UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM ~~10-Q/A~~

~~Amendment No. 1~~10-Q

(Mark One)

☒ Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
For the quarterly period ended ~~March 31, 2019~~April 5, 2020

☐ Transition Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934
For the transition period from ~~_____~~ to ~~_____~~

Commission file number: 0-24020

SYPRIS SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	61-1321992
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

101 Bullitt Lane, Suite 450
Louisville, Kentucky 40222	(502) 329-2000
(Address of principal executive	(Registrant’s telephone number,
offices) (Zip code)	including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SYPR	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☐ Large accelerated filer	☐ Accelerated filer	☐ Non-accelerated filer	☒ Smaller reporting company
☐ Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of May 8, ~~2019,~~2020, the Registrant had ~~21,294,463~~21,309,580 shares of common stock outstanding.

We are filing this Amendment No. 1 (this “Form 10-Q/A”) to amend our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019, which was filed with the United States Securities and Exchange Commission (“SEC”) on May 15, 2019 (the “Original Filing”). This Form 10-Q/A includes restated unaudited consolidated financial statements as of and for the three months ended March 31, 2019.

As previously described in our Current Report on Form 8-K filed with the SEC on June 27, 2019, our Audit and Finance Committee of the Board of Directors (the “Audit Committee”), after considering the recommendation of management, concluded that the unaudited consolidated financial statements as of and for the three months ended March 31, 2019 included in the Original Filing should no longer be relied upon and would be restated through the filing of this Form 10-Q/A.

As previously disclosed, we identified certain misstatements in our previously filed unaudited interim financial statements for the first quarter of 2019 which required restatement. These misstatements arose as a result of the implementation of a new enterprise resource planning system (“ERP system”) at our Sypris Electronics segment effective January 1, 2019. Due to data entry processing errors following this transition, certain vendor invoices related to raw material inventory receipts in the first quarter of 2019 for the Sypris Electronics segment were incorrectly recorded in the second quarter of 2019. These errors resulted in an understatement of accounts payable and cost of sales of approximately $786,000 as of and for the quarter ended March 31, 2019. Promptly upon identifying the error, the Company undertook a review of its systems and processes related to the transition to the new ERP system, as well as a review of certain accounting entries in the first quarter. The Company also corrected other immaterial accounting errors affecting the first quarter of 2019 discovered through this review related to the ERP system transition. To correct all misstatements as reflected in this Form 10-Q/A, the Company recognized an incremental net loss of $731,000 for the three months ended March 31, 2019. As a result, net loss increased from $2,305,000 as reported in the Original Filing to $3,036,000 and net loss per share increased from $0.11 to $0.15 for the three months ended March 31, 2019. Cash flows from operating activities did not change as a result of the restatement. See Note 3 (Restatement of Previously Reported Financial Statements) to the Company’s financial statements in Part I, Item 1 of this Form 10-Q/A for further details.

The information in this Form 10-Q/A not only restates the unaudited consolidated financial statements that were contained in the Original Filing, but also amends other information contained in the Original Filing affected by the corrections described above. Therefore, this Form 10-Q/A should be read together with the Original Filing. Additionally, except for the restatement and related matters, this Form 10-Q/A does not reflect events occurring after the date of the Original Filing and should be read in conjunction with our filings with the SEC subsequent to the date of the Original Filing. These corrections had no impact on the Company’s Sypris Technologies reportable business segment.

~~The following items in the Original Filing have been revised in this Form 10-Q/A:~~

~~Part I - Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Pursuant to the rules of the SEC, Part II - Item 6 of the Original Filing has been amended to include the currently-dated certifications from our chief executive officer and chief financial officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. These certifications are included in this Form 10-Q/A as Exhibits 31(i)-1, 31(i)-2, and 32.1.

The accompanying notes are an integral part of the consolidated financial statements.

								April 5,			December 31,
		March 31,			December 31,			2020			2019
		2019			2018			(Unaudited)
		(Unaudited) (Restated)
Assets	Assets
Current assets:
Cash and cash equivalents		$	5,689		$	10,704		$	5,206		$	5,095
Accounts receivable, net			9,120			9,881			8,922			7,444
Inventory, net			21,109			18,584			19,401			20,784
Other current assets			4,385			4,755			3,782			4,282
Assets held for sale			1,474			1,474			2,167			2,233
Total current assets			41,777			45,398			39,478			39,838

Property, plant and equipment, net			14,758			14,655			9,687			11,675
Operating lease right-of-use assets			7,532			0			6,727			7,014
Other assets			1,509			1,515			1,374			1,529
Total assets		$	65,576		$	61,568		$	57,266		$	60,056

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	12,301		$	13,427		$	10,686		$	9,346
Accrued liabilities			14,717			14,965			11,624			12,495
Operating lease liabilities, current portion			980			0			862			841
Finance lease obligations, current portion			632			593			667			684
Note payable – related party, current portion									2,500			0
Total current liabilities			28,630			28,985			26,339			23,366
Note payable – related party			6,453			6,449
Operating lease liabilities, net of current portion			7,367			0			6,672			6,906
Finance lease obligations, net of current portion			2,889			2,804			2,225			2,351
Note payable – related party									3,967			6,463
Other liabilities			6,810			8,496			6,756			7,539
Total liabilities			52,149			46,734			45,959			46,625
Stockholders’ equity:
Preferred stock, par value $0.01 per share, 975,150 shares authorized; no shares issued			0			0			0			0
Series A preferred stock, par value $0.01 per share, 24,850 shares authorized; no shares issued			0			0			0			0
Common stock, non-voting, par value $0.01 per share, 10,000,000 shares authorized; no shares issued			0			0			0			0
Common stock, par value $0.01 per share, 30,000,000 shares authorized; 21,370,395 shares issued and 21,354,203 outstanding in 2019 and 21,414,374 shares issued and 21,398,182 outstanding in 2018			214			214
Common stock, par value $0.01 per share, 30,000,000 shares authorized; 21,324,395 shares issued and 21,309,580 outstanding in 2020 and 21,324,618 shares issued and 21,298,426 outstanding in 2019									213			213
Additional paid-in capital			154,450			154,388			154,789			154,702
Accumulated deficit			(116,520	)		(114,926	)		(117,738	)		(117,433	)
Accumulated other comprehensive loss			(24,717	)		(24,842	)		(25,957	)		(24,051	)
Treasury stock, 16,192 shares in 2019 and 2018			0			0
Treasury stock, 15,038 and 26,192 shares in 2020 and 2019, respectively									0			0
Total stockholders’ equity			13,427			14,834			11,307			13,431
Total liabilities and stockholders’ equity		$	65,576		$	61,568		$	57,266		$	60,056

The accompanying notes are an integral part of the consolidated financial statements.

Additional
Accumulated
Accumulated
Other

Common Stock

Paid-In

Deficit

Comprehensive

Treasury

Shares

Amount

Capital

(Restated)

Loss

Stock

January 1, 2019 balance
21,398,182 $ 214 $ 154,388 $ (114,926 ) $ (24,842 ) $ 0
Net loss
0 0 0 (3,036 ) 0 0
Adoption of new accounting standards
0 0 0 1,442 0 0
Foreign currency translation adjustment
0 0 0 0 125 0
Noncash compensation
0 0 111 0 0 0
Retire treasury stock
(43,979 ) 0 (49 ) 0 0 0
March 31, 2019 balance
21,354,203 $ 214 $ 154,450 $ (116,520 ) $ (24,717 ) $ 0

											Accumulated
					Additional						Other
	Common Stock				Paid-In			Accumulated			Comprehensive			Treasury
	Shares		Amount		Capital			Deficit			Loss			Stock

January 1, 2020 balance		21,298,426	$	213	$	154,702		$	(117,433	)	$	(24,051	)	$	0

Net loss		0		0		0			(305	)		0			0
Foreign currency translation adjustment		0		0		0			0			(1,906	)		0
Exercise of stock options		11,154		0		(7	)		0			0			0
Noncash compensation		0		0		94			0			0			0

April 5, 2020 balance		21,309,580	$	213	$	154,789		$	(117,738	)	$	(25,957	)	$	0

The accompanying notes are an integral part of the consolidated financial statements.

(2)	Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of Sypris Solutions, Inc. and its wholly-owned subsidiaries and have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, pursuant to such rules and regulations, certain notes and other financial information included in audited financial statements have been condensed or omitted. The December 31, ~~2018~~2019 consolidated balance sheet data was derived from audited statements, but does not include all disclosures required by U.S. GAAP. The Company’s operations are domiciled in the United States (U.S.) and Mexico, and we serve a wide variety of domestic and international customers. All intercompany transactions and accounts have been eliminated.

These unaudited consolidated financial statements reflect, in the opinion of management, all material adjustments (which include only normal recurring adjustments) necessary to fairly state the results of operations, financial position and cash flows for the periods presented, and the disclosures herein are adequate to make the information presented not misleading. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results for the three months ended ~~March 31, 2019~~April 5, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2019.~~2020. These unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements, and notes thereto, for the year ended December 31, ~~2018~~2019 as presented in the Company’s Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform with current period presentation.

COVID-19 Assessment

In March 2020, the World Health Organization categorized the current coronavirus disease (“COVID-19”) as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. COVID-19 continues to spread throughout the United States and other countries across the world, and the duration and severity of its effects are currently unknown. While the Company expects the effects of the pandemic to negatively impact its results of operations, cash flows and financial position, the current level of uncertainty over the economic and operational impacts of COVID-19 means the related financial impact cannot be reasonably estimated at this time. The Company’s consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods presented. Such estimates and assumptions affect, among other things, the Company’s long-lived asset valuation; inventory valuation; valuation of deferred income taxes and income tax contingencies; the allowance for doubtful accounts; and pension plan assumptions. Events and changes in circumstances arising after April 5, 2020, including those resulting from the impacts of COVID-19, will be reflected in management’s estimates for future periods. Factors deriving from the COVID-19 response that have or may negatively impact sales and gross margin in the future include, but are not limited to: limitations on the ability of our suppliers to manufacture, or procure from manufacturers, the material components we utilize in the manufacture of the products we sell, or to meet delivery requirements and commitments; limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to remain at home; limitations on the ability of our customers to conduct their business and purchase our products; and limitations on the ability of our customers to pay us on a timely basis.

~~(3)~~

~~Restatement of Previously Reported Financial Statements~~

Subsequent to March 31, 2019, misstatements were identified in our previously filed unaudited interim financial statements which required restatement. The misstatements arose as a result of the implementation of a new ERP system at our Sypris Electronics segment effective January 1, 2019. Due to data entry processing errors following this transition to the new ERP system, certain vendor invoices related to raw material inventory receipts in the first quarter of 2019 for the Sypris Electronics segment were incorrectly recorded in the second quarter of 2019. These errors resulted in an understatement of accounts payable and cost of sales of approximately $786,000 as of and for the quarter ended March 31, 2019. Promptly upon identifying the error, the Company undertook a review of its systems and processes related to the transition to the new ERP system, as well as a review of certain accounting entries in the first quarter. The Company also corrected other immaterial accounting errors affecting the first quarter of 2019 discovered through this review related to the ERP system transition. To correct all misstatements as reflected in this Form 10-Q/A, the Company recognized incremental net loss of $731,000 for the three months ended March 31, 2019. As a result, our reported net loss increased from $2,305,000 to $3,036,000 and net loss per share increased from $0.11 to $0.15 for the three months ended March 31, 2019. Cash flows from operating activities did not change as a result of the restatement.

