Chicago Rivet & Machine Co (CVR) Risk Analysis

We compete with a number of other manufacturers and distributors that produce and sell products similar to ours.  Price, quality and service are the primary elements of competition.  Our competitors include a large number of independent domestic and international suppliers.  We are not as large as a number of these companies and do not have as many financial or other resources.  Faced with intense domestic and international competition and pressure to reduce costs, many customers have expanded their sourcing of components worldwide.  As a result, we have experienced competition from suppliers in other parts of the world that benefit from economic advantages, such as lower labor costs, lower health care costs and fewer regulatory burdens.  There can be no assurance that we will be able to compete successfully with existing or new competitors.  Increased competition could have a material adverse effect on our business, results of operations and financial condition.

Various factors, such as general economic changes in the financial markets, announcements or significant developments with respect to the automotive industry, actual or anticipated variations in our or our competitors' quarterly or annual financial results, the introduction of new products or technologies by us or our competitors, changes in other conditions or trends in our industry or in the markets of any of our significant customers, changes in governmental regulation, or changes in securities analysts' estimates of our competitors or our industry, could cause the market price of our common stock to fluctuate substantially.  Our common stock is traded on NYSE American (not registered, trading privileges only).  The average daily trading volume for our common stock during 2023 was less than 3,000 shares per day.  As a result, shares of our common stock may be difficult to sell, and the price of our common stock may vary significantly based on trading volume.

As more fully disclosed in Item 9A. Controls and Procedures, material weaknesses were identified that existed as of December 31, 2023, regarding deficiencies in internal control over financial reporting related to income taxes and valuation of inventory.

We face risk of exposure to warranty and product liability claims in the event that our products fail to perform as expected or result, or are alleged to have resulted, in bodily injury, property damage or other losses.  In addition, if any of our products are or are alleged to be defective, then we may be required to participate in a product recall.  We may also be involved from time to time in legal proceedings and commercial or contractual disputes.  Any losses or other liabilities related to these exposures could have a material adverse effect on our business, results of operations and financial condition.

Our operations are subject to environmental laws and regulations.  Currently, environmental costs and liabilities with respect to our operations, and the cost of compliance with such laws and regulations, are not considered material to our business, but there can be no assurance that we will not be adversely impacted by these costs and liabilities in the future either under present laws and regulations or those that may be adopted or imposed in the future.

Cybersecurity threats are growing in number and sophistication and include, among others, malicious software, attempts to gain unauthorized access to data, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data. In addition to security threats, we are also subject to other systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, natural disasters, power shortages, terrorist attacks or other events. The unavailability of our information systems, the failure of these systems to perform as anticipated or any significant breach of data security could cause loss of data, disrupt our operations, lead to financial losses from remedial actions, require significant management attention and resources, and negatively impact our reputation among our customers, which could have a negative impact on our business, results of operations and financial condition.

During 2022 and 2023 our business has experienced a period of significant material, labor and shipping price volatility (generally resulting from an increase in the price of commodities, energy costs, freight costs, labor costs and other input costs), as well as supply chain disruptions, in addition to an environment of rising interest rates. While some of these input cost increases moderated in fiscal 2023, other exposures will likely continue in fiscal 2024 and perhaps further into the future. This environment of significant price volatility has resulted in, and may continue to result in, increased costs that may not be, or may only be partially, offset by increasing sales prices and expense reduction. During this same period, we also experienced constrained labor availability which has resulted in inflationary wage pressures, both internally and at key vendors.  Although we have developed and implemented strategies to mitigate the impact of supply chain disruptions along with the impact of higher input and other costs, these strategies, together with commercial negotiations with our customers and suppliers, typically offset only a portion (less than 100%) of the adverse impact. Additionally, our operating model typically requires long lead times between the design and development of products, the launch of production and the delivery of the final product. This lead time requires us to secure vendor supply well in advance to minimize launch and production inefficiencies. During such lead times, price commitments are subject to change and could lead to an inability to fully recover all such price changes.