SYPR 10-K & 10-Q changes, risk factors and insider trading

We had a net losslosses of $6.3 million and $1.7 million in 20242025 and $1.62024, million in 2023.respectively. We believe that we need to increase our revenues through new business generation in order to operate profitably. We are working to increase our revenues with new and existing customers. However, if we are not successful in maintaining or increasing our revenues, we may be unable to maintain the critical mass of capital investments or talented employees that are needed to succeed in our chosen markets or to maintain our existing facilities, which could result in restructuring or exit costs. As we work to expand our customers and our products, we must also effectively manage a more diverse production schedule to avoid slowing our production output. As we are awarded new products with new customers, we must onboard new operational processes in an effective and efficient manner. We cannot assure you that we will be successful in maintaining or increasing our revenues with new and existing customers to a level necessary to support our working capital requirements or to achieve profitability.

Our five largest customers in 20242025 were Northrop Grumman, Sistemas, Detroit Diesel, SubComSubCom, ADI, and ADI,Sistemas, which in the aggregate accounted for 70%63% of net revenue. The loss of any of these customers or any other significant customer, or the renewal of business on less favorable terms, would have a material adverse impact on our business and results of operations. Due to our customer concentration, if one or more of our major customers were to experience difficulties in fulfilling their obligations to us, cease doing business with us, significantly reduce the amount of their purchases from us, favor competitors or new entrants or change their purchasing patterns, our business may be harmed.

Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty, and a variety of other economic factors that are beyond our control. Any prolonged reduction in oil and natural gas prices will depress the immediate levels of exploration, development and production activity, which could have an adverse effect on our business, results of operations and financial condition. Even the perception of longer-term lower oil and natural gas prices by oil and natural gas companies and related service providers can similarly reduce or defer major expenditures by these companies and service providers given the long-term nature of many large-scale development projects. Oil prices are particularly sensitive to actual and perceived threats to global political stability and to changes in production from OPEC member states. The waroutbreak or escalation of military hostilities, including between Russia and Ukraine, Israel and Hamas, the U.S., Israel and Iran, continued instability in Ukrainethe couldMiddle continueEast, to contribute toand the volatilitypotential indestabilizing effect such conflicts may pose for the global oil and natural gas prices and continued sanctions against Russiamarkets could impact demand for our products and adversely affect our profitability. Additionally, potential climate change regulation, including a potential carbon tax, could adversely affect the level of exploration, development and production activity of certain of our customers and the demand for our services and products.

CyberCybersecurity securityand artificial intelligence risks could negatively affect operations and result in increased costs.

Sypris Electronics, as a U.S. defense subcontractor, and our Company overall, face cyber securitycybersecurity threats, threats to the physical security of our facilities and employees and terrorist or criminal acts, as well as the potential for business disruptions associated with information technology failures and natural disasters.

We routinely experience cyber securitycybersecurity threats, threats to our information technology infrastructure and attempts to gain access to our sensitive information, as do our customers, vendors, suppliers and subcontractors, including the threat of ransomware attacks on our systems and the systems of third-party vendors and other parties with which we conduct business, all of which may become more pronounced in the event of geopolitical events and other uncertainties, such as the warmilitary inhostilities Ukrainebetween orRussia theand Ukraine, Israel and GazaHamas, conflict.and the U.S., Israel and Iran. Prior cyber attacks directed at us have resulted in security breaches, but to date have not had a material impact on our financial results. We have robust measures in place to address and mitigate cyber-related risks. However, we expect we will continue to experience additional attempted attacks in the future, including from nation states and criminal actors. We continue to invest in the cybersecurity and resiliency of our networks and products and to enhance our internal controls and processes, which are designed to help protect our systems and infrastructure, and the information they contain. The techniques used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly evolving and often are not recognized until launched against a target, or even some time after. For example, the evolving use of artificial intelligence (“AI”) increases the risk of cyberattacks and data breaches, which themselves can evolve more rapidly when artificial intelligence is used to facilitate the attack. Despite our network and application security, threat intelligence services, internal control measures, and physical security procedures we employ to safeguard our systems, we may still be vulnerable to a security breach, intrusion, or loss or theft of confidential client data, transaction data, or proprietary company information, which may harm our business, reputation and future financial results. Use of artificial intelligence by our team members, whether authorized or unauthorized, could increase the risk that our intellectual property and other proprietary information may be unintentionally disclosed. We may be unable to anticipate these techniques, implement adequate preventative measures or remediate any intrusion on a timely or effective basis even if our security measures are appropriate, reasonable, and/or comply with applicable legal requirements. Certain efforts may be state-sponsored and supported by significant financial and technological resources, making them even more sophisticated and difficult to detect. Insider or employee cyber and security threats are also a significant concern for all companies, including ours. Use of artificial intelligence by team members, whether authorized or unauthorized, could increase the risk that intellectual property or other proprietary information is unintentionally disclosed. We depend on our customers, suppliers, and other business partners to implement adequate controls and safeguards to protect against and report cyber incidents. If they fail to deter, detect or report cyber incidents in a timely manner, we may suffer financial and other harm, including to our information, operations, performance, employees and reputation. Although we implement various measures and controls to monitor and mitigate risks associated with these threats and to increase the cyber resiliency of our infrastructure and products, there can be no assurance that these processes will be sufficient. Moreover, business policies and internal controls may not keep pace with rapidly evolving AI enabled threats. Successful attacks could lead to losses or misuse of sensitive information or capabilities; theft or corruption of data; harm to personnel, infrastructure or products; financial costs and liabilities and protracted disruptions in our operations and performance.

The costs related to cyber securitycybersecurity or other security threats or disruptions may not be fully insured or indemnified by other means. Additionally, obtaining external providers with expertise for assisting with the recovery from or defense against a cyber incident may not be obtainable on acceptable terms. Occurrence of any of these events could adversely affect our internal operations, the products we provide to customers, loss of competitive advantages derived from our research and development efforts, early obsolescence of our products, our future financial results, our reputation or our stock price.

