Government Contracts and Funding Risks - Company relies heavily on U.S. Government contracts, with significant revenue contributions from major defense contractors: Raytheon (36%), Lockheed Martin (24%), and United States Air Force (14%) for 2024[101] - Company faces risks related to government funding, which is subject to congressional budget authorization and may lead to contract terminations or adjustments if appropriations are delayed or reduced[95] - The competitive bidding process poses risks, including unforeseen technological difficulties and cost overruns, which may adversely affect profitability[98] - Loss of small business status could limit eligibility for government contracts and special programs, adversely affecting competitive positioning[116] - The company’s contracts with the U.S. government are subject to the Federal Acquisition Regulation (FAR), which dictates allowable costs for pricing[275] Financial Performance and Position - Revenue for the year ended December 31, 2024 was 81,078,864,adecreaseof5,387,457 or 6.2% compared to 86,466,321for2023[160]−Revenuefromprimegovernmentcontractswas11,677,152, a slight decrease of 164,993or1.411,842,145 for 2023[161] - Revenue from government subcontracts decreased by 4,968,232or7.164,704,370 for the year ended December 31, 2024[162] - Cost of sales for the year ended December 31, 2024 was 63,840,803,adecreaseof5,559,890 or 8.0% compared to 69,400,693for2023[164]−GrossprofitfortheyearendedDecember31,2024was17,238,061, an increase of 172,433or1.017,065,628 for 2023[168] - Gross profit margin increased to 21.3% for the year ended December 31, 2024, compared to 19.7% for 2023[168] - Net income for the year ended December 31, 2024 was 3,299,334,adecreaseof13,901,870 or 80.8% compared to 17,201,204in2023[174]−Basicearningspersharedecreasedto0.26 for the year ended December 31, 2024, down 1.14or81.41.40 in 2023[175] - Working capital increased to 17,122,111atDecember31,2024,anincreaseof1,719,730 or 11.2% from 15,402,381in2023[177]−Cashbalanceincreasedto5,490,963 at December 31, 2024, an increase of 396,169or7.85,094,794 in 2023[182] - Total assets decreased to 67,982,002in2024from74,360,132 in 2023, reflecting a decline of 8.5%[241] - Total liabilities decreased to 42,048,760in2024from52,278,404 in 2023, a reduction of 19.5%[241] - Shareholders' equity increased to 25,933,242in2024from22,081,728 in 2023, an increase of 17.5%[241] Internal Controls and Compliance - The company has identified material weaknesses in internal control over financial reporting, leading to multiple restatements of its consolidated financial statements[128] - A settlement with the SEC requires the company to remediate its internal control weaknesses by December 31, 2024, with a potential civil monetary penalty of 400,000ifitfailstocomply[129]−ManagementconfirmedthatasofDecember31,2024,thecompanyhasfullyremediateditsmaterialweaknessesininternalcontroloverfinancialreporting[204]−ThefinancialstatementspresenttheCompany′sfinancialpositionasofDecember31,2024,inconformitywithgenerallyacceptedaccountingprinciples[224]−Theauditopinionconfirmsthatthefinancialstatementsarefreeofmaterialmisstatement,whetherduetoerrororfraud[224]RisksandLiabilities−Companyissubjecttostrictenvironmentalregulations,withpotentialfinesandremediationexpensesfornon−compliance,impactingfinancialcondition[102]−Thecompanyfacespotentialliabilityforproductfailures,andanymaterialproductliabilitynotcoveredbyinsurancecouldadverselyaffectitsfinancialcondition[121]−Increasedscrutinyregardingenvironmental,social,andgovernance(ESG)responsibilitiescouldexposethecompanytoadditionalcostsandimpactitsliquidityandstockprice[122]−ThecompanyhasexposuretointerestrateriskasitsborrowingcostsarebasedonthePrimeRate,whichcannegativelyimpactprofitability[127]RevenueRecognitionandAccounting−TheCompanyrecognizedapproximately80.1 million in revenue over time for the year ended December 31, 2024, from long-term contracts[229] - The revenue recognition method used is based on an input method that reflects the ratio of costs incurred to total estimated costs at completion[229] - The company’s revenue recognition follows ASC 606, recognizing revenue when control of goods or services is transferred to customers[257] - The company utilizes the cost-to-cost input method to measure progress on performance obligations, which reflects the transfer of control to the customer[265] - Income taxes are accounted for under the asset and liability method, recognizing deferred tax assets and liabilities for future tax consequences[293] Operational and Financial Management - The company’s working capital requirements can vary significantly, potentially affecting liquidity and capital resources if cash flows from operations are insufficient[113] - The company has undergone multiple amendments to its Amended and Restated Credit Agreement since March 2016, indicating ongoing financial management[218] - The company maintains an allowance for credit losses on accounts receivable and contract assets, assessed quarterly based on factors such as the age of receivables[278] - The company has right-of-use assets of 2,856,200andleaseliabilitiesof3,100,572 as of December 31, 2024, down from 4,740,193and5,099,629 in 2023, respectively[284] Miscellaneous - The company has not paid any dividends to date and intends to retain earnings for business operations[145] - As of December 31, 2024, the company has 310,458 securities available for future issuance under equity compensation plans[147] - The effective tax rate for 2024 was 25.7%, compared to an effective tax benefit rate of (346.6%) in 2023[173] - The company reported a decrease in contract liabilities from 5,937,629in2023to2,430,663 in 2024, a decline of 59.0%[241] - Operating cash flow for 2024 was 3,558,935,comparedto3,928,341 in 2023, a decrease of 9.4%[249] - The company performed its annual impairment assessment of goodwill as of December 31, 2024, concluding that goodwill was not impaired[286] - The company’s long-lived assets were determined not to be impaired as of December 31, 2024, based on expected cash flows[287] - Basic and diluted income per common share for the years ended December 31, 2024 and 2023 were calculated using 116,024 and 160,742 incremental shares, respectively[291] - The company complies with FASB ASC Topic 260 for earnings per share calculations, using the treasury stock method[290]
