Quarterly Report for Quarter Ending September 30, 2025 (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, 2024, 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, 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, 2025 were $7,360,284 compared to $6,969,921 for the three months ended September 30, 2024, an increase of $390,363, or 5.6%. The quarter-over-quarter increase in sales was primarily driven by higher order volumes from our H & L Tool automotive customers, following a modest rebound in production among select Original Equipment Manufacturers ("OEMs"). This uptick occurred despite persistent industry headwinds. Sales for the nine months ended September 30, 2025 were $21,903,997 compared to $22,882,579 for the nine months ended September 30, 2024, a decrease of $978,582, or 4.3%. The year-over-year decrease in sales reflects the broader challenges facing the automotive sector, including softening consumer demand, the impact of recent tariff announcements, ongoing global economic uncertainty, and, most recently, a renewed shortage in semiconductor supply. Year-over-year, H & L Tool continued to experience a significant decline in sales volume, particularly early in the year, as key automotive customers reduced schedules in response to these pressures.

Gross margins for the three months ended September 30, 2025 were $1,329,496 compared to $694,987 for the three months ended September 30, 2024, an increase of $634,509, or 91.3%. The quarter-over-quarter improvement was driven by a combination of favorable product mix, including the sale of a greater number of higher-margin assembly equipment units, and continued progress in operational efficiency. Gross margins for the nine months ended September 30, 2025 were $3,962,300 compared to $2,854,995 for the nine months ended September 30, 2024, an increase of $1,107,305, or 38.8%. The year-over-year results benefited from price increases which took effect during the current year and helped offset margin pressures despite lower overall sales volumes. Although price increases were secured in both 2024 and 2025, the timing lag between rising input costs and the implementation of new pricing, particularly at H & L Tool, resulted in margin compression during 2024. Inflationary pressures on wages, transportation, energy, and outsourced processing services took effect immediately, while the benefit of revised pricing only materialized in 2025, contributing to the stronger margin performance in the current year. Additional margin expansion was achieved through sustained cost containment efforts and the consolidation of the Albia operations into the Tyrone manufacturing facility, which yielded savings in labor, overhead, and facility expenses. These initiatives were partially offset by lower year-over-year order volumes from automotive customers, which reduced operating leverage, particularly at H & L Tool, where more than 80% of revenue is tied to automotive supply contracts. When production levels drop, it becomes more difficult to absorb fixed costs such as labor, facility expenses, and depreciation, all of which weigh heavily on gross margin.

Net income for the three months ended September 30, 2025 was $67,572, or $0.07 per share, compared to net loss of $1,446,621, or $1.50 per share for the three months ended September 30, 2024, an increase of $1,514,193, or 104.7%. The return to profitability in the third quarter of 2025 was driven by higher gross margins, disciplined cost management, and, the absence of prior year charges associated with the closure of the Company's manufacturing facility in Albia, Iowa. Net income for the nine months ended September 30, 2025 was $73,615, or $0.08 per share, compared to a net loss of $2,002,484, or $2.07 per share for the nine months ended September 30, 2024, an increase of $2,076,099, or 103.7%. Despite significant headwinds, year-to-date results improved meaningfully compared to the prior year. This reflects stronger performance in the third quarter, the benefit of previously implemented price increases, and the sale of Albia

manufacturing facility, which resulted in the recording of a one-time gain of $339,520. It also highlights the Company's progress in managing cost pressures and stabilizing operations in a difficult environment. Looking ahead, we remain focused on improving profitability through a combination of targeted customer engagement, pricing strategies, and operational efficiencies. However, we recognize that industry headwinds including inflation, supply chain complexity, and changing customer demand patterns may continue to affect our near-term financial performance.

Fastener segment sales were $6,433,949 for the three months ended September 30, 2025 compared to $5,927,316 for the three months ended September 30, 2024, an increase of $506,633, or 8.5%. Fastener segment sales were $18,990,136 for the nine months ended September 30, 2025 compared to $19,560,720 for the nine months ended September 30, 2024, a decline of $570,584, or 2.9%. The automotive sector is the primary market for our fastener segment products, and sales to automotive customers were $4,228,502 for the three months ended September 30, 2025 compared to $3,578,390 for the three months ended September 30, 2024, an increase of $650,112, or 18.2%. Sales to automotive customers were $11,876,239 for the nine months ended September 30, 2025 compared to $13,050,096 for the nine months ended September 30, 2024, a decline of $1,173,857, or 9.0% primarily due to a slowdown in North American vehicle production and continued volatility across the Midwest automotive manufacturing sector. Industry-wide production fell sharply in January 2025, leading to reduced order volumes from key original equipment manufacturers. In addition, elevated interest rates and ongoing economic uncertainty contributed to softer consumer demand, prompting inventory adjustments and cautious procurement behavior among our automotive customers. In contrast, fastener segment sales to non-automotive customers, including those in the construction and electronics industries, were $2,205,447 for the three months ended September 30, 2025 compared to $2,348,926 for the three months ended September 30, 2024, a decrease of $143,479, or 6.1%, and $7,113,897 for the nine months ended September 30, 2025 compared to $6,510,624 for the nine months ended September 30, 2024, an increase of $603,273, or 9.3%, reflecting the successful execution of a strategic pivot by our sales team. In response to softening demand in the automotive sector, the sales team proactively expanded outreach to customers in industrial, construction, and consumer goods markets, which are segments that have historically demonstrated more stable demand profiles amid broader economic headwinds.

