What changed in this filing

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Item 1. Financial Statements

2025-05-14 compared with 2024-11-07 · 360 added, 344 removed, 180 unchanged (80% of the section changed)

1 unchanged sentence

SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

COMPREHENSIVE (LOSS) INCOME

THOUSANDS, EXCEPT SHARE DATA)

THREE MONTHS ENDED

Cost of goods sold

2 unchanged sentences

Research and development

Restructuring

operating expenses

Restructuring charges

Total operating expenses

(Loss) income from operations

Other expense:

Interest expense

(Loss) income before income taxes

Income tax expense (benefit)

Income tax (benefit) expense

Net (loss) income

1 unchanged sentence

Basic (in dollars per share)

Weighted average number of common shares

outstanding - basic (in shares)

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)

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

Other comprehensive (loss) income

currency translation

Comprehensive (loss)

income, net of tax

Accompanying Condensed Notes to Condensed Consolidated Financial Statements.

Foreign currency translation

Comprehensive (loss) income, net of tax

Accompanying Notes to Condensed Consolidated Financial Statements.

SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

OF MARCH 31, 2025 AND DECEMBER 31, 2024

THOUSANDS, EXCEPT SHARE DATA)

Current assets:

Restricted cash

Accounts receivable, less

allowances of $ 286 and $ 358 , respectively

Accounts receivable, less allowances of $ 231 and $ 196 , respectively

Inventories, net

Contract assets

assets and other assets

current assets

Assets held for sale

Prepaid assets and other assets

Total current assets

Property and equipment, net

1 unchanged sentence

Deferred tax assets

Other intangible assets,

LIABILITIES AND SHAREHOLDERS’

Other intangible assets, net

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Current portion of finance

lease obligations

Current portion of operating

lease obligations

Accounts payable

1 unchanged sentence

Customer deposits

accrued liabilities

current liabilities

Current portion of operating leases

Current portion of finance lease obligations

Notes payable

Other accrued liabilities

Total current liabilities

Long-term liabilities:

Long-term line of credit

net of issuance costs

Long-term finance lease

obligations, net of current portion

Long-term operating lease

obligations, net of current portion

long-term liabilities

Long-term operating lease obligations, net of current portion

Long-term finance lease obligations, net of current portion

Other long-term liabilities

Total long-term liabilities

Total liabilities

Shareholders’ equity:

Preferred stock, $ 1 par

Preferred stock, $ 1 par value;

1,000,000 shares authorized;

250,000 shares issued and outstanding

Common stock - $ 0.01 par

Common stock - $ 0.01 par value;

9,000,000 shares authorized;

1 unchanged sentence

Additional paid-in capital

Accumulated other comprehensive

shareholders’ equity

liabilities and shareholders’ equity

The balance sheet as of December 31, 2023 has been derived from the consolidated

audited financial statements at that date.

Accompanying Condensed Notes to Condensed Consolidated Financial Statements.

Accumulated other comprehensive loss

Retained earnings

Total shareholders’ equity

Total liabilities and shareholders’ equity

Accompanying Notes to Condensed Consolidated Financial Statement .

SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING

Adjustments to reconcile

net income to net cash (used in) provided by operating activities:

Depreciation and amortization

Compensation on stock-based

THREE MONTHS ENDED

CASH FLOWS FROM 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

Change in accounts receivable allowance

Change in inventory reserves

Change in accounts receivable

Changes in current operating

assets and liabilities:

Changes in current operating assets and liabilities:

Accounts receivable

Employee Retention Credit

Contract assets

Prepaid expenses and other

current assets

Prepaid expenses and other assets

Accounts payable

1 unchanged sentence

Customer deposits

accrued liabilities

cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING

Proceeds from sale of property

and equipment

of property and equipment

cash used in investing activities

CASH FLOWS FROM FINANCING

Other accrued liabilities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of property and equipment

Purchases of property and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from line of credit

Payments to line of credit

Proceeds from financing

Principal payments on financing

Share repurchases

from stock option exercises

cash provided by (used in) financing activities

Effect of exchange rate

changes on cash

Net change in cash and cash equivalents

Proceeds from notes payable

Principal payments on financing leases

Stock option exercises

Net cash provided by financing activities

Effect of exchange rate changes on cash

Net change in cash

Cash - beginning of period

Cash - end of period

Reconciliation of cash and restricted cash

reported within the condensed consolidated balance sheets:

Total cash and restricted

cash reported in the condensed consolidated statements of cash flows

SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED

Supplemental disclosure of cash flow information:

Cash paid for

Cash paid for interest

Cash paid for income taxes

Supplemental noncash investing and financing

Property and equipment

purchases in accounts payable

Operating lease assets

acquired under operating leases

Equipment acquired under

finance lease

Accompanying Condensed Notes to Condensed Consolidated Financial Statements.