As discussed below, the Company experienced a liquidity shortfall beginning in 2024 and the firstfourth quarter of 2025.2023 and at various times during 2024, 2025 and into 2026. Suppliers may not sell to us given our liquidity position. If we are unable to purchase components from our suppliers, we may not be able to continue to service our customers which could adversely affect our financial position, results of operations and/or cash flows.

As reflected in the consolidated financial statements, the Company reported a net loss of $1.7$6.3 million and $1.6$1.7 million for the year ended December 31, 2024,2025, and 2023,2024, respectivelyrespectively, and cash used in operations of $1.1$5.7 million for the year ended December 31, 2023.2025. The Company’s net inventory increased significantly in 2023 primarily related to contracts with Sypris Electronics’ aerospace and defense customers. Shipments to customers on certain of these contracts were delayed beyond the initial delivery dates, which negatively impacted the cycle time to convert inventory to cash. As a result, the Company experienced a liquidity shortfall beginning in the fourth quarter of 2023 and is continuing to aggressively manage working capital to improve liquidity. The shipment delays also contributed to an increase in trade payable balances with certain suppliers during 2023 and early 2024,2024. The Company successfully negotiated amended payment and other terms on the past due balances with certain suppliers during 2024 and is continuing to work with suppliers to improve terms and maintain consistency in its supply chain relationships. The Company received the benefit of additional loans of $2.5 million during year ended December 31, 2023,2024, and $2.5$3.0 million during the year ended December 31, 20242025 from Gill Family Capital Management, Inc. (“GFCM”), an entity controlled by the Gill family that beneficially owns approximately 14.2% of our common stock, to help the Company manage its liquidity during those periods. Additionally, during the first quarter of 2025,2026, the Company and GFCM amended the secured promissory note (the “Note”) to increase the principal amount by $3.0 million to $12.0 million, extend the maturity dates for $2.0 million of the obligation to April 1, 2026,2027, $2.0 million to April 1, 2027,2028, $5.0 million to April 1, 20282029 and $3.0 million to April 1, 20292030 (see Note 12 to the consolidated financial statements in this Annual Report on Form 10-K).

As of December 31, 2024,2025, we had collective bargaining agreements covering approximately 356224 employees (all of which were in Sypris Technologies), or 50%41% of our total employees. Excluding certain Mexico employees covered under an annually ratified agreement, there are no collective bargaining agreements covering 26 employees expireexpiring within the next twelve months. Certain Mexico employees are covered by an annually ratified collective bargaining agreement. These employees in Mexico represented approximately 46%36% of the Company’s workforce, or 330200 employees as of December 31, 2024.2025. Our ability to maintain our workforce depends on our ability to attract and retain new and existing customers as well as maintain good relations with our employees and labor unions. We could experience a work stoppage or other disputes which could disrupt our operations or the operations of our customers and could harm our operating results.

We have manufacturing operations located in Mexico. Excluding the cost of steel used in production, a significant portion of our operating expenses are denominated in the Mexican Peso. Currency exchange rates fluctuate daily as a result of a number of factors, including changes in a country's political and economic policies. Volatility in the currencies of our entities and the United States dollar, as well as inflationary costs, could seriously harm our business, operating results and financial condition. The primary impact of currency exchange fluctuations is on the cash, payables and expenses of our Mexican operating entities. During the year ended December 31, 2024, the Company’s Sypris Technologies segment entered into Mexican Peso (“MXP”) put option contracts to manage a portion of the foreign currency exchange risk on forecasted expenses denominated in MXP. There can be no assurance the hedges will fully offset the financial impact resulting from movements in foreign currency exchange rates. Additionally, unexpected losses have occurred from increases in the value of the Mexican Peso relative to the United States dollar and further unexpected losses could occur, which could be material to our business, financial results, or operations.

Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks, which could adversely affect our profitability and overall financial position. We endeavor to obtain insurance from financially solid, responsible, highly rated counterparties in established markets to cover significant risks and liabilities (including, for example, natural disasters, space launches and on-orbit operations, cyber security,cybersecurity, hazardous operations, energetics and products liability). Not every risk or liability can be insured, and insurance coverage is not always reasonably available. The policy limits and terms of coverage reasonably obtainable may not be sufficient to cover actual losses or liabilities. Even if insurance coverage is available, we are not always able to obtain it at a price or on terms acceptable to us or without increasing exclusions. Disputes with insurance carriers over the availability of coverage, and the insolvency of one or more of our insurers has affected and may continue to affect the availability or timing of recovery, as well as our ability to obtain insurance coverage at reasonable rates in the future. In some circumstances we may be entitled to certain legal protections or indemnifications from our customers through contractual provisions, laws or otherwise. However, these protections are not always available, are difficult to negotiate and obtain, are typically subject to certain terms or limitations, including the availability of funds, and may not be sufficient to cover our losses or liabilities. If insurance coverage, customer indemnifications and/or other legal protections are not available or are not sufficient to cover risks or losses, it could have a material adverse effect on our financial position, results of operations and/or cash flows.

Conditions have remained relatively stable for theThe North American Class 4-88 commercial vehicle market experienced a downturn in 2025, in addition to the automotive,automotive and sport utility vehicle and off-highway markets also served by Sypris Technologies. New heavy-duty truck demand has historically been cyclical and is particularly sensitive to the industrial sector of the economy, which generates a significant portion of the freight tonnage hauled by commercial vehicles. During 2024,2025, production of Class 8 trucks in North America decreased 2%24% from 2023.2024. According to industry publications, the outlook for 20252026 and 2027 is forforecasting continueda weakenedslight demandincrease within production downover 5% from 2024 levels driven by lower year-over-year freight volumes and rates,2025, before reboundingincreasing 12%27% in 2026.2028. We believe that the market diversification Sypris Technologies has accomplished over recent years by adding new programs in the automotive, sport-utility and off-highway markets has benefited and will continue to benefit the Company as the demand cycles for our products in these markets differs from the Class 8 commercial vehicle market, thereby reducing volatility in our revenue profile.

