Quarterly Report for Quarter Ending September 28, 2025 (Form 10-Q)

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We are a diversified provider of truck components, oil and gas pipeline components and aerospace and defense electronics. We offer a wide range of manufactured products, often under multi-year sole-source contracts.

We are organized into two business segments, Sypris Technologies and Sypris Electronics. Sypris Technologies, which is comprised of Sypris Technologies, Inc. and its subsidiaries, generates revenue primarily from the sale of forged, machined, welded and heat-treated steel components primarily for the heavy commercial vehicle and high-pressure energy pipeline applications. Sypris Electronics, which is comprised of Sypris Electronics, LLC, generates revenue primarily through circuit card and full "box build" manufacturing, high reliability manufacturing, systems assembly and integration, design for manufacturability and design to specification work.

We focus on those markets where we believe we have the expertise, qualifications and leadership position to sustain a competitive advantage. We target our resources to support the needs of industry participants that embrace technological innovation and flexibility, coupled with multi-year contractual relationships, as a strategic component of their supply chain management. These contracts, many of which are sole-source by part number, have historically created opportunities to invest in leading-edge processes or technologies to help our customers remain competitive. The productivity and innovation that can result from such investments helps to differentiate us from our competition when it comes to cost, quality, reliability and customer service.

Economic Conditions

Our operations are impacted by global economic conditions, including inflationary increases of certain raw materials, as well as logistics, tariffs, transportation, utilities and labor costs, supply chain constraints and increased interest rates. While we have taken pricing actions and implemented transformation initiatives that we expect to improve productivity and offset these cost increases, we expect supply chain pressures and inflationary cost increases to continue throughout 2025, which may continue thereafter and could negatively impact our results of operations.

Sypris Technologies Outlook

Uncertainty in tariffs, the economy, freight and regulations have the potential to disrupt fleet investment and replacement cycles for the North American Class 8 commercial vehicle market in addition to the automotive, sport utility vehicle and off-highway markets also served by Sypris Technologies. According to industry publications, the outlook for 2025 is for continued weakened demand with production down 28% from 2024 levels and an additional 14% decline in 2026 driven by lower year-over-year freight volumes and rates, before recovering 33% in 2027. 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 will help offset some of the anticipated cyclical decline for the commercial vehicle market, 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, 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. Additionally, orders of our Tube Turns® products were impacted by tariff uncertainty during the first nine months of 2025.

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

Sypris Electronics Outlook

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 have delayed certain customer deliveries, limited our ability to ramp up production in response to customer demand for certain products and have caused out-of-sequence manufacturing, which increases costs and decreases operational efficiency.

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 and 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 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 markets, which require our advanced capabilities for delivering products for complex, high cost of failure platforms.

While we do not serve as a prime contractor to the U.S. government, we serve as a subcontractor on various U.S. government programs. Funding for U.S. Government programs is subject to a variety of factors that can affect our business, including the U.S. presidential administration's budget requests and procurement priorities and policies, annual congressional budget authorization and appropriation processes, and other U.S. government domestic and international priorities. U.S. government spending levels, particularly defense spending, and timely funding thereof can affect our financial performance over the short and long term.

The Administration published its FY 2026 budget request in June 2025. The budget request includes $848.3 billion in the base budget (discretionary) funding, and $113.3 billion in reconciliation (mandatory) funding for the DoW. The One Big Beautiful Bill Act passed the Senate and House and was signed by the President on July 4, 2025. The bill provides more than $150 billion in mandatory funding (inclusive of the $113.3 billion) for DoW available until September 30, 2029.

The start of the new fiscal year began October 1, 2025, without the passage of Appropriation Acts or a Continuing Resolution ("CR") and the Government began its shutdown procedures, to include furloughing government civilian employees. It is unclear at this time when either a CR or Appropriations Act will be enacted. Federal agencies, including DoW, have published guidance for identifying those missions and functions that may continue to be carried out in the absence of available appropriations. The DoW published "Contingency Plan Guidance for Continuation of Operations in the Absence of Available Appropriations" stated the DoW's priorities include: Operations to secure the U.S. Southern Border, Middle East Operations, Golden Dome for America, Depot Maintenance, Shipbuilding, and Critical Munitions. We are closely monitoring the known and potential impact and if the shutdown extends for a prolonged period of time, we expect our cash flows to be negatively impacted.

