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Item 1. Financial Statements

2025-08-07 compared with 2025-05-14 · 266 added, 204 removed, 336 unchanged (58% of the section changed)

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CONSOLIDATED STATEMENTS OF OPERATIONS

COMPREHENSIVE (LOSS) INCOME

THOUSANDS, EXCEPT SHARE DATA)

COMPREHENSIVE INCOME (LOSS)

THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

THREE MONTHS ENDED

SIX MONTHS ENDED

Cost of goods sold

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Total operating expenses

(Loss) income from operations

Income (loss) from operations

Other expense:

Interest expense

(Loss) income before income taxes

Income tax (benefit) expense

Net (loss) income

Net (loss) income per common share:

Income (loss) before income taxes

Income tax expense (benefit)

Net income (loss)

Net income (loss) per common share:

Basic (in dollars per share)

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

Other comprehensive (loss) income

Other comprehensive income (loss)

Foreign currency translation

Comprehensive (loss) income, net of tax

Comprehensive income (loss), net of tax

Accompanying Notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

OF MARCH 31, 2025 AND DECEMBER 31, 2024

OF JUNE 30, 2025 AND DECEMBER 31, 2024

THOUSANDS, EXCEPT SHARE DATA)

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Customer deposits

Current portion of operating leases

Current portion of operating lease obligations

Current portion of finance lease obligations

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1,000,000 shares authorized;

250,000 shares issued and outstanding

250,000 shares issued

and outstanding

Common stock - $ 0.01 par value;

9,000,000 shares authorized;

2,760,993 and 2,760,793 shares issued and outstanding, respectively

2,780,134 and 2,760,793

shares issued and outstanding, respectively

Additional paid-in capital

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Total liabilities and shareholders’ equity

Accompanying Notes to Condensed Consolidated Financial Statement .

Accompanying Notes to Condensed Consolidated Financial Statements .

SYSTEMS INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED

SIX 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:

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation and amortization

Compensation on stock-based awards

Deferred taxes

Change in accounts receivable allowance

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Other accrued liabilities

Net cash (used in) provided by operating activities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

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Payments to line of credit

Proceeds from notes payable

Principal payments on financing leases

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CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED

SIX MONTHS ENDED

Supplemental disclosure of cash flow information:

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Property and equipment purchases in accounts payable

Conversion of notes payable to finance leases

Operating lease assets acquired under operating leases

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Shareholders’

Balance as of December 31, 2023

Balance as of March 31, 2024

Foreign currency translation adjustment

Restricted Stock Unit Vesting

Compensation on stock-based awards

Issuance for stock-based awards

Balance as of June 30, 2024

Balance as of March 31, 2025

Foreign currency translation adjustment

Stock option exercises

Compensation on stock-based awards

Balance as of June 30, 2025

Balance as of December 31, 2023

Net income (loss)

Foreign currency translation adjustment

Compensation on stock-based awards

Issuance for stock-based awards

Balance as of June 30, 2024

Balance as of December 31, 2024

Foreign currency translation adjustment

Stock option exercises

Compensation on stock-based awards

Balance as of March 31, 2025

Balance as of June 30, 2025

Accompanying Notes to Condensed Consolidated Financial Statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

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accompanying unaudited condensed consolidated financial statements for the interim periods have been prepared in accordance with Generally

Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial information and pursuant to

the rules and regulations of the Securities and Exchange Commission.

Accordingly, the Company has omitted footnote disclosures that would

substantially duplicate the disclosures contained in the Company’s audited consolidated financial statements.

These unaudited condensed

consolidated financial statements should be read together with the audited consolidated financial statements for the year ended December

31, 2024, and notes thereto included in our Annual Report on Form 10-K as filed with the SEC.

Accepted Accounting Principles in the United States of America (“U.S.

GAAP”) for interim financial information and pursuant

to the rules and regulations of the Securities and Exchange Commission (“SEC”).

Accordingly, the Company has omitted footnote

disclosures that would substantially duplicate the disclosures contained in the Company’s audited consolidated financial statements.

These unaudited condensed consolidated financial statements should be read together with the audited consolidated financial statements

for the year ended December 31, 2024, and notes thereto included in our Annual Report on Form 10-K as filed with the SEC.

condensed consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly owned subsidiaries.

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All dollar amounts are stated in thousands of U.S.

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 expenses

during each reporting period.

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.