The oil and gas markets served by our Tube Turns® brand of engineered products continues to be shaped largely by geopolitical factors, macroeconomic variables such as high interest rates and rising material costs, evolving policies and regulations and the emergence of new technologies. Sales in this market are dependent on, among other things, the level of worldwide oil and natural gas demand, the price of crude oil and natural gas and capital spending by exploration and production companies and drilling contractors. The conflicts in the Middle East, including military hostilities between Israel and Hamas and the U.S., Israel and Iran, the war between Russia and Ukraine and inflationary pressures have also led to disruption, instability and volatility in global markets and industries that could negatively impact our operations.

Ongoing demand in the electronic circuit card assembly industry across multiple manufacturing sectors continues to create shortages and extended lead times. In some instances, waiting times for certain components approach a year or more. We factor supplier-provided lead times into internal planning schedules and new customer quotations. From time to time, we encounter part obsolescence which requires us to identify an alternate part suitable for use. We continue to work with our customers on strategies to mitigate any adverse impact upon our ability to service their requirements. Factors which arise after the placement of the customer’s order may cause us to miss projected delivery dates. Inflationary costs are expected to continue butthrough are not expected to have a significant impact on operating income in 2025.2026.

The electronic circuit card assembly industry is expectedhighly competitive, and demand can be volatile from period to experienceperiod. steady growth in 2025, driven by increasingIncreasing demand for advanced technologies, supply chain diversification, and continued strong government defense spending.spending Geopoliticalalong with geopolitical factors, including ongoing U.S.-China trade tensions and regulatory shifts, are prompting companies to adopt supply chain resilience strategies, such as "friendshoring", nearshoring and onshoring that benefit domestic suppliers. Additionally, OEMs are expected to continue the trend of outsourcing lower-level electronic assemblies, while focusing on their core competencies of design and system integration. However, challenges such as labor cost fluctuations, raw material constraints, and evolving trade policies may impact operational efficiency and cost structures. Overall, the sector is positioned for growth, with companies focusing on technological innovation, strategic partnerships, and supply chain optimization to maintain competitiveness in a rapidly evolving defense and aerospace market. During 20232024 and 2024,2025, we announced new program awards and releases for Sypris Electronics, with certain programs continuing into 2026. In addition to contract awards from Department of Defense (“DoD”)DoW prime contractors related to weapons systems, electronic warfare and infrared countermeasures in our traditional aerospace and defense markets, we have also been awarded subcontracts for manufacturing services to the communication and navigation markets, which require our advanced capabilities for delivering products for complex, high cost of failure platforms.

OverallWhile congressionalthe sentimentU.S. remainspresidential strongadministration has announced their proposal for supportinga thesignificant DoD’sincrease National Defense Strategy andin defense spending.spending However,in FY 2027, we anticipate that the federal budgetbudget, debt ceiling and regulatory environment will continue to be subject to debate and compromise shaped by, among other things, the U.S. presidential administration and Congress, heightened political tensions, the global security environment, inflationary pressurespressures, and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly, and the effect on individual programs or our results cannot be predicted at this time. Additionally, the U.S. presidential administration continues to take steps to evaluate government-wide and defense-specific staffing and procurement, which includes assessing mission priorities, procurement methods, program performance, and other factors and then potentially taking action based on those assessments. The impact on demand for our products and services and our business are difficult to predict.

Pension Plan Funded Status. Our U.S. defined benefit pension plans are closed to new entrants and an there were no participants still accruing benefits under any of the plans in 2024.2025. Changes in our net obligations are principally attributable to changing discount rates and the performance of plan assets. Pension obligations are valued using discount rates established annually in consultation with our outside actuarial advisers using a theoretical bond portfolio, adjusted according to the timing of expected cash flows for our future obligations. Plan liabilities at December 31, 20242025 are based upon a discount rate of 5.55%5.20% which reflects the Above Mean Mercer Yield Curve rate as of December 31, 20242025 rounded to the nearest 5th basis point. Declining discount rates increase the present value of future pension obligations; a 25 basis point decrease in the discount rate would increase our U.S. pension liability by about $0.4 million. As indicated above, when establishing the expected long-term rate of return on our U.S. pension plan assets, we consider historical performance and forward-looking return estimates reflective of our portfolio mix and investment strategy. Based on the most recent analysis of projected portfolio returns, we concluded that the use of 3.45%3.95% for the Louisville Hourly Plan, 3.75%4.65% for the Marion Plan and 3.15%4.45% for the Louisville Salaried Plan as the expected return on our U.S. pension plan assets for 20242025 was appropriate. A change in the assumed rate of return on plan assets of 100 basis points would result in a $0.2 million change in the estimated 20252026 pension expense.

At December 31, 2024,2025, we have $7.1$6.2 million of unrecognized losses relating to our U.S. pension plans. Actuarial gains and losses, which are primarily the result of changes in the discount rate and other assumptions and differences between actual and expected asset returns, are deferred in Accumulated Other Comprehensive IncomeLoss and amortized to expense following the corridor approach. We use the average remaining service period of active participants unless almost all of the plan’s participants are inactive, in which case we use the average remaining life expectancy for all active and inactive participants.

Stock-based Compensation. We account for stock-basedstock option based compensation in accordance with the fair value recognition provisions using the Black-Scholes option-pricing method, which requires the input of several subjective assumptions. The Company uses historical Company and industry data to estimate the expected price volatility. Due to the lack of sufficient historical exercise data to provide a reasonable basis upon which to otherwise estimate the expected term of the stock options, the Company uses the simplified method to estimate the expected term. Under the simplified method, the expected term of an option is presumed to be the mid-point between the vesting date and the end of the contractual term. The dividend yield is assumed to be zero as we have not paid dividends nor do we anticipate paying any dividends in the foreseeable future. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. Forfeitures are recorded as they occur. Changes in the subjective assumptions can materially affect the fair value estimate of stock-based compensation and consequently, the related expense recognized in the consolidated statements of operations.