With respect to the Appropriations Acts, the House Appropriations Subcommittee on Defense (HAC-D) released its FY 2026 congressional marks using the FY 2025 enacted amounts as its baseline on June 12, 2025. The bill recommends $831.5 billion in discretionary funding for the DoW. The Senate Armed Services Committee marked up its version of the FY 2026 National Defense Authorization Act (FY 2026 NDAA) on July 10, 2025 and included a topline increase of $32.1 billion. The House Armed Services Committee (HASC) also completed their markup of the FY 2026 NDAA on July 15, 2025 and held at the topline of the FY 2026 President's budget request.

We anticipate the federal budget, debt ceiling and regulatory environment will continue to be subject to debate and compromise shaped by, among other things, the new U.S. presidential administration and Congress, heightened political tensions, the global security environment, inflationary pressures, 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.

See also the discussion of Congressional budgetary constraints or reallocations risks within "Item 1A, Risk Factors" included in our 2024 Form 10-K.

Results of Operations

The tables below compare our segment and consolidated results for the three and nine-month periods of operations of 2025 to the three and nine-month periods of operations of 2024. The tables present the results for each period, the change in those results from 2024 to 2025 in both dollars and percentages and the results for each period as a percentage of net revenue.

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The first two columns in each table show the absolute results for each period presented.

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The columns entitled "Year Over Year Change" and "Year Over Year Percentage Change" show the change in results, both in dollars and percentages. These two columns show favorable changes as positive and unfavorable changes as negative. For example, when our net revenue increases from one period to the next, that change is shown as a positive number in both columns. Conversely, when expenses increase from one period to the next, that change is shown as a negative number in both columns.

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The last two columns in each table show the results for each period as a percentage of net revenue. In these two columns, the cost of sales and gross profit for each are given as a percentage of that segment's net revenue. These amounts are shown in italics.

In addition, as used in the table, "NM" means "not meaningful."

Three Months Ended September 28, 2025 Compared to Three Months Ended September 29, 2024

														Year Over
										Year Over				Year				Results as Percentage of
										Year				Percentage				Net Revenue for the Three
		Three Months Ended,								Change				Change				Months Ended
		Sept. 28,				Sept. 29,				Favorable				Favorable				Sept. 28,				Sept. 29,
		2025				2024				(Unfavorable)				(Unfavorable)				2025				2024
		(in thousands, except percentage data)
Net revenue:
Sypris Technologies		$	11,534			$	19,469			$	(7,935	)			(40.8	)%			40.2	%			54.6	%
Sypris Electronics			17,138				16,188				950				5.9				59.8				45.4
Total			28,672				35,657				(6,985	)			(19.6	)			100.0				100.0
Cost of sales:
Sypris Technologies			10,664				15,808				5,144				32.5				92.5				81.2
Sypris Electronics			15,957				13,870				(2,087	)			(15.0	)			93.1				85.7
Total			26,621				29,678				3,057				10.3				92.8				83.2
Gross profit:
Sypris Technologies			870				3,661				(2,791	)			(76.2	)			7.5				18.8
Sypris Electronics			1,181				2,318				(1,173	)			(49.1	)			6.9				14.3
Total			2,051				5,979				(3,828	)			(65.7	)			7.2				16.8
Selling, general and administrative			3,789				4,250				461				10.8				13.2				11.9
Operating (loss) income			(1,738	)			1,729				(3,467	)			NM				(6.1	)			4.8
Interest expense, net			385				546				161				29.5				1.3				1.5
Other (income) expense, net			(2,474	)			246				2,720				NM				(8.6	)			0.7
Income before taxes			351				937				(586	)			(62.5	)			1.2				2.6
Income tax (benefit) expense, net			(166	)			547				713				NM				(0.6	)			1.5
Net income		$	517			$	390			$	127				32.6				1.8	%			1.1	%

Nine Months Ended September 28, 2025 Compared to Nine Months Ended September 29, 2024.