Supplemental noncash investing and financing activities:

Property and equipment purchases in accounts payable

Operating lease assets acquired under operating leases

Accompanying Notes to Condensed Consolidated Financial Statements.

SYSTEMS INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Preferred Stock

Comprehensive

Shareholders’

Balance as of June 30, 2023

Foreign currency translation adjustment

Stock option exercises

Compensation on stock-based

Balance as of September

Balance as of June 30, 2024

Foreign currency translation adjustment

Compensation on stock-based awards

Stock repurchases

Balance as of September

Balance as of December 31, 2023

Foreign currency translation adjustment

Restricted Stock Unit Vesting

Compensation on stock-based awards

Stock option exercises

Cumulative adjustment

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

Balance as of September

Balance as of March 31, 2024

Balance as of December 31, 2024

1 unchanged sentence

Foreign currency translation adjustment

Compensation on stock-based awards

Stock option exercises

Stock repurchases

Balance as of September

Accompanying Condensed Notes to Condensed Consolidated Financial Statements.

Compensation on stock-based awards

Balance as of March 31, 2025

Accompanying Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

18 unchanged sentences

during each reporting period.

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

Significant items subject to estimates and assumptions include the net realizable value reserves for inventories,

accounts receivable allowances, realizability of deferred tax assets and long-lived asset recovery.

2 unchanged sentences

Issued New Accounting Standards

November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting

Standards Update (“ASU”) 2023-07, Segment Reporting Topic (280):

November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“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.

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 supplements reportable segment

disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The Company adopted this ASU in the

fourth quarter of 2024 and have included related interim reporting disclosures in Note 9 – Segment Information, to these condensed

consolidated financial statements.

December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740):

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.

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 disclosures.

November 2024, the FASB issued ASU No.

2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation

Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses, which requires disaggregated expense information in the notes

to the financial statements related to purchases of inventory, employee compensation, depreciation, intangible asset amortization and

selling expenses for each statement of earnings line item that contains those expenses.

2024-03 is effective for annual reporting

periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15,

The guidance is to be applied on a prospective basis with the option to apply the standard retrospectively;

this ASU allows for

early adoption.

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

are as follows:

OF INVENTORIES

SCHEDULE OF INVENTORIES

Raw materials

3 unchanged sentences

Intangible Assets

intangible assets as of September 30, 2024 and December 31, 2023 are as follows:

OF OTHER INTANGIBLE ASSETS

Relationships

Balances as of January 1, 2023

intangible assets as of March 31, 2025 and December 31, 2024 are as follows:

SCHEDULE OF OTHER INTANGIBLE ASSETS

Balances as of December 31, 2024

Balances as of September 30, 2024

Balances as of March 31, 2025

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

1 unchanged sentence

our intangible assets is 4.8 years.

Of the patents value as of September 30, 2024, $ 94 are being amortized and $ 85 are in process and

a patent has not yet been issued.

expense of finite life intangible assets for the three months ended September 30, 2024 and 2023 was $ 4 and $ 40 , respectively.

expense of finite life intangible assets for the nine months ended September 30, 2024 and 2023 was $ 84 and $ 120 , respectively.

of September 30, 2024, estimated future annual amortization expense (except projects in process) related to these assets is as follows:

OF ESTIMATED FUTURE ANNUAL AMORTIZATION EXPENSE

Of the patents value as of March 31, 2025, $ 85 are being amortized and $ 84 are in process and a patent

has not yet been issued.

expense of finite life intangible assets for the three months ended March 31, 2025 and 2024 was $ 5 and $ 40 , respectively.

of March 31, 2025, estimated future annual amortization expense (except projects in process) related to these assets is as follows:

SCHEDULE OF ESTIMATED FUTURE ANNUAL AMORTIZATION EXPENSE

Remainder of 2025

Property and Equipment

As of March 31, 2025, the Company classified its

Blue Earth manufacturing facility and related land as held for sale as the criteria for classification as held for sale were met and the sale is expected to be completed in the next twelve months.