Net Revenue. Sypris Technologies derives its revenue from the sale of forged and finished steel components and subassemblies and high-pressure closures and other fabricated products. Net revenue for Sypris Technologies decreased $2.7$23.5 million from the prior year to $75.2$51.7 million in 2024.2025. The net revenue decrease was primarily attributable to decreasedthe salescyclical volumesdecline of $2.4 million attributable toin the commercial vehicle market,market. $1.1During 2025, production of Class 8 trucks in North America decreased 24% from 2024. Additionally, during the first quarter of 2025, Sypris Technologies began operating under a sub-maquiladora services agreement with one of its customers in Mexico. As a result, the customer retains ownership of the inventory, and revenue is recognized on the value-add portion only, resulting in a decrease of $4.8 million fromfor the automotive,year sportended utilityDecember vehicle31, and2025 off-highwayas markets,compared partiallyto offsetthe byprior ayear. $0.8Energy product sales decreased $1.9 million increaseas incompared energyto productthe sales.prior year due to the impact of tariffs on sales volumes. Revenue for Sypris Technologies is expected to decrease slightly in 2025,2026, due to the anticipated decline in the commercial vehicle market,market during the first half of 2026, partially offset by higher energy component sales and new program expansion with existing customers in the commercial vehicle market. Additionally, Sypris Technologies began operating under a sub-maquiladora services agreement with one of its customers in Mexico early in 2025. As a result, the customer retains ownership of the inventory, and revenue will be recognized on the value-add portion only.

Sypris Electronics derives its revenue primarily from circuit card and full “box build” manufacturing, high reliability manufacturing and systems assembly and integration. Net revenue for Sypris Electronics increased $6.7$3.2 million to $65.0$68.1 million in 2024.2025. The increase in revenue for the year ended December 31, 20242025 was primarily related to the ramping of production during the year a follow-on program and shipments on several new programs that began shipping in 2024.programs. This was partially offset by a decrease in sales to customers serving the communicationscompletion market.of shipments under one of its long-term contracts. The order backlog for Sypris Electronics is expected to support an increase in revenue during 2025.2026.

Gross Profit. Sypris Technologies’ gross profit increaseddecreased $3.6$6.4 million to $12.8$6.4 million in 20242025 as compared to $9.2$12.8 million in the prior year due to the favorablesignificant impactdecrease ofin foreign exchange rates and reduced operating supply spendvolumes and lower equipment maintenance expenses for our Mexican subsidiary and an improved mixabsorption of ourfixed higher-marginoverhead energycosts productsas fora theresult currentof year.lower production.

Sypris Electronics’ gross profit decreased $0.9$4.1 million to $7.1$3.0 million as compared to $8.0$7.1 million in the prior year. The decrease in gross profit for the year ended December 31, 20242025 was primarily a result of an unfavorable mix of programs and a high amountdelays of unusablecertain inventorycustomer ondeliveries, twowhich programshas thatlimited rampedour ability to ramp up production duringto the year.levels anticipated and resulted in increased costs and decreased operational efficiency. Additionally, Sypris Electronics incurred additional engineering costs for scope modifications on a new contractcontracts during 2024.2025. TheFurthermore, CompanySypris submittedElectronics arecorded $0.6charges of $1.2 million requestrelated forto equitableexcess adjustmentand (“REA”)obsolete inventory during the firstyear quarteras a result of 2025changes toin offsetestimated somefuture ofdemand theseon incurredvarious costs. The REA was finalized during the first quarter of 2025. No amount was recorded as revenue for the REA during 2024.programs. The expected increase in revenue during 20252026 attributable to order backlog is expected to favorably impact overhead absorptionabsorption, and the contribution margin from higher volumes is further expected to generate gross profit expansion.

Selling, General and Administrative. Selling, general and administrative expense increaseddecreased $0.7$1.0 million to $16.0 million in 2025 as compared to $17.0 million in 20242024. asThe compared to $16.3 milliondecrease in 2023. The increase in sellingselling, general and administrative expense for the year ended December 31, 20242025 was primarily as a result of experiencedlower higherconsulting employeecosts, reduced headcount and favorable medical insurance claim expense during 2024. Additionally, selling, general and administrative expenses increased as a result of an increase in headcount to support the increase in volumes for Sypris Electronics and increased insurance costs.claims. Selling, general and administrative expense increased as a percentage of revenue to 13.3% for the year ended December 31, 2025 from 12.1% for the year ended December 31, 2024 from 12.0% for the year ended December 31, 2023.2024.

Other (Income) Expense, Net. Other (income) expense, net, was $1.2income of $2.0 million in 20242025 as compared to $1.1expense of $1.2 million for 2023.2024. During the year ended December 31, 2024,2025, the Company closed on a sale leaseback transaction with an unrelated third party. Under this transaction, the Company sold its facility located in Louisville, Kentucky, with a net book value of $0.4 million for net cash proceeds of approximately $2.9 million. The Company recognized a gain of $2.5 million on this transaction, which is included in other income (expense), net in the consolidated statements of operations. This gain was partially offset by pension related expense of $0.8$0.6 million. Foreign currency related expenses were not material for the year ended December 31, 2024.2025.

During the year ended December 31, 2023,2024, the Company recognized pension related expense of $1.0$0.8 million. Foreign currency related expenses were not material for the year ended December 31, 2023.2024.

Income Taxes. The 2025 income tax provision consists of a current tax benefit of $0.1 million and deferred tax expense of $0.1 million. The 2024 income tax provision consists of current tax expense of $1.5 million and deferred tax expense of $0.2 million. The 2023 income tax provision consists of current tax expense of $0.6 million and deferred tax expense of $0.1 million. The current tax expense in 20242025 and 20232024 includes taxes accrued by our Mexican subsidiary and domestic state income taxes and adjustments. The 20242025 and 20232024 deferred tax expense includes net changes in the foreign deferred tax assets during the year.