~~The following tables summarize the effects of the restatement on the specific items presented in the Company’s consolidated financial statements as of March 31, 2019:~~

~~Unaudited Consolidated Statement of Operations as of March 31, 2019:~~

Previously
Reported

Adjustment

Restated

Net revenue
$ 19,564 $ 0 $ 19,564
Cost of sales
17,973 731 18,704
Gross profit
1,591 (731 ) 860

Selling, general and administrative
3,454 0 3,454
Severance, equipment relocation and other costs
98 0 98
Operating loss
(1,961 ) (731 ) (2,692 )

Interest expense, net
217 0 217
Other expense (income), net
51 0 51
Loss before taxes
(2,229 ) (731 ) (2,960 )

Income tax expense
76 0 76
Net loss
$ (2,305 ) $ (731 ) $ (3,036 )

Loss per share:

Basic
(0.11 ) (0.04 ) (0.15 )
Diluted
(0.11 ) (0.04 ) (0.15 )

~~Selected Unaudited Consolidated Balance Sheet Information as of March 31, 2019:~~

Previously

Reported

Adjustment

Restated

Inventory
$ 21,209 $ (100 ) $ 21,109
Total current assets
41,877 (100 ) 41,777
Total assets
65,676 (100 ) 65,576
Accounts payable
11,670 631 12,301
Total current liabilities
27,999 631 28,630
Total liabilities
51,518 631 52,149
Accumulated deficit
(115,789 ) (731 ) (116,520 )
Total stockholders’ equity 14,158 (731 ) 13,427
Total liabilities and stockholders’ equity
65,676 (100 ) 65,576

~~(4)~~(3)

Recent Accounting Pronouncements

In ~~February 2016,~~August 2018, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued ~~Accounting Standards Update (“ASU”) No. 2016-02,~~ASU 2018-14, ~~Leases~~Compensation – Retirement Benefits – Defined Benefit Plans – General, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans ~~(ASC 842)~~. The guidance eliminated certain disclosures about defined benefit plans, added new ~~standard was issued to increase transparency~~disclosures, and ~~comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.~~clarified other requirements. This ~~standard affects any entity that enters into a lease, with some specified scope exemptions.~~

~~The Company adopted this update beginning on~~guidance became effective January 1, ~~2019 using the alternative modified retrospective transition method and will~~2020. There were no changes to interim disclosure requirements. As this standard relates only to financial disclosures, its adoption did not recast comparative periods in transition to the new standard. In addition, we elected certain practical expedients which permit us to not reassess whether existing contracts are or contain leases, to not reassess the lease classification of any existing leases, to not reassess initial direct costs for any existing leases, and to not separate lease and nonlease components for all classes of underlying assets. We also madehave an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet for all classes of underlying assets. The adoption of ASC 842 on January 1, 2019 resulted in the recognition of right-of-use assets (ROU) of approximately $7,664,000 and lease liabilities of operating leases of approximately $8,549,000. The implementation decreased the accumulated deficit by $1,442,000, which was driven by the recognition of the remaining deferred gain related to the operating lease portion on a 2016 sale-leaseback directly into the accumulated deficit. There was no material impact to ~~its Consolidated Statements of Operations~~our operating results, financial position or ~~Cash Flows. See Note 5 for further information regarding the impact of the adoption of ASC 842 on the Company’s financial statements.~~cash flows.

In August ~~2016,~~2018, the FASB issued ASU ~~No. 2016-15 Statement of Cash Flows Topic 230:~~2018-15, ~~Classification of Certain Cash Receipts~~Intangibles-Goodwill and ~~Cash Payments~~Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract (ASU 2018-15). ASU ~~No. 2016-15 addresses how certain cash receipts and cash payments are presented and classified~~2018-15 aligns the requirements for capitalizing implementation costs incurred in ~~the statement of cash flows~~a hosting arrangement that is a service contract with the ~~objective of reducing existing differences in the presentation of these items. The amendments in ASU No. 2016-15~~requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance became effective ~~for us in the first quarter~~January 1, 2020 and ~~were adopted retrospectively. The adoption of this update~~ did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments, new guidance for the accounting for credit losses on certain financial instruments. This guidance introduces a new approach to estimating credit losses on certain types of financial instruments and modifies the impairment model for available-for-sale debt securities. This guidance, which becomes effective January 1, ~~2020,~~2023, is not expected to have a material impact on our consolidated financial statements.

In ~~February 2018,~~December 2019, the FASB issued ASU ~~No. 2018-02,~~2019-12, ~~Reclassification~~Income Taxes – Simplifying the Accounting for Income Taxes. This guidance is intended to simplify various aspects of ~~Certain Tax Effects from Accumulated Other Comprehensive Income~~ ~~(ASU 2018-02). Under existing U.S. GAAP,~~income tax accounting including the ~~effects~~elimination of certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and ~~laws on deferred tax balances are recorded as~~clarifies the accounting for transactions that result in a ~~component of income tax expense~~step-up in the ~~period in which the law was enacted. When deferred~~ tax balances related to items originally recorded in accumulated other comprehensive income are adjusted, certain tax effects become stranded in accumulated other comprehensive income. The amendments in ASU 2018-02 allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Actbasis of ~~2017 (the “Tax Act”). The~~goodwill. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Entities are required to make additional disclosures, regardless of whether they elect to reclassify stranded amounts of tax effects. The Company adopted the standardbecomes effective January 1, ~~2019,~~2021 and ~~has elected~~early adoption is permitted. Adoption of this guidance requires certain changes to ~~not reclassify~~primarily be made prospectively, with some changes to be made retrospectively. We are currently assessing the ~~income tax effects~~impact of ~~the Tax Act from accumulated other comprehensive income to retained earnings. The adoption of ASU 2018-02 did not have an impact~~this guidance on ~~the Company’s~~our consolidated financial statements.

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~ (ASU 2018-15). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new guidance will be effective for public companies for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effect that the new guidance will have on its consolidated financial statements and related disclosures.

(5(4)

Leases

The Company determines if an arrangement is a lease at its inception. The Company has entered into operating leases for real ~~estate.~~estate and personal property, including manufacturing and information technology equipment. These real estate leases have initial terms which range from 10 ~~year~~ to 11 years, and often include one or more options to renew. These renewal terms can extend the lease term by 5 years, and will be included in the lease term when it is reasonably certain that the Company will exercise the option. The Company’s existing leases do not contain significant restrictive provisions; however, certain leases contain provisions for payment of real estate taxes, insurance and maintenance costs by the Company. The lease agreements do not contain any residual value guarantees. Some of the real estate lease agreements include periods of rent holidays and payments that escalate over the lease term by specified amounts. All operating lease expenses are recognized on a straight-line basis over the lease term. For finance leases, interest expense is recognized on the lease liability and the ~~ROU~~right-of-use asset is amortized over the lease term.

Some leases may require variable lease payments based on factors specific to the individual agreements. Variable lease payments for which we are typically responsible for include real estate taxes, insurance and common area maintenance expenses based on the Company’s pro-rata share, which are excluded from the measurement of the lease liability. Additionally, one of the Company’s real estate ~~lease~~leases has lease payments that adjust based on annual changes in the Consumer Price Index (“CPI”). The leases that are dependent upon CPI are initially measured using the index or rate at the commencement date and are included in the measurement of the lease liability. Incremental payments due to changes in the index are treated as variable lease costs and expensed as incurred.

These operating leases are included in “Operating lease right-of-use assets” on the Company’s ~~March 31, 2019 Consolidated Balance Sheet,~~consolidated balance sheets, and represent the Company’s right to use the underlying asset for the lease term. The Company’s ~~obligation~~obligations to make lease payments are included in “Operating lease liabilities, current portion” and “Operating lease liabilities, net of current portion” on the Company’s March 31, 2019 Consolidated Balance Sheet. Based on the present value of the lease payments for the remaining lease term of the Company’s existing leases, the Company recognized right-of-use assets of approximately $7,664,000 and lease liabilities for operating leases of approximately $8,549,000 on January 1, 2019, and included adjustments for any unamortized lease incentives and prepaid and accrued rent.consolidated balance sheets. Operating lease right-of-use assets and liabilities ~~commencing after January 1, 2019~~ are recognized at the commencement date based on the present value of lease payments over the lease term. As of ~~March~~April 5, 2020, total right-of-use assets and operating lease liabilities were approximately $6,727,000 and $7,534,000, respectively. As of December 31, 2019, total right-of-use assets and operating lease liabilities were approximately ~~$7,532,000~~$7,014,000 and ~~$8,347,000,~~$7,747,000, respectively.

We primarily use our incremental borrowing rate, which is updated quarterly, based on the information available at commencement date, in determining the present value of lease payments. If readily available, we would use the implicit rate in a new lease to determine the present value of lease payments. The Company has certain contracts for real estate which may contain lease and non-lease components which it has elected to treat as a single lease component.

The Company has entered into various short-term operating leases, primarily for office equipment with an initial term of twelve months or less. Lease payments associated with short-term leases are expensed as incurred and are not recorded on the Company’s balance sheet. The related lease expense for short-term leases was not material for the three months ended April 5, 2020 and March 31, 2019.

The following table presents information related to lease expense for the three months ended April 5, 2020 and March 31, 2019 (in thousands):

	Three Months
	Ended		Three Months Ended
	March 31,		April 5,		March 31,
	2019		2020		2019
	(Unaudited)		(Unaudited)
Finance lease expense:
Amortization expense	$	111	$	120	$	111
Interest expense		91		77		91
Operating lease expense		351		351		351
Variable lease expense		79		68		79
Total lease expense	$	632	$	616	$	632

The following table presents supplemental cash flow information related to leases (in thousands):

~~Maturities of~~The annual future minimum lease ~~liabilities~~payments as of ~~March 31, 2019~~April 5, 2020 are as follows (in thousands):

Operating

Finance

Leases

Leases

2020
$ 1,445 $ 945
2021
1,428 927
2022
1,480 612
2023
1,496 612
2024
1,514 607
Thereafter
3,867 1,006
Total lease payments
11,230 4,709
Less imputed interest
(2,883 ) (1,188 )
Total
$ 8,347 $ 3,521

	Operating			Finance
	Leases			Leases
Next 12 months	$	1,428		$	927
12 to 24 months		1,480			612
24 to 36 months		1,496			613
36 to 48 months		1,514			607
48 to 60 months		1,244			549
Thereafter		2,623			457
Total lease payments		9,785			3,765
Less imputed interest		(2,251	)		(873	)
Total	$	7,534		$	2,892

The following table presents certain information related to lease terms and discount rates for leases as of ~~March 31, 2019:~~April 5, 2020:

(6(5)

Revenue from Contracts with Customers

The Company recognizes revenue when it satisfies a performance obligation by transferring control of a promised product or rendering a service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for the product or service (the “transaction price”). The Company’s transaction price in its contracts with customers is generally fixed; no payment discounts, rebates or refunds are included within its contracts. The Company also does not provide service-type warranties nor does it allow customer returns. In connection with the sale of various parts to customers, the Company is subject to typical assurance warranty obligations covering the compliance of the electronics parts produced to agreed-upon ~~specifications (See Note 14).~~specifications. Customer returns, when they occur, relate to quality rework issues and are not connected to any repurchase obligation of the Company.

A performance obligation is a promise in a contract to transfer a distinct product or render a service to a customer and is the unit of account to which the transaction price is allocated under ASC 606. When a contract contains multiple performance obligations, we allocate the transaction price to the individual performance obligations using the price at which the promised goods or services would be sold to customers on a standalone basis. For most sales within our Sypris Technologies segment and a portion of sales within Sypris Electronics, control transfers to the customer at a point in time. Indicators that control has transferred to the customer include the Company having a present right to payment, the customer obtaining legal title and the customer having the significant risks and rewards of ownership. The Company’s principal terms of sale are FOB Shipping Point, or equivalent, and, as such, the Company primarily transfers control and records revenue for product sales upon shipment.

For contracts where Sypris Electronics serves as a contractor for aerospace and defense companies under federally funded programs, we generally recognize revenue over time as we perform because of continuous transfer of control to the customer. This continuous transfer of control to the customer is supported by clauses in the contracts that allow the customer to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit and take control of any work in process. Because control is transferred over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. We use labor hours incurred as a measure of progress for these contracts because it best depicts the Company’s performance of the obligation to the customer, which occurs as we incur labor on our contracts. Under this measure of progress, the extent of progress towards completion is measured based on the ratio of labor hours incurred to date to the total estimated labor hours at completion of the performance obligation.

Our contract profit margins may include estimates of revenues for goods or services on which the customer and the Company have not reached final agreements, such as contract changes, settlements of disputed claims, and the final amounts of requested equitable adjustments permitted under the contract. These estimates are based upon management’s best assessment of the totality of the circumstances and are included in our contract profit based upon contractual provisions and our relationships with each customer.

The majority of ~~our~~Sypris Electronics’ contractual arrangements with customers are for one year or less. For the remaining population of non-cancellable contracts greater than one year we had ~~$13,269,000~~$19,068,000 of remaining performance obligations as of ~~March 31, 2019,~~April 5, 2020, all of which were long-term Sypris Electronics’ contracts. We expect to recognize approximately ~~37%~~63% of our remaining performance obligations as revenue in ~~the 2019, 50%~~2020, 36% in ~~2020~~2021 and the balance ~~thereafter.~~in 2022.