Actual results could differ from

those estimates.

preparation of financial statements in conformity with U.S.

GAAP 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 condensed consolidated financial

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

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.

Actual results could differ from those estimates.

Issued New Accounting Standards

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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

fourth quarter of 2024 and has 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.

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.

Early adoption is permitted.

The Company is currently evaluating

the impact of this ASU on its consolidated financial statements disclosures.

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

statements disclosures.

November 2024, the FASB issued ASU No.

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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.

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

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

In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted.

The OBBBA makes permanent key elements

of the Tax Cuts and Jobs Act of 2017, including 100% bonus depreciation, domestic research cost expensing and the business interest expense

limitation, among other tax changes.

The new legislation has multiple effective dates, with certain provisions effective in 2025 and others

in the future.

The Company is currently evaluating the provisions of the new law and the potential effects on the Company’s financial

position, results of operations, and cash flows.

are as follows:

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Intangible Assets

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

intangible assets as of June 30, 2025 and December 31, 2024 are as follows:

SCHEDULE OF OTHER INTANGIBLE ASSETS

Balances as of December 31, 2024

Balances as of March 31, 2025

Balances as of June 30, 2025

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

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our intangible assets is 4.6 years.

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

Of the patents value as of June 30, 2025, $ 81 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:

expense of finite life intangible assets for the three months ended June 30, 2025 and 2024 was $ 4 and $ 40 , respectively.

expense of finite life intangible assets for the six months ended June 30, 2025 and 2024 was $ 9 and $ 80 , respectively.

of June 30, 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.

and Equipment

of June 30, 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.

The sale of the Blue Earth facility was completed in July 2025 for $ 500 .

The carrying value

of these assets held for sale was $ 495 as of June 30, 2025 and is classified as a current asset in our condensed consolidated balance

During the second quarter of 2025, in light of

our sustained low stock price, we performed a Step 1 recoverability test in accordance with U.S.

GAAP for our long-lived assets.

Based on our assessment of undiscounted future cash flows, we concluded that the carrying amounts of our asset group is recoverable,

and therefore, no impairment was recognized at this stage.

However, as a result of the sale of our Blue Earth facility in July 2025, we are now closer to meeting the criteria for a Step 2 impairment analysis, which involves estimating the fair value of

the asset group.

If future developments, including changes in market conditions or operational forecasts, result in a decline in fair

value below carrying amounts, this may lead to the recognition of an impairment loss in subsequent periods.

CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS

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

With regard to cash, we maintain our excess cash balances in checking accounts at primarily two financial institutions, one in

the United States and one in China.

We maintain our excess cash balances in checking accounts primarily at two financial institutions, one in the United States and

one in China.

The account in the United States may at times exceed federally insured limits.

The Company’s

$ 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.

The Company’s $ 652 cash balance as

of June 30, 2025, included approximately $ 573 and $ 5 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 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:

who represent 10% or more of net sales for the three and six months ended June 30, 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

Three Months Ended June 30,

Six Months Ended June 30,

who represent 10% or more of accounts receivable and contract assets for the period ended June 30, 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

Contract Assets

sales from the U.S.

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

represented approximately 2 % of net sales for both the three and six months ended June 30, 2025.

Export sales from

represented approximately 3 % and 2 % of net sales for the three and six months ended June 30, 2024, respectively.

under contract manufacturing agreements that was recognized over time, excluding noncash consideration, accounted for 75 %

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:

of net sales for both the three and six months ended June 30, 2025 and 74 %

of net sales for both the three and six months ended June 30, 2024.

following tables summarize our net sales by market for the three and six months ended June 30, 2025 and 2024, respectively:

SCHEDULE OF NET SALES BY MARKET

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Product Transferred at Point in Time

Noncash Consideration 1

Consideration 1

Total Net Sales by Market

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

Product/ Service Transferred

Product Transferred at Point in Time

Noncash Consideration 1

Consideration 1

Total Net Sales by Market

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Product Transferred at Point in Time

Noncash Consideration 1

Consideration 1

Total Net Sales by Market

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Product/ Service Transferred

