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RISK AND UNCERTAINTIES

9 Months Ended

Sep. 30, 2025

13.

RISK AND UNCERTAINTIES

Economic Environment

New or increased economic and trade sanctions, including tariffs, may create economic and political uncertainties and could potentially impact the cost of our raw materials and subassemblies having an adverse effect on our business, operations and profitability. Although our supply chain predominantly consists of US based suppliers, and our material costs are established on issued purchase orders, future procurements may be impacted by economic and political uncertainties including tariffs, and may directly affect the Company’s profitability on previously negotiated firm fixed price contracts.

On October 1, 2025, the federal government entered a shutdown, after Congress failed to reach an agreement on a short-term spending deal or full-year appropriation. The defense industry, including our company, could be impacted if the shutdown becomes prolonged, stemming from slow downs in incremental funding on existing contracts or delays in payments on government contract invoices. Since government employees are furloughed, many critical operations will cease, including purchase order acceptance and new contract awards.

Boeing A-10 Program Contract Termination

On May 7, 2025, the Company submitted to The Boeing Company a Request for Equitable Pricing Adjustment on the Boeing A-10 program addressing higher manufacturing costs on its 2019 firm fixed price contract. Subsequently, on July 14, 2025, the Company received a Termination Notice from The Boeing Company with respect to the Boeing A-10 program directing the Company to scrap and return materials and tooling to the Air Force prior to August 15, 2025 when funding would no longer be available. The company continues to have correspondence with the Boeing Company over the termination of the Boeing A-10 program.

In light of these events, and in conjunction with the Air Force’s decision to accelerate the retirement of the Boeing A-10 fleet, the Company evaluated the situation and recognized an adjustment to address the risk during the quarter ended June 30, 2025. The Company will continue to evaluate the situation and will recognize further adjustments if required, in the period in which a reasonable estimate can be determined.