Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis contains certain "forward-looking statements" which are inherently subject to risks and uncertainties that may cause actual events to differ materially from those discussed herein. Factors which may cause such differences in events include those disclosed under the section captioned "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2025, and in other fillings we make with the Securities and Exchange Commission. These factors include, among other things: risk related to the Company's ability to continue as a going concern, conditions in the domestic and international automotive industry, upon which we rely for sales revenue, the intense competition in our markets, the concentration of our sales with major customers, risks related to export sales, including the imposition of tariffs, the price and availability of raw materials, supply chain disruptions, labor relations issues and rising costs, losses related to product liability, warranty and recall claims, costs relating to compliance with environmental laws and regulations, information systems disruptions and the threat of cyber-attacks, geo-political events and disruptions, including the engagement of the U.S. in hostilities abroad and the resulting effect on supply chains, cost of raw materials and export sales, the loss of the services of our key employees, our indebtedness which could affect our financial flexibility, financial condition and competitive position, and our internal control over financial reporting where a material weakness was identified. Many of these factors are beyond our ability to control or predict. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to publish revised forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events unless required under the federal securities laws.

Results of Operations

Sales for the three months ended September 30, 2026 were $7,530,167 compared to $7,360,284 for the three months ended September 30, 2025, an increase of $169,883, or 2.3%. Sales for the nine months ended September 30, 2026 were $21,618,309 compared to $21,903,997 for the nine months ended September 30, 2025, a decrease of $285,688, or 1.3%. The year-over-year decrease in sales was primarily driven by lower order volumes from our fastener customers, reflecting continuing soft demand across key end markets and broader macroeconomic conditions. Customers continued to exhibit more cautious purchasing behavior during the period amid elevated interest rates, inflationary pressures, a renewed shortage in semiconductor supply, and ongoing economic uncertainty resulting, in part, from geopolitical events.

Gross margins for the three months ended September 30, 2026 were $671,810 compared to $1,329,496 for the three months ended September 30, 2025, a decrease of $657,686, or 49.5%. Gross margins for the nine months ended September 30, 2026 were 2,193,581 compared to 3,962,300 for the nine months ended September 30, 2025, a decrease of $1,768,719, or 44.6%. The decrease in gross margin was driven by lower sales volumes, which reduced the absorption of fixed manufacturing costs, as well as an unfavorable sales mix. In addition, gross margins were further impacted by increases in raw material and labor costs, together with ongoing inflationary pressures across manufacturing operations, which were not fully offset through pricing actions or operational efficiencies.

Net loss for the three months ended September 30, 2026 was $915,977, or $0.95 per share, compared to net income of $67,572, or $0.07 per share for the three months ended September 30, 2025, a decrease of $983,549, or 1455.6%. Net loss for the nine months ended September 30, 2026 was $2,267,520, or $2.35 per share, compared to net income of $73,615, or $0.08 per share for the nine months ended September 30, 2025. The net loss was primarily driven by lower sales volumes, reduced absorption of fixed manufacturing costs, an unfavorable product mix, higher material and labor costs, and higher material selling and administrative expenses. Operating results were impacted by weakened demand across general industrial markets, coupled with a more cautious customer ordering environment. Higher borrowing costs, persistent inflation, and general economic and geopolitical uncertainty contributed to delayed purchasing decisions and lower overall activity levels. Results for the year-to-date period were further affected by the absence of a $339,520 gain on the sale of the Albia facility recognized in the prior-year period.

Fastener segment sales were $6,489,430 for the three months ended September 30, 2026 compared to $6,433,949 for the three months ended September 30, 2025, an increase of $55,481, or 0.9%. Fastener segment sales were $18,537,112 for the nine months ended September 30, 2026 compared to $18,990,136 for the nine months ended September 30, 2025, a decrease of $453,024, or 2.4%, reflecting lower sales to non-automotive customers, particularly in the construction and electronics markets, which more than offset modest growth in sales to automotive customers from key original equipment manufacturers. North American vehicle production remains challenged, and uncertainty continues to affect broader automotive industry demand trends. In addition, elevated interest rates and ongoing economic uncertainty continue to contribute to softer consumer demand, prompting inventory adjustments and cautious procurement behavior among our automotive customers. The automotive sector is the primary market for our fastener

segment products, and sales to automotive customers were $4,008,418 for the three months ended September 30, 2026 compared to $4,228,502 for the three months ended September 30, 2025, a decrease of $220,084, or 5.2%. Sales to automotive customers were $11,825,014 for the nine months ended September 30, 2026 compared to $11,876,239 for the nine months ended September 30, 2025, basically flat. Fastener segment sales to non-automotive customers, including those in the construction and electronics industries, were $2,481,012 for the three months ended September 30, 2026 compared to $2,205,447 for the three months ended September 30, 2025, an increase of $275,565, or 12.5%. Fastener segment sales to non-automotive customers were $6,712,098 for the nine months ended September 30, 2026 compared to $7,113,897 for the nine months ended September 30, 2025, a decrease of $401,799 or 5.6%.

Assembly equipment segment sales were $1,040,737 for the three months ended September 30, 2026 compared to $926,335 for the three months ended September 30, 2025, an increase of $114,402, or 12.3%. Assembly equipment segment sales were $3,081,197 for the nine months ended September 30, 2026 compared to $2,913,861 for the nine months ended September 30, 2025, an increase of $167,336, or 5.7%.

Selling and administrative expenses were $1,588,803 for the three months ended September 30, 2026 compared to $1,264,926 for the three months ended September 30, 2025, an increase of $323,877, or 25.6%. Selling and administrative expenses were $4,525,876 for the nine months ended September 30, 2026 compared to $4,244,987 for the nine months ended September 30, 2025, an increase of $280,889 or 6.6%. Selling and administrative expenses were 21.1% and 17.2% of sales in the three months ended September 30, 2026 and 2025, respectively.