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the three months ended April 5, 2020 and March 31, 2019 ~~and April 1, 2018~~ (in thousands):

	March 31,		April 1,
	2019		2018		April 5,		March 31,
	(Unaudited)				2020		2019
					(Unaudited)
Sypris Technologies – transferred point in time	$	16,141	$	14,507	$	13,717	$	16,141
Sypris Electronics – transferred point in time		682		914		2,107		682
Sypris Electronics – transferred over time		2,741		4,521		6,601		2,741
Net revenue	$	19,564	$	19,942	$	22,425	$	19,564

Differences in the timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue, customer deposits and billings in excess of revenue recognized (contract liabilities) on the consolidated balance sheets.

Contract assets – Contract assets include unbilled amounts typically resulting from sales under contracts where revenue is recognized over time and revenue recognized exceeds the amount billed to the customer, and the right to payment is subject to conditions other than the passage of time. Contract assets are generally classified as current assets in the consolidated balance sheet. The balance of contract assets as of ~~March 31, 2019~~April 5, 2020 and December 31, ~~2018~~2019 were ~~$554,000~~$936,000 and ~~$839,000,~~$906,000, respectively, and are included within other current assets in the accompanying consolidated balance sheets.

Contract liabilities – Some of the Company’s contracts within Sypris Electronics are billed as work progresses in accordance with the contract terms and conditions, either at periodic intervals or upon achievement of certain milestones. Often this results in billing occurring prior to revenue recognition resulting in contract liabilities. Additionally, the Company occasionally receives cash payments from customers in advance of the Company’s performance resulting in contract liabilities. These contract liabilities are classified as either current or long-term in the consolidated balance sheet based on the timing of when the Company expects to recognize revenue. As of ~~March~~April 5, 2019, the contract liabilities balance was $7,176,000, of which $5,811,000 was included within accrued liabilities and $1,365,000 was included within other liabilities in the accompanying consolidated balance sheets. As of December 31, 2019, ~~and December 31, 2018,~~the contract liabilities ~~were $8,733,000 and $8,369,000, respectively, and are~~balance was $7,504,000, of which $5,769,000 was included within accrued liabilities and $1,735,000 was included within other liabilities in the accompanying consolidated balance sheets. Payments received from customers in advance of revenue recognition are not considered to be significant financing components because they are used to meet working capital demands that can be higher in the early stages of a contract.

The Company recognized revenue from contract liabilities of ~~$1,344,000~~$2,312,000 and ~~$727,000~~$1,344,000 during the ~~first quarters of~~three months ended April 5, 2020 and March 31, 2019, ~~and 2018,~~ respectively.

Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in selling, general and administrative expense in the consolidated statements of operations.

We do not disclose the value of unsatisfied performance obligations for contracts with original expected lengths of one year or less.

(7()

~~Strategic Actions~~

The Company completed a number of strategic actions during the past four years in response to the nonrenewal of supply agreements with certain Tier I automotive customers primarily due to global pricing constraints, the downturn in the commercial vehicle market beginning in the fourth quarter of 2015 and other market and economic factors impacting the Company. Strategic actions taken included: (i) the Company’s exit from the Broadway Plant (defined below) (see Note 8), (ii) the sale of Sypris Electronics’ SioMetrics, Cyber Range, Information Security Solutions and Data Systems product lines (the “CSS business”) in 2016, (iii) the sale and leaseback of the Company’s facility in Toluca, Mexico in 2016, (iv) the sale of the Company’s manufacturing facility in Morganton, North Carolina in 2015, (v) the capacity reallocation of certain oil and gas industry components to Mexico, (vi) the relocation of its Sypris Electronics operation to a new facility beginning in 2017, and (vii) reductions in employment costs through senior management pay reductions. Using a portion of the proceeds generated from the asset sales noted above, the Company paid off all of its most senior secured debt consisting of a “Term Loan” and “Revolving Credit Facility” in August 2016. During this period, the Company also received the benefit of cash infusions from Gill Family Capital Management, Inc. (“GFCM”) in the form of secured promissory note obligations totaling $6,500,000 in principal, scheduled to mature in part in 2021, 2023 and 2025.

The Company has reduced its reliance on certain of its traditional Tier 1 customers that represent the primary suppliers to the original equipment manufacturers (“OEMs”) in the commercial vehicle markets, while targeting to replace these customers with more diversified, longer-term relationships, especially among the OEMs and others who place a higher value on the Company’s innovation, flexibility and core commitment to lean manufacturing principles. Among the customer programs not being renewed was a supply agreement with Meritor Inc. (“Meritor”), which expired on January 1, 2017, and the Company’s business with Eaton Corporation (“Eaton”), both of which utilized production at the Company’s Louisville, Kentucky automotive and commercial vehicle manufacturing plant (the “Broadway Plant”). As a result of these decisions, the Company experienced a significant reduction in its commercial vehicle revenues in 2017 (See Note 8). During the fourth quarter of 2018, the Company entered into a three-year agreement to supply axle shafts, as well as a number of other product lines, to Sistemas Automotrices de Mexico, S.A. de C.V. (“Sistemas”) for periods of up to six years from the commencement of production.

(86)

Exit and Disposal Activities

On February 21, 2017, the Board of Directors approved a modified exit or disposal plan with respect to the Broadway Plant, which included the relocation of production to other Company facilities, as needed, and/or the closure of the plant. The relocation of production was complete as of the end of 2017. The Company has relocated certain assets from the Broadway Plant to other manufacturing facilities, as needed, to serve its existing and target customer base and identified underutilized or non-core assets for disposal. Management expects to apply the proceeds from the sale of any underutilized or non-core assets to help fund the costs to transfer any additional equipment from the Broadway Plant. On April 13, 2020, the Company completed the sale of the Broadway Plant real estate for $1,700,000 and recognized a gain of $807,000. Management is currently evaluating options for ~~the real estate and~~ any remaining assets in the Broadway Plant.

As a result of these initiatives, the Company recorded charges of ~~$98,000,~~$91,000, or less than $0.01 per share, and ~~$509,000,~~$98,000, or ~~$0.03~~less than $0.01 per share, during the first three months of ~~2019~~2020 and ~~2018,~~2019, respectively, related to the transition of production from the Broadway Plant, which is included in severance, relocation and other costs in the consolidated statement of operations. All amounts incurred were recorded within Sypris Technologies. The charges for the ~~first quarter of 2019~~three months ended April 5, 2020 were primarily related to mothball costs associated with the closed facility. ~~The charges for the first quarter of 2018 included $68,000 for equipment relocation costs and $441,000 for other costs.~~

A summary of the total pre-tax charges is as follows (in thousands):

Costs Incurred

Three Months

Total

Remaining

Total

Ended

Recognized

Costs to be

Program

March 31, 2019

to date

Recognized

Severance and benefit related costs
$ 1,350 $ 0 $ 1,350 $ 0
Asset impairments
188 0 188 0
Equipment relocation costs
1,895 8 1,793 102
Other
1,454 90 1,168 286
$ 4,887 $ 98 $ 4,499 $ 388

			Costs Incurred
				Three Months		Total		Remaining
	Total			Ended		Recognized		Costs to be
	Program			April 5, 2020		to date		Recognized
Severance and benefit related costs	$	1,350		$	0	$	1,350	$	0
Asset impairments		188			0		188		0
Equipment relocation costs		1,826			0		1,826		0
Other		1,689			91		1,637		52
	$	5,053		$	91	$	5,001	$	52

The Company expects to incur additional pre-tax costs of approximately ~~$388,000~~$52,000 within Sypris Technologies, the majority of which is expected to be cash expenditures.

As noted above, management expects to use proceeds from the sale of underutilized or non-core assets to fund costs incurred on the transfer of equipment from the Broadway Plant. The following assets have been segregated and included in assets held for sale in the consolidated balance sheets (in thousands):

	March 31,			December 31,			April 5,			December 31,
	2019			2018			2020			2019
	(Unaudited)						(Unaudited)

Machinery, equipment, furniture and fixtures	$	11,207		$	11,207
Property, plant and equipment							$	13,623		$	13,346
Accumulated depreciation		(9,733	)		(9,733	)		(11,456	)		(11,113	)
Property, plant and equipment, net	$	1,474		$	1,474		$	2,167		$	2,233

(9(7)

Loss Per Common Share

The Company computes earnings per share using the two-class method, which is an earnings allocation formula that determines earnings per share for common stock and participating securities. Restricted stock granted by the Company is considered a participating security since it contains a non-forfeitable right to dividends.

Our potentially dilutive securities include potential common shares related to our stock options and restricted stock. Diluted earnings per share considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect. Diluted earnings per share excludes the impact of common shares related to our stock options in periods in which the option exercise price is greater than the average market price of our common stock for the period. For the three months ended April 5, 2020 and March 31, 2019, ~~and April 1, 2018,~~ diluted weighted average common shares do not include the impact of any outstanding stock options and unvested compensation-related shares because the effect of these items on diluted net loss would be anti-dilutive.

A reconciliation of the weighted average shares outstanding used in the calculation of basic and diluted loss per common share is as follows (in thousands):

	Three Months Ended
	March 31,			April 1,			Three Months Ended
	2019			2018			April 5,			March 31,
	(Restated)						2020			2019
	(Unaudited)						(Unaudited)
Loss attributable to stockholders:
Net loss as reported	$	(3,036	)	$	(1,795	)	$	(305	)	$	(3,036	)
Less distributed and undistributed earnings allocable to restricted awarded holders		0			0			0			0
Less dividends declared attributed to restricted awarded holders		0			0			0			0
Net loss allocable to common stockholders	$	(3,036	)	$	(1,795	)	$	(305	)	$	(3,036	)

Loss per common share attributable to stockholders:
Basic	$	(0.15	)	$	(0.09	)	$	(0.01	)	$	(0.15	)
Diluted	$	(0.15	)	$	(0.09	)	$	(0.01	)	$	(0.15	)

Weighted average shares outstanding – basic		20,669			20,394			20,988			20,669
Weighted average additional shares assuming conversion of potential common shares		0			0			0			0
Weighted average shares outstanding – diluted		20,669			20,394			20,988			20,669

(1311)

Segment Data

The Company is organized into two business segments, Sypris Technologies and Sypris Electronics. The segments are each managed separately because of the distinctions between the products, markets, customers, technologies and workforce skills of the segments. Sypris Technologies manufactures forged and finished steel components and subassemblies, high-pressure closures and other fabricated products. Sypris Electronics is focused on circuit card and full “box build” manufacturing, high reliability manufacturing, systems assembly and integration, design for manufacturability and design to specification work. There was no intersegment net revenue recognized in any of the periods presented.

The Company includes the unallocated costs of its corporate office, including the employment costs of its senior management team and other corporate personnel, administrative costs and net corporate interest expense incurred at the corporate level under the caption “General, corporate and other” in the table below. Such unallocated costs include those for centralized information technology, finance, legal and human resources support teams, certain professional fees, director fees, corporate office rent, certain self-insurance costs and recoveries, software license fees and various other administrative expenses that are not allocated to our reportable segments. The unallocated assets include cash and cash equivalents maintained in its domestic treasury accounts and the net book value of corporate facilities and related information systems. The unallocated liabilities consist primarily of the related party notes payable. Domestic income taxes are calculated at an entity level and are not allocated to our reportable segments. Corporate capital expenditures and depreciation and amortization include items attributable to the unallocated fixed assets of the corporate office and related information systems.

The following table presents financial information for the reportable segments of the Company (in thousands):

	Three Months Ended
	March 31,			April 1,			Three Months Ended
	2019			2018			April 5,		March 31,
	(Restated)						2020		2019
	(Unaudited)						(Unaudited)
Net revenue from unaffiliated customers:
Sypris Technologies	$	16,141		$	14,507		$	13,717	$	16,141
Sypris Electronics		3,423			5,435			8,708		3,423
	$	19,564		$	19,942		$	22,425	$	19,564
Gross profit (loss):
Sypris Technologies	$	2,304		$	2,107		$	2,493	$	2,304
Sypris Electronics		(1,444	)		(76	)		1,098		(1,444	)
	$	860		$	2,031		$	3,591	$	860
Operating income (loss):
Sypris Technologies	$	1,052		$	305
Sypris Electronics		(2,310	)		(755	)
General, corporate and other		(1,434	)		(1,176	)
	$	(2,692	)	$	(1,626	)
Income (loss) before taxes:
Sypris Technologies	$	907		$	304
Sypris Electronics		(2,327	)		(773	)
General, corporate and other		(1,540	)		(1,286	)
	$	(2,960	)	$	(1,755	)

(1412)

Commitments and Contingencies

The provision for estimated warranty costs is recorded at the time of sale and periodically adjusted to reflect actual experience. The Company’s warranty liability, which is included in accrued liabilities in the accompanying consolidated balance sheets as of ~~March 31, 2019~~April 5, 2020 and December 31, ~~2018~~2019 was ~~$572,000~~$581,000 and ~~$582,000,~~$569,000, respectively. The Company’s warranty expense for the three months ended April 5, 2020 and March 31, 2019 ~~and April 1, 2018~~ was not material.