Product Transferred at Point in Time

Noncash Consideration 1

Consideration 1

Total Net Sales by Market

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Total net sales

Product/ Service Transferred

Product Transferred at Point in Time

Consideration 1

Total Net Sales by Market

Six Months Ended June 30, 2025

Product/ Service Transferred

Product Transferred at Point in Time

Consideration 1

Total Net Sales by Market

Medical Device

Medical Imaging

Aerospace and Defense

Total net sales

Product/ Service Transferred

Product Transferred at Point in Time

Consideration 1

Total Net Sales by Market

Six Months Ended June 30, 2024

Product/ Service Transferred

Product Transferred at Point in Time

Consideration 1

Total Net Sales by Market

Medical Device (2)

Medical Imaging (2)

Aerospace and Defense

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 three months ended March 31, 2025 were as follows:

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 in the condensed consolidated balance sheets, consist of unbilled amounts related to revenue recognized over

Significant changes in the contract assets balance during the six months ended June 30, 2025 were as follows:

SCHEDULE OF CONTRACT ASSETS

Balances as of January 1, 2025

Balance as of December 31, 2024

Increase (decrease) attributed to:

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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

Balance outstanding as of June 30, 2025

expect substantially all the remaining performance obligations for the contract assets recorded as of June 30, 2025 to be transferred

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

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FINANCING ARRANGEMENTS

February 29, 2024, we entered into 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.

February 29, 2024, we entered into 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

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borrowing rate by one percent until the Company is in compliance with the original terms of the Revolver.

The First Amendment increases the borrowing rate for revolving loans by 100 basis points.

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

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

The Second Amendment accelerated the expiration of the

The Second Amendment shortened the duration 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

July 29, 2025, we amended the Revolver (the “Third Amendment”) to extend the expiration of the Revolver to August 31, 2026.

We have recorded the outstanding Revolver amount of $ 11,615 as long-term on the condensed consolidated balance sheets based on extension

in the signed Third Amendment.

Revolver, as amended, bears interest at a weighted-average interest rate of 7.8 % and 7.7 % as of June 30, 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.

We had borrowings on our line of credit of $ 11,615 and $ 8,695 outstanding as of June 30, 2025 and December 31, 2024, respectively.

As of June 30, 2025, we had unused availability on the line of credit of $ 3,385 , which is subject to a month end cap based on the previously

noted minimum Liquidity.

Company had an interim funding agreement with a bank related to deposits made on equipment purchases funded through a finance lease when

the equipment was received and operational.

The equipment was received and the lease agreements were finalized during the three months

ended June 30, 2025.

As of June 30, 2025, we have no amounts 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 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.

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.

terms that can extend the lease term from one 1 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 June 30, 2025, we have no amounts outstanding on the interim funding agreement for equipment.

We have 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

Three Months Ended March 31,

Three Months Ended June 30,

Operating lease cost

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Total lease cost

Six Months Ended June 30,

Operating lease cost

Finance lease interest cost

Finance lease amortization expense

Total lease cost

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

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Balance Sheet Location

March 31, 2025

December 31, 2024

Finance lease assets

Property, plant and equipment

Operating lease assets

Property and equipment, net

Operating lease assets

Operating lease assets, net

Total leased assets

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Long-term operating lease liabilities

Long term operating lease liabilities, net

Long-term operating lease obligations, net of current portion

Long-term finance lease liabilities

Long term finance lease obligations, net

Long-term finance lease obligations, net of current portion

Total lease liabilities

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

condensed consolidated statements of cash flows information for the six months ended June 30, 2025 and 2024 related to leases was as

SCHEDULE OF SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS INFORMATION

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Cash paid for amounts included in the measurement of lease liabilities

Property acquired under operating lease

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

Conversion of notes payable to finance leases

annual payments of lease liabilities as of June 30, 2025 were as follows:

SCHEDULE OF FUTURE PAYMENTS OF LEASE LIABILITIES

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Present value of lease liabilities

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

lease term and discount rate as of June 30, 2025 and 2024 were as follows:

SCHEDULE OF LEASE TERM AND DISCOUNT RATE

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STOCK BASED AWARDS

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

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

compensation expense of $ 117 and $ 126 for the three months ended June 30, 2025 and 2024, respectively, and $ 235 and $ 206 for the six

months ended June 30, 2025 and 2024, respectively, was reported in the condensed consolidated statements of operations within general

and administrative expenses.

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:

granted 43,382 service-based stock options during the three and six months ended June 30, 2025.

We granted 22,000 service-based stock

options during the three and six months ended June 30, 2024.