As reflected in the consolidated financial statements, the Company reported a net loss of $1.7$6.3 million and $1.6$1.7 million for the yearsyear ended December 31, 20242025 and 2023,2024, respectively, and cash used in operating activities of $11.1$5.7 million for the year ended December 31, 2023.2025. The Company’s net inventory increased significantly in 2023, primarily related to contracts with Sypris Electronics’ aerospace and defense customers. Shipments to customers on certain of these contracts were delayed beyond the initial delivery dates, which negatively impacted the cycle time to convert inventory to cash. Additionally, the Company experienced a significant drop in volumes within the Sypris Technologies business attributable to the cyclical decline in the commercial vehicle market in 2025, which led to a corresponding decrease in gross profit. As a result, the Company experienced a liquidity shortfall beginning in the fourth quarter of 2023,2023 and theat Companyvarious istimes continuingduring to2024, aggressively2025 manageand workinginto capital to improve liquidity.2026. The shipment delays also contributed to an increase in trade payable balances with certain suppliers during 2023 and early 2024.2024, The Company successfully negotiated amended payment and other terms on the past due balances with certain suppliers during 2024 and is continuing to work with suppliers to improve terms and maintain consistency in its supply chain relationships. The Company received the benefit of additional loans of $2.5 million during the year ended December 31, 2024 and $2.5 million during the year ended December 31, 2023 from GFCM to help the Company manage its liquidity during those periods. This additional $5.0 million loaned to the Company by GFCM in the fourth quarter of 2023 and the first quarter of 2024 was approved by the Audit Committee and provided the Company necessary liquidity. Additionally, during the first quarter of 2025, the Company and GFCM amended the Note to increase the principal amount by $3.0 million to $12.0 million, extend the maturity dates for $2.0 million of the obligation to April 1, 2026, $2.0 million to April 1, 2027, $5.0 million to April 1, 2028 and $3.0 million to April 1, 2029 (see Note 12 to the consolidated financial statements in this Annual Report on Form 10-K).

Our ability to service our current liabilities will require a significant amount of cash. Management has evaluated our ability to generate this cash to meet our obligations for the next twelve months. Our primary sources of funds to meet our liquidity and capital requirements include cash on hand, funds generated through continued revenue growth from the Company’s consolidated operations and reductions in the Company’s investment in working capital. Based upon our current forecast, we believe that we will have sufficient liquidity to finance our operations for the next twelve months.

During the year ended December 31, 2024,2025, the Company and GFCM amended the Note to, among other things: (i) increase the principal amount by $2.5$3.0 million to $9.0$12.0 million, (ii) extend the maturity dates for $2.0 million of the obligation to April 1, 2025,2026, $2.0 million to April 1, 20262027, $5.0 million on April 1, 2028 and the balance toof $3.0 million on April 1, 2027,2029, and (iii) allow for the deferral of payment for up to 60%100% of the interest due on the Note to April 1, 2025.2026. During the first quarter of 2025,2026, the Company further amended the Note to increase the principal amount by $3.0 million with a maturity date of April 1, 2029, extend the maturity dates on all tranches by one year and allow for the continued deferral of payment for up to 100% of the interest due on the Note to April 1, 2026.2027. Interest on the Note is payable quarterly, unless the deferral option is elected, and the rate is reset on April 1 of each year at the greater of 8% or 500 basis points above the five-year Treasury note average during the previous 90-day period. The additional amounts loaned to the Company in 2024 and 2025,2025 and the Note modification in 2026, were approved by the Audit Committee and provided the Company with necessary liquidity.

Purchase Commitments. We had purchase commitments totaling approximately $29.7$25.2 million at December 31, 2024,2025, primarily for inventory, which are due through 2026.inventory.

Operating Activities. Net cash providedused byin operating activities was $2.0$5.7 million in 2024,2025, as compared to cash usedprovided of $11.1$2.0 million in 2023.2024. The aggregate increasedecrease in accounts receivable in 2024 resulted in a usage of cash of $1.8 million as a result of an early payment from a Sypris Technologies customer in the prior year, which was not repeated in 2024. The decrease in inventory in 20242025 resulted in a source of cash of $9.1cash of $0.7 million as a result of the timing of shipments during the period. The decrease in inventory in 2025 resulted in a source of cash of $13.3 million. The decrease in inventory was primarily as a result of a ramp up of shipments within Sypris Electronics and the reflection of our strategic inventory management efforts. A significant portion of the inventory had been purchased in previous periods and was funded through prepayments from customers, which was recorded as contract liabilities. As shipments have increased with Sypris Electronics during the year, these contract liabilities have also decreased, which is the primary component of the $10.0 million change in accrued and other liabilities during 2025. Accounts payable decreased during 2024,2025, resulting in a use of cash of $8.2 million. This change in accounts payable was driven by an effort within Sypris Electronics to pay down past due receivablespayables and reduce inventory purchases during the period. Prepaid expenses and other current assets increaseddecreased during 20242025 resulting in a cash useprovided of $1.9$0.6 million primarily as a result of increaseddecreased contract assets and capitalized costs associated with programs in the startup phase of production at Sypris Electronics in addition to increased VAT taxes refundable in Mexico.Electronics.

Investing Activities. Net cash used in investing activities for the year ended December 31, 2024 was comprised of capital expenditures of $1.1 million and $2.1 million in 2024 and 2023, respectively.million.

Financing Activities. Net cash provided by financing activities was $0.8 million in 20242025 asand comparedwas to net cash usedcomprised of $0.6proceeds from the Note of $3.0 million, partially offset by payments on finance leases and equipment financing obligation of $2.1 million inand 2023.$0.1 million for minimum statutory tax withholdings on stock-based compensation. Net cash used in financing activities in 2024 was comprised of proceeds from the Note of $2.5 million and proceeds from equipment financing obligations of $0.4 million, partially offset by payments on finance leases and equipment financing obligations of $2.0 million and payments of $0.1 million for minimum statutory tax withholdings on stock-based compensation. Net cash used in financing activities in 2023 included principal payments on finance lease and equipment financing obligations of $1.7 million and payments of $0.1 million for minimum statutory tax withholdings on stock-based compensation. This was partially offset by proceeds from a working capital line of credit in Mexico of $0.5 million and $0.7 million in proceeds received from equipment financing obligations.