The carrying value of these assets held for sale was $ 507

as of March 31, 2025, which approximates its fair value, and is classified as a current asset in our condensed consolidated balance sheets.

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

4 unchanged sentences

The Company’s

$ 1,239 cash balance as of September 30, 2024 included approximately $ 1,035 and $ 6 that was held at banks located in China and Mexico,

respectively.

$ 1,162 cash balance as of March 31, 2025, included approximately $ 887 and $ 8 that was held at banks located in China and Mexico, respectively.

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

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

represented 10% or more of gross accounts receivable.

One customer accounted for 28 % and 26 % of net sales for the three and nine months

ended September 30, 2024, respectively.

Two customers accounted for 36 % and 38 % of net sales for both the three and nine months ended

September 30, 2023.

of September 30, 2024, one customer represented approximately 22 % of our gross accounts receivable.

As of December 31, 2023, two customers

represented approximately 35 % of our gross accounts receivable.

assets for three customers accounted for 44 % of gross contract assets as of September 30, 2024.

Contract assets for two customers accounted

for 34 % of gross contract assets as of December 31, 2023.

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

asset balances individually represented 10% or more of gross accounts receivable.

Customers who represent 10% or more of net sales for

the three months ended March 31, 2025 and 2024 are as follows:

OF NET SALES CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

March 31, 2025

March 31, 2024

March 31, 2025

March 31, 2024

who represent 10% or more of accounts receivable and contract assets for the period ended March 31, 2025 and December 31, 2024 are as

OF ACCOUNTS RECEIVABLE CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

March 31, 2025

December 31, 2024

Accounts Receivable

March 31, 2025

December 31, 2024

OF CONTRACT ASSETS CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

March 31, 2025

December 31, 2024

Contract Asset

March 31, 2025

December 31, 2024

sales from the U.S.

represented approximately 2 %

of net sales for both the three and nine months ended September 30, 2024.

Export sales represented approximately 3 %

of net sales for both three and nine month ended September 30, 2023.

under contract manufacturing agreements that was recognized over time accounted for approximately 72 % and 73 % of net sales for the three

and nine months ended September 30, 2024, respectively and approximately 74 % of net sales for both the three and nine months ended September

30, 2023, respectively.

following tables summarize our net sales by market for the three months ended September 30, 2024 and 2023, respectively:

OF NET SALES BY MARKET

Months Ended September 30, 2024

Service Transferred

Transferred at Point in Time

Consideration 1

Net Sales by Market

Aerospace and defense

Months Ended September 30, 2023

Service Transferred

Transferred at Point in Time

Consideration 1

Net Sales by Market

Aerospace and defense

Noncash consideration represents material provided by the customer

used in the build of the product.

following tables summarize our net sales by market for the nine months ended September 30, 2024 and 2023, respectively:

Months Ended September 30, 2024

Service Transferred

Transferred at Point in Time

Consideration 1

Net Sales by Market

represented approximately 2 % and 3 % of net sales for the three months ended March 31, 2025 and 2024, respectively.

under contract manufacturing agreements that was recognized over time excluding noncash consideration accounted for 74 %

of net sales for the three months ended March 31, 2025 and 2024.

following tables summarize our net sales by market for the three months ended March 31, 2025 and 2024, respectively:

SCHEDULE OF NET SALES BY MARKET

Product/ Service Transferred

Product Transferred at Point in Time

Noncash Consideration 1

Total Net Sales by Market

Three Months Ended March 31, 2025

Product/ Service Transferred

Product Transferred at Point in Time

Noncash Consideration 1

Total Net Sales by Market

Medical Device

Medical Imaging

Aerospace and Defense

Months Ended September 30, 2023

Service Transferred

Transferred at Point in Time

Consideration 1

Net Sales by Market

Total net sales

Product/ Service Transferred

Product Transferred at Point in Time

Noncash Consideration 1

Total Net Sales by Market

Three Months Ended March 31, 2024

Product/ Service Transferred

Product Transferred at Point in Time

Noncash Consideration 1

Total Net Sales by Market

Medical Device (2)

Medical Imaging (2)

Aerospace and Defense

Noncash consideration represents material provided by the customer

used in the build of the product.