The Company bears insurance risk as a member of a group captive insurance entity for certain general liability, automobile and workers’ compensation insurance programs, a self-insured worker’s compensation program and a self-insured employee health program. The Company records estimated liabilities for its insurance programs based on information provided by the third-party plan administrators, historical claims experience, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. The Company monitors its estimated insurance-related liabilities on a quarterly basis. As facts change, it may become necessary to make adjustments that could be material to the Company’s consolidated results of operations and financial condition.

The Company is involved in certain litigation and contract issues arising in the normal course of business. While the outcome of these matters cannot, at this time, be predicted in light of the uncertainties inherent therein, management does not expect that these matters will have a material adverse effect on the consolidated financial position or results of operations of the Company. Additionally, the Company believes its product liability insurance is adequate to cover all potential liability claims.

The Company accounts for loss contingencies in accordance with U.S. GAAP. Estimated loss contingencies are accrued only if the loss is probable and the amount of the loss can be reasonably estimated. With respect to a particular loss contingency, it may be probable that a loss has occurred but the estimate of the loss is within a wide range or undeterminable. If the Company deems an amount within the range to be a better estimate than any other amount within the range, that amount will be accrued. However, if no amount within the range is a better estimate than any other amount, the minimum amount of the range is accrued.

The Company has various current and previously-owned facilities subject to a variety of environmental regulations. The Company has received certain indemnifications from either companies previously owning these facilities or from purchasers of those facilities. As of ~~March 31, 2019~~April 5, 2020 and December 31, ~~2018,~~2019, no amounts were accrued for any environmental matters.

On December 27, 2017, the U.S. Department of Labor (the “DOL”) filed a lawsuit alleging that the Company had misinterpreted the language of ~~the~~its Company’s 401(k) Plans (collectively, the “Plan”). The DOL does not appear to dispute that the Company reached such interpretation in good faith and after consulting with independent ERISA counsel. If the DOL’s allegations were upheld by a court, the Company could be required to make additional contributions into the accounts of its Plan participants. ~~While the~~The Company regards the DOL’s allegations to be without merit and is continuing to vigorously defend the matter.

On February 17, 2017, several employees (“Lucas Plaintiffs”) of KapStone Charleston Kraft, LLC filed a lawsuit in South Carolina alleging that they had been seriously burned when they opened a hinged closure and a hot tar-like material spilled out. Among other claims, the Lucas Plaintiffs allege that Sypris Technologies, Inc. (“ST”) designed and manufactured the closure, that the closure was defective and that those defects had caused or contributed to their injuries. ST’s motion to dismiss for lack of jurisdiction was denied on February 28, 2020. The Company ~~submitted a counteroffer to a proposed settlement offer from the DOL in February 2019 in an amount deemed~~regards these allegations to be ~~immaterial~~without merit and any damages to be undeterminable at this time. The Company’s general liability insurer has accepted the ~~Company’s financial statements. The parties have been unable to reach any mutually acceptable settlement.~~

During the year ended December 31, 2017, the Company became aware of a lawsuit involving one of Sypris Electronics’ customers and its primary distributor. This customer informed the Company that, as a result of the lawsuit, the customer would no longer operate its business, and that it has transferred this business to a designated successor.defense costs. The Company ~~holds $746,000 of gross inventory related specifically~~is continuing to ~~this customer as of March 31, 2019. On December 21, 2017,~~vigorously defend the Company entered into a new supply agreement with the designated successor, which provides for purchases of the aforementioned inventory and additional purchases in excess of our inventories on hand and for prices in excess of our cost. As of March 31, 2019, the Company has recognized revenue of $293,000 under the new supply agreement and has received purchase orders under the new supply agreement, however not all purchase obligations were met as of March 31, 2019. No assurances can be given that the successor customer will be successful or will continue to comply with the terms of the new agreement, which could adversely affect our ability to recoup any or all of our investment in these inventories. Given the uncertainties described above, the Company maintains a reserve of $246,000 on the recoverability of the inventory as of March 31, 2019 and estimates that the range of loss that is reasonably possible should the program with the successor not be successful could increase by an additional $500,000.matter.

As of ~~March 31, 2019,~~April 5, 2020, the Company had outstanding purchase commitments of approximately ~~$9,831,000,~~$7,977,000, primarily for the acquisition of inventory and manufacturing equipment.

(1513)

Income Taxes

The provision for income taxes includes federal, state, local and foreign taxes. The Company’s effective tax rate varies from period to period due to the proportion of foreign and domestic pre-tax income expected to be generated by the Company. The Company provides for income taxes for its domestic operations at a statutory rate of 21% in ~~2019~~2020 and ~~2018~~2019 and for its foreign operations at a statutory rate of 30% in ~~2019~~2020 and ~~2018.~~2019. Reconciling items between the federal statutory rate and the effective tax rate also include the expected usage of federal net operating loss carryforwards, state income taxes, valuation allowances and certain other permanent differences.

The Company recognizes liabilities or assets for the deferred tax consequences of temporary differences between the tax bases of assets or liabilities and their reported amounts in the financial statements in accordance with ASC 740, Income Taxes (ASC 740). These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of assets or liabilities are recovered or settled. ASC 740 requires that a valuation allowance be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The Company evaluates its deferred tax position on a quarterly basis and valuation allowances are provided as necessary. During this evaluation, the Company reviews its forecast of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred tax assets to determine if a valuation allowance is needed. Based on its current forecast, the Company has established a valuation allowance against ~~the domestic net~~all U.S. deferred tax ~~asset.~~assets and a portion of its non-U.S. deferred tax assets. Until an appropriate level and characterization of profitability is attained, the Company expects to continue to maintain a valuation allowance on its net deferred tax assets related to future U.S. and a portion of its non-U.S. tax benefits.

(1614)

Employee Benefit Plans

~~Pension~~The following table details the components of pension (income) expense ~~(benefit) consisted of the following~~ (in thousands):

	Three Months Ended						Three Months Ended
	March 31,			April 1,			April 5,			March 31,
	2019			2018			2020			2019
	(Unaudited)						(Unaudited)
Service cost	$	1		$	2		$	1		$	1
Interest cost on projected benefit obligation		329			333			352			329
Net amortizations of actuarial loss		158			168			166			158
Expected return on plan assets		(325	)		(326	)		(270	)		(325	)
Net periodic benefit cost	$	163		$	177		$	249		$	163

The net periodic benefit cost of the defined benefit pension plans incurred during the three-month periods ended April 5, 2020 and March 31, 2019 ~~and April 1, 2018~~ are reflected in the following captions in the accompanying consolidated statements of operations (in thousands):

(17)	Subsequent Events

There are many uncertainties regarding the current COVID-19 pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of our business, including how it will impact our customers, employees, suppliers, vendors, business partners and distribution channels. While the pandemic did not materially adversely affect the Company’s financial results and business operations in the Company’s first fiscal quarter ended April 5, 2020, we are unable to predict the impact that COVID-19 will have on our financial position and operating results due to numerous uncertainties. The Company expects to continue to assess the evolving impact of the COVID-19 pandemic and intends to make adjustments to its responses accordingly.

Subsequent to April 5, 2020, the Company reduced production at our operations in response to COVID-19 related government mandates, reduced demand conditions and other operational drivers, primarily in our Sypris Technologies segment. This resulted in temporarily suspending operations on certain production lines with corresponding reductions in headcount or work hours for our employees, primarily at our facility in Toluca, Mexico. The extent of the impact of the COVID-19 outbreak on our operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, its impact on our customers and suppliers and the range of governmental and community reactions to the pandemic, which are uncertain and cannot be fully predicted at this time.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 in the United States. On April 27, 2020, the Company received approval from the U.S. Small Business Administration (the “SBA”) to fund its request for a loan under the SBA’s Paycheck Protection Program created as part of the CARES Act. In connection with the approval, on May 1, 2020, the Company entered into a promissory note in favor of BMO Harris Bank National Association (“BMO”), as lender, with a principal amount of $3,558,000 pursuant to the Paycheck Protection Program (the “PPP Note”). The PPP Note bears interest at a fixed rate of 1.0% per annum, with the first six months of principal and interest deferred. Beginning in October 2020, the Company expects to make 18 equal payments of principal and interest with the final payment due in April 2022. The PPP Note may be accelerated upon the occurrence of an event of default.

The PPP Note is unsecured and guaranteed by the SBA. The Company may apply for forgiveness of the PPP Note, with the amount which may be forgiven equal to the sum of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred by the Company during the eight-week period beginning upon receipt of PPP Note funds, subject to limitations and calculated in accordance with the terms of the CARES Act. Any forgiveness of the PPP Note shall be subject to approval of the SBA and will require the Company and BMO to apply to the SBA for such treatment in the future. We intend to comply with the necessary requirements to seek forgiveness of all or a portion of the PPP Note, but no assurance can be provided that we will obtain forgiveness of the PPP Note in whole or in part.

On April 13, 2020, the Company completed the sale of the Broadway Plant real estate for $1,700,000 and recognized a gain of $807,000.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a diversified provider of truck components, oil and gas pipeline components and aerospace and defense electronics. We offer a wide range of manufactured products, often under multi-year sole-source contracts.

We are organized into two business segments, Sypris Technologies and Sypris Electronics. Sypris Technologies, which is comprised of Sypris Technologies, Inc. and its subsidiaries, generates revenue primarily from the sale of forged, machined, welded and heat-treated steel components primarily for the heavy commercial vehicle and high-pressure energy pipeline applications. Sypris Electronics, which is comprised of Sypris Electronics, LLC, generates revenue primarily through circuit card and full “box build” manufacturing, high reliability manufacturing, systems assembly and integration, design for manufacturability and design to specification work.

We focus on those markets where we believe we have the expertise, qualifications and leadership position to sustain a competitive advantage. We target our resources to support the needs of industry participants that embrace technological innovation and flexibility, coupled with multi-year contractual relationships, as a strategic component of their supply chain management. These contracts, many of which are sole-source by part number, have historically created opportunities to invest in leading-edge processes or technologies to help our customers remain competitive. The productivity and innovation that can result from such investments helps to differentiate us from our competition when it comes to cost, quality, reliability and customer service.

The COVID-19 pandemic has resulted, and is likely to continue to result, in significant economic disruption and has and will likely adversely affect our business. As of the date of this filing, significant uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic. The Company has continued to operate at each location and sought to remain compliant with government regulations imposed due to the COVID-19 pandemic. During periods of lower production, the Company is scheduling and performing certain preventative maintenance procedures on its equipment and is utilizing resources to continue making progress on certain of the strategic initiatives included in the Company’s 2020 annual operating plan. The Company began to experience lower revenue late in the first quarter due to the COVID-19 pandemic, and a more significant impact is expected in the second quarter. While the Company expects the effects of the pandemic will negatively impact its results of operations, cash flows and financial position, management has implemented actions to mitigate the financial impact, to protect the health of its employees and to comply with government regulations at each location. Factors deriving from the COVID-19 response that have or may negatively impact sales and gross margin in the future include, but are not limited to: limitations on the ability of our suppliers to manufacture, or procure from manufacturers, the material components we utilize in the manufacture of the products we sell, or to meet delivery requirements and commitments; limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to remain at home; limitations on the ability of our customers to conduct their business and purchase our products; and limitations on the ability of our customers to pay us on a timely basis.

We are experiencing disruptions in our business as we implement modifications to preserve adequate liquidity and ensure that our business can continue to operate during this uncertain time. Certain states and the Mexican government have issued executive orders requiring all workers to remain at home, unless their work is essential. We believe that, based on the various standards published to date, the work our employees are performing for the aerospace and defense, energy and transportation markets is essential. With respect to liquidity, we are evaluating and taking actions to reduce costs and spending across our organization. This includes reducing hiring activities, reducing compensation for our Chairman, President and CEO, certain other senior leadership and corporate personnel and our Board of Directors, and limiting discretionary spending. We have also reduced anticipated spending on capital investment projects and are managing working capital to preserve liquidity during this crisis. In addition to these activities, subsequent to quarter end, the Company secured a $3.6 million term loan with BMO Harris Bank National Association (“BMO”), pursuant to the Paycheck Protection Program (“PPP Loan”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). Proceeds from the PPP Loan are expected to be used to retain workers and maintain payroll, make lease payments and utility payments.