Assembly equipment segment sales were $926,335 for the three months ended September 30, 2025 compared to $1,042,605 for the three months ended September 30, 2024, a decrease of $116,270, or 11.2%. Assembly equipment segment sales were $2,913,861 for the nine months ended September 30, 2025 compared to $3,321,859 for the nine months ended September 30, 2024, a decrease of $407,998, or 12.3%. Both automotive and non-automotive assembly equipment sales decreased in this segment. These declines reflect timing-related factors in customer purchasing cycles as well as project delays stemming from cautious capital investment trends across multiple industries. Although sales declined year-over-year, the assembly equipment gross margin increased by $715,056 during the year-to-date period. This margin expansion reflects the Company's ongoing efforts to enhance operational efficiency and reduce its cost structure, with the consolidation of the Albia operations into the Tyrone manufacturing facility yielding meaningful cost savings through streamlined workflows, increased capacity utilization, and reduced overhead.

Selling and administrative expenses were $1,264,926 for the three months ended September 30, 2025 compared to $1,518,558 for the three months ended September 30, 2024, a decrease of $253,632, or 16.7%. Selling and administrative expenses were $4,244,987 for the nine months ended September 30, 2025 compared to $4,474,310 for the nine months ended September 30, 2024, a decrease of $229,323, or 5.1%, primarily due to reduced salaries, commissions and provision for contingencies. Selling and administrative expenses were 17.2% and 21.8% of sales in the three months ended September 30, 2025 and 2024, respectively, and 19.4% and 19.6% of sales in the nine months ended September 30, 2025 and 2024, respectively. The Company believes that it has made substantial progress in continuing to implement its plans to reduce costs and improve efficiency and will continue to do so for the remainder of the year.

Other income for the three months ended September 30, 2025 was $2,711 compared to $28,146 for the three months ended September 30, 2024, a decrease of $25,435, or 90.4%. The decrease was 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, 2025 was $356,302 compared to $102,570 for the nine months ended September 30, 2024, an increase of $253,732 primarily driven by the sale of the Albia manufacturing facility which resulted in the recording of a one-time gain of $339,520.

The Company's effective tax rates were zero and (32.0)% for the nine months ended September 30, 2025 and 2024, respectively. See Note 5. Income taxes to the Condensed Consolidated Financial Statements included herein for additional information.

Liquidity and Capital Resources

Working capital was $11,271,780 as of September 30, 2025, compared to $10,371,215 at the beginning of the year, an increase of $900,565, or 8.7%.

While the results for the third quarter 2025 were positive, 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 income of $64,570 and operating loss of $823,571 for the three months ended September 30, 2025 and 2024, respectively. The Company reported operating losses of $282,687 and $1,619,315 for the nine months ended September 30, 2025 and 2024, respectively. The Company's liquid assets at September 30, 2025 consisted of cash and cash equivalents totaling $1,682,919. 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 (i) investing resources in the Company's sales efforts to increase revenues, including the recent hiring of Mr. James T. Tanner as the Company's new Senior Vice President of Sales and Marketing. Mr. Tanner brings over 30 years of sales and leadership experience in manufacturing and spent over 10 years in the fastener industry, (ii) executing on the sale of Albia real estate in February 2025, which generated net cash proceeds of approximately $678,000, and the October 2024 consolidation of the Albia operations into the Tyrone manufacturing facility, enhancing economies of scale and contributing towards improved margins from cost reductions, and (iii) entering into a one-year, $3,000,000 operating 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, bearing interest at a fluctuating rate per annum equal to 1% plus the applicable prime rate, with a floor of 7% (the loan can be prepaid without penalty). 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.

On May 2, 2025, the Company borrowed $500,000 under its revolving line of credit to support working capital and general corporate purposes. As of September 30, 2025, the Company had an aggregate borrowing capacity under its committed revolving credit facility of $2,500,000. This facility includes certain financial covenants such as minimum profitability for the twelve months ending December 31, 2025, and minimum tangible net worth. As of September 30, 2025, the Company was in compliance with all such financial covenants. 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 $448,344 of which $102,811 were classified as current within Other current liabilities in the Condensed Consolidated Balance Sheets at September 30, 2025. See Note 7. Leases to the Condensed Consolidated Financial Statements included herein for additional information.

Outlook for the remainder of 2025

With respect to the Outlook for the remainder of 2025, the economic environment remains challenging. Our order volume continued to show improvement in the third quarter of 2025 compared to the fourth quarter of 2024 but it is not yet at the year-to-date levels we experienced in the third quarter of 2024. Significant uncertainty remains in the manufacturing sector as companies like ours continue to navigate the potential impacts of new tariffs and numerous market factors that may impact our business and the business of our customers. In particular, we have taken the uncertainty created by tariffs as an opportunity to actively engage with both current and potential customers on ways in which we can work with them to help meet their needs in the current economic environment. We remain actively engaged with current and potential customers to help strengthen relationships with existing customers and build relationships with new customers. In addition, the Company believes the actions taken in 2024 and throughout 2025 to reduce costs have better positioned the Company to manage the uncertainty noted above, and we will continue to seek efficiency improvements in our operations as well as appropriate price adjustments from customers while aggressively pursuing new sales opportunities to drive volume back to historic levels. We will also continue to actively monitor and analyze potential impacts from tariffs and other external factors so that we are positioned to take actions promptly and as necessary to address such potential impacts. We believe that our recent efficiency improvements and our focus on driving new sales, as well as our long term

operating history in a very competitive global marketplace, quality products, and customer service, will provide the foundation for improved operating results in the future.