Insiders ranked by realized 90-day signed return on their open-market trades at M-Tron Industries, Inc.. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.43pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.37pp
Lean -
Net-tone change vs last year's 10-K.
MD&A
-0.48pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+11
retaliatory+6
incidents+5
failure+3
outages+3
Positive rising
able+1
effective+1
opportunities+1
enhance+1
innovation+1
Risk Factors (Item 1A)
7,832 words
Item 1A.
Risk Factors
Investing in our securities involves risks. Before making an investment decision, you should carefully consider the risks described below. Any of these risks could result in a material adverse effect on our business, financial condition, results of operations, or prospects, and could cause the trading price of our securities to decline, resulting in a loss of all or part of your investment. The risks and uncertainties described below are not the only ones we face, but represent those risks and uncertainties that we believe are material to our business, operating results, prospects and financial condition. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.
Unless otherwise stated, all dollar amounts are in thousands.
Summary Risk Factors
Risks Related to our Business and Industry
Macroeconomic fluctuations may harm our business, results of operations and stock price
Our variable rate indebtedness subjects us to interest rate risk and could cause our debt service obligations to increase significantly.
We are dependent on a single line of business.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
delayed+6
negative+1
restated+1
limitations+1
Positive rising
advances+1
MD&A (Item 7)
3,058 words
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis together with our audited consolidated financial statements and the accompanying notes. This discussion contains forward-looking statements, including statements regarding our expected financial position, business and financing plans. These statements involve risks and uncertainties. Our actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Report, particularly under the headings "Cautionary Statement Concerning Forward-Looking Statements" and "Risk Factors ."
Unless otherwise stated, all dollar amounts are in thousands.
Overview
Mtron is engaged in the designing, manufacturing and marketing of highly-engineered, high reliability frequency and spectrum control products used to control the frequency or timing of signals in electronic circuits in various applications. Mtron’s primary markets are aerospace and defense, space, and avionics.
The accompanying consolidated financial statements include the accounts of the Company and all of its majority-owned subsidiaries.
For a discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023, refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 27, 2025, which is available free of charge on the SEC's website at https://www.sec.gov and on our website at ir.mtron.com.
Trends and Uncertainties
We are not aware of any material trends or uncertainties, other than the global economic conditions affecting our industry generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income other than those listed in Part I, Item 1A, Risk Factors, of this Annual Report on Form 10-K.
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Results of Operations
The following table presents our Consolidated Statements of Operations for the periods indicated:
Year Ended December 31,
(in thousands)
$ Change
% Change
Revenues
Costs and expenses:
Manufacturing cost of sales
Engineering, selling and administrative
Total costs and expenses
Operating income
Other income:
Interest income, net
Other income, net
Total other income, net
Income before income taxes
Income tax expense
Net income
2025 compared to 2024
Total Revenues
Total revenues increased $5,405, or 11.0%, from $49,012 in 2024 to $54,417 in 2025 primarily due to strong defense program product and solution shipments, as well as an increase in shipments in the avionics and industrials sectors.
Total Costs and Expenses
Total costs and expenses increased $4,508, or 11.4%, from $39,618 in 2024 to $44,126 in 2025 primarily due to:
a $3,897, or 14.8%, increase in Manufacturing cost of sales from $26,372 in 2024 to $30,269 in 2025 driven by the increase in production of several new products, which result in higher initial manufacturing costs, as well as the impact of tariffs; and
a $611, or 4.6%, increase in Engineering, selling and administrative from $13,246 in 2024 to $13,857 in 2025 driven by continued investment in research and development; higher sales commissions consistent with the growth in revenues; higher stock-based compensation; higher sales and marketing costs; and an increase in administrative and corporate expenses consistent with the overall growth in the business.
The Company's total costs and expenses for 2024 included bonus expense of approximately $1.5 million, or 3.0% of revenues, which was not incurred in 2025.
Gross Margin
Gross margin (Revenues less Manufacturing cost of sales as a percentage of Revenues) decreased 180 basis points from 46.2% in 2024 to 44.4% in 2025 reflecting product mix and higher tariff-related costs.
Total Other Income, Net
Total other income, net increased $282, or 74.0%, from $381 in 2024 to $663 in 2025 primarily due to a $296 increase in Interest income, net from $243 in 2024 to $539 in 2025 driven by higher average balances invested in money market mutual funds.
Income Tax Expense
Income tax expense increased $368, or 17.2%, from $2,139 in 2024 to $2,507 in 2025 primarily due to the increase in Income before income taxes discussed above.
Backlog
As of December 31, 2025, our order backlog was $76,425, an increase of $29,186, or 61.8%, from $47,239 as of December 31, 2024. The increase in backlog from December 31, 2024 reflects the nature of a program centric business model, which can materially affect backlog based on the timing and size of these orders.
The backlog of unfilled orders includes amounts based on signed contracts and purchase orders, which are likely to be fulfilled substantially within the next 12 to 24 months. Order backlog is adjusted quarterly to reflect project cancellations, deferrals, revised project scope and cost. We expect to fill the vast majority of our order backlog as of December 31, 2025 during 2026 and 2027, but cannot provide assurances as to what portion of the order backlog will be fulfilled in any given year.
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Non-GAAP Financial Measures
To supplement our Consolidated Financial Statements presented on a U.S. GAAP basis, the Company presents its financial condition and results of operations in the way it believes will be most meaningful and representative of its business results. Some of the measurements the Company uses are "Non-GAAP financial measures" under SEC rules and regulations. The non-GAAP financial measures the Company presents are listed below and may not be comparable to similarly-named measures reported by other companies. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net earnings or diluted earnings per share prepared in accordance with U.S. GAAP.
The Company uses the following operating performance measure because the Company believes it provides both management and investors with a more complete understanding of the underlying operational results and trends and our marketplace performance as well as a more accurate view of the Company's ability to generate profits:
Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA") is derived by excluding the items set forth below from Income before income taxes. Excluded items include the following:
Interest income
Interest expense
Depreciation
Amortization
Non-cash stock-based compensation
Other discrete items that might have a significant impact on comparable GAAP measures and could distort the evaluation of our normal operating performance.