While we are unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources, we will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers and shareholders.

~~The Sypris Technologies segment continues to migrate from its historical, concentrated dependence upon~~After two years of record high volumes, the commercial vehicle markets to a more diversified base of customers who place value on our innovation, flexibility and lean manufacturing capabilities. During 2016, the continued strength of the U.S. dollar, the tightening of margins in certain sectors of the commercial vehicle markets and the generally softening of certain key market segments led the Company to reevaluate the strategic importance of each of its customers to the Company’s long-term success. In connection with this reevaluation process, the Company and Meritor determined not to renew their supply agreement for certain of Meritor’s domestic, forged axle shafts beginning in 2017. The Company has also not renewed its business with Eaton. However, the Company continues to supply component parts to Sistemas Automotrices de Mexico, S.A de C.V. (“Sistemas”), Meritor’s joint venture in Mexico, and continues to supply axle shafts to Meritor’s Brazilian subsidiary. Duringsoftened materially during the fourth quarter of ~~2018,~~2019, impacting production rates as customers responded to the demand reduction and balanced inventory levels. This anticipated cyclical decline, coupled with the impact of the COVID-19 pandemic, is expected to result in a significant decline in North American Class 4-8 shipments in 2020, with Class 8 production dropping as much as 40%. Sypris Technologies has experienced a significant reduction in demand from customers serving the automotive, commercial vehicle, sport utility vehicle and off-highway markets and the significant drop in oil prices has created uncertainty for many of the energy infrastructure projects utilizing the components we produce and sell. Sypris Technologies’ revenue was negatively impacted at the end of the first quarter and a more significant impact is expected in the second quarter. We further believe that revenue will continue to be negatively impacted in periods beyond the second quarter until the COVID-19 pandemic diminishes. We believe that the market diversification Sypris Technologies has accomplished over recent years by adding new programs in the automotive, sport-utility and off-highway markets has benefited and will continue to benefit the Company ~~entered into a new three-year agreement to supply axle shafts,~~ as ~~well~~demand for our products in these markets did not decline as ~~a number of other product lines, to Sistemas for periods of up to six years from~~dramatically as demand declined in the ~~commencement of production.~~overall commercial vehicle market. In addition, we believe that demand may recover more quickly in the sport-utility and off-highway markers than the overall commercial vehicle market.

~~The~~Depressed oil and gas prices coupled with reduced travel, business closures, and other economic impacts related to the COVID-19 pandemic are suppressing near-term oil and natural gas demand, which has adversely impacted the oil and gas markets served by our Tube Turns® brand of engineered product ~~lines,~~lines. This is causing major pipeline developers to significantly scale back near term capital investments in new pipeline infrastructure. This has resulted in reduced demand for our products. However, the downturn is having less of an impact on existing pipeline development projects, as many have ~~strengthened along with the overall economy, and domestic pipeline projects continue to be active with U.S. domestic gas and oil production increasing in 2018 and the first quarter of 2019.~~been financed based upon long-term, bilateral contracts.

We ~~are pursuing~~will continue to pursue new business in a wide variety of markets from light automotive ~~to refrigeration valves~~ to new energy related product lines to achieve a more balanced portfolio across our customers, markets and products. We have recently announced new program awards in each of these markets that have contributed to revenue growth for Sypris Technologies in 2018 and the first quarter of 2019. We believe these opportunities provide a solid multi-year foundation for growth and that additional prospective business may result in increased revenue going forward.

In accordance with the U.S. Department of Defense (DoD) guidance issued in March 2020 designating the Defense Industrial Base as a critical infrastructure workforce, our Sypris Electronics production facility has continued to operate in support of essential products and services required to meet national security commitments to the U.S. Government and the U.S. military.

The U.S. Government has taken actions in response to COVID-19 to increase progress payments in new and existing contracts and accelerate contract awards through increased use of Undefinitized Contracting Actions (UCAs) to provide cash flow and liquidity for companies in the Defense Industrial Base, including large prime contractors and smaller suppliers. Certain of the large prime contractors are implementing multiple actions to help support certain suppliers affected by COVID-19, including accelerating payments to businesses, such as Sypris Electronics.

In the past few years, we have faced challenges within Sypris Electronics, ~~such as the uncertainty~~including certain electronic component shortages and extensive lead-time manufacturing issues. This had a negative impact on our production schedules and margin performance in 2019. However, these negative impacts did not persist in the ~~worldwide macroeconomic climate~~first quarter of 2020, as many of the component shortages and ~~its impact on~~issues were resolved. The majority of our aerospace and defense ~~spending patterns globally over~~programs require specific components that are sole-sourced to specific suppliers; therefore, the ~~last several years, as well as~~resolution of supplier constraints requires coordination with our customers or the ~~emergence~~end-users of ~~new competitors~~the products. We have partnered with our customers to qualify alternative components or suppliers and will continue to exercise our ~~manufacturing capabilities.~~supply chain to mitigate the impact on our business. While the COVID-19 outbreak did not have a material impact on our supply chain in the first quarter of 2020, overall component shortages may become a challenge throughout 2020. As a result, there can be no assurance that we will continue to be successful in addressing these shortages and issues.

~~However,~~Despite the electronic component shortage challenges, in 2019, we ~~have recently~~ announced new program awards for Sypris Electronics, ~~that contributed to revenue in 2018,~~ with certain programs continuing into ~~2019.~~2020. In addition to program awards related to weapons systems, electronic warfare and infrared countermeasures in our traditional aerospace and defense markets, we have also been awarded programs related to the communication and navigation markets which align with our advanced capabilities for delivering products for complex, high cost of failure platforms.

On February 10, 2020, the U.S. presidential administration submitted the fiscal year (FY) 2021 President’s Budget, requesting $1.34 trillion in total discretionary funding (a U.S. Government fiscal year starts on October 1 and ends on September 30). The ~~National Defense Authorization~~FY 2021 budget requests $672 billion for base discretionary national defense spending, the maximum permitted under the Bipartisan Budget Act ~~for Fiscal Year~~of 2019 ~~provides nearly $700~~(BBA-19). The total national defense request is $741 billion. The FY 2021 budget requests $705 billion ~~in funding~~ for the ~~U.S. Department of Defense, which~~DoD. The FY 2021 budget is expected to support program growth and market expansion opportunities for ~~the remainder of 2019~~periods beginning late in 2020 and into 2021 for aerospace and defense participants. We expect to compete for follow-on business opportunities on future builds of several existing ~~programs, as our competitiveness is enhanced by the reduction in our overhead structure following our relocation into a new manufacturing facility at the beginning of 2017.~~programs.

In the near term, certain electronic component shortages and extensive lead-time issues are prevalent in many of the segments in the electronic manufacturing industry that we serve. This had a negative impact on our segment revenues and gross profit in the first quarter. We are working with our customers to qualify alternative components or suppliers to mitigate the impact on our business. We expect that these issues will be resolved for some component shortages in the next 6 to 9 months, but these and other shortages may persist as a challenge beyond 2019. The majority of our aerospace and defense programs require specific components that are sole-sourced to specific suppliers; therefore, the resolution of supplier constraints requires coordination with our customers or the end-users of the products. As a result, there can be no assurance that we will be successful in addressing these shortages and issues.

The Company completed a number of strategic actions during the past three years in response to the nonrenewal of its supply agreement with certain Tier I automotive customers primarily due to global pricing constraints, the downturn in the commercial vehicle market beginning in the fourth quarter of 2015 and other market and economic factors impacting the Company during this period. Strategic actions taken included: (i) the initiation of the exit of the Broadway Plant (see discussion below), (ii) the sale of the Company’s SioMetrics, Cyber Range, Information Security Solutions and Data Systems product lines (the “CSS business”) in 2016, (iii) the sale and leaseback of the Company’s facility in Toluca, Mexico in 2016, (iv) the sale of the Company’s manufacturing facility in Morganton, North Carolina in 2015, (v) the capacity reallocation of certain oil and gas industry components to Mexico, (vi) the relocation of its Sypris Electronics operation to a new facility, and (vii) reductions in employment costs through senior management pay reductions. Using a portion of the proceeds generated from asset sales noted above, the Company paid off all of its most senior, secured debt consisting of a “Term Loan” and “Revolving Credit Facility” in August 2016. During this period, the Company also received the benefit of cash infusions from Gill Family Capital Management, Inc. (“GFCM”) in the form of secured promissory note obligations totaling $6.5 million in principal, scheduled to mature in part in 2021, 2023 and 2025 (See Note 12 to the consolidated financial statements in this Form 10-Q).

The Company has reduced its reliance on certain of its traditional Tier 1 customers that represent the primary suppliers to the original equipment manufacturers (“OEMs”) in the commercial vehicle markets, while targeting to replace these customers with more diversified, longer-term relationships, especially among the OEMs and others who place a higher value on the Company’s innovation, flexibility and core commitment to lean manufacturing principles. Among the customer programs not being renewed were (i) a supply agreement with Meritor that expired on January 1, 2017 and (ii) the Company’s business with Eaton, both of which utilized production at the Company’s Broadway Plant. As a result of these decisions, the Company experienced a significant reduction in its commercial vehicle revenues in 2017 (See Note 8 to the consolidated financial statements in this Form 10-Q).

On February 21, 2017, the Board of Directors approved a modified exit or disposal plan with respect to the Broadway Plant, which was substantially complete as of the end of 2017. The Company has relocated certain assets from the Broadway Plant to other manufacturing facilities as needed to serve its existing and targeted customer base and identified underutilized or non-core assets for disposal. Management expects to use a portion of the proceeds from the sale of any underutilized or non-core assets to help fund costs of transferring any additional equipment from the Broadway Plant. Management is currently evaluating options for the real estate and any remaining assets in the Broadway Plant.

~~Our failure or inability to realize these key financial objectives could materially and adversely impair the Company’s ability to operate, its cash flows, financial condition and ongoing results.~~

The table below compares our segment and consolidated results for the first quarter of ~~2019~~2020 to the first quarter of ~~2018.~~2019. It presents the results for each period, the change in those results from ~~2018~~2019 to ~~2019~~2020 in both dollars and as a percentage, as well as the results for each period as a percentage of net revenue.

Three Months Ended ~~March 31~~~~, 201~~9April 5, 2020 Compared to Three Months Ended ~~April~~ 1~~, 201~~8March 31, 2019

										Year Over																		Year Over
							Year Over			Year			Results as Percentage of												Year Over			Year	Results as Percentage of
							Year			Percentage			Net Revenue for the Three												Year			Percentage	Net Revenue for the Three
	Three Months Ended,						Change			Change			Months Ended						Three Months Ended,						Change			Change	Months Ended
	March 31,			April 1,			Favorable			Favorable			March 31,			April 1,			April 5,			March 31,			Favorable			Favorable	April 5,			March 31,
	2019			2018			(Unfavorable)			(Unfavorable)			2019			2018			2020			2019			(Unfavorable)			(Unfavorable)	2020			2019
	(Restated)												(Restated)
	(in thousands, except percentage data)																		(in thousands, except percentage data)
Net revenue:
Sypris Technologies	$	16,141		$	14,507		$	1,634			11.3	%		82.5	%		72.7	%	$	13,717		$	16,141		$	(2,424	)	(15.0)%		61.2	%		82.5	%
Sypris Electronics		3,423			5,435			(2,012	)		(37.0	)		17.5			27.3			8,708			3,423			5,285		154.4		38.8			17.5
Total		19,564			19,942			(378	)		(1.9	)		100.0			100.0			22,425			19,564			2,861		14.6		100.0			100.0

Cost of sales:
Sypris Technologies		13,837			12,400			(1,437	)		(11.6	)		85.7			85.5			11,224			13,837			2,613		18.9		81.8			85.7
Sypris Electronics		4,867			5,511			644			11.7			142.2			101.4			7,610			4,867			(2,743	)	(56.4)		87.4			142.2
Total		18,704			17,911			(793	)		(4.4	)		95.6			89.8			18,834			18,704			(130	)	(0.7)		84.0			95.6

Gross profit (loss):
Sypris Technologies		2,304			2,107			197			9.3			14.3			14.5			2,493			2,304			189		8.2		18.2			14.3
Sypris Electronics		(1,444	)		(76	)		(1,368	)		(1,800.0	)		(42.2	)		(1.4	)		1,098			(1,444	)		2,542		NM		12.6			(42.2	)
Total		860			2,031			(1,171	)		(57.7	)		4.4			10.2			3,591			860			2,731		317.6		16.0			4.4

