the Company’s common stock exceeds $28.80 per share on average over 20 consecutive trading days after February 27, 2026;

3,000 Shares to vest if the closing price of the Company’s common stock exceeds $34.56 per share on average over 20 consecutive trading days after February 27, 2027;

3,000 Shares to vest if the closing price of the Company’s common stock exceeds $41.47 per share on average over 20 consecutive trading days after February 27, 2028.

Total compensation expense related to stock options was $ 256 for the year ended December 31, 2023.

Total compensation expense related to stock options was $ 237 for the year ended December 31, 2022.

As of December 31, 2023, there was $ 873 of unrecognized compensation which will vest and expense over the next 3.96 years.

A summary of option activity as of and for the years ended December 31, 2023 and 2022 as follows:

compensation expense related to stock options was $ 243 and $ 256 for the years ended December 31, 2024 and 2023, respectively.

As of December

31, 2024, there was $ 781 of unrecognized compensation which will vest and expense over the next 3.4 years.

is the status of option activity as of and for the years ended December 31, 2024 and 2023 as follows:

OF OPTION ACTIVITY

Exercise Price

4 unchanged sentences

Exercisable on December 31, 2024

Restricted Stock Units

During the years ended December 31, 2023 and 2022, we granted 22,500 and 21,000 restricted stock units (“RSUs”), respectively, under our 2017 Stock Incentive Plan to non-employee directors which vest over two years.

Total compensation expense related to the RSUs were $ 167 and $ 97 for the years ended December 31, 2023 and 2022, respectively.

Total unrecognized compensation expense related to the RSUs was $ 206 , which will vest over the next 1.11 years.

The RSUs granted in the years ended December 31, 2023 and 2022 had an average grant price of $ 9.11 and $ 12.00 per share, respectively.

As of December 31, 2023, we had 27,000 RSUs outstanding with a weighted average remaining contractual term of 9.12 years.

During the twelve months ended December 31, 2023 and 2022, 10,500 and 0 RSUs vested, respectively.

Stock Units (“RSUs”)

compensation expense related to the RSUs were $ 218 and $ 167 for the years ended December 31, 2024 and 2023, respectively.

Total unrecognized

compensation expense related to the RSUs was $ 87 , which will vest over the next 0.3 years.

is the status of restricted stock activity as of and for the years ended December 31, 2024 and 2023 as follows:

OF RESTRICTED STOCK ACTIVITY

Intrinsic Value

Outstanding – January 1, 2023

Outstanding – December 31, 2023

Outstanding – December 31, 2024

SEGMENT INFORMATION

Our results of operations for the years ended December 31, 2024 and 2023 represent a single operating and reporting

segment referred to as Contract Manufacturing within the EMS industry.

The Company operates in the Medical Device, Medical Imaging, Aerospace

and Defense, and Industrial markets with over 50% of its net sales coming from the medical-related markets.

We strategically direct production

between our various manufacturing facilities based on a number of considerations to best meet our customers’ needs.

Our plants generate

net sales over several of the markets the Company servers.

We share resources for sales, marketing, engineering, supply chain, information

services, human resources, payroll, and all corporate accounting functions.

Our chief operating decision maker (the “CODM”) is the Company’s

President and Chief Executive Officer.

The CODM regularly evaluates financial information on a consolidated basis to assess performance and allocate resources.

following table presents selected financial information with respect to the Company’s single operating segment for the years ended

December 31, 2024 and 2023:

OF SEGMENT INFORMATION

Cost of goods sold

Operating expenses:

General and administrative

Research and development

Restructuring charges

Total operating expenses

(Loss) income from operations

Other expense:

Interest expense

(Loss) income before income taxes

Income tax expense (benefit)

Net (loss) income

Company’s long-lived tangible assets, including the Company’s operating lease assets recognized on the consolidated balance

sheets were located as follows:

OF LONG LIVED TANGIBLE ASSETS

United States

Total long-lived tangible assets

Export net from our U.S.

domestic operations

represent approximately 3.4 % and 4.1 % of consolidated net sales for the years ended December 31, 2024 and 2023, respectively.

by our major EMS industry markets for the years ended December 31, 2024 and 2023 are as follows:

SCHEDULE OF NET SALES BY EMS INDUSTRY MARKETS

Medical Device

Medical Imaging

Aerospace and Defense

Total net sales

COMMITMENTS AND CONTINGENCIES

We are subject to various legal proceedings and claims that arise in the ordinary course of business.

In our opinion, the amount of any ultimate liability with respect to these actions will not materially affect our consolidated financial statements or results of operations.

Change of Control Agreements

Since 2002, we entered into Change of Control Agreements (the Agreement(s)) with certain key executives (the Executive(s)).