Reconciliation of GAAP Income Before Income Taxes to EBITDA and Non-GAAP Adjusted EBITDA
The following table presents a reconciliation of income before income taxes to Adjusted EBITDA, a non-GAAP measure:
Three Months Ended December 31,
Year Ended December 31,
(in thousands, except share data)
Income before income taxes
Adjustments:
Interest income, net
Depreciation
Amortization
Total adjustments
EBITDA
Non-cash stock compensation
Adjusted EBITDA
Three months ended December 31, 2025 compared to three months ended December 31, 2024
Adjusted EBITDA increased $1,429 from $3,056 for the three months ended December 31, 2024 to $4,485 for the three months ended December 31, 2025. The increase was primarily due to higher revenues and lower engineering, selling and administrative expenses partially offset by lower gross margin discussed above.
Year ended 2025 compared to Year ended 2024
Adjusted EBITDA increased $1,441 from $11,141 in 2024 to $12,582 in 2025. The increase was primarily due to higher revenues discussed above, continued operating leverage, and lower incentive compensation partially offset by lower gross margin discussed above. Adjusted EBITDA in 2024 included bonus expense of approximately 3.0% of revenues, which was not incurred in 2025.
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Liquidity and Capital Resources
Overview
Liquidity refers to our ability to access sufficient sources of cash to meet the requirements of our operating, investing and financing activities.
Capital refers to our long-term financial resources available to support business operations and future growth.
Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of the business, timing of cash flows, general economic conditions and access to the capital markets and the other sources of liquidity and capital described herein.
As of December 31, 2025 and 2024, Cash and cash equivalents were $20,891 and $12,641, respectively.
Cash Flow Activity
The following table presents the cash flow activity for the period indicated:
As of December 31,
(in thousands)
Cash and cash equivalents, beginning of year
Cash provided by operating activities
Cash used in investing activities
Cash provided by financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, end of year
Operating Activities
Cash provided by operating activities was $10,659 in 2025 compared to $7,521 in 2024, an increase of $3,138 primarily due to the following:
Higher net income;
Higher non-cash adjustments, including:
Stock-based compensation expense, which increased $445 from $636 in 2024 to $1,081 in 2025;
Deferred income tax provision, which decreased $1,268 from $212 in 2024 to $1,480 in 2025;
Working capital movements, including:
Accounts receivable, which decreased $186 in 2025 compared to an increase of $2,040 in 2024, reflecting shorter customer payment cycles;
Inventories, net, which increased $164 in 2025 compared to $625 in 2024;
Prepaid expenses and other assets, which increased $1,156 in 2025 compared to $165 in 2024, primarily due to higher income taxes receivable; and
Accounts payable, accrued compensation and other expenses, and other liabilities, which increased $328 in 2025 compared to $889 in 2024, primarily due to the timing of goods received and services performed prior to period end and reflects normal fluctuations in operating activity.
Our working capital metrics were as follows:
As of December 31,
(in thousands)
Current assets
Less: Current liabilities
Working capital
Current ratio
Management continues to focus on efficiently managing working capital requirements to match operating activity levels and will seek to deploy the Company’s working capital where it will generate the greatest returns.
Investing Activities
Cash used in investing activities was $2,551 in 2025 compared to $1,898 in 2024, an increase of $653 primarily due to the purchase of equipment to support growth and next generation product development.
Financing Activities
Cash provided by financing activities was $142 in 2025 compared to $3,105 in 2024, a decrease of $2,963 primarily due to lower exercises of stock options awarded in December 2023.
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Capital Resources
We believe that existing cash and cash equivalents, marketable securities and cash generated from operations will provide sufficient liquidity to meet our ongoing working capital and capital expenditure requirements for the next 12 months from the date of this filing and for the foreseeable future. The Company’s management continues to strive for profitability both internally and through acquisition.
Our Board has adhered to a practice of not paying cash dividends. This policy takes into account our long-term growth objectives, including our anticipated investments for organic growth, potential acquisitions or other strategic ventures and stockholders' desire for capital appreciation of their holdings. No cash dividends are expected to be paid for the foreseeable future.
Contractual Obligations
The following table summarizes contractual obligations, in total, and by remaining maturity:
Payments due by Period
(in thousands)
Total Payments
Leases
Revolving credit facility
Delayed draw facility
Total
Leases
Leases represent the future minimum lease payments under our operating leases. We believe that we maintain adequate financial resources to meet the actual required payments under these obligations.
Revolving Credit Facility and Delayed Draw Facility
On December 31, 2025, we entered into an amended and restated credit agreement (the "Credit Agreement") with Fifth Third Bank, National Association ("Fifth Third Bank"), replacing our prior credit facility with Fifth Third Bank (the "Previous Credit Agreement"). The Credit Agreement provides for a $10.0 million revolving credit facility (the "Revolving Facility") and a $10.0 million delayed draw term loan facility (the "Delayed Draw Facility"). Borrowings under the Revolving Facility and the Delayed Draw Facility bear interest at a rate based on the Secured Overnight Financing Rate ("SOFR") plus a margin ranging from 2.00% to 3.00%, determined by the Company's leverage ratio, with a SOFR floor of 0.00%. The Company will pay a fee on the average unused daily amount of the facilities at a rate ranging from 0.20% and 0.30%, determined by the Company's leverage ratio. Amounts outstanding under the Revolving Facility are due at maturity on December 31, 2028, and advances under the Delayed Draw Facility are available for a period of 36 months from the date of the Credit Agreement, with each advance maturing 36 months after funding and subject to quarterly amortization requirements. The Credit Agreement contains various affirmative and negative covenants that are customary for transactions of this type, including on the incurrence of debt and liabilities, as well as financial reporting requirements. The Credit Agreement also imposes certain financial covenants based on the following criteria: (a) Leverage Ratio and (b) Fixed Charge Coverage Ratio (each as defined in the Credit Agreement). All loans pursuant to the Credit Agreement are secured by a first-priority lien on substantially all of the personal property of the Company. See Note 7 – Revolving Credit Agreement to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Report for details of the Credit Agreement.
