Nortech Systems (NSYS) risk factors, FY2024 10-K

Risks Related to our Business

1. 01A large percentage of our net sales have been made to a small number of customers, and the loss of a major customer, if not replaced, would adversely affect us
2. 02We are dependent on suppliers for components and raw materials and may experience shortages, extended lead times, cost premiums and shipment delays that would adversely affect our customers and us
3. 03Our customers cancel orders, change order quantity, timing and specifications that if not managed would have an adverse effect on the timing of net sales and inventory carrying costs
4. 04We depend heavily on our people and may from time to time have difficulty attracting and retaining skilled employees and the cost of labor may continue to increase
5. 05Our engineering net sales depend on our ability to deliver quality value-added engineering services required by our customers
6. 06We operate in highly competitive industries, and we depend on continuing outsourcing by Original Equipment Manufacturers (“OEM”)
7. 07The manufacture and sale of products carries potential risk for product liability claims and warranty claims
8. 08The Company is majority owned by one group of shareholders, and those shareholders may be able to take actions that do not reflect the will or best interests of other shareholders
9. 09In addition, the majority shareholder group may have an interest in pursuing transactions that, in its judgment, could enhance its investment, even though such transactions might be inconsistent with your investment objectives
10. 10Operating in foreign countries exposes our operations to risks that could adversely affect our operating results
11. 11We face risks arising from the restructuring of our operations

Risks Related to our Assets

1. 12Disruptions to our information systems, including security breaches, losses of data or outages, cyber attacks and other security issues, have and could in the future adversely affect our operations and/or financial results
2. 13We are investing in new technologies which are inherently risky
3. 14Our investments in new products and technologies are inherently risky and are a departure from historical business operations

Financial Risks

1. 15If we fail to comply with the covenants contained in our credit agreement, we may be unable to secure additional financing and repayment obligations on our outstanding indebtedness may be accelerated
2. 16Our exposure to financially troubled customers, start-up businesses or suppliers may adversely affect our financial results
3. 17Changes in foreign currency translation rates could adversely impact our net sales and earnings
4. 18We do not expect to pay dividends for the foreseeable future, and we may never pay dividends; investors must rely on stock appreciation for any return on investment in our common stock
5. 19We expect volatility in the price of our common stock, which may subject us to securities litigation
6. 20If we fail to maintain effective systems of internal control over financial reporting and disclosure controls and procedures, we may not be able to accurately report our financial results or prevent fraud
7. 21Our services involve other inventory risk

Market Risks

1. 22The economic conditions around the world could adversely affect demand for our products and services and the financial health of our customers
2. 23Pandemics or disease outbreaks could adversely affect our operations, supply chains, financial condition and results of operations

Legal and Regulatory Risks

1. 24We may not meet regulatory quality standards applicable to our manufacturing and quality processes which could have an adverse effect on our business
2. 25Our international operations are, and will continue to be, subject to risks relating to changes in foreign legal and regulatory requirements
3. 26Complying with securities laws, tax laws, accounting policies and regulations, and subsequent changes, may be costly for us and adversely affect our financial statements
4. 27Anti-Corruption and Trade Laws - We may incur costs and suffer damages if our employees, agents, or suppliers violate anti-bribery, anti-corruption or trade laws and regulations
5. 28Non-compliance with environmental laws may result in restrictions and could adversely affect operations
6. 29Global climate change and related regulations could negatively affect the Company
7. 30If we use hazardous materials in a manner that causes contamination or injury, we could be liable for resulting damages
8. 31If we are not able to comply with Department of Defense cybersecurity requirements, our net sales from defense contractors could be reduced