Selling, general and administrative		3,454			3,148			(306	)		(9.7	)		17.6			15.8			3,223			3,454			231		6.7		14.4			17.6
Severance, relocation and other costs		98			509			411			80.7			0.5			2.6			91			98			7		7.1		0.4			0.5
Operating loss		(2,692	)		(1,626	)		(1,066	)		(65.6	)		(13.7	)		(8.2	)
Operating income (loss)																				277			(2,692	)		2,969		NM		1.2			(13.7	)

Interest expense, net		217			213			(4	)		(1.9	)		1.1			1.1			227			217			(10	)	(4.6)		1.0			1.1
Other expense (income), net		51			(84	)		(135	)		NM			0.3			(0.4	)
Other expense, net																				283			51			(232	)	(454.9)		1.3			0.3

Loss before taxes		(2,960	)		(1,755	)		(1,205	)		(68.7	)		(15.1	)		(8.8	)		(233	)		(2,960	)		2,727		92.1		(1.1	)		(15.1	)
Income tax expense, net		76			40			(36	)		(90.0	)		0.4			0.2			72			76			4		5.3		0.3			0.4

Net loss	$	(3,036	)	$	(1,795	)	$	(1,241	)		(69.1	)		(15.5	)%		(9.0	)%	$	(305	)	$	(3,036	)	$	2,731		90.0%		(1.4	)%		(15.5	)%

Net Revenue. Sypris Technologies primarily derives its revenue from the sale of forged and finished steel components and subassemblies and high-pressure closures and other fabricated products. Net revenue for Sypris Technologies ~~increased 11.3%~~decreased 15.0%, or ~~$1.6~~$2.4 million, for the first quarter of ~~2019~~2020 compared to the first quarter of ~~2018.~~2019. The net revenue ~~growth~~decrease for the quarter was primarily attributable to ~~increased~~decreased sales volume of ~~$1.6~~$3.5 million with customers in the commercial vehicle ~~market. Additionally, price increases on one of our commercial vehicle programs implemented during the fourth quarter of 2018 resulted in an increase of $0.3~~market and a $0.9 million ~~for the three months ended March 31, 2019. The growth for the year was partially offset by a~~ decline in energy related product sales partially offset by growth in the automotive, light truck and sport utility markets of ~~$0.3~~$1.9 million.

Sypris Electronics derives its revenue primarily from circuit card and full “box build” manufacturing, high reliability manufacturing and systems assembly and integration. Net revenue for Sypris Electronics ~~decreased $2.0~~increased $5.3 million to $8.7 million in the first quarter of 2020 compared to $3.4 million in the first quarter of ~~2019 compared to $5.4 million in~~2019. In the ~~first quarter of 2018. Revenue~~prior year, revenue for the first quarter ~~of 2019~~ was ~~primarily affected~~negatively impacted by shortages of certain electronic components and extensive lead-time issues in the electronic manufacturing industry. ~~The~~Additionally, the first quarter of 2019 was also impacted by shipments accelerated into the fourth quarter of 2018 as the Company planned for the implementation of a new ERP system effective in ~~January.~~January 2019. Many of challenges faced during the prior year with the electronic component shortages have been resolved and production rebounded to more normal run rates during the first quarter of 2020.

Gross Profit. Sypris Technologies’ gross profit increased $0.2 million to $2.5 million in the first quarter of 2020 as compared to $2.3 million in the first quarter of 2019. During 2019, ~~as compared to $2.1 million in~~ the ~~first quarter of 2018. The net increase in sales volume over~~results for the ~~prior~~ period ~~resulted in higher gross profit of $0.2 million. Additionally, gross profit was positively~~were negatively impacted ~~by a price increase on a commercial vehicle program implemented during the fourth quarter of 2018. These increases were partially offset~~ by additional start-up costs on new programs including ~~wage~~lower productivity, higher supply consumption and ~~fringe related costs.~~scrap and rework expense. Additionally, utility costs were higher as more production occurred during peak electrical rate periods. Labor productivity improved in the first quarter of 2020 driving lower variable employment costs and controls over supply spend, product quality and utility consumption contributed to increased profitability. These improvements were partially offset by lower contribution margin from the net decrease in sales volume over the prior period. Gross margin for the first quarter of 2020 reached 18.0% as compared to 14.3% in the prior year period.

Sypris Electronics’ gross profit ~~decreased $1.3~~increased $2.5 million to $1.1 million in the first quarter of 2020 as compared to a loss of $1.4 million ~~in the first quarter of 2019 as compared to a loss of $0.1 million~~ for the first quarter of ~~2018.~~2019. The ~~decrease~~increase in gross profit was primarily as a result of ~~lower volumes~~the growth in revenue during the quarter. Certain programs contributing to the improvement in revenue and gross margin for the comparable periods reached their expected quarterly run rates during the first quarter ~~driving an increase in unabsorbed overhead. Program mix also factored into~~of 2020 and allowed management to more efficiently balance production and to improve overhead absorption. The order backlog for Sypris Electronics is expected to support a stable revenue rate during the ~~decrease, as the Company experienced declines~~balance of 2020 and price increases on certain ~~higher~~programs could contribute to margin ~~legacy programs. The lower volumes on the legacy programs were partially offset by a new program which launched during 2018, which is still~~expansion beginning in the ~~ramp-up phase and~~second quarter. Gross margin for the first quarter of 2020 was 12.6% as compared to a negative gross margin ~~performance is lower than what is expected after full run rates are achieved.~~ of 42.2% in the prior year.

Selling, General and Administrative. Selling, general and administrative expense ~~increased $0.3~~decreased $0.2 million to ~~$3.5~~$3.2 million in the first quarter of ~~2019~~2020 as compared to ~~$3.2~~$3.5 million for the same period in ~~2018~~2019 primarily as a result of ~~higher employee medical insurance claim expenses during the period as compared to the prior year and~~lower consultation costs associated with the Company’s new ERP implementation effective in ~~January.~~

~~Severance~~~~, Relocation~~January 2019 and ~~Other Costs~~. ~~Severance, relocation and other costs~~a reduction in director fees, which were ~~$0.1 million for~~temporarily suspended effective as of the first quarter of ~~2019~~2020 amid the COVID-19 pandemic. Salary reductions implemented in response to the COVID-19 pandemic were effective as ~~compared~~of the beginning of the second quarter and will contribute to ~~$0.5 million~~lower expense in future periods.

Income Taxes.The Company’s income tax expense for the ~~first quarter~~three months ended April 5, 2020 and March 31, 2019 consists primarily of ~~2018.~~ currently payable state and local income taxes on domestic operations and foreign income taxes on one of its Mexican subsidiaries.

The ~~charges~~Company currently maintains a valuation allowance against its domestic deferred tax assets and a material portion of its foreign deferred tax assets as of April 5, 2020. The Company intends to continue to maintain a valuation allowance on these deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, given the recent earnings and anticipated future earnings for its Mexican operation, we believe that there is a reasonable possibility that, within the ~~first quarter of 2019 were primarily related~~next 12 months, sufficient positive evidence may become available to ~~mothball costs associated with the closure~~allow management to reach a conclusion that up to approximately $3.7 million of the ~~Broadway plant. The charges for the first quarter~~valuation allowance against foreign deferred tax assets as of ~~2018 included $0.1 million in equipment relocation costs and $0.4 million in other costs primarily related to mothball costs associated with the closure~~December 31, 2019 will no longer be needed. Release of the ~~Broadway plant.~~valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense in the period the release is recorded. However, the exact timing and amount of any valuation allowance release are subject to change on the basis of the level of profitability that the Company is able to achieve.

Payroll Protection Program. As described above, the Company secured a PPP Loan under the CARES Act after the end of the first quarter of 2020. Proceeds from the PPP Loan are expected to be used to retain workers and maintain payroll, make lease payments and utility payments. The PPP Loan is evidenced by a promissory note in favor of BMO, as lender, with a principal amount of $3.6 million (the “PPP Note”) that bears interest at a fixed annual rate of 1.00%, with the first six months of principal and interest deferred. Beginning in October 2020, the Company expects to make 18 equal monthly payments of principal and interest with the final payment due in April 2022. The PPP Note may be accelerated upon the occurrence of an event of default.

The PPP Note is unsecured and guaranteed by the U.S. Small Business Administration. The Company may apply for forgiveness of the PPP Note, with the amount which may be forgiven equal to the sum of payroll costs, covered rent and mortgage obligations, and covered utility payments incurred by the Company during the eight-week period beginning upon receipt of PPP Term Note funds, subject to limitations and calculated in accordance with the terms of the CARES Act. Any forgiveness of the PPP Note shall be subject to approval of the SBA and will require the Company and BMO to apply to the SBA for such treatment in the future. We intend to comply with the necessary requirements to seek forgiveness of all or a portion of the PPP Note, but no assurance can be provided that we will obtain forgiveness of the PPP Note in whole or in part.

Gill Family Capital Management Note. The Company has received the benefit of cash infusions from GFCM in the form of secured promissory note obligations totaling $6.5 million in principal as of ~~March 31, 2019~~April 5, 2020 and December 31, ~~2018~~2019 (the “Note”). GFCM is an entity controlled by the Company’s chairman, president and chief executive officer, Jeffrey T. Gill and one of our directors, R. Scott Gill. GFCM, Jeffrey T. Gill and R. Scott Gill are significant beneficial stockholders of the Company. As of ~~March 31, 2019,~~April 5, 2020, our principal commitment under the Note was $2.5 million due on April 1, 2021, $2.0 million on April 1, 2023 and the balance on April 1, 2025. The Note allows for up to an 18-month deferral of payment for up to 60% of the interest due on the notes maturing in April of 2021 and 2023, and provide for a first security interest in substantially all of the Company’s assets, including those in Mexico. During the first quarter of 2020, the Company provided notice to GFCM of its intention to elect to defer the specified portion of the interest payments due on April 6, 2020 and July 6, 2020.

Finance Lease Obligations. On March 9, 2016, the Company completed the sale of its 24-acre Toluca property for 215 million Mexican Pesos, or approximately $12.2 million in U.S. dollars. Simultaneously, the Company entered into a ten-year lease of the 9 acres and buildings currently occupied by the Company and needed for its ongoing business in Toluca. As a result of the Toluca Sale-Leaseback, the Company has a capital lease obligation of ~~$2.6~~$2.4 million for the building as of ~~March 31, 2019.~~April 5, 2020.

In January 2018, the Company entered into a capital lease for $1.3 million for new production equipment installed at its Sypris Electronics facility during 2017. The balance of the lease obligation as of ~~March 31, 2019~~April 5, 2020 was ~~$0.6~~$0.3 million.

In February 2019, the Company entered into a capital lease for $0.3 million for new machinery at its Sypris Technologies facility in the U.S. The balance of the lease obligation as of ~~March 31, 2019~~April 5, 2020 was ~~$0.3~~$0.2 million.

Purchase Commitments. We had purchase commitments totaling approximately ~~$9.8~~$8.0 million at ~~March 31, 2019,~~April 5, 2020, primarily for inventory and manufacturing equipment.

Cash Balance. ~~At March 31, 2019,~~April 5, 2020, we had approximately ~~$5.7~~$5.2 million of cash and cash equivalents, of which ~~$1.2~~$1.9 million was held in jurisdictions outside of the U.S. that, if repatriated, could result in withholding taxes.

We have projected that our cash and cash equivalents will be sufficient to allow us to continue operations for the next 12 months. Significant changes from our current forecasts, including, but not limited to: (i) the impact of the COVID-19 pandemic and changes in worldwide and U.S. economic conditions (ii) meaningful shortfalls in projected revenue or sales proceeds from underutilized or non-core equipment, ~~(ii)~~(iii) unexpected costs or expenses, and/or ~~(iii)~~(iv) operating difficulties which cause unexpected delays in scheduled shipments, could require us to seek additional funding or force us to make further reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs. Any of these actions could materially harm our business, results of operations and future prospects.