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Critical Accounting Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Our significant accounting policies are more fully described in Note 2 – Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of this Report. Certain accounting policies require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, and the effects of revisions are reflected in the financial statements in the period in which they are determined to be necessary. The accounting policies described below are those that most frequently require us to make estimates and judgments and, therefore, are critical to understanding our results of operations.
Income Taxes
We account for income taxes in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 740, Income Taxes ("ASC 740"), which requires an asset and liability approach for the financial accounting and reporting of income taxes. Under this method, deferred income taxes are recognized for the expected future tax consequences of differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. These balances are measured using the enacted tax rates expected to apply in the year(s) in which these temporary differences are expected to reverse. The effect of a change in tax rates on deferred income taxes is recognized in income in the period when the change is enacted.
Based on consideration of all available evidence regarding their utilization, we record net deferred tax assets to the extent that it is more likely than not that they will be realized. Where, based on the weight of all available evidence, it is more likely than not that some amount of a deferred tax asset will not be realized, we establish a valuation allowance for the amount that, in our judgment, is sufficient to reduce the deferred tax asset to an amount that is more likely than not to be realized. In reaching such conclusions, we consider available positive and negative evidence including past operating results, projections of future taxable income, the feasibility of ongoing tax planning strategies and the realizability of tax loss carryforwards. Our projections of future taxable income include estimates and assumptions regarding our income and costs, as well as the timing and amount of reversals of taxable temporary differences.
The Company follows a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and for which actual outcomes may differ from forecasted outcomes. The Company's policy is to include interest and penalties related to uncertain tax positions in income tax expense.
Inventories
We account for inventories at the lower of cost or net realizable value using the FIFO (first-in, first-out) method.
Inventory reserves are determined based on estimated losses that result from inventory that becomes obsolete or for which the Company has excess inventory levels. In determining these estimates, the Company performs an analysis on current demand and usage for each inventory item over historical time periods. Based on that analysis, the Company reserves a percentage of the inventory amount within each time period based on historical demand and usage patterns of specific items in inventory. Actual experience could differ from the amounts estimated requiring adjustments to inventory valuation in future periods.
Recently Issued Accounting Pronouncements
For additional information on recently issued account pronouncements, refer to Note 2 - Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements.
Our operating results may vary significantly from period to period.
A relatively small number of customers account for a significant portion of our revenues and accounts receivable, and the loss of any of these customers, a decrease in their demand for our products, or their insolvency could have a material effect on our results of operations or liquidity.
Our order backlog may not be indicative of future revenues and may fluctuate from period to period.
Our future rate of growth and profitability are highly dependent on the development and growth of the aerospace and defense, space, avionics, instrumentation and industrial markets, which can be cyclical.
The market share of our customers in the aerospace and defense, space, avionics, instrumentation and industrial markets may change over time, reducing the potential value of our relationships with our existing customer base.
A significant portion of our revenue is derived from customers in the aerospace and defense industry, and our business could be adversely affected by changes in government spending or procurement policies.
We may make acquisitions that are not successful, or we may fail to integrate acquired business into our operations properly.
If we are unable to introduce innovative products, demand for our products may decrease.
Our markets are highly competitive, and we may lose business to larger and better-financed competitors.
Our success depends on our ability to retain key management and technical personnel and attracting, retaining, and training new technical personnel.
We purchase certain key components and raw materials from single or limited sources and could lose sales if these sources fail to fulfill our needs for any reason.
As a supplier to U.S. government defense contractors, we are subject to a number of procurement regulations and other requirements and could be adversely affected by changes in regulations or any negative findings from a U.S. government audit or investigation.
Our products are complex and may contain errors or design flaws, which could be costly to correct.
Future changes in our environmental liability and compliance obligations may increase costs and decrease profitability.
We have significant international operations and sales to customers outside of the United States that subject us to certain business, economic and political risks.
Changes in the U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition, and results of operations.
We rely on information technology systems to conduct our business, and disruption, failure or security breaches of these systems could adversely affect our business and results of operations.
Cybersecurity risks and cybersecurity incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results
If we fail to correct any material weakness that we identify in our internal control over financial reporting or otherwise fail to maintain effective internal control over financial reporting, we may not be able to report our financial results accurately and timely, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and the price of our common stock may decline.
Risks Related to Our Securities
The price of our common stock has fluctuated considerably and is likely to remain volatile, in part due to the limited market for our common stock.
Our officers and directors have significant voting power and may vote their shares in a manner that is not in the best interest of other stockholders.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of the Company more difficult, which acquisition may be beneficial to our stockholders.
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Risks Related to the Separation
As a result of the Separation, certain of our directors and officers may have actual or potential conflicts of interest because of their positions or relationships with The LGL Group, Inc.
The LGL Group, Inc. continues to perform functions for us, and we continue to perform functions for The LGL Group, Inc., on a transitional basis, and as a result, we may experience operational disruptions and incur significant costs to perform these functions ourselves following the transition period or be subject to claims and liability.
If the Separation does not qualify as tax-free United States federal income tax purposes as a result of a breach by us of any covenant or representation made by us in the Tax Agreement, we could be subject to significant liability.
Risks Related to Our Business and Industry
Macroeconomic fluctuations may harm our business, results of operations and stock price.
Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions and geopolitical risks, including credit market conditions, trade policies, tariffs, levels of consumer and business confidence, commodity prices and availability, inflationary pressure, exchange rates, levels of government spending and deficits, social or political conditions, and other challenges that could affect the global economy including impacts associated with the continuing developments in the war against Ukraine and sanctions which have been announced by the United States and other countries against Russia, which have caused significant uncertainty, adding to continuing concerns about supply chain disruptions, inflation and increases in interest rates in the markets in which we operate. Similar geopolitical tensions and political and/or armed conflicts, including tensions between the U.S. and China, China and Taiwan, and the conflicts between the U.S. and Iran and Israel and Palestine could adversely impact our financial performance and global operations. Such conditions could have an adverse impact on our flexibility to react to changing economic and business conditions and on our ability to fund our operations. In addition, restrictions on credit availability could adversely affect the ability of our customers to make payments. Similarly, credit restrictions may adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial distress.
Our variable rate indebtedness subjects us to interest rate risk and could cause our debt service obligations to increase significantly.
Amounts outstanding under our Credit Agreement would bear interest at the Secured Overnight Financing Rate ("SOFR") plus a margin ranging from 2.00% to 3.00%, with a SOFR floor of 0.00%. Variable rate borrowings expose us to potential increased interest expense in a rising interest rate environment, if we utilize the line of credit. If interest rates were to increase, our debt service obligations on variable rate indebtedness would increase even though the amount borrowed remained the same, which could adversely affect our cash flows. As of December 31, 2025 and 2024, we had no outstanding balances under the Credit Agreement or the Previous Credit Agreement.
We are dependent on a single line of business.
We are engaged only in the design, manufacture and marketing of standard and custom-engineered electronic components that are used primarily for the control of frequency and spectrum of signals in electronic circuits. Virtually all of our 2025 and 2024 revenues came from sales of electronic components, which consist of packaged quartz crystals, oscillator modules, electronic filters and RF solutions.
Given our reliance on this single line of business, any decline in demand for this product line or failure to achieve continued market acceptance of existing and new versions of this product line may harm our business and our financial condition. Additionally, unfavorable market conditions affecting this line of business would likely have a disproportionate impact on us in comparison with certain competitors, who have more diversified operations and multiple lines of business. Should this line of business fail to generate sufficient sales to support ongoing operations, there can be no assurance that we will be able to develop alternate business lines.
Our operating results may vary significantly from period to period.
We experience fluctuations in our operating results. Some of the principal factors that contribute to these fluctuations include changes in demand for our products; our effectiveness in managing manufacturing processes, costs and inventory; our effectiveness in engineering and qualifying new product designs with our OEM customers and in managing the risks associated with offering those new products into production; changes in the cost and availability of raw materials, which often occur in the electronics manufacturing industry and which affect our margins and our ability to meet delivery schedules; macroeconomic and served industry conditions; and events that may affect our production capabilities, such as labor conditions and political instability. In addition, due to the prevailing economic climate and competitive differences between the various market segments which we serve, the mix of sales between our aerospace and defense, space, avionics, industrial and instrumentation market segments may affect our operating results from period to period.
Our revenues and operating results are highly dependent on the development and growth of demand for our products in the aerospace and defense, space, avionics, instrumentation and industrial markets, which are cyclical. We cannot be certain whether we will generate sufficient revenues or sufficiently manage expenses to sustain profitability.
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A relatively small number of customers account for a significant portion of our revenues and accounts receivable, and the loss of any of these customers, a decrease in their demand for our products, or their insolvency could have a material adverse effect on our results of operations or liquidity.
For the year ended December 31, 2025, our largest and second largest customers accounted for 36.0% and 14.9% of the Company's total revenues, respectively. Additionally, as of December 31, 2025, four customers accounted for approximately 71.4% of our gross accounts receivable balance. The loss of any of these customers, a decrease in their demand for our products, or the insolvency of any of these customers could have a material adverse effect on our results of operations or liquidity.
Our order backlog may not be indicative of future revenues and may fluctuate from period to period.
Our order backlog is comprised of orders that are subject to specific production release, including orders under contracts, and purchase orders. Our customers may order products from multiple sources to ensure timely delivery when backlog is particularly long and may cancel or defer orders without significant penalty. They also may cancel orders when business is weak, and inventories are excessive. As a result, we cannot provide assurances as to the portion of backlog orders to be filled in any given year, and our order backlog as of any particular date may not be representative of actual revenues for any subsequent period.
Our future rate of growth and profitability are highly dependent on the development and growth of the aerospace and defense, space, avionics, instrumentation and industrial markets, which can be cyclical.
In 2025 and 2024, the majority of our revenues were derived from sales to manufacturers of equipment for the aerospace and defense, space, avionics, instrumentation and industrial markets for frequency and spectrum control devices, including indirect sales through distributors and contract manufacturers. During 2026, we expect a significant portion of our revenues to continue to be derived from sales to these manufacturers. Often OEMs and other service providers within these markets have experienced periods of capacity shortage and periods of excess capacity, as well as periods of either high or low demand for their products. In periods of excess capacity or low demand, purchases of capital equipment may be curtailed, including equipment that incorporates our products. A reduction in demand for the manufacture and purchase of equipment for these markets, whether due to cyclical, macroeconomic or other factors, or due to our reduced ability to compete based on cost or technical factors, could substantially reduce our net sales and operating results and adversely affect our financial condition. Moreover, if these markets fail to grow as expected, we may be unable to maintain or grow our revenues. The multiple variables which affect the aerospace and defense, space, avionics, instrumentation and industrial markets for our products, as well as the number of parties involved in the supply chain and manufacturing process, can impact inventory levels and lead to supply chain inefficiencies. As a result of these complexities, we may have limited visibility to forecast revenue projections accurately for the near and medium-term timeframes.
The market share of our customers in the aerospace and defense, space, avionics, instrumentation and industrial markets may change over time, reducing the potential value of our relationships with our existing customer base.
We have developed long-term relationships with our existing customers, including pricing contracts, custom designs and approved vendor status. If these customers lose market share to other equipment manufacturers in the aerospace and defense, space, avionics, instrumentation and industrial markets with whom we do not have similar relationships, our ability to maintain revenue, margin or operating performance may be adversely affected.