														Year Over
										Year Over				Year				Results as Percentage of
										Year				Percentage				Net Revenue for the Nine
		Nine Months Ended,								Change				Change				Months Ended
		Sept. 28,				Sept. 29,				Favorable				Favorable				Sept. 28,				Sept. 29,
		2025				2024				(Unfavorable)				(Unfavorable)				2025				2024
		(in thousands, except percentage data)
Net revenue:
Sypris Technologies		$	39,204			$	55,660			$	(16,456	)			(29.6	)%			43.8	%			52.1	%
Sypris Electronics			50,402				51,071				(669	)			(1.3	)			56.2				47.9
Total			89,606				106,731				(17,125	)			(16.0	)			100.0				100.0
Cost of sales:
Sypris Technologies			34,084				47,229				13,145				27.8				86.9				84.9
Sypris Electronics			47,521				44,998				(2,523	)			(5.6	)			94.3				88.1
Total			81,605				92,227				10,622				11.5				91.1				86.4
Gross profit:
Sypris Technologies			5,120				8,431				(3,311	)			(39.3	)			13.1				15.1
Sypris Electronics			2,881				6,073				(3,192	)			(52.6	)			5.7				11.9
Total			8,001				14,504				(6,503	)			(44.8	)			8.9				13.6
Selling, general and administrative			11,310				12,876				1,566				12.2				12.6				12.1
Operating (loss) income			(3,309	)			1,628				(4,937	)			NM				(3.7	)			1.5
Interest expense, net			1,068				1,468				400				27.2				1.2				1.4
Other (income) expense, net			(2,085	)			781				2,866				NM				(2.3	)			0.7
Loss before taxes			(2,292	)			(621	)			(1,671	)			(269.1	)			(2.6	)			(0.6	)
Income tax expense, net			141				1,194				1,053				88.2				0.2				1.1
Net loss		$	(2,433	)		$	(1,815	)		$	(618	)			(34.0	)			(2.7	)%			(1.7	)%

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 for the three- and nine-month periods ended September 28, 2025 decreased $7.9 million and $16.5 million, respectively, from the prior year comparable periods. The net revenue decrease for the quarter and nine-month periods was primarily attributable to the anticipated cyclical decline in the commercial vehicle market. Additionally, energy product sales decreased $1.7 million and $1.9 million for the three and nine months ended September 28, 2025 as compared to the prior year comparable periods due to timing. 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 $1.0 million and $4.2 million for the three and nine months ended September 28, 2025 respectively as compared to the prior year comparable periods.

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 $1.0 million and decreased $0.7 million, respectively, for the three and nine months ended September 28, 2025, from the prior year comparable periods. The increase in revenue for the three months ended September 28, 2025 was primarily attributable improved material availability on certain programs during the period, which allowed for increased shipments. The net revenue decrease for the nine-month period was primarily attributable to changes in customer delivery schedules requested for 2025 as compared to the previous year and material availability issues.

Gross Profit. Sypris Technologies' gross profit decreased $2.8 million and $3.3 million for the three and nine months ended September 28, 2025, respectively, from the prior year comparable periods as a result of the lower volumes. Gross margin for the three and nine months ended September 28, 2025 was 7.5% and 13.1%, respectively, as compared to 18.8% and 15.1%, respectively, for the three and nine months ended September 29, 2024.

Sypris Electronics' gross profit decreased $1.1 million and $3.2 million for the three and nine months ended September 28, 2025, respectively, from the prior year comparable periods. The decrease in gross profit for the three and nine months ended September 28, 2025 was primarily a result of an unfavorable mix of programs and delays of certain customer deliveries, which has limited our ability to ramp up production and resulted in increased costs and decreased operational efficiency. The order backlog for Sypris Electronics is expected to support a stable revenue rate during the balance of 2025 and into 2026. Gross margin for the three and nine months ended September 28, 2025 was 6.9% and 5.7%, respectively, as compared to 14.3% and 11.9%, respectively, for the three and nine months ended September 29, 2024.