Operating Activities. Net cash ~~used in~~provided by operating activities was ~~$4.5~~$0.7 million in the first quarter of ~~2019,~~2020, as compared to ~~$0.6~~cash used of $4.5 million ~~used~~ in the same period of ~~2018.~~2019. The aggregate ~~decrease~~increase in accounts receivable in ~~2019~~2020 resulted in a usage of cash of $1.5 million. The decrease in inventory in 2020 resulted in a source of cash of $0.8 million. The ~~investment in inventory in 2019 resulted in a usage of cash of $2.6 million. The increase~~decrease in inventory primarily relates to the ~~new program revenue growth for Sypris Electronics. A significant portion of~~expected decline in volumes within the ~~inventory receipts were funded through prepayments from customers of Sypris Electronics~~commercial vehicle market in ~~the second half of 2018.~~2020. Additionally, there was ~~a decrease~~an increase in accounts payable during the quarter, ~~which resulted in~~providing a ~~usage~~source of cash of ~~$1.2~~$1.5 million. Accrued and other liabilities ~~increased~~decreased during the first quarter of ~~2019,~~2020, resulting in a ~~source~~use of cash of ~~$0.4~~$0.8 million, primarily as a result of ~~additional prepayments from customers of Sypris Electronics.~~a decrease in unearned revenue.

Investing Activities. Net cash used in investing activities was ~~$0.3~~$0.2 million ~~for capital expenditures~~ for the first quarter of ~~2019~~2020 as compared to ~~neutral~~$0.3 million for the first quarter of ~~2018.~~2019. Net cash used in investing activities for the first quarter of ~~2018 includes~~2020 included capital expenditures of $0.5 million partially offset by proceeds of ~~$0.4~~$0.3 million from the sale of idle assets by Sypris Technologies during the ~~period offset by~~period. Net cash used in investing activities in the first quarter of 2019 included capital expenditures of ~~$0.4~~$0.3 million. On April 13, 2020, the Company completed the sale of the Broadway Plant real estate and received gross cash proceeds of $1.7 million and recognized a gain of $0.8 million.

Financing Activities. Net cash used in financing activities was $0.2 million for the first quarter of 2020 and was primarily comprised of capital lease payments. Net cash used in financing activities was $0.2 million for the first quarter of 2019 and was comprised of capital lease payments of $0.1 million and payments of $0.1 million for minimum statutory tax withholdings on stock-based compensation. ~~Net cash used in financing activities in the first quarter of 2018 was $0.4 million and was comprised of capital lease payments.~~

See the information concerning our critical accounting policies included under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation - Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019. There have been no significant changes in our critical accounting policies during the three months ended ~~March 31, 2019, with the exception of leases. See Note~~April 5, ~~“Leases,” to the consolidated financial statements included in this Report.~~2020.

This Quarterly Report on Form ~~10-Q/A,~~10-Q, and our other oral or written communications, may contain “forward-looking” statements. These statements may include our expectations or projections about the future of our business, industries, business strategies, prospects, potential acquisitions, liquidity, financial condition or financial results and our views about developments beyond our control, including domestic or global economic conditions, government spending, industry trends and market developments. These statements, including those outlined in management’s recovery plan, are based on management’s views and assumptions at the time originally made, and, except as required by law, we undertake no obligation to update these statements, even if, for example, they remain available on our website after those views and assumptions have changed. There can be no assurance that our expectations, projections or views will come to pass, and undue reliance should not be placed on these forward-looking statements.

A number of significant factors could materially affect our specific business operations and cause our performance to differ materially from any future results projected or implied by our prior statements. Many of these factors are identified in connection with the more specific descriptions contained throughout this report. Other factors which could also materially affect such future results currently include: the ~~quantitative effects~~impact of COVID-19 and economic conditions on our future operations; possible public policy response to the pandemic, including legislation or restrictions that may impact our operations or supply chain; our ability to comply with the requirements of the ~~restatement~~SBA and seek forgiveness of ~~our previously issued unaudited consolidated interim financial statements as~~all or a portion of ~~and for~~ the ~~quarter ended March 31, 2019; the effectiveness of our internal control over financial reporting and our disclosure controls and procedures;~~PPP Loan; our failure to achieve ~~targeted gains~~ and ~~cash proceeds from the anticipated sale of certain equipment; our failure to return to~~maintain profitability on a timely basis by steadily increasing our revenues from profitable contracts with a diversified group of customers, which would cause us to continue to use existing cash resources or other assets to fund operating losses; our failure to achieve targeted gains and cash proceeds from the anticipated sale of certain equipment; the fees, costs and supply of, or access to, debt, equity capital, or other sources of liquidity; dependence on, retention or recruitment of key ~~employees;~~employees and distribution of our human capital; the cost, quality, timeliness, efficiency and yield of our operations and capital investments, including the impact of tariffs, product recalls or related liabilities, employee training, working capital, production schedules, cycle times, scrap rates, injuries, wages, overtime costs, freight or expediting costs; disputes or litigation involving governmental, supplier, customer, employee, creditor, stockholder, product liability or environmental claims; our inability to develop new or improved products or new markets for our products; cost, quality and availability of raw materials such as steel, component parts (especially electronic components), natural gas or utilities; breakdowns, relocations or major repairs of machinery and equipment, especially in our Toluca Plant; our inability to regain compliance with the NASDAQ listing standards minimum closing bid price in a timely manner; our reliance on a few key customers, third party vendors and sub-suppliers; continued shortages and extensive lead-times for electronic components; inventory valuation risks including excessive or obsolescent valuations or price erosions of raw materials or component parts on hand or other potential impairments, non-recoverability or write-offs of assets or deferred costs; other potential weaknesses in internal controls over financial reporting and enterprise risk management; ~~disputes~~failure to adequately insure or ~~litigation involving governmental, supplier, customer, employee, creditor, stockholder, product liability or~~to identify environmental ~~claims; the fees, costs and supply of, or access to, debt, equity capital,~~ or other ~~sources of liquidity; our reliance on a few key customers, third party vendors and sub-suppliers; continued shortages and extensive lead-times for electronic components; breakdowns, relocations~~insurable risks; unanticipated or ~~major repairs of machinery and equipment, especially in our Toluca Plant;~~uninsured disasters, public health crises, losses or business risks; our failure to successfully complete final contract negotiations with regard to our announced contract “orders”, “wins” or “awards”; volatility of our customers’ forecasts, scheduling demands and production levels which negatively impact our operational capacity and our effectiveness to integrate new customers or suppliers, and in turn cause increases in our inventory and working capital levels; the costs of compliance with our auditing, regulatory or contractual obligations; labor relations; strikes; union negotiations; pension valuation, health care or other benefit costs; our inability to patent or otherwise protect our inventions or other intellectual property from potential competitors; adverse impacts of new technologies or other competitive pressures which increase our costs or erode our margins; U.S. government spending on products and services that Sypris Electronics provides, including the timing of budgetary decisions; changes in licenses, security clearances, or other legal rights to operate, manage our work force or import and export as needed; risks of foreign operations; currency exchange rates; war, terrorism, or political uncertainty; cyber security threats and disruptions; ~~failure to adequately insure or to identify environmental or other insurable risks; unanticipated or uninsured disasters, losses or business risks;~~ inaccurate data about markets, customers or business conditions; or unknown risks and uncertainties and the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019.

We are a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K and thus are not required to provide the quantitative and qualitative disclosures about market risk specified in Item 305 of Regulation S-K.

~~We have established~~ disclosure controls and ~~procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under~~procedures. Based on the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that information relating to the Company is accumulated and communicated to management, including our principal officers as appropriate to allow timely decisions regarding required disclosure. In connection with the Original Filing, our Chief Executive Officer and Chief Financial Officer evaluated the effectivenessevaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer and our Principal Financial Officer have concluded that as of ~~March 31, 2019 and concluded that~~the end of the period covered by this report, our disclosure controls and procedures were effective as of March 31, 2019. In connection with the filing of this Form 10-Q/A, our Chief Executive Officer and Chief Financial Officer re-evaluated the conclusions regarding the effectiveness of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective as of March 31, 2019 due to material weaknesses in our internal control over financial reporting as described below.effective.

As described in the Explanatory Note to this Form 10-Q/A, the Company identified misstatements in the previously-reported quarter ended March 31, 2019. The misstatements were the result of improperly designed controls around the implementation of a new ERP system at our Sypris Electronics segment effective January 1, 2019. Due to data entry processing errors that were made following this transition to the new ERP system, certain vendor invoices related to raw material inventory receipts in the first quarter of 2019 for the Sypris Electronics segment were incorrectly recorded in the second quarter of 2019. These errors resulted in an understatement of accounts payable and cost of sales as of and for the quarter ended March 31, 2019.

~~In connection with the restatement of Company’s financial statements for the quarter ended March 31, 2019, the Company identified two material weaknesses~~(b) Changes in internal controls ~~over financial reporting that arose from the new ERP system implementation. The two material weaknesses are:~~

The Audit Committee, the Board of Directors, and management are committed to maintaining a strong internal control environment. As a result, the Company has been actively engaged in developing and implementing remediation plans to address the material weaknesses outlined above. The remediation efforts include the following:

Management believes the foregoing remedial efforts will effectively remediate the material weaknesses, but the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation efforts described above.

Beginning January 1, 2019, we implemented the updated guidance on lease accounting. In connection with the adoption of this standard, we implemented changes to our disclosure controls, procedures related to lease accounting as well as the associated control activities within.

On January 1, 2019, we implemented an ERP system at Sypris Electronics. The implementation resulted in the two material weaknesses identified above. We believe we have developed an appropriate plan to remediate and have begun our remediation efforts related to the material weaknesses.

~~Other than the updates and remediation efforts described above, here~~. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are involved from time to time in litigation and other legal or environmental proceedings incidental to our business. Neither we, nor any of our subsidiaries, are currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding currently threatened against us.

Information regarding risk factors appears in Part I — Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Forward-Looking Statements,” in this Quarterly Report on Form ~~10-Q/A,~~10-Q, and in Part I — Item 1A, “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018. There~~2019. Except for below, there have been no material changes during the fiscal quarter from the risk factors disclosed in our Annual Report on Form ~~10-K~~10-K.

The COVID-19 pandemic could materially adversely affect our financial condition and results of operations.

The novel strain of the coronavirus identified in China in late 2019 (COVID-19) has globally spread throughout other ~~than with respect~~areas such as Asia, Europe, the Middle East, and North America and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns. These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our respective vendors, suppliers, and partners. We have manufacturing operations in the U.S. and Mexico, and each of these countries has been affected by the outbreak and taken measures to try to contain it. While we believe that, based on the various standards published to date, the work our employees are performing for the aerospace and defense, energy and transportation markets is essential, there can be no assurance that governmental authorities will not impose restrictions on the operations of our facilities as a result of the COVID-19 pandemic or that our facilities will continue to operate during the pandemic. If our operations or the operations of our suppliers are restricted, we may be unable to perform fully on our contracts and our costs may increase as a result of the COVID-19 outbreak. These cost increases may result in unfavorable changes in estimate which may not be fully recoverable or adequately covered by insurance. The ultimate impact and efficacy of government measures and potential future measures is currently unknown.

There is considerable uncertainty regarding the business impacts from such measures and potential future measures. Shelter-in-place orders and other measures, including work-from-home and social distancing policies implemented to protect employees, have resulted in reduced workforce availability at some of our sites, and reduced capacity at some of our vendors and suppliers. Restrictions on our access to or operation of our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, can impact our ability to meet customer demand and could have a material adverse effect on our financial condition and results of operations, particularly if prolonged. Similarly, current and future restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, can also impact our ability to meet demand and could materially adversely affect us. Our customers have experienced, and may continue to experience, disruptions in their operations and supply chains, which can result in delayed, reduced, or canceled orders, or collection risks, and which may adversely affect our results of operations.

The pandemic has significantly increased economic and demand uncertainty. It is likely that the current outbreak and continued spread of COVID-19 will cause an economic slowdown, and it is possible that it could cause a global recession. There is a significant degree of uncertainty and lack of visibility as to the ~~risk factors discussed below.~~

~~Implementation~~extent and duration of any such slowdown or recession. We are currently seeing negative impacts on demand in some of our ~~new enterprise resource planning system has~~markets, particularly automotive and oil and gas, and are expecting slowing economic conditions to adversely ~~impacted~~affect those markets for the balance of 2020. Given the significant economic uncertainty and ~~could continue~~volatility created by the pandemic, it is difficult to ~~negatively affect~~predict the nature and extent of impacts on our business.