The North American Class 8 commercial vehicle market experienced a downturn in 2025, in addition to the automotive and sport utility vehicle markets also served by Sypris Technologies. New heavy-duty truck demand has historically been cyclical and is particularly sensitive to the industrial sector of the economy, which generates a significant portion of the freight tonnage hauled by commercial vehicles. During 2025, production of Class 8 trucks in North America decreased 24% from 2024. According to industry publications, the outlook for 2026 and 2027 is forecasting asequential slightincreases increaseof in9.1% productionand over9.7%, 2025, before increasing 25% in 2028.respectively. We believe that the market diversification Sypris Technologies has accomplished over recent years by adding new programs in the automotive, sport-utility and off-highway markets has benefited and will continue to benefit the Company as the demand cycles for our products in these markets differs from the Class 8 commercial vehicle market, thereby reducing volatility in our revenue profile.

We will continue to pursue new business in a wide variety of markets from light automotive to new pressure vessel and pipeline applications and artificial intelligence data center applications to achieve a more balanced portfolio across our customers, markets and products.

The electronic circuit card assembly industry is highly competitive, and demand can be volatile from period to period. Increasing demand for advanced technologies, supply chain diversification, and continued strong government defense spending along with geopolitical factors, including ongoing U.S.-China trade tensions and regulatory shifts, are prompting companies to adopt supply chain resilience strategies, such as "friendshoring", nearshoring and onshoring that benefit domestic suppliers. Additionally, OEMs are expected to continue the trend of outsourcing lower-level electronic assemblies, while focusing on their core competencies of design and system integration. However, challenges such as labor cost fluctuations, raw material constraints, and evolving trade policies may impact operational efficiency and cost structures. Overall, the sector is positioned for growth, with companies focusing on technological innovation, strategic partnerships, and supply chain optimization to maintain competitiveness in a rapidly evolving defense and aerospace market. During 2024, 2025 and the first quartersix months of 2026, we announced new program awards and releases for Sypris Electronics, with certain programs continuing into 2028. In addition to contract awards from Department of War (“DoW”) prime contractors related to weapons systems, electronic warfare and infrared countermeasures in our traditional aerospace and defense markets, we have also been awarded subcontracts for manufacturing services to the communication and navigation and space markets, which require our advanced capabilities for delivering products for complex, high cost of failure platforms.

The tabletables below comparescompare our segment and consolidated results for the firstthree quarterand six month periods of operations of 2026 to the firstthree quarterand six month periods of operations of 2025. ItThe presentstables present the results for each period, the change in those results from 2025 to 2026 in both dollars and aspercentages a percentage, as well asand the results for each period as a percentage of net revenue.

Three Months Ended AprilJuly 5, 2026 Compared to Three Months Ended MarchJune 30,29, 2025

Sypris Electronics derives its revenue primarily from circuit card and full “box build” manufacturing, high reliability manufacturing and systems assembly and integration. Net revenue for Sypris Electronics decreased $2.5$1.9 million toand $13.4$4.4 millionmillion, inrespectively, for the firstthree quarterand ofsix 2026months comparedended toJuly $15.95, million2026, infrom the firstprior quarteryear ofcomparable 2025.periods. The net revenue decrease for the period was primarily attributable to material availability in addition to customer design changes on certain new programs, which pushed out delivery dates.

Gross Profit. Sypris Technologies’ gross profit decreasedincreased $0.7$0.6 million toand $1.4decreased $0.1 million infor the firstthree quarterand ofsix 2026months asended comparedJuly to5, 2026, respectively, from the firstprior quarteryear ofcomparable 2025periods as a result of lowerthe volumeschange in thevolumes. commercial vehicle market and the related loss of fixed overhead absorption and anHowever, unfavorable foreign exchange raterates for our Mexican subsidiary.subsidiary This was partially offset byhad a favorablenegative miximpact ofon highermargins marginfor energyboth productthe sales.three and six months ended July 5, 2026. Gross margin for the firstthree quarterand ofsix months ended July 5, 2026 was 11.4%18.5% and 15.3%, respectively, as compared to 15.5%15.2% inand 15.4%, respectively, for the firstthree quarterand ofsix months ended June 29, 2025.

Sypris Electronics’ gross profit decreased $1.9$1.2 million toand a loss of $0.6 million in the first quarter of 2026 as compared to gross profit of $1.3$3.1 million for the firstthree quarterand ofsix 2025.months ended July 5, 2026, respectively, from the prior year comparable periods. The decrease in gross profit for the three and six months ended July 5, 2026 was primarily a result of lower volumes and higher scrap incurred during the period, which included expired material resulting from program delays. Furthermore, Sypris Electronics recorded charges of $0.8 million and $1.0 million related to excess and obsolete inventory during the three and six months ended July 5, 2026, respectively. Additionally, delays of certain customer deliveries has limited our ability to ramp up production to the levels anticipated and resulted in increased costs and decreased operational efficiency. Furthermore,Results for the priorsix-months periodended resultsJune 29, 2025 included additional gross profit of $0.3 million for a request for equitable adjustment (“REA”) approved during the during the first quarter of 2025 to offset certain additional costs for scope modifications on a new contract during 2024. While the order backlog for Sypris Electronics supports a stable revenue rate during the balance of 2026, material availability challenges are expected to continue. Gross margin for the firstthree quarterand ofsix months ended July 5, 2026 was (4.5)%a loss of 4.9% and 4.7%, respectively, as compared to 7.9%2.5% inand 5.1%, respectively, for the firstthree quarterand ofsix months ended June 29, 2025. Gross margins are forecasted to improve as production volumes increase throughout the remainder of 2026.

