Nn — Key Risks

Heavy Debt Load and Escalating Preferred Stock Dividends Threaten Financial Flexibility

As of December 31, 2025, the company carried $159.5 million in total debt, with annual cash interest payments alone running roughly $11.2 million. On top of that, 65,000 shares of Series D Preferred Stock are outstanding with a carrying value of $112.4 million — including $65.7 million in accumulated unpaid dividends. The dividend rate on this preferred stock is currently 12% per year and steps up by 2.5% annually starting March 2026, meaning this obligation gets more expensive every year. Common stockholders sit last in line if anything goes wrong.

Ten Largest Customers Represent Nearly Half of All Revenue

The top ten customers accounted for approximately 49% of consolidated net sales in 2025. Losing even one major customer could meaningfully shrink revenue and compress profit margins with little warning, since the company would have limited ability to quickly replace that volume.

Nearly Half of Revenue Exposed to Currency Swings and Trade Policy Risk

46% of revenues come from international customers and are denominated in foreign currencies, creating direct exposure to exchange rate moves. Beyond currency risk, the company sources raw materials internationally and sells into markets affected by tariffs — particularly China and Mexico. Escalating U.S. tariffs and retaliatory measures from other governments could raise input costs and reduce customer demand simultaneously.

Key Raw Materials Prices — Especially Precious Metals — Are Volatile

The company uses large quantities of steel, aluminum, copper, silver, and gold in manufacturing. Silver in particular has shown increased recent volatility. If commodity prices spike and the company cannot pass those costs on to customers quickly, profit margins get squeezed directly.

Medical Device Regulation Creates Approval and Compliance Risk

Some of the company's products are regulated by the FDA. If the FDA finds non-compliance, it can ban products, force recalls, block new approvals, or impose civil and criminal penalties. Obtaining clearance for new or modified medical devices can be slow and expensive, limiting the company's ability to grow that portion of its business.

NOL Tax Assets Could Be Restricted After Ownership Changes

The company holds approximately $47.9 million in federal net operating loss (NOL) carryforwards — deferred tax benefits that reduce future tax bills. Under IRS rules, if ownership of the company shifts by more than 50% over a three-year period, the ability to use these NOLs could be severely curtailed, effectively increasing future taxes owed and reducing cash available for operations.

Activist Shareholders Have Already Targeted the Company

The filing explicitly states the company "has been" subject to activist shareholder actions, not merely that it faces this risk in the abstract. Activist campaigns can distract management, force strategic changes not in long-term shareholders' interests, and contribute to stock price volatility — all of which can destabilize operations during a period when the company is already managing significant debt obligations.