Selling, General and Administrative. Selling, general and administrative decreased $0.5 million and $1.6 million for the three and nine months ended September 28, 2025, respectively, as compared to the prior year comparable periods. The decrease for the three and nine month periods was primarily as a result of as a result of lower consulting costs, reduced headcount and favorable medical claims. Selling, general and administrative expense as a percentage of revenue for the three and nine months ended September 28, 2025 was 13.2% and 12.6%, respectively, as compared to 11.9% and 12.1%, respectively, for the three and nine months ended September 29, 2024.

Other (Income) Expense, Net. During the three and nine months ended September 28, 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 expense of $0.1 million and $0.4 million for the three and nine months ended September 28, 2025.

Other (income) expense for the three and nine months ended September 29, 2024 included pension expense of $0.2 million and $0.6 million, respectively.

Income Taxes. The Company's income tax expense for the three and nine months ended September 28, 2025 and September 29, 2024 consists primarily of foreign income taxes on its Mexican subsidiaries. Additionally, a deferred tax adjustment was recorded in 2024 related to the fixed asset valuation utilized by the Company's foreign operation which increased the effective tax rate. Furthermore, the Company's income tax expense for the nine months ended September 29, 2024 includes an expense of $0.1 million to settle with Mexico's Federal Tax Administration Service, Servicio de Administracion Tributaria's for the 2016 tax audit (See Note 13 to the consolidated financial statements in this Quarterly Report on Form 10-Q).

Deferred tax assets and liabilities are determined separately for each tax jurisdiction in which we conduct our operations or otherwise incur taxable income or losses. The Company evaluates its deferred tax position on a quarterly basis and valuation allowances are provided as necessary. During this evaluation, the Company reviews its forecast of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred tax assets to determine if a valuation allowance is needed. Based on its current forecast, the Company has established a valuation allowance against all U.S. deferred tax assets. Until an appropriate level and characterization of profitability is attained, the Company expects to continue to maintain a valuation allowance on its net deferred tax assets related to future U.S. tax benefits. If we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase net income in the period that such determination is made.

Liquidity, Capital Resources

As reflected in the consolidated financial statements, the Company has an accumulated deficit as of September 28, 2025, a net loss for the nine months ended September 28, 2025 and the year ended December 31, 2024, as well as negative cash flow from operating activities for the nine months ended September 28, 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 the Company 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. 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 $3.0 million during the nine months ended September 28, 2025 and $2.5 million during the year ended December 31, 2024 from Gill Family Capital Management, Inc. ("GFCM") to help the Company manage its liquidity during those periods. This additional $5.5 million loaned to the Company by GFCM in 2024 and the first nine months of 2025 was approved by the Audit Committee and provided the Company necessary liquidity. Additionally, during the first nine months of 2025, the Company and GFCM amended the Note to 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 9 to the consolidated financial statements in this Quarterly Report on Form 10-Q).

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.

Although we believe the assumptions underlying our current forecast are reasonable, management is also prepared to implement contingency plans that include other cost reduction initiatives to improve profitability and cash flow, or management can take additional steps such as adjusting the timing and amount of certain operating expenses as well as capital expenditures or the issuance of new debt. If we are unable to achieve our forecasted revenue, or if our costs are higher than expected, we may be required to revise our plans to provide for additional cost-cutting measures, seek additional financing or to consider other strategic alternatives. We may not be able to secure additional financing on favorable terms, if at all.

Cash Balance. As of September 28, 2025, we had approximately $8.4 million of cash and cash equivalents, of which $2.7 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.

Material Cash Requirements

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 September 28, 2025 and $9.0 million as of December 31, 2024 (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 September 28, 2025, our principal commitment under the Note was $2.0 million due on April 1, 2026, $2.0 million on April 1, 2027, $5.0 million due on April 1, 2028 and the balance of $3.0 million due on April 1, 2029. 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. The Note allows for a deferral of payment for up to 100% of the interest due on the Note to April 1, 2026.