Selling, General and Administrative. Selling, general and administrative expense increased $0.9$0.4 million toand $4.4$1.3 million infor the firstthree quarterand ofsix 2026months ended July 5, 2026, respectively, as compared to $3.5the millionprior year comparable periods. The increase for the samethree periodand insix 2025month periods was primarily as a result of higher medical claims experience during the current period. The Company experienced an increase in the number of high-cost medical claims during the first quartersix months of 2026 as compared to a favorable experience in the prior year. The Company is self-insured for medical claims with stop loss coverage for claims over $0.3 million. Selling, general and administrative expense increased as a percentage of revenue to 17.1%14.6% and 15.8% for the firstthree quarterand ofsix 2026months ended July 5, 2026, respectively, from 11.8%12.8% inand 12.3%, respectively, for the priorthree yearand comparablesix period.months ended June 29, 2025.

Income Taxes. The Company’s income tax expense(benefit) expense, net for the three and six months ended AprilJuly 5, 2026 and MarchJune 30,29, 2025 consists primarily of currently payable state and local income taxes on domestic operations and foreign income taxes of its Mexican subsidiary.

Liquidity andLiquidity, Capital Resources

As reflected in the consolidated financial statements, the Company has an accumulated deficit as of AprilJuly 5, 2026, a net loss for the quartersix months ended AprilJuly 5, 2026 and the year ended December 31, 2025, as well as negative cash flow from operating activities for the quartersix months ended AprilJuly 5, 2026 and the year ended December 31, 2025. The Company’s net inventory increased significantly in 2023, primarily related to contracts with Sypris Electronics’ aerospace and defense customers. Shipments to customers on certain of these contracts were delayed beyond the initial delivery dates, which negatively impacted the cycle time to convert inventory to cash. Additionally, the Company experienced a significant drop in volumes within the Sypris Technologies business attributable to the cyclical decline in the commercial vehicle market in 2025 and into the first quarter of 2026, which led to a corresponding decrease in gross profit. As a result, the Company experienced a liquidity shortfall beginning in the fourth quarter of 2023 and at various times during 2024, 2025 and into 2026. The shipment delays within Sypris Electronics also contributed to an increase in trade payable balances with certain suppliers during 2023 and 2024. The Company successfully negotiated amended payment and other terms on the past due balances with certain suppliers and is continuing to work with suppliers to improve terms and maintain consistency in its supply chain relationships.

Cash Balance. As of April 5, 2026, we had approximately $4.8 million of cash and cash equivalents, of which $1.2 million was held in jurisdictions outside of the U.S. that, if repatriated, could result in withholding taxes. We expect existing cash and cash flows from operations to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as capital expenditures, for at least the next twelve months. Significant changes from our current forecasts, including, but not limited to: (i) meaningful shortfalls in our projected revenues, (ii) unexpected costs or expenses, and/or (iii) operating difficulties which cause unexpected delays in scheduled shipments, could require us to seek additional funding or force us to make further reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs. Any of these actions could materially harm our business, results of operations and future prospects. Additional financing may not be available to us.

Gill Family Capital Management Note. The Company has received the benefit of cash infusions from GFCM in the form of secured promissory note obligations totaling $12.0 million in principal as of AprilJuly 5, 2026 and December 31, 2025 (the “Note”). GFCM is an entity controlled by the Company’s Chairman, President and Chief Executive Officer, Jeffrey T. Gill and one of our directors, R. Scott Gill. GFCM, Jeffrey T. Gill and R. Scott Gill are significant beneficial stockholders of the Company.

As of AprilJuly 5, 2026, our principal commitment under the Note was $12.0 million, with $2.0 million due on April 1, 2027, $2.0 million on April 1, 2028, $5.0 million due on April 1, 20292029, and the balance of $3.0 million due on April 1, 2030. The Note allows for a deferral of payment for up to 100% of the interest due on the Note to April 1, 2027. Interest on the Note is reset on April 1 of each year, at the greater of 8.0% or 500 basis points above the five-year Treasury note average during the preceding 90-day period, in each case, payable quarterly, unless the deferral option is elected.

Loan Agreement. On February 11, 2026, the Company, through its Mexican operations, entered into Mexico Bajio Loan in the amount of approximately $1.2 million to fund working capital needs. The loan is to be paid in monthly installments over a five-year period and bears a fixed interest rate of 10.5% per annum. The balance of the loan as of AprilJuly 5, 2026, was $1.1 million.

Finance Lease Obligations. As of AprilJuly 5, 2026, the Company had $4.5$4.3 million outstanding under finance lease obligations for both property and machinery and equipment with maturities through 2036 and a weighted average interest rate of 13.2%.13.3%.

Equipment Financing Obligations. As of AprilJuly 5, 2026, the Company had $1.3$1.2 million outstanding under equipment financing facilities, with payments due through 2031, and a weighted average interest rate of 7.1%.

Purchase Commitments. We had purchase commitments totaling approximately $22.0$17.7 million asat of AprilJuly 5, 2026, primarily for inventory and manufacturing equipment.

Operating Activities. Net cash used in operating activities was $2.3$0.5 million in the first quartersix months of 2026, as compared to $5.5$4.4 million in the same period of 2025. The aggregate decreaseincrease in accounts receivable in 2026 resulted in casha provideduse of $0.3cash of $0.7 million primarily as a result of the timing of receipts. The increasedecrease in inventory in 2026 resulted in a source of cash of $0.9 million. The decrease in inventory in 2026 was primarily as a result of increasedshipments within the Sypris Electronics business. A significant portion of the inventory had been purchased in previous periods and was funded through prepayments from customers, which was recorded as contract liabilities. Partially offsetting this was an increase in inventory within Sypris Technologies to support higher volumes expected in the second half of 20262026. andAccounts resultedpayable increased during the first six months of 2026, resulting in usecash provided of cash$2.2 million. The increase in accounts payable was primarily associated with the increase in inventory for our Sypris Technologies business to support the higher volumes expected in the second half of $0.4 million.2026. Accrued and other liabilities increased during the period and provided $0.9$1.2 million in the first quartersix months of 2026 as a result of prepayments from customers with Sypris Electronics to fund inventory purchases, which was recorded as contract liabilities.liabilities, Accountsand payableadditional decreasedaccrued unpaid interest on the Note. Other current assets increased during the first quartersix months of 2026 as a result of timing of paymentsprepayments to our suppliers, resulting in a use of cash of $0.3$0.5 million.