The Agreements provide an inducement for each Executive to remain as an employee in the event of any proposed or anticipated change of control in the organization, including facilitating an orderly transition, and to provide economic security for the Executive after a change in control has occurred.

In the event of an involuntarily termination in connection with a change of control as defined in the agreements, each Executive would receive their base salary, annual bonus at time of termination, and continued participation in health, disability and life insurance plans for a period of three years for officers and two years for all other participants.

are subject to various legal proceedings and claims that arise in the ordinary course of business.

In our opinion, the amount of any

ultimate liability with respect to these actions will not materially affect our consolidated financial statements or results of operations.

of Control Agreements

2002, we entered into Change of Control Agreements (the Agreement(s)) with certain key executives (the Executive(s)).

The Agreements

provide an inducement for each Executive to remain as an employee in the event of any proposed or anticipated change of control in the

organization, including facilitating an orderly transition, and to provide economic security for the Executive after a change in control

has occurred.

the event of an involuntary termination in connection with a change of control as defined in the agreements, each Executive would receive

their base salary, annual bonus at time of termination, and continued participation in health, disability and life insurance plans for

a period of three years for officers and two years for all other participants.

RESTUCTURING CHARGES

the year ended December 31, 2024, we incurred restructuring charges of $ 571

related to the closure and consolidation of our Blue Earth, Minnesota production facility, which was substantially completed in the

fourth quarter of 2024.

There were no restructuring charges or amounts accrued or incurred in the year ended December 31,

EMPLOYEE RETENTION CREDIT AND PAYROLL TAX DEFERRAL

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

We qualified for ERC on qualified wages paid in the first and second quarters of 2021.

During the year ended December 31, 2022, the Company received the ERC related to the first quarter of 2021 of $ 2,559 .

During the year ended December 31, 2023, the Company received the ERC related to the second quarter of 2021 of $ 2,650 .

The CARES Act allowed for the deferral of the employer portion of social security taxes incurred through the end of calendar 2020.

As of December 31, 2022, there was $ 1,158 of social security tax payments deferred.

We remitted this amount due during the year ended December 31, 2023 upon receipt of the remining credits under the ERC that exceeded the deferral amount as allowed under IRS Notices 2020-22 and 2021-2024.

As of December 31, 2023, we recorded a receivable due from the IRS for $ 785 of the above $1,158 payment as it is being refunded to us;

we have recorded an offsetting liability due to the IRS under the tax ID of our former professional employer organization (“PEO”).

March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law which allowed for

the deferral of the employer portion of social security taxes incurred through the end of calendar 2020.

During the year ended December

31, 2023, the Company remitted $ 1,158 to the Internal Revenue Service (“IRS”) related to the deferral of payroll taxes, of

which $ 785 was recorded as a refund receivable as of December 31, 2023, with a corresponding liability due.

These amounts were settled

during the first quarter of 2024.

RELATED PARTY TRANSACTIONS

David Kunin, our Chairman, is a minority owner of Abilitech Medical, Inc.

Abilitech paid the Company $ 0 and $ 247 in the years ended December 31, 2023 and 2022, respectively, for delivery of medical products.

As of December 31, 2023, we have fully reserved our accounts receivable and inventory, aggregating $ 226 , related to Abilitech.

Abilitech has ceased operations and therefore we do not believe that Abilitech will fully pay the Company for outstanding accounts receivable or for inventory and we have recorded a full reserve against the gross amounts.

In January 2024, we received a payment of $ 28 from Abilitech for partial payment of previously fully reserved accounts receivable balances.

The Company believes that transactions with Abilitech are on terms comparable to those that the Company could reasonably expect in an arm's length transaction with an unrelated third party.

David Kunin, our Chairman, is a minority owner (less than 10 %) of Marpe Technologies, LTD an early-stage medical device company dedicated to the early detection of skin cancer through full body scanners.

Kunin, our Chairman, is a minority owner of Abilitech Medical, Inc.

We had accounts receivable related to Abilitech of $ 226 as of December 31, 2023.

Payments of $ 33 were received

during the twelve months ended December 31, 2024 and we wrote off the remaining receivables during 2024.

Abilitech has ceased operations and

therefore we do not believe that Abilitech will pay the Company for outstanding accounts receivable.

Company believes that transactions with Abilitech were on terms comparable to those that the Company could reasonably expect in an arm’s

length transaction with an unrelated third party.

Kunin, our Chairman, is a minority owner (less than 10 %) of Marpe Technologies, LTD an early-stage medical device company dedicated to

the early detection of skin cancer through full body scanners.

Kunin is also a member of the Board of Directors of Marpe Technologies.