A significant portion of our revenue is derived from customers in the aerospace and defense industry, and our business could be adversely affected by changes in government spending or procurement policies.
We derive a significant portion of our revenue from sales to customers in the aerospace and defense markets. These customers in turn generally contract with government agencies. The funding of government programs is subject to Congressional appropriation and national budget deficit reduction initiatives. Future spending levels are difficult to predict, and the termination or curtailment of individual programs could adversely affect our business. Most governmental programs are subject to funding approval through congressional appropriations which can be modified or terminated without warning upon the determination of a legislative or administrative body. Appropriations can also be affected by legislation that addresses larger budgetary issues of the U.S. government which could reduce available funding for most federal agencies, including the United States Department of War. Government contracts are also subject to specific regulations, and failure to comply with applicable requirements could result in contract termination, suspension, or debarment from future government contracting. It is difficult to assess how this may impact our defense industry customers and the business we do with them in the future.
We may make acquisitions that are not successful, or we may fail to integrate acquired businesses into our operations properly.
We intend to continue exploring opportunities to buy other businesses or technologies that could complement, enhance, or expand our current business or product lines, or that might otherwise offer us growth opportunities. We may have difficulty finding such opportunities or, if such opportunities are identified, we may not be able to complete such transactions for reasons including a failure to secure necessary financing.
Any transactions that we are able to identify and complete may involve a number of risks, including:
The diversion of our management's attention from the management of our existing business to the integration of the operations and personnel of the acquired or combined business or joint venture;
Material business risks not identified in due diligence;
Exposure to potential unknown liabilities of the acquired or combined business;
Possible adverse effects on our operating results during the integration process;
Substantial acquisition-related expenses, which would reduce our net income, if any, in future years;
The occurrence of significant goodwill impairment charges;
The loss of key employees and customers as a result of changes in management; and
Our possible inability to achieve the intended objectives of the transaction.
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In addition, we may not be able to integrate, operate, maintain or manage, successfully or profitably, our newly acquired operations or employees. We may not be able to maintain uniform standards, controls, policies and procedures, and this may lead to operational inefficiencies.
Any of these difficulties could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If we are unable to introduce innovative products, demand for our products may decrease.
Our future operating results are dependent on our ability to continually develop, introduce and market innovative products, to modify existing products, to respond to technological change and to customize some of our products to meet customer requirements. There are numerous risks inherent in this process, including the risks that we will be unable to anticipate the direction of technological change or that we will be unable to develop and market new products and applications in a timely or cost-effective manner to satisfy customer demand.
Our markets are highly competitive, and we may lose business to larger and better-financed competitors.
Our markets are highly competitive worldwide, with low transportation costs and few import barriers. We compete principally on the basis of product quality and reliability, availability, customer service, technological innovation, timely delivery and price. Within the industries in which we compete, competition has become increasingly concentrated and global in recent years.
Many of our major competitors, some of which are larger than us, and potential competitors have substantially greater financial resources and more extensive engineering, manufacturing, marketing and customer support capabilities. If we are unable to successfully compete against current and future competitors, our operating results will be adversely affected.
Our success depends on our ability to retain key management and technical personnel and attracting, retaining, and training new technical personnel.
Our future growth and success will depend in large part upon our ability to recruit highly skilled technical personnel, including engineers, and to retain our existing management and technical personnel. In addition, the loss or retirement of key employees presents particular challenges to the extent the departing employee had particularly valuable knowledge or experiences. This requires us to identify and train existing or new employees to perform necessary functions, which we may be unable to do, or which could result in unexpected costs, reduced productivity, or difficulties with respect to internal processes and controls. If we fail to have succession plans in place or our succession plans do not operate effectively, we may not be able to maintain continuity and our business could be adversely affected. Further, there is a labor shortage in the markets in which we operate which are highly competitive, and some of our operations are not located in highly populated areas. As a result, we may not be able to recruit and retain key personnel. Our failure to hire, retain or adequately train key personnel could have a negative impact on our performance.
We purchase certain key components and raw materials from single or limited sources and could lose sales if these sources fail to fulfill our needs for any reason.
If single-source components or key raw materials were to become unavailable on satisfactory terms, and we could not obtain comparable replacement components or raw materials from other sources in a timely manner, our business, results of operations and financial condition could be harmed. On occasion, one or more of the components used in our products have become unavailable, resulting in unanticipated redesign and related delays in shipments. Changes in global economic and geopolitical conditions have disrupted supply chains and the ability to obtain components and raw materials around the world for all companies, including us. We cannot give assurance that we will be able to obtain the necessary components and raw materials necessary to conduct our business. In addition, our suppliers may be impacted by compliance with environmental regulations including Restriction of Hazardous Substances in Electrical and Electronic Equipment ("RoHS") and Waste Electrical and Electronic Equipment ("WEEE"), which could disrupt the supply of components or raw materials or cause additional costs for us to implement new components or raw materials into our manufacturing processes.
Our supply chain is also subject to increasing regulatory requirements, including rules aimed at extinguishing forced labor that require extensive efforts to map supply chains effectively and efficiently beyond tier 1 suppliers for any involvement in human rights abuses. Goods suspected of being manufactured with forced labor could be blocked from importation into the United States, which could impact our ability to obtain necessary components and materials and adversely affect our revenue. Additionally, foreign governments may restrict our access to supply; for example, if China were to further restrict export of rare earth minerals, our suppliers’ ability to obtain such supply may be constrained and we may be unable to obtain sufficient quantities, or obtain supply in a timely manner, or at a commercially reasonable cost.
As a supplier to U.S. government defense contractors, we are subject to a number of procurement regulations and other requirements and could be adversely affected by changes in regulations or any negative findings from a U.S. government audit or investigation.