Total net sales

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

Medical, as reported in the prior year period filing, has been split between

Medical Device and Medical Imaging to conform with the current year presentation.

assets, recorded as such in the condensed consolidated balance sheet, consist of unbilled amounts related to revenue recognized over

Significant changes in the contract assets balance during the nine months ended September 30, 2024 were as follows:

OF CONTRACT ASSETS

Significant changes in the contract assets balance during the three months ended March 31, 2025 were as follows:

SCHEDULE OF CONTRACT ASSETS

Balances as of January 1, 2025

Increase (decrease) attributed to:

Amounts transferred over

time to contract assets

Allowance for current expected

credit losses

invoiced during the period

Balance outstanding as of September 30,

expect substantially all of the remaining performance obligations for the contract assets recorded as of September 30, 2024 to be transferred

to accounts receivable 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.

Amounts transferred over time to contract assets

Allowance for current expected credit losses

Amounts invoiced during the period

Balance outstanding as of March 31, 2025

expect substantially all of the remaining performance obligations for the contract assets recorded as of March 31, 2025 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.

FINANCING ARRANGEMENTS

had a credit agreement with Bank of America, which was entered into on June 15, 2017 and provides for a line of credit arrangement of

$ 16,000 , that was to expire on June 15, 2026.

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

February 29, 2024, we entered into a $ 15,000

Senior Secured Revolving Line of Credit with

Bank of America (the “Revolver”).

6 unchanged sentences

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

The Company met the covenants for the period ended September 30, 2024.

These ratios are calculated based on trailing twelve-month results.

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

3 unchanged sentences

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

We were in compliance with all the financial covenants

related to this agreement as of and for the period ended September 30, 2024, except for the covenant related to operating expense contributions

to our Mexican operations in the first and second quarters of 2024 in excess of the amounts allowed under the Revolver.

a waiver of this event of default from the bank in August 2024.

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 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) index rate.

Our line of credit bears

interest at a weighted-average interest rate of 7.9 % and 8.3 % as of September 30, 2024 and December 31, 2023, respectively.

We had borrowings

on our line of credit of $ 9,550 and $ 5,846 outstanding as of September 30, 2024 and December 31, 2023, respectively.

As of September

30, 2024 we had unused availability on the line of credit of $ 5,450 .

Company has an interim funding agreement as of September 30, 2024 with a bank related to $ 317

of deposits made on equipment purchases that

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

As of September 30, we have $ 317

outstanding on the interim funding agreement

for equipment we expect to receive in the fourth quarter of 2024.

line of credit is shown net of debt issuance costs of $ 42 and $ 31 on the condensed consolidated balance sheet as of September 30, 2024

and December 31, 2023, respectively.

We were not in compliance with financial covenants

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

We have received

a waiver of this event of default from the bank.

On March 27, 2025, we amended (the “First 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.

Provisions of

the First Amendment relating to the Company’s compliance with these ratios were replaced with provisions of the Second Amendment

(described below).

Provisions of the First Amendment relating to minimum EBITDA requirements of the Company were replaced with provisions

of the Second Amendment (described below).

Provisions of the First Amendment requiring the Company to maintain unrestricted cash and

Revolver availability (collectively, “Liquidity”) at specified levels were replaced with provisions of the Second Amendment

(described below).

The First 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 Revolver.

May 14, 2025, we further amended (the “Second Amendment”) the Revolver, which amended the First Amendment in part, to

defer the Company’s compliance with the leverage ratio and minimum fixed charge ratio until the fourth quarter of 2025 at which

time the Company must maintain (a) a leverage ratio of 2.5 times for the year ended December 31, 2025 and for each twelve-month quarterly

reporting period thereafter;

and (b) a minimum fixed charge coverage ratio to 1.25 times for the year ended December 31, 2025 and for

each twelve-month quarterly reporting period thereafter.

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

depreciation and amortization), as defined in the Revolver, as of the end of the second quarter of 2025 of at least $1,000, the third

quarter of 2025 of at least $1,300 and the fourth quarter of 2025 and each quarter thereafter of at least $1,600.