Weighted average stock option fair value assumptions and the weighted average

grant date fair value of stock options granted were as follows:

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

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Risk-free interest rate

3.45 - 4.34 %

Expected life (years)

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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:

compensation expense related to stock options was $ 69 and $ 123 for the three and six months ended June 30, 2025, respectively.

compensation expense related to stock options was $ 65 and $ 121 for the three and six months ended June 30, 2024, respectively.

June 30, 2025, there was $ 764 of unrecognized compensation related to stock options which will be recognized over a weighted average

period of 2.66 years.

is a summary of stock option activity as of and for the six months ended June 30, 2025 and 2024:

SCHEDULE OF OPTION ACTIVITY

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Outstanding – December 31, 2023

Outstanding – March 31, 2024

Outstanding – June 30, 2024

Outstanding – December 31, 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:

Outstanding – June 30, 2025

Exercisable on June 30, 2025

compensation expense related to restricted stock units (“RSUs”) was $ 48 and $ 112 for the three and six months ended June

30, 2025, respectively.

Total compensation expense related to RSUs was $ 61 and $ 85 for the three and six months ended June 30, 2024,

respectively.

During the three- and six-month periods ended June 30, 2025 and 2024, we granted 43,664 and 15,141

RSUs, respectively, at an average grant price per share of $ 8.73 and $ 11.06 , respectively, under our 2017 Stock Incentive Plan

to non-employee directors which vest over two years.

As of June 30, 2025, total unrecognized compensation expense related to

the RSUs was $ 356 , which will vest over a weighted average period of 1.8 years.

is a summary of RSU activity as of and for the six months ended June 30, 2025 and 2024:

SCHEDULE OF RESTRICTED STOCK ACTIVITY

Intrinsic Value

Outstanding – December 31, 2023

Outstanding – March 31, 2024

Outstanding – June 30, 2024

Outstanding – December 31, 2024

Outstanding – March 31, 2025

NET (LOSS) INCOME PER SHARE DATA

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:

Outstanding – June 30, 2025

NET INCOME (LOSS) PER SHARE DATA

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

Dilutive net income (loss) 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 anti-dilutive.

and diluted weighted average shares outstanding were as follows:

SCHEDULE OF BASIC AND DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING

Three Months Ended

Basic weighted average shares outstanding

Dilutive effect of outstanding stock options and non-vested restricted stock units

effect of outstanding stock options and non-vested restricted stock units 1

Diluted weighted average shares outstanding

following items were excluded from the computation of diluted weighted-average shares outstanding

as their inclusion would be anti-dilutive:

the three and six months ended June 30, 2025, restricted stock units and stock options totaling

89,927 and 504,194 , respectively.

the three and six months ended June 30, 2024, restricted stock units and stock options totaling

31,611 and 45,453 , respectively.

a quarterly basis, we estimate what our effective tax rate will be for the full fiscal year and record a quarterly income tax provision

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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 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

effective tax rate for the three and six months ended June 30, 2025 was 35 % and 25 %, respectively.

Our effective tax rate for the

three and six months ended June 30, 2024 was 12 % and 21 %, respectively.

The primary drivers of the increase in effective tax rate were

changes in pretax (loss) income and taxes on foreign entities.

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.

results of operations for the six months ended June 30, 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,

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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:

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

balance sheets were located as follows:

SCHEDULE OF LONG LIVED TANGIBLE ASSETS

March 31, 2025

December 31, 2024

United States

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RESTRUCTURING CHARGES

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:

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

During the six months ended June 30, 2025, the Company incurred $ 266

of restructuring charges, in connection with activities related to the Blue Earth facility and additional staff reductions in the

first quarter of 2025.

We have not recorded any restructuring charges in the three months ended June 30, 2025.

following table summarizes the related activity for the six months ended June 30, 2025:

SCHEDULE OF RESTRUCTURING CHARGES

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Cash payments

March 31, 2025

June 30, 2025

following table summarizes the related activity for the six months ended June 30, 2024:

Facility Consolidation

December 31, 2023

Cash payments

June 30, 2024

RELATED PARTY TRANSACTIONS

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 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.

We had accounts receivable related to Abilitech of $ 226 as of December

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

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.”

During the three and six months

ended June 30, 2025 and 2024, we recognized no net sales to Marpe Technologies.

As of June 30, 2025, we have no outstanding accounts

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 EVENTS

July 24, 2025, the Company closed on the sale of the Blue Earth facility for $ 500 as discussed in Note 1 – “Summary of Significant

Accounting Policies.”

July 29, 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