A number of our customers are U.S. government contractors. As one of their suppliers, we must comply with significant procurement regulations and other requirements. Under applicable federal regulations for defense contractors, we will be required to comply with the Cybersecurity Maturity Model Certification ("CMMC") program in the next several years and other similar cybersecurity requirements. We also maintain registration under ITAR for certain of our production facilities. One of those production facilities must comply with additional requirements and regulations for its production processes and for selected personnel in order to maintain the security of classified information. These requirements, although customary within these markets, increase our performance and compliance costs. Compliance with applicable regulatory requirements is subject to continual review and is rigorously monitored through periodic inspections and product field monitoring. If any inspection reveals noncompliance with these regulations, it could adversely affect our operations. Our international operations are, and will continue to be, subject to risks relating to changes in foreign legal and regulatory requirements. If any of these various requirements change, our costs of complying with them could increase and reduce our operating margins. To the extent that we are unable to comply with the CMMC or other requirements, our business with the Department of War or its prime customers could be at risk.
We operate in a highly regulated environment and are routinely audited and reviewed by the U.S. government and its agencies such as the Defense Contract Audit Agency and Defense Contract Management Agency. These agencies review our performance under our contracts, our cost structure and our compliance with applicable laws, regulations, and standards, as well as the adequacy of, and our compliance with, our internal control systems and policies. Systems that are subject to review include our purchasing systems, billing systems, property management and control systems, cost estimating systems, compensation systems and management information systems.
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Any costs found to be improperly allocated to a specific contract will not be reimbursed or must be refunded if already reimbursed. If an audit uncoversimproper or illegal activities, we may be subject to civil and criminalpenalties and administrative sanctions, which may include termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business as a supplier to contractors who sell products and services to the U.S. government. In addition, our reputation could be adversely affected if allegations of impropriety were made against us.
From time to time, we may also be subject to U.S. government investigations relating to our or our customers' operations and products and are expected to perform in compliance with a vast array of federal laws, including the Truth in Negotiations Act, the FalseClaims Act, the International Traffic in Arms Regulations promulgated under the Arms Export Control Act, the Foreign Corrupt Practices Act, and other federal statutes and regulations, including those established by OFAC. We or our customers may be subject to reductions of the value of contracts, contract modifications or termination, and the assessment of penalties and fines, which could negatively impact our results of operations and financial condition, or result in a diminution in revenue from our customers, if we or our customers are found to have violated the law or are indicted or convicted for violations of federal laws related to government security regulations, employment practices or protection of the environment, or are found not to have acted responsibly as defined by the law. Such convictions or actions could also result in suspension or debarment from serving as a supplier to government contractors for some period of time. Such convictions or actions could have a material adverse effect on us and our operating results. The costs of cooperating or complying with such audits or investigations may also adversely impact our financial results.
Our products are complex and may contain errors or design flaws, which could be costly to correct.
When we release new products, or new versions of existing products, they may contain undetected or unresolvederrors or defects. The majority of our products are custom designed for requirements of specific OEM systems. The expected business life of these products ranges from less than one year to more than 10 years depending on the application. Some of the customizations are modest changes to existing product designs while others are major product redesigns or new product platforms.
Despite testing, errors or defects may be found in new products or upgrades after the commencement of commercial shipments. Undetectederrors and design flaws have occurred in the past and could occur in the future. These errors could result in delays, loss of market acceptance and sales, diversion of development resources, damage to the Company's reputation, product liability claims and legal action by its customers and third parties, failure to attract new customers and increased service costs.
Future changes in our environmental liability and compliance obligations may increase costs and decrease profitability.
Our present and past manufacturing operations, products, and/or product packaging are subject to environmental laws and regulations governing air emissions, wastewater discharges, and the handling, disposal and remediation of hazardous substances, wastes and other chemicals. In addition, more stringent environmental regulations may be enacted in the future, and we cannot presently determine the modifications, if any, in our operations that any future regulations might require, or the cost of compliance that would be associated with such regulations.
Environmental laws and regulations may cause us to change our manufacturing processes, redesign some of our products, and change components to eliminate some substances in our products in order to be able to continue to offer them for sale.
We have significant international operations and sales to customers outside of the United States that subject us to certain business, economic and political risks.
We have office and manufacturing space in Noida, India, and a sales office in Hong Kong. Additionally, foreign revenues for 2025 (primarily to Malaysia) accounted for 23.2% of our 2025 consolidated revenues. We anticipate that sales to customers located outside of the United States will continue to be a significant part of our revenues for the foreseeable future. Our international operations and sales to customers outside of the United States subject our operating results and financial condition to certain business, economic, political, health, regulatory and other risks, including but not limited to:
Political and economic conflict, weakness, or instability in countries in which our products are manufactured and sold, as well as in neighboring countries;
Business interruptions due to natural disasters, outbreak of disease, extreme weather, climate change and other events beyond our control;
Expropriation or the imposition of government controls;
Responsibility to comply with anti-bribery laws such as the U.S. Foreign Corrupt Practices Act and similar anti-bribery laws in other jurisdictions;
Sanctions, tariffs or restrictions on trade imposed or proposed by the U.S. government;
Export license requirements;
Local, regional or national laws or regulations, particularly those affecting our customers, suppliers, manufacturing facilities, and/or significant portions of our workforce;
Currency controls or fluctuations in exchange rates;
High levels of inflation or deflation;
Difficulty in staffing and managing non-U.S. operations;
Greaterdifficulty in collecting accounts receivable and longer payment cycles;
Changes in labor conditions and difficulties in staffing and managing international operations; and
Limitations on insurance coverage against geopolitical risks, natural disasters and business operations.
Additionally, to date, very few of our international revenue and cost obligations have been denominated in foreign currencies. As a result, changes in the value of the U.S. dollar relative to foreign currencies may affect our competitiveness in foreign markets. We do not currently engage in foreign currency hedging activities, but may do so in the future to the extent that we incur a significant amount of foreign-currency denominated liabilities.
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Changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact our business, financial condition, and results of operations.