In addition, the Second

Amendment requires the Company to always maintain Liquidity of at least $2,500.

The Second Amendment accelerated the expiration of the

Revolver to June 30, 2026 and increases the borrowing rate by 25 basis points.

The Revolver, as amended, bears interest at a weighted-average interest rate of 7.2 %

and 7.7 % as of March 31, 2025 and December 31, 2024, respectively.

We had borrowings on our line of credit of $ 11,955

outstanding as of March 31, 2025 and December

31, 2024, respectively.

As of March 31, 2025, we had unused availability on the line of credit of $ 3,045 ,

which is subject to a month end cap based on the previously noted minimum Liquidity.

Company has an interim funding agreement as of March 31, 2025 with a bank related to deposits made on equipment purchases that will be

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

As of March 31, 2025 we have $ 563 outstanding on the interim

funding agreement for equipment.

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

Most leases include the option to renew, with renewal

terms that can extend the lease term from one 1

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.

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

We amended our operating leases for

part of our manufacturing facility in China and our corporate office in Maple Grove, Minnesota during the first nine months of 2024

which extended the lease through August of 2033 with monthly lease payments of $ 14

As of September 30, 2024, we have a lease commitment of approximately $ 400 for a finance lease that will commence

in the fourth quarter of 2024.

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 March 31, 2025, we have $ 563

of future lease commitments under the above noted interim funding

agreement which will be converted into finance leases when all of the underlying equipment is received and operational in 2025.

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

components of lease expense were as follows:

SCHEDULE OF COMPONENTS OF LEASE EXPENSE

Months Ended September 30,

Operating lease cost

Finance lease interest cost

Finance lease amortization

Total lease cost

Months Ended September 30,

Three Months Ended March 31,

Operating lease cost

Finance lease interest cost

Finance lease amortization

Finance lease amortization expense

Total lease cost

condensed consolidated balance sheet information related to leases was as follows:

OF SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION RELATED TO LEASES

Sheet Location

SCHEDULE OF SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEETS INFORMATION RELATED TO LEASES

Balance Sheet Location

March 31, 2025

December 31, 2024

Finance lease assets

Property and equipment, net

Property, plant and equipment

Operating lease assets

1 unchanged sentence

Total leased assets

Current finance lease liabilities

Current portion of finance lease obligations

Current operating lease liabilities

Current portion of operating lease obligations

Current finance lease liabilities

Current portion of finance lease obligations

Long-term operating lease liabilities

Long term operating lease liabilities, net

Long term finance lease liabilities

Long-term finance lease liabilities, net of

current portion

Long-term operating lease

obligations, net of current portion

Long term finance lease obligations, net

Total lease liabilities

condensed consolidated statement of cash flows information for the nine months ended September 30, 2024 related to leases was as follows:

OF SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS INFORMATION

condensed consolidated statements of cash flows information for the three months ended March 31, 2025 and 2024 related to leases was as

SCHEDULE OF SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INFORMATION

Operating Leases

Cash paid for amounts included

in the measurement of lease liabilities

Cash paid for amounts included in the measurement of lease liabilities

Property acquired under operating lease

payments of lease liabilities as of September 30, 2024 were as follows:

OF FUTURE PAYMENTS OF LEASE LIABILITIES

annual payments of lease liabilities as of March 31, 2025 were as follows:

SCHEDULE OF FUTURE PAYMENTS OF LEASE LIABILITIES

Remainder of 2025

Total lease payments

imputed interest

Present value of

lease liabilities

lease term and discount rate as of September 30, 2024 were as follows:

OF LEASE TERM AND DISCOUNT RATE

Present value of lease liabilities

lease term and discount rate as of March 31, 2025 and 2024 were as follows:

SCHEDULE OF LEASE TERM AND DISCOUNT RATE

Weighted-average remaining lease term (years)

6 unchanged sentences

compensation expense was reported as follows in the condensed consolidated statements of operations within general and administrative

expenses of $ 127 and $ 80 for the three months ended September 30, 2024 and 2023, respectively, and $ 334 and $ 299 for the nine months ended

September 30, 2024 and 2023, respectively.