The Company worked with Marpe Technologies to apply for a grant from the Israel-United States Binational Industrial Research and Development Foundation, a legal entity created by Agreement between the Government of the State of Israel and the Government of the United States of America (“BIRD Foundation”).

The Company worked with Marpe Technologies to apply for a grant from the Israel-United States Binational Industrial Research and Development

Foundation, a legal entity created by Agreement between the Government of the State of Israel and the Government of the United States

of America (“BIRD Foundation”).

The parties were successful in receiving approval for a $ 1,000 conditional grant.

The Company and Marpe Technologies will each receive $ 500 from the BIRD Foundation and, among other obligations under the grant, each is required to contribute $ 500 to match grant funds from the BIRD Foundation.

The Company will meet its obligation by providing certain services at cost or with respect to administrative services at no cost to Marpe Technologies.

The total value of the Company’s contribution will not exceed $500.

Marpe is engaged in raising funds for its operations, which funds are necessary to pay for the Company’s services beyond its contribution.

and Marpe Technologies will each receive $ 500 from the BIRD Foundation and, among other obligations under the grant, each is required

to contribute $ 500 to match grant funds from the BIRD Foundation.

The Company met its obligation by providing certain services

at cost or with respect to administrative services at no cost to Marpe Technologies.

The total value of the Company’s contribution

will not exceed $ 500 .

Marpe is engaged in raising funds for its operations, which funds are necessary to pay for the Company’s

services beyond its contribution.

The Company will receive a 10 -year exclusive right to manufacture the products of Marpe Technologies.

There can be no assurances that Marpe Technologies’ medical device operations will be commercially successful, that Marpe Technologies will be successful in raising additional funds to finance its operations or, if commercially successful, the Company will recover the value of services provided to Marpe if not paid when the services are provided.

The transactions between the Company and Marpe Technologies have been approved by the Audit Committee pursuant to the Company Related-Party Transactions Policy.

During the twelve months ended December 31, 2023 and 2022, we recognized net sales to Marpe Technologies of $ 163 and $ 440 , respectively.

As of December 31, 2023, we have recorded an unbilled receivable of $ 39 related to expected reimbursement from the BIRD Foundation and have outstanding accounts receivable of $ 20 .

In March 2024, we received a payment of $ 50 from the BIRD Foundation.

The Company believes that transactions with Marpe are on terms comparable to those that the Company could reasonably expect in an arm’s length transaction with an unrelated third party.

There can be no assurances that Marpe Technologies’ medical device operations will be commercially successful, that Marpe Technologies

will be successful in raising additional funds to finance its operations or, if commercially successful, the Company will recover the

value of services provided to Marpe if not paid when the services are provided.

The transactions between the Company and Marpe Technologies

have been approved by the Audit Committee pursuant to the Company Related-Party Transactions Policy.

During the years ended December

31, 2024 and 2023, we recognized net sales to Marpe Technologies of $ 8 and $ 163 , respectively.

As of December 31, 2024, we have outstanding

accounts receivable of $ 20 .

In January 2025, we received a payment of $ 20 from the BIRD Foundation.

The Company believes that transactions

with Marpe are on terms comparable to those that the Company could reasonably expect in an arm’s length transaction with an unrelated

SUBSEQUENT EVENTS

Credit Facility

On February 29, 2024, the replaced its asset back line of credit agreement with $ 15,000 Senior Secured Revolving Line of Credit with Bank of America (the “Revolver”).

The Revolver allows for borrowings at a defined base rate, or at the one, three or six month Secured Overnight Finance Rate, also known as “SOFR”, plus a defined margin.

If the Company prepays SOFR borrowings before their contractual maturity, the Company has agreed to compensate the bank for lost margin, as defined in the Revolver agreement.

The Company is required to quarterly pay a 20 -basis point fee on the unused portion of the Revolver.

The Revolver requires the Company to maintain no more than 2.5 times leverage ratio and at least a 1.25 times minimum fixed charges coverage ratio, both of which are defined in the Revolver agreement.

There are no subjective acceleration clauses under the Revolver that would accelerate the maturity of outstanding borrowings.

The Revolver contains certain covenants which, among other things, require the Company to adhere to regular reporting requirements, abide by shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures.

The Revolver is secured by substantially all the Company’s assets and expires on February 28, 2027.

Lease Renewal

In January 2024, we extended the lease in our China facility that expired on January 20, 2024.

The new lease now expires on January 20, 2027.

March 27, 2025, the Company amended its Revolver line of credit agreement as discussed in Note 4 – “Financing Arrangements.”

During February 2025, the Company determined its intent to sell the Blue Earth, Minnesota facility and classified the net book value of

the property as held for sale.

We are currently seeking to sell this facility in 2025.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data