We are subject to the trade policies, export/import controls, and other rules and regulations, including tariffs, trade sanctions, and license requirements of the U.S. and other government authorities. During the first Trump Administration from 2017 to 2021, certain tariffs and retaliatory tariffs, as well as other trade restrictions, were imposed on various products and materials. In 2025, President Trump again imposed tariffs and retaliatory tariffs against U.S. trading partners, some countries responded with new or increased tariffs of their own, and the amount of the import tariff and the number of products subject to tariffs changed multiple times based on actions by the U.S. government .However, there is currently significant uncertainty about the future relationship between the United States and various other countries with respect to trade policies, treaties, tariffs and customs duties. On February 20, 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Following the Supreme Court’s decision, the Trump Administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business.
Future tariffs and trade restrictions may cause the prices of our vendors’ products to increase, which could reduce demand for such products, or reduce our vendors’ margins, and adversely impact their revenues, financial results, and ability to service debt. This in turn could adversely affect our financial condition and results of operations. In addition, to the extent changes in the political environment have a negative impact on us or on the markets in which we operate our business, our results of operations and financial condition could be materially and adversely impacted in the future. Given our manufacturing operations in India and sales office in Hong Kong, any expansion of tariffs to additional countries or retaliatory measures by foreign governments could directly impact our cost structure and competitive position. At this time, the situation remains dynamic and it remains unclear what the U.S. government or foreign governments will or will not do with respect to additional tariffs that may be imposed or international trade agreements and policies.
We rely on information technology systems to conduct our business, and disruption, failure or security breaches of these systems could adversely affect our business and results of operations.
We rely on information technology ("IT") systems in order to achieve our business objectives. We also rely upon industry accepted security measures and technology to securely maintain confidential information maintained on our IT systems. However, our portfolio of hardware and software products, solutions and services and our enterprise IT systems may be vulnerable to damage or disruption caused by circumstances beyond our control such as catastrophic events, power outages, natural disasters, computer system or network failures, computer viruses, cyber-attacks or other malicious software programs. The failure or disruption of our IT systems to perform as anticipated for any reason could disrupt our business and result in decreased performance, significant remediation costs, transaction errors, loss of data, processing inefficiencies, downtime, litigation and the loss of suppliers or customers. A significant disruption or failure could have a material adverse effect on our business operations, financial performance and financial condition.
We rely on third-party providers for cloud infrastructure, hosting, content delivery, telecommunications, and other critical services. Disruptions, outages, performance degradations, cybersecurity incidents, or other failures at these providers, or at their subcontractors and subprocessors, could impair our operations, internal processes, and ability to serve customers. Certain events, including prolonged cloud service disruptions, domain name system failures, payment processor outages, or the insolvency or other failure of a key vendor, may exceed the scope of our business continuity and disaster recovery assumptions and could result in material operational disruption, data loss, reputational harm, and increased costs.
Our reliance on a limited number of providers for certain services may increase the severity of these risks, including the potential impact of outages, security incidents, or adverse changes to service levels, terms of use, or pricing. In addition, cyber insurance may be unavailable on commercially reasonable terms, may not be sufficient to cover all losses, and may be subject to retentions, sublimits, exclusions, and other limitations that could reduce or eliminate coverage for certain costs, liabilities, or lost profits.
Our IT systems require sustained investment to maintain, protect, and enhance existing systems and to develop new systems to keep pace with evolving technologies and regulatory standards. We are also evaluating and may implement generative artificial intelligence ("AI") technologies in our operations, and our suppliers, customers, and vendors may do the same. While AI may create opportunities for innovation and efficiency, AI-enabled systems may not perform as intended and may introduce or exacerbate operational, privacy, cybersecurity, and intellectual property risks, including inaccurate or biased outputs, data leakage, misuse, and claims or regulatory scrutiny relating to training data, model operation, or generated content. We may also depend on third-party AI models and vendors, and their availability, reliability, performance, or terms of use may change, which could increase costs or negatively affect our operations.
Cybersecurity risks and cybersecurity incidents may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.
Our business could be negatively impacted by cybersecurity events and other disruptions. We face various cybersecurity threats, including attacks using malware, ransomware, distributed denial of service attacks, credential stuffing, supply-chain compromises of software updates, managed service providers, or widely used tools, or phishing incidents resulting in unauthorized access, theft, use, destruction, or other compromises of our systems, as well as threats to the physical security of our facilities and employees, and threats from terrorist acts. In addition, we face cybersecurity threats from entities and persons that may seek to target us through our customers, suppliers and other third parties with whom we do business. Many of these cybersecurity threats are increasingly sophisticated and constantly evolving, especially with the growing prevalence of artificial intelligence. Accordingly, we maintain information security staff, policies and procedures for managing risk to our information systems, and we review and update our policies, procedures and practices in light of evolving threats. We conduct employee training on cybersecurity to mitigate persistent and continuously evolving cybersecurity threats. However, there can be no assurance that any such actions, including the timeliness of our efforts to review, update or implement policies, procedures and practices in light of evolving threats, or the safeguards put in place by our customers, suppliers and other parties on which we rely, will be sufficient to detect, prevent and mitigate cybersecurity breaches or disruptions, or the unauthorized release of sensitive information or corruption of data.
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Privacy, data protection, and AI laws at the local, state, federal, and international levels impose obligations on us to protect the confidentiality of personal information and create additional compliance and liability risks, including in connection with cybersecurity incidents. A growing patchwork of privacy and AI statutes and regulations imposes differing and evolving requirements relating to notices and disclosures, consumer rights and appeals, data minimization, restrictions on the collection and use of sensitive data, targeted advertising, and certain forms of profiling or automated decision-making. We may also be subject to laws and regulations governing children’s and teen privacy, biometric identifiers and voiceprints, and marketing and telemarketing practices, including requirements for email, SMS, and call or text consent. Transfers of personal data across borders may require the use of specific transfer mechanisms and the implementation of additional safeguards. These obligations vary materially by jurisdiction and may increase compliance complexity and costs, limit our ability to develop or offer new products or services, and adversely affect consumer experience.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve gainingunauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our investor relationships. As our reliance on technology increases, so will the risks posed to our information systems, both internal and those we outsource. There is no guarantee that any processes, procedures and internal controls we have implemented or will implement will prevent cyber intrusions, which could have a negative impact on our financial results, operations, business relationships or confidential information. We are also subject to evolving disclosure and governance requirements related to cybersecurity, and failure to timely assess and disclose material cybersecurity incidents or to maintain effective processes could result in regulatory scrutiny, litigation, and reputational harm.