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

An additional 50,000 ,

175,000 , 100,000 and 100,000 shares were authorized in March 2020, May 2022, May 2023 and May 2024, respectively.

granted 1,000 and 23,000 , respectively, service-based stock options during the three and nine months ended September 30, 2024, respectively.

The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2024 was $ 8.20 .

25,000 and 54,000 , respectively, service-based stock options during the three and nine months ended September 30, 2023.

Weighted average

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

OF WEIGHTED AVERAGE GRANT DATE FAIR VALUE OF STOCK OPTIONS GRANTED

expenses of $ 118 and $ 80 for the three months ended March 31, 2025 and 2024, respectively.

the 2017 Stock Incentive Plan (“2017 Plan”), as amended, there are an aggregate of 775,000 shares authorized for issuance.

did not grant service-based stock options during the three months ended March 31, 2025.

Weighted average stock option fair value

assumptions and the weighted average grant date fair value of stock options granted during the three months ended March 31, 2024

were as follows:

SCHEDULE OF WEIGHTED AVERAGE GRANT DATE FAIR VALUE OF STOCK OPTIONS GRANTED

Stock option fair value assumptions:

Risk-free interest

Risk-free interest rate

3.45 - 4.34 %

Expected life (years)

1 unchanged sentence

Expected volatility

Weighted average grant date fair value of stock

options granted

compensation expense related to stock options was $ 61 and $ 184 for the three and nine months ended September 30, 2024, respectively.

Total compensation expense related to stock options was $ 42 and $ 184 for the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, there was $ 775 of unrecognized compensation related to stock options which will be recognized over a weighted

average period of 3.6 years.

is the status of option activity for the nine months ended and as of September 30, 2024:

OF OPTION ACTIVITY

Weighted average grant date fair value of stock options granted

compensation expense related to stock options was $ 54 and $ 56 for the three months March 31, 2025 and 2024, respectively.

31, 2025, there was $ 621 of unrecognized compensation related to stock options which will be recognized over a weighted average period

of 2.25 years.

is a summary of stock option activity as of and for the three months ended March 31, 2025 and 2024:

SCHEDULE OF OPTION ACTIVITY

Exercise Price

Intrinsic Value

Outstanding – December 31, 2023

Outstanding – September 30, 2024

Exercisable on September 30, 2024

the three and nine months ended September 30, 2024 and 2023, we granted 15,141 and 18,000 restricted stock units (“RSUs”),

respectively, at an average grant price per share of $ 11.06 and $ 9.37 , respectively, under our 2017 Stock Incentive Plan to non-employee

directors which vest over two years .

Total compensation expense related to the RSUs was $ 66 and $ 150 for the three and nine months ended

September 30, 2024, respectively.

Total compensation expense related to the RSUs was $ 38 and $ 113 for the three and nine months ended

September 30, 2023, respectively.

As of September 30, 2024, total unrecognized compensation expense related to the RSUs was $ 153 , which

will vest over a weighted average period of 0.6 years.

is the status of restricted stock activity for the nine months ended and as of September 30, 2024:

OF RESTRICTED STOCK ACTIVITY

Outstanding – March 31, 2024

Outstanding – December 31, 2024

Outstanding – September 30, 2024

Outstanding – March 31, 2025

Exercisable on March 31, 2025

the periods ended March 31, 2025 and 2024, we did not grant restricted stock units (“RSUs”).

Total compensation expense related

to the RSUs was $ 64 and $ 24 for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, total unrecognized

compensation expense related to the RSUs was $ 23 , which will vest over a weighted average period of 0.25 years.

is a summary of RSU activity as of and for the three months ended March 31, 2025 and 2024:

SCHEDULE OF RESTRICTED STOCK ACTIVITY

Intrinsic Value

Outstanding – December 31, 2023

Outstanding – March 31, 2024

Outstanding – December 31, 2024

Outstanding – March 31, 2025

NET (LOSS) INCOME PER SHARE DATA

net (loss) income per common share is calculated by dividing net (loss) income by the weighted average number of common shares outstanding

during the period.

Diluted net income per common share is computed by dividing net income by the weighted average number of common shares

outstanding using the treasury stock method during the period.

The Company’s potentially dilutive common shares are those that

result from dilutive common stock options and non-vested stock relating to restricted stock units.