Other income for the three months ended September 30, 2026 was $890 compared to $2,711 for the three months ended September 30, 2025, a decrease of $1,821 primarily attributable to lower interest income earned on short-term investments, which declined due to a reduction in the average balance of such investments during the current period.

Other income for the nine months ended September 30, 2026 was $65,210 compared to $16,782 for the nine months ended September 30, 2025, an increase of $48,428 due to small gains on asset sales.

The Company's effective tax rates were zero for the nine months ended September 30, 2026 and 2025, respectively.

See Note 5. Income taxes to the Condensed Consolidated Financial Statements included herein for additional information.

Liquidity and Capital Resources

Working capital was $7,897,361 as of September 30, 2026, compared to $9,894,317 at the beginning of the year, a decrease of $1,996,956, or 20.2%.

On March 6, 2025, the Company entered into a one-year $3,000,000 operating credit agreement (the "March 2025 Credit Agreement"), renewable annually, and consisting of a: (a) $2,500,000 revolving line of credit, and (b) $500,000 non-revolving line of credit. The non-revolving line of credit expired on December 31, 2025 and was not renewed. Borrowings under the March 2025 Credit Agreement bear interest at a fluctuating rate per annum equal to 1% plus the applicable prime rate subject to a 7% floor. On July 31, 2026, the Company paid off the amounts outstanding under the March 2025 Credit Agreement and terminated this agreement.

On July 31, 2026, the Company entered into a one-year loan and security agreement with a related party (the "July 2026 Related Party Note"), renewable annually, and consisting of one term loan in the amount of $1,500,000. Borrowings under the July 2026 Related Party Note bear interest at a fluctuating rate per annum equal to 1.25% plus the applicable prime rate subject to 7% floor. The agreement can be early terminated and amounts due repaid, at the Company's discretion, without prepayment penalties. The July 2026 Related Party Note contains a single financial covenant requiring the Company to obtain the lender's consent before paying any dividends, and is secured by a lien on all the Company's assets. As of September 30, 2026, the Company was in compliance with this covenant. As of September 30, 2026, there were $1,500,000 in borrowings outstanding under the July 2026 Related Party Note.

See Note 10. Debt to the Condensed Consolidated Financial Statements included herein for additional information.

The Company also had outstanding total operating lease obligations of $368,945 of which $106,158 were classified as current within Other current liabilities in the Condensed Consolidated Balance Sheets at September 30, 2026.

See Note 7. Leases to the Condensed Consolidated Financial Statements included herein for additional information.

The Company has incurred significant recurring operating losses over the last two years, primarily driven by a continuous decline in revenues, recurring negative cash flows from operations and continued reduction in liquidity. The Company reported operating loss of $916,993 and operating income of $64,570 for the three months ended September 30, 2026

and 2025, respectively. The Company reported operating loss of $2,332,295 and operating income of $56,833 for the nine months ended September 30, 2026 and 2025, respectively. The Company's liquid assets at September 30, 2026 consisted of cash and cash equivalents totaling $633,933. The Company's declining revenues, recurring operating losses and negative cash flows, and continued reduction in liquidity, raise substantial doubt about the Company's ability to continue as a going concern within one year after the issuance date of these financial statements. In response, the Company has taken various strategic actions including (a) taking action to sell certain H&L assets in 2026 and in connection with such anticipated sale, the Company classified these assets in the amount of $179,254 as Assets held for sale in the Consolidated Balance Sheets at December 31, 2025 and September 30, 2026, (b) leveraging the Company's sales team to identify and execute on new sales opportunities and increase revenue; and (c) evaluating other financing sources, including exploring the potential for a real estate sale leaseback or similar transaction, or seeking to potentially raise additional capital.

The Company will continue to seek to enhance its sales efforts to further improve revenue, improve operating efficiency and enhance liquidity. The Company believes that if it successfully implements the foregoing strategic actions, it will mitigate the factors giving rise to substantial doubt, however, there is no guarantee that the Company will successfully implement these strategic actions. As a result, there remains substantial doubt regarding the Company's ability to continue as a going concern.

The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern, and they do not include any adjustments that might result from the outcome of this uncertainty.

Outlook for the remainder of 2026

Fiscal 2026 guidance remains subject to ongoing macroeconomic uncertainty. We expect production volumes in the segments we serve to increase slightly with the added benefit of new customer awards ramping up in the first quarter of 2027. Overall, results remain consistent with our current 2026 outlook, supported by modest improvement in automotive demand, while non-automotive markets continue to lag expectations. Significant uncertainty remains in the manufacturing sector as companies like ours continue to navigate the potential impacts of tariffs and numerous market factors and geopolitical events that may impact our business in the coming year. The Company will continue to focus on actions to reduce operating expenses and push efficiency improvements in operations to better position us to manage this uncertainty, as well as seek appropriate price adjustments from customers and aggressively pursue new sales opportunities to drive volume back to historic levels. While sales in the fastener segments remain lower than anticipated, the company's sales team's focus over the last year on new business with existing customers, new customers and new products is progressing and the company expects these efforts to begin showing meaningful progress in the fourth quarter and full year 2027 based on discussions and negotiations that are in progress. We will also actively seek to achieve a more favorable sales mix, and aggressively manage our cost of goods sold, to improve our operating margin. In addition, we will actively monitor and analyze potential impacts from tariffs and other external factors, including both challenges and opportunities resulting from tariffs and external factors, so that we are positioned to take actions promptly and as necessary to address such potential impacts. We believe our continued focus on efficiency improvements and driving new sales, as well as our long term operating experience, quality products, and customer service in a very competitive global marketplace will provide the foundation for improved operating results in the future.