Additionally, remote work has become more common among our employees and employees of our third-party service providers and has increased risks to our IT systems and our confidential, proprietary, and sensitive data and that of our third-party service providers as more of those employees utilize network connections, computers, and devices outside of the employer’s premises or network, including working at home, while in transit, and in public locations. Those employees working remotely could expose us and other third-party service providers to additional cybersecurity risks and vulnerabilities as their systems could be negatively affected by vulnerabilities present in external systems and technologies outside of their control.
If we fail to correct any material weakness that we identify in our internal control over financial reporting or otherwise fail to maintain effective internal control over financial reporting, we may not be able to report our financial results accurately and timely, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our financial reports and the price of our common stock may decline.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on our system of internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States ("U.S. GAAP"). We are required to comply with the Sarbanes-Oxley Act of 2002, as amended (the "Sarbanes-Oxley Act"), and other rules that govern public companies.
If we identify material weaknesses in our internal control over financial reporting in the future, if we cannot comply with the requirements of the Sarbanes-Oxley Act in a timely manner or attest that our internal control over financial reporting is effective, or if our independent registered public accounting firm cannot express an opinion as to the effectiveness of our internal control over financial reporting when required, we may not be able to report our financial results accurately and timely. As a result, investors, counterparties and consumers may lose confidence in the accuracy and completeness of our financial reports. Accordingly, access to capital markets and perceptions of our creditworthiness could be adversely affected, and the market price of our common stock could decline. In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources. These events could have a material and adverse effect on our business, operating results, financial condition and prospects.
Risks Related to Our Securities
The price of our common stock has fluctuated considerably and is likely to remain volatile, in part due to the limited market for our common stock.
From January 1, 2025 through December 31, 2025, the high and low closing prices for our common stock were $59.64 and $35.00, respectively. There is a limited public market for our common stock, and we cannot provide assurances that a more active trading market will develop or be sustained. As a result of limited trading volume in our common stock, the purchase or sale of a relatively small number of shares could result in significant price fluctuations and it may be difficult for holders to sell their shares without depressing the market price for our common stock.
Additionally, the market price of our common stock may continue to fluctuate significantly in response to a number of factors, some of which are beyond our control, including the following:
General economic conditions affecting the availability of long-term or short-term credit facilities, the purchasing and payment patterns of our customers, or the requirements imposed by our suppliers;
Economic conditions in our industry and in the industries of our customers and suppliers;
Changes in financial estimates or investment recommendations by securities analysts relating to our common stock;
Market reaction to our reported financial results;
Loss of a major customer;
Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments; and
Changes in key personnel.
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Our officers and directors have significant voting power and may vote their shares in a manner that is not in the best interest of other stockholders.
Our officers and directors control approximately 5.6% of the voting power represented by our outstanding shares of common stock as of March 16, 2026. If these stockholders act together, they may be able to exert significant control over our management and affairs requiring stockholder approval, including approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of all of our stockholders.
Provisions in our corporate charter documents and under Delaware law could make an acquisition of the Company more difficult, which acquisition may be beneficial to our stockholders.
Provisions in our certificate of incorporation and by-laws, as well as provisions of the General Corporation Law of the State of Delaware ("DGCL"), may discourage, delay or prevent a merger, acquisition or other change in control of the Company, even if such a change in control would be beneficial to our stockholders. These provisions include prohibiting our stockholders from fixing the number of directors and establishing advance notice requirements for stockholder proposals that can be acted on at stockholder meetings and nominations to our board of directors (the "Board").
Additionally, Section 203 of the DGCL prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. We have not opted out of the restrictions under Section 203, as permitted under DGCL.
Risks Related to the Separation
As a result of the Separation, certain of our directors and officers may have actual or potential conflicts of interest because of their positions or relationships with The LGL Group, Inc. .
As a result of the Separation, Marc Gabelli serves as special advisor to our Chairman of the Board of Directors and also serves as Executive Chairman of the Board of Directors of The LGL Group, Inc. ("LGL Group"). Such dual roles could create, or appear to create, potential conflicts of interest when LGL Group and our officers and directors face decisions that could have different implications for the two companies.
In addition, potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between LGL Group and us regarding the terms of the agreements governing the Separation and the relationship thereafter between the companies.
If the Separation does not qualify as tax-free for U.S. federal income tax purposes as a result of a breach by us of any covenant or representation made by us in the Tax Agreement, we could be subject to significant liability.
If the Separation fails to qualify for tax-free treatment due to a breach by us (or any of our subsidiaries) of any covenant or representation made by us in the Tax Agreement between us and LGL Group, we generally will be required to indemnify LGL Group for all tax-related lossessuffered by it. In addition, we will not control the resolution of any tax contest relating to taxes suffered by LGL Group in connection with the Separation, and we may not control the resolution of tax contests relating to any other taxes for which we may ultimately have an indemnity obligation under the Tax Agreement. In the event that LGL Group suffers tax-related losses in connection with the Separation that must be indemnified by us under the Tax Agreement, the indemnification liability could have a material adverse effect on us.
If the Separation fails to qualify for tax-free treatment, for any reason, LGL Group and/or holders of LGL Group's common stock would be subject to substantial U.S. taxes as a result of the Separation, and we could incur significant liabilities under applicable law or as a result of the Tax Agreement.