During the first nine months of 2025, the Company amended the Note to increase the principal amount by $3.0 million, which is due on April 1, 2029. The amendment increased the aggregate amount previously loaned by GFCM to the Company from $9.0 million to $12.0 million. This additional amount loaned to the Company in the first nine months of 2025 was approved by the Audit Committee and provided the Company necessary liquidity.

Finance Lease Obligations. As of September 28, 2025, the Company had $5.1 million outstanding under finance lease obligations for both property and machinery and equipment with anticipated maturities through 2035 and a weighted average interest rate of 12.6%.

Equipment Financing Obligations. As of September 28, 2025, the Company had $1.1 million outstanding under equipment financing facilities, with payments due through 2030, and a weighted average interest rate of 6.9%.

Operating leases. As of September 28, 2025, the Company had $8.0 million outstanding under operating lease obligations for property with payments due through 2045 and a weighted average interest rate of 11.9%. During the three and nine months ended September 28, 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. Our initial annual cash payments to the buyer-lessor are approximately $0.3 million, and the payments will escalate three percent annually. The Company recognized a gain of $2.5 million on this transaction, which is included in other (income) expense in the consolidated statements of operations. Right-of-use assets and lease liabilities recognized related to this sale leaseback transaction were $2.2 million.

Purchase Commitments. We had purchase commitments totaling approximately $31.9 million as of September 28, 2025, primarily for inventory and manufacturing equipment, which are due through 2026.

Cash Flows

Operating Activities. Net cash used in operating activities was $4.6 million in the first nine months of 2025 as compared to $0.3 million in the same period of 2024. The decrease in inventory in 2025 resulted in a source of cash of $9.4 million. The decrease in inventory was primarily as a result of the ramp up of shipments within Sypris Electronics. 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 period, these contract liabilities have also decreased, which is the primary component of the $12.2 million change in accrued and other liabilities during the first nine months of 2025. Prepaid expenses and other assets decreased during the period, resulting in an increase in cash of $1.8 million, primarily as a result of a decrease in contract assets and a decrease in VAT refundable. Accounts payable decreased during the first nine months of 2025, resulting in a use of cash of $4.5 million. During the first nine months 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 payment for the inventory is now made by the customer, resulting in a decrease in accounts payable.

Investing Activities. Net cash provided by investing activities was $2.5 million for the nine months ended September 28, 2025. During the nine months ended September 28, 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. Partially offsetting this was capital expenditures during the same period of $0.4 million.

Net cash used in investing activities for the nine months ended September 29, 2024 was comprised of capital expenditures of $0.7 million.

Financing Activities. Net cash provided by financing activities was $1.3 million for the first nine months of 2025 and was comprised of proceeds from the Note of $3.0 million, partially offset by payments on finance leases and equipment financing obligation of $1.0 million and $0.1 million for minimum statutory tax withholdings on stock-based compensation. Net cash provided by financing activities was $1.3 million for the first nine months of 2024 and was comprised of proceeds from the Note of $2.5 million and proceeds from an equipment financing obligation of $0.4 million, partially offset by payments on finance leases and equipment financing obligation of $1.5 million and payments of $0.1 million for minimum statutory tax withholdings on stock-based compensation.

Critical Accounting Policies

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, 2024. There have been no significant changes in our critical accounting policies during the nine months ended September 28, 2025.

Forward-looking Statements

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 proposed or imposed tariffs by the U.S. government on imports to the U.S. and/or the imposition of retaliatory tariffs by foreign countries; 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 failure to successfully win new business or develop new or improved products or new markets for our products; 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; war, geopolitical conflict, terrorism, or political uncertainty, or disruptions resulting from the Russia-Ukraine war or the Israel and Gaza conflict, or other tensions in the Middle East, including arising out of international sanctions, foreign currency fluctuations and other economic impacts; 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; cyber security 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; our ability to maintain compliance with the Nasdaq listing standards minimum closing bid price; 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 and the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.