Investing Activities. Net cash used in investing activities was comprised of capital expenditures of $0.2$0.6 million for the first quartersix months of 2026 as compared to a$0.2 negligible amountmillion for the first quartersix months of 2025.

Financing Activities. Net cash provided by financing activities was $0.7$0.3 million for the first quartersix months of 2026 and was comprised of proceeds from the Mexico Bajio Loan of $1.1 million, partially offset by capitalfinance lease, equipment financing obligation and debt payments of $0.4$0.7 million and $0.1$0.2 million for minimum statutory tax withholdings on stock-based compensation. Net cash provided by financing activities was $2.5$1.9 million for the first quartersix months of 2025 and was comprised of proceeds from the Note of $3.0 million, partially offset by capitalpayments leaseon finance leases and equipment financing obligation payments of $0.5$1.0 million.million and $0.1 million for minimum statutory tax withholdings on stock-based compensation.

See the information concerning our critical accounting policies included under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation - Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. There have been no significant changes in our critical accounting policies during the threesix months ended AprilJuly 5, 2026.

This Quarterly Report on Form 10-Q, and our other oral or written communications, may contain “forward-looking” statements. These statements may include our expectations or projections about the future of our business, industries, business strategies, prospects, potential acquisitions, liquidity, financial condition or financial results and our views about developments beyond our control, including domestic or global economic conditions, such as inflation, supply chain conditions, government spending, industry trends and market developments. These statements are based on management’s views and assumptions at the time originally made, and, except as required by law, we undertake no obligation to update these statements, even if, for example, they remain available on our website after those views and assumptions have changed. There can be no assurance that our expectations, projections or views will come to pass, and undue reliance should not be placed on these forward-looking statements.

A number of significant factors could materially affect our specific business operations and cause our performance to differ materially from any future results projected or implied by our prior statements. Many of these factors are identified in connection with the more specific descriptions contained throughout this report. Other factors which could also materially affect such future results currently include: the fees, costs and supply of, or access to, debt, equity capital, or other sources of liquidity; the termination or non-renewal of existing contracts by customers; our failure to achieve and maintain profitability on a timely basis by steadily increasing our revenues from profitable contracts with a diversified group of customers, which would cause us to continue to use existing cash resources or require us to sell assets to fund operating losses; volatility of our customers’ forecasts and our contractual obligations to meet current scheduling demands and production levels, which may negatively impact our operational capacity and our effectiveness to integrate new customers or suppliers, and in turn cause increases in our inventory and working capital levels; cost, quality and availability or lead times of raw materials such as steel, component parts (especially electronic components), natural gas or utilities including increased cost relating to inflation, as well as the impact of proposedexisting or future tariffs, trade restrictions or other changes in trade policy imposed tariffs by the U.S.United governmentStates on imports to the U.S. and/or the imposition of retaliatory tariffs by foreign countriesgovernments; our reliance on a few key customers, third party vendors and sub-suppliers; significant delays or reductions due to a prolonged continuing resolution or U.S. government shutdown reducing the spending on products and services that Sypris Electronics provides; risks of foreign operations, including foreign currency exchange rate risk exposure, which could impact our operating results; the cost, quality, timeliness, efficiency and yield of our operations and capital investments, including the impact of inflation, tariffs, product recalls or related liabilities, employee training, working capital, production schedules, cycle times, scrap rates, injuries, wages, overtime costs, freight or expediting costs; inventory valuation risks including excessive or obsolescent valuations or price erosions of raw materials or component parts on hand or other potential impairments, non-recoverability or write-offs of assets or deferred costs; our failure to successfully complete final contract negotiations with regard to our announced contract “orders”, “wins” or “awards”; our ability to maintain compliance with the Nasdaq listing standards, including without limitation minimum closing bid price and stockholders’ equity; our failure to successfully win new business or develop new or improved products or new markets for our products; war, geopolitical conflict, terrorism, or political uncertainty,instability, or disruptionsother resultingdisruptions, fromsuch militaryas hostilitiesconflicts betweeninvolving Russia and Ukraine, Israel and Hamas, and the U.S., Israel and Iran, orand other tensionsdevelopments in the Middle East, including those arising out of international sanctions, foreign currency fluctuations and other economic impacts; adverse impacts of new technologies or other competitive pressures which increase our costs or erode our margins; the costs and supply of insurance on acceptable terms and with adequate coverage; unanticipated or uninsured product liability claims, disasters, public health crises, losses or business risks; breakdowns, relocations or major repairs of machinery and equipment, especially in our Toluca Plant; the costs of compliance with our auditing, regulatory or contractual obligations; pension valuation, health care or other benefit costs; dependence on, retention or recruitment of key employees and highly skilled personnel and distribution of our human capital; our reliance on revenues from customers in the oil and gas and automotive markets, with increasing consumer pressure for reductions in environmental impacts attributed to greenhouse gas emissions and increased vehicle fuel economy; labor relations; strikes; union negotiations; disputes or litigation involving governmental, supplier, customer, employee, creditor, stockholder, premises liability, personal injury, product liability, warranty or environmental claims; failure to adequately insure or to identify product liability, environmental or other insurable risks; costs associated with environmental or other claims relating to properties previously owned; our inability to patent or otherwise protect our inventions or other intellectual property rights from potential competitors or fully exploit such rights which could materially affect our ability to compete in our chosen markets; changes in licenses, security clearances, or other legal rights to operate, manage our work force or import and export as needed; cybersecurity threats and disruptions, including ransomware attacks on our systems and the systems of third-party vendors and other parties with which we conduct business, all of which may become more pronounced in the event of geopolitical conflicts and other uncertainties, such as the conflict in Ukraine; risks related to owning our common stock, including increased volatility; possible public policy response to a public health emergency, including U.S. or foreign government legislation or restrictions that may impact our operations or supply chain; or unknown risks and uncertainties.uncertainties, including those that are currently unknown or that we currently deem immaterial and the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.