~~We rely extensively~~The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, cancellation of physical participation in meetings, events and conferences, and social distancing measures), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, vendors, and suppliers. Work-from-home and other measures introduce additional operational risks, including cybersecurity risks, which could have an adverse effect on our ~~information technology (“IT”) systems~~operations. There is no certainty that such measures will be sufficient to ~~assist us in managing our business~~mitigate the risks posed by the virus, and ~~summarizing our operational results. On January 1, 2019 we deployed a new ERP system at Sypris Electronics. The new ERP system was implemented~~illness and workforce disruptions could lead to ~~position the Company for long-term growth, further enhance operating efficiencies and provide more effective management~~unavailability of our business operations, including sales order processing, inventory control, purchasing and supply chain management, and financial reporting. Implementing the new ERP system has been costly and has required, and may continue to require, the investment of significantkey personnel and ~~financial resources.~~harm our ability to perform critical functions. In addition to the risks ~~inherent~~specifically described above, the impact of COVID-19 is likely to implicate and exacerbate other risks disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the conversion to any new IT system, including the loss of information, disruption to our normal operations, and changes in accounting procedures, the implementation of our new ERP system has resulted in reporting disruptions related to maintaining an effective internal control environment.year ended December 31, 2019.

Failure to properly or adequately address any issues with our new ERP system could result in increased costs and the diversion of management’s and employees’ attention and resources and could materially adversely affect our operating results, internal control over financial reporting and ability to manage our business effectively. While the ERP system is intended to further improve and enhance our information management systems, the ongoing implementation of this new ERP system exposes us to the risks of integrating that system with our existing systems and processes, including possible continued disruption of our financial reporting.

~~We have identified two material weaknesses in our internal control over financial reporting which, if not remediated, could result in material misstatements of our financial statements.~~

We recently identified material weaknesses in internal control over financial reporting that pertain to our ERP system conversion that took place on January 1, 2019 involving (1) the ineffective design and implementation of effective controls with respect to the ERP system conversion, and (2) inadequate or ineffective process level and monitoring controls in the area of accounting close and financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Although we have developed and are implementing a plan to remediate these material weaknesses and believe, based on our evaluation to date, that these material weaknesses will be remediated in a timely fashion, we cannot ensure that this will occur within a specific timeframe. These material weaknesses will not be remediated until all necessary internal controls have been implemented, tested and determined to be operating effectively. In addition, we may need to take additional measures to address the material weaknesses or modify the planned remediation steps, and we cannot be certain that the measures we have taken, and expect to take, to improve our internal controls will be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that the identified material weaknesses will not result in an additional material misstatement of our financial statements. Moreover, we cannot ensure that we will not identify additional material weaknesses in our internal control over financial reporting in the future.

If we are unable to remediate the material weaknesses, our ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the rules and forms of the SEC, could be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties and materially and adversely impact our business and financial condition.

The following table summarizes the shares of common stock that were repurchased by the Company – all from its current or former employees – during the first quarter ended March 31, 2019 (dollars in thousands except per share data): None.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Item 1.	Financial Statements

	Consolidated Statements of Operations for the Three Months Ended April 5, 2020 and March 31, 2019 ~~and April 1, 2018~~	2

	Consolidated Statements of Comprehensive Loss for the Three Months Ended April 5, 2020 and March 31, 2019 ~~and April 1, 2018~~	3

	Consolidated Balance Sheets at ~~March 31, 2019~~April 5, 2020 and December 31, ~~2018~~ 2019	4

	Consolidated Cash Flow Statements for the Three Months Ended April 5, 2020 and March 31, 2019 ~~and April 1, 2018~~	5

	Consolidated Statements of Stockholders’ Equity for the Three Months Ended April 5, 2020 and March 31, 2019 ~~and April 1, 2018~~	6

	Notes to Consolidated Financial Statements	7

~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	18

~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~	23

~~Item 4.~~	~~Controls and Procedures~~	23


	~~Item 1A.~~	~~Risk Factors~~	24

	Item 2.	~~Unregistered Sales~~Management’s Discussion and Analysis of ~~Equity Securities~~Financial Condition and ~~Use~~Results of ~~Proceeds~~ Operations	24 18

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23

	Item 4.	Controls and Procedures	23

Part II.	Other Information

	Item 1.	Legal Proceedings	24

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 3.	Defaults Upon Senior Securities	25 24

	Item 4.	Mine Safety Disclosures	25 24

	Item 5.	Other Information	25 24

	Item 6.	Exhibits	25

	Three Months Ended						Three Months Ended
	March 31,			April 1,			April 5,			March 31,
	2019			2018			2020			2019
	(Restated)
Cash flows from operating activities:
Net loss	$	(3,036	)	$	(1,795	)	$	(305	)	$	(3,036	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		691			672			620			691
Stock-based compensation expense		111			143			94			111
Deferred loan costs recognized		4			3			4			4
Gain on the sale of assets		0			(281	)
Net gain on the sale of assets								(154	)		0
Provision for excess and obsolete inventory		37			(75	)		40			37
Non-cash lease expense								288			164
Other noncash items		(127	)		68			190			(86	)
Contributions to pension plans		(10	)		(11	)		(34	)		(10	)
Changes in operating assets and liabilities:
Accounts receivable		758			(675	)		(1,478	)		758
Inventory		(2,564	)		78			846			(2,486	)
Other current assets		398			(667	)		(99	)		473
Accounts payable		(1,170	)		1,047			1,474			(1,187	)
Accrued and other liabilities		436			847			(772	)		40
Net cash used in operating activities		(4,472	)		(646	)

Net cash provided by (used in) operating activities								714			(4,527	)
Cash flows from investing activities:
Capital expenditures, net		(348	)		(406	)		(453	)		(348	)
Proceeds from sale of assets		0			363			288			0
Net cash used in investing activities		(348	)		(43	)		(165	)		(348	)

Cash flows from financing activities:
Principal payments on finance lease obligations		(146	)		(425	)		(143	)		(146	)
Indirect repurchase of shares of minimum statutory tax withholdings		(49	)		0			(7	)		(49	)
Net cash used in financing activities		(195	)		(425	)		(150	)		(195	)

Net decrease in cash and cash equivalents		(5,015	)		(1,114	)

Effect of exchange rate changes on cash balances								(288	)		55
Net increase (decrease) in cash and cash equivalents								111			(5,015	)
Cash and cash equivalents at beginning of period		10,704			8,144			5,095			10,704

Cash and cash equivalents at end of period	$	5,689		$	7,030		$	5,206		$	5,689

Supplemental disclosure of cash flow information:
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for finance lease obligations	$	269		$	0

	March 31,			December 31,			April 5,			December 31,
	2019			2018			2020			2019
	(Restated) (Unaudited)						(Unaudited)
Raw materials	$	15,894		$	12,354		$	14,639		$	15,139
Work in process		5,385			6,331			5,332			5,889
Finished goods		1,251			1,313			1,550			1,675
Reserve for excess and obsolete inventory		(1,421	)		(1,414	)		(2,120	)		(1,919	)
Total	$	21,109		$	18,584		$	19,401		$	20,784

	March 31,			December 31,			April 5,			December 31,
	2019			2018			2020			2019
	(Unaudited)						(Unaudited)
Land and land improvements	$	219		$	219		$	50		$	50
Buildings and building improvements		11,257			11,178			7,111			8,108
Machinery, equipment, furniture and fixtures		60,199			59,179			49,198			55,520
Construction in progress		2,025			2,141			607			371
		73,700			72,717			56,966			64,049
Accumulated depreciation		(58,942	)		(58,062	)		(47,279	)		(52,374	)
	$	14,758		$	14,655		$	9,687		$	11,675

						Additional					Accumulated Other																Accumulated
	Common Stock					Paid-In		Accumulated			Comprehensive			Treasury							Additional						Other
	Shares			Amount		Capital		Deficit			Loss			Stock		Common Stock					Paid-In			Accumulated			Comprehensive			Treasury
																Shares			Amount		Capital			Deficit			Loss			Stock
January 1, 2018 balance		21,422,077		$	214	$	153,858	$	(111,591	)	$	(25,551	)	$	0


January 1, 2019 balance																	21,398,182		$	214	$	154,388		$	(114,926	)	$	(24,842	)	$	0

Net loss		0			0		0		(1,795	)		0			0		0			0		0			(3,036	)		0			0
Adoption of new accounting standards		0			0		0		170			0			0		0			0		0			1,442			0			0
Foreign currency translation adjustment		0			0		0		0			408			0		0			0		0			0			125			0
Noncash compensation		0			0		143		0			0			0		0			0		111			0			0			0
Retire treasury stock		(65,895	)		0		0		0			0			0		(43,979	)		0		(49	)		0			0			0
April 1, 2018 balance		21,356,182		$	214	$	154,001	$	(113,216	)	$	(25,143	)	$	0

March 31, 2019 balance																	21,354,203		$	214	$	154,450		$	(116,520	)	$	(24,717	)	$	0

	Previously Reported			Adjustment			Restated
Net revenue	$	19,564		$	0		$	19,564
Cost of sales		17,973			731			18,704
Gross profit		1,591			(731	)		860

Selling, general and administrative		3,454			0			3,454
Severance, equipment relocation and other costs		98			0			98
Operating loss		(1,961	)		(731	)		(2,692	)

Interest expense, net		217			0			217
Other expense (income), net		51			0			51
Loss before taxes		(2,229	)		(731	)		(2,960	)

Income tax expense		76			0			76
Net loss	$	(2,305	)	$	(731	)	$	(3,036	)

Loss per share:
Basic		(0.11	)		(0.04	)		(0.15	)
Diluted		(0.11	)		(0.04	)		(0.15	)

	Previously
	Reported			Adjustment			Restated
Inventory	$	21,209		$	(100	)	$	21,109
Total current assets		41,877			(100	)		41,777
Total assets		65,676			(100	)		65,576
Accounts payable		11,670			631			12,301
Total current liabilities		27,999			631			28,630
Total liabilities		51,518			631			52,149
Accumulated deficit		(115,789	)		(731	)		(116,520	)
Total stockholders’ equity		14,158			(731	)		13,427
Total liabilities and stockholders’ equity		65,676			(100	)		65,576

	Operating			Finance
	Leases			Leases
2020	$	1,445		$	945
2021		1,428			927
2022		1,480			612
2023		1,496			612
2024		1,514			607
Thereafter		3,867			1,006
Total lease payments		11,230			4,709
Less imputed interest		(2,883	)		(1,188	)
Total	$	8,347		$	3,521

			Costs Incurred
			Three Months		Total		Remaining
	Total		Ended		Recognized		Costs to be
	Program		March 31, 2019		to date		Recognized
Severance and benefit related costs	$	1,350	$	0	$	1,350	$	0
Asset impairments		188		0		188		0
Equipment relocation costs		1,895		8		1,793		102
Other		1,454		90		1,168		286
	$	4,887	$	98	$	4,499	$	388

					Total Number of		Maximum
	Total		Average		Shares Purchased		Dollar Value of Shares
	Number		Price		as a Part of		that May Yet Be
	of Shares		Paid per		Publicly Announced		Purchased Under the
Period	Purchased (a)		Share		Plans or Programs		Plans or Programs
1/1/2019 – 1/27/2019		43,979	$	1.12		—	$	—
1/28/2019 – 2/24/2019		—	$	—		—	$	—
2/25/2019 – 3/31/2019		—	$	—		—	$	—

Exhibit
Number		Description

~~31(i)-1~~ 10.1		Promissory Note between BMO Harris Bank N.A. and Sypris Solutions, Inc., dated as of April 30, 2020, executed by Sypris Solutions, Inc. on May 1, 2020 (incorporated by reference to Exhibit 10.1 to the Company Form 8-K filed on May, 6, 2020 (Commission File No. 000-24020)).

10.2		The 2020 Sypris Omnibus Plan (incorporated by reference to Exhibit A to the Company’s Proxy Statement filed on April 3, 2020 (Commission File No. 000-24020)).

31(i)-1		CEO certification pursuant to Section 302 of Sarbanes - Oxley Act of 2002.

31(i)-2		Principal Financial Officer certification pursuant to Section 302 of Sarbanes - Oxley Act of 2002.

32		CEO and Principal Financial Officer certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

			SYPRIS SOLUTIONS, ~~INC~~	INC.
			(Registrant)


~~Date:~~	~~August 9, 2019~~	~~By:~~	~~/s/~~ ~~Anthony C. Allen~~
			~~(Anthony C. Allen)~~
			~~Vice President & Chief Financial Officer~~


Date:	~~August 9, 2019~~May 20, 2020	By:	~~/s/ Rebecca R. Eckert~~	/s/ Anthony C. Allen
			(~~Rebecca R. Eckert)~~	Anthony C. Allen)
			~~Controller (Principal Accounting Officer)~~	Vice President & Chief Financial Officer


Date:	May 20, 2020	By:	/s/ Rebecca R. Eckert
			(Rebecca R. Eckert)
			Controller (Principal Accounting Officer)


~~Part II.~~	~~Other Information~~


	~~Item 1.~~	~~Legal Proceedings~~	24


Signatures			26