In a period where the Company incurs

a net loss, the Company excludes dilutive securities, and the shares used for the basic and diluted loss per share are the same.

calculation of diluted (loss) income per shared excluded 189,265 and 93,391 in weighted average shares for the three and nine months ended

September 30, 2024, respectively, and 64,322 and 52,896 in weighted average shares for the three and nine months ended September 30,

2023, respectively, as their effect was anti-dilutive.

Basic and diluted weighted average shares outstanding were as follows:

OF BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING

net (loss) income per common share is computed by dividing net (loss) income 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.

three months ended March 31, 2025 and 2024, there were restricted stock units and stock options totalling 472,941 and 38,405 , respectively,

excluded from the computation of diluted weighted-average shares outstanding as their inclusion would be anti-dilutive.

Basic and diluted

weighted average shares outstanding were as follows:

SCHEDULE OF BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING

Three Months Ended

September 30,

Nine Months Ended

September 30,

Basic weighted average shares outstanding

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As the year progresses, we refine our estimate based on the facts and circumstances, including discrete

effective tax rate for the three and nine months ended September 30, 2024 was 8 % and 62 %, respectively.

Our effective tax rate for the

three and nine months ended September 30, 2023 was ( 21 %) and 13 %, respectively.

The primary drivers of the change in rate relate to changes

in pretax book income and the 2023 U.S.

federal provision to return adjustments recorded in the third quarter of 2024, partially offset

by realization of deferred tax assets in the 2024 periods as the Company removed its valuation allowance in the fourth quarter of 2023.

effective tax rate for the three months ended March 31, 2025 was 28.0 %.

Our effective tax rate for the three months ended March 31, 2024

The primary drivers of the increase in effective tax rate were changes in pretax (loss) income and an increase in the GILTI

SEGMENT INFORMATION

results of operations for the three months ended March 31, 2025 and 2024 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 serves.

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 prepared in accordance

GAAP on a consolidated basis to assess performance and allocate resources.

Company’s net sales were located as follows:

SCHEDULE OF NET SALES

March 31, 2025

March 31, 2024

United States

Total net sales

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

sheets were located as follows:

SCHEDULE OF LONG LIVED TANGIBLE ASSETS

March 31, 2025

December 31, 2024

United States

Total long-lived tangible assets

RESTRUCTURING CHARGES

the first nine months of 2024, we accrued restructuring charges of $ 267 related to the closure and consolidation of our Blue Earth, Minnesota

production facility, which is planned to be completed in the fourth quarter of 2024.

There were no restructuring charges or amounts accrued

in the nine months ended September 30, 2023.

PAYROLL TAX DEFERRAL

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.

2024, we recorded restructuring charges of $ 571 related to the closure and consolidation of our Blue Earth, Minnesota production facility,

which was completed in the fourth quarter of 2024.

During the quarter ended March 31, 2025, the Company incurred $ 266 of restructuring

charges related to staff reductions and activities related to the Blue Earth facility.

The following table summarizes the related activity for the quarter ended March 31, 2025:

SCHEDULE OF RESTRUCTURING CHARGES

Facility Consolidation

Workforce Reductions

December 31, 2024

Cash payments

March 31, 2025

RELATED PARTY TRANSACTIONS

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

We have accounts receivable related to Abilitech of $ 85 .

of $ 28 were received during the three months ended March 31, 2024.

Abilitech has ceased operations and therefore we do not believe that

Abilitech will pay the Company for outstanding accounts receivable, and we have recorded a full allowance against the gross amount.

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.

We had accounts receivable related to Abilitech of $ 226

as of December 31, 2023.

Payments of $ 33

were received during the year 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.

The 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

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

The Company has an agreement 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

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 has 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 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.

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

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

2 unchanged sentences

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

During the three months ended September 30, 2024 and 2023, we recognized net sales to Marpe Technologies of $ 8 and

$ 0 , respectively.

During the nine months ended September

30, 2024 and 2023, we recognized net sales to Marpe Technologies of $ 75 and $ 163 , respectively.

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

During the three months ended March

31, 2025 and 2024, we recognized no net sales to Marpe Technologies.

As of March 31, 2025, we have no outstanding accounts receivable.

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.

SUBSEQUENT EVENT

On May 14, 2025, the Company amended

its Revolver line of credit agreement as discussed in Note 4 – “Financing Arrangements.”

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements