INTT 10-K & 10-Q changes, risk factors and insider trading

The following aredisclosures some ofreflect the Company’s beliefs and opinions as to factors that could materially and adversely affect the Company, our future performance and our securities in the future, or could cause actual results to differ materially from those expressed or implied in our forward-looking statements. TheReferences to past events are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. Furthermore, the risks and uncertainties described below are not the only risks facing us and we cannot predict every event and circumstance that may adversely affect our business. However, these risks and uncertainties are the most significant factors that we have identified and believe at this time. If one or more of these risks actually occurs, our business, results of operations and/or financial condition could suffer, and the price of our stock could be negatively affected.

A key element of our growth strategy is to acquire businesses, technologies or products that are complementary to our current product offerings. We seek to make acquisitions that will further expand our product lines as well as strengthen our positions in servedthe markets we serve and provide expansion into new markets. We may not be able to execute our acquisition strategy and our future growth may be limited if:

In connection with our acquisition of Acculogic we have recorded a contingent consideration liability that represents the fair value of additional payments we may make to the seller of up to an additional CAD $5.0 million in the five-year period from 2022 through 2026. The additional payments will be based on a percentage of net invoices for which payments have been received on systems sold to EV battery customers exceeding CAD $2.5 million per year in each of the five years. The maximum payment is capped at CAD $5.0 million, which equates to approximately USD $3.5$3.7 million at December 31, 2024.2025. There were no payments due for the years ended December 31, 20232022 or 2022,2023. whileWe anpaid immaterialthe contractually due amount isfor 2024 during the first quarter of 2025 and expect to make the payment for the amount due for 20242025 andin isthe recordedfirst as a componentquarter of other current liabilities.2026. The fair value of this contingent consideration liability involves assessing the total amount of revenue we expect from sales to EV or battery customers during the applicable time periods as well as when we expect to receive payment for the related net invoices. At December 31, 2024,2025, the total contingent consideration liability on our balanceConsolidated sheetBalance Sheet was USD $0.9$0.6 million which was its estimated fair value at that date. Any future adjustments to the estimated fair value of the contingent liability will be recorded in our results of operations for the period in which the adjustment occurs.

As we implement our business strategy as intended, we have and may in the future experience rapid growth and development in a relatively short period of time. The management of this growth will require, among other things, continued development of our financial and management controls and management information systems, stringent control of costs, the ability to attract and retain qualified management personnel and the training of new personnel. Failure to successfully manage our possible growth and development could have a material adverse effect on our business.

We sell certain of our products in markets other than the semiSemi market, including the automotive,Auto/EV, defenseDefense/aerospace,Aerospace, industrial,Industrial, lifeLife sciencesSciences and securitySafety/Security markets. During 20242025 and 2023,2024, our sales to markets other than the semiSemi market were $82.0$77.9 million and $57.6$82.0 million, respectively, and represented 63%68% and 47%63% of our consolidated revenue, respectively. Our goal is to increase our sales to markets other than the semi marketSemi; however, in most cases, the expansion of our product sales into these new markets has occurred in the last several years, and we may experience difficulty in expanding our sales efforts further into these markets. These difficulties could include hiring sales and marketing staff with sufficient experience selling into these new markets and our ability to continue to develop products which meet the needs of customers in these markets and which are not currently offered by our competitors. In addition, due to the highly specialized nature of certain of our product offerings in these markets, we do not expect broad market penetration in many of these markets. If we are unable to expand these sales, our revenue and results of operations will remain substantially dependent upon the cycles of the semiSemi market.

During 2022, as global supply chain constraints became more pronounced, we experienced price increases and lack of availability from several of our normal suppliers for the materials needed to produce our products in a timely manner and/or with the level of margins we typically expect to achieve. While the global supply chain seems to have returned to a more normalized state asduring of the end of 2024,2025, ongoing uncertainty from geopolitical events and the global trade environment, including changes in the United States’ or international trade policy, tariffs, export controls, quotas, embargoes, or sanctions may trigger additional retaliatory actions by affected countries resulting in “trade wars” and further increased costs for goods and materials transported globally, which may negatively impact our customers, revenues and earnings. Furthermore, certain components of our products may continue to be in short supply from time to time because of high demand or the inability of some vendors to consistently meet our quality or delivery requirements. A significant portion of our material purchases require some custom work, and there are not always multiple suppliers capable of performing such custom work on a timely or cost-effective basis. If any of our suppliers were to cancel commitments or fail to meet quality or delivery requirements needed to satisfy customer orders for our products, we could lose time-sensitive customer orders, have reduced revenues and earnings, experience reputational harm and be subject to contractual penalties, any of which could have a material adverse effect on our business, results of operations and financial condition. Additionally, we may not be able to raise our prices to our customers in an amount or timeframe sufficient to offset the increases in price we are experiencing from our suppliers. This could result in a reduction in our earnings in future periods.

We rely on various information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, including confidential data, and to carry out and support a variety of business activities, including manufacturing, research and development, supply chain management, sales and accounting. A failure in, or a breach of, our operational or security systems or infrastructure, or those of our suppliers and other service providers, including as a result of cyberattacks, could disrupt our business, result in the disclosure or misuse of proprietary or confidential information, result in litigation, damage our reputation, cause losses and significantly increase our costs. Although we have been and continue to be the target of security breaches,attacks, we have not experienced material losses to date related to such incidents. Nevertheless, there can be no assurance that we will not suffer such losses in the future. In addition, domestic and international regulatory agencies have implemented, and are continuing to implement, various reporting and remediation requirements that companies must comply with upon learning of a breach. While we have insurance that may protect us from incurring some of these costs, there is no assurance that such insurance coverage is adequate to cover all costs and damages incurred in connection with a cyberattack.

In prior periods, our management identifiedIf material weaknesses in our internal control over financial reporting. If other material weaknessesreporting are identified in the future, we may not be able to report our financial results accurately, prevent fraud or file our periodic reports in a timely manner, which may adversely affect investor confidence in our Company and, as a result, the value of our common stock.

AsWe furthercannot explainedbe incertain “Item 9A. Controls and Procedures,” in prior periods, our management identifiedthat material weaknesses in our internal control over financial reporting, which have been remediated as of December 31, 2024. We cannot be certain that other material weaknessesreporting will not occur in the future. If material weaknesses are identified in the future, or if we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, our reported financial results could be materially misstated and we could be subject to investigations or sanctions by regulatory authorities, which would require additional financial and management resources, and the value of our common stock could decline.

Our credit facility (the “Loan Agreement”) with M&T Bank (“M&T”) contains covenants requiring us to, among other things, provide financial and other information and to provide notice upon the occurrence of certain events affecting us or our business. These covenants also place restrictions on our ability to incur additional indebtedness, and enter into certain transactions, including selling assets, engaging in mergers or acquisitions, or engaging in transactions with affiliates. If we fail to satisfy one or more of the covenants under our creditLoan facility,Agreement, we would be in default thereunder and may be required to repay such debt with capital from other sources or otherwise not be able to draw down against our facility. Under such circumstances, we may have difficulty in locating another lender that would be willing to extend credit to us, and other sources of capital may not be available to us on reasonable terms or at all.

AtOn JuneAugust 30,5, 2024,2025, we were in compliance with all ofexecuted the covenantsSixth includedAmendment into ourthe creditLoan facility,Agreement, exceptwhich forformally waives the fixed charge coverage ratio financial covenant which was 1.16 to 1.0 for theperiods quarter endedending June 30, 2024,2025 forthrough whichand including March 31, 2026. During the period of this waiver we receivedare required to request consent from M&T if we wish to utilize our revolving facility and we formally pledged a one-timeportion waiverof fromour cash holdings equal to our total open debt with M&T. At September 30, 2024 and December 31, 2024,2025, we had total debt of $3.8 million with M&T and were in compliance with all of theother covenants included in ourthe credit facility.facility including the debt covenants of the Loan Agreement. See “Part II; Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Liquidity and Capital Resources; Credit Facility” and “Part II; Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note (10) Debt” in this Report for a discussion of the material terms of our credit facility.

We hold our cash and cash equivalents that we use to meet our working capital needs in deposit accounts at multiple financial institutions. We also hold $3.8 million of restricted cash at M&T under the terms of the Sixth Amendment to the Loan Agreement. The balance held in these accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”), standard deposit insurance limit or similar government guarantee schemes. If a financial institution in which we hold such funds fails or is subject to significant adverse conditions in the financial or credit markets, we could be subject to a risk of loss of all or a portion of such uninsured funds or be subject to a delay in accessing all or a portion of such uninsured funds. Any such loss or lack of access to these funds could adversely impact our short-term liquidity and ability to meet our obligations.

For example, onin March 10, 2023, Silicon Valley Bank,Bank and on March 12, 2023, Signature Bank,Bank were closed by state regulators and the FDIC was appointed receiver for each bank. The FDIC created successor bridge banks and all deposits of Silicon Valley Bank and Signature Bank were transferred to the bridge banks under a systemic risk exception approved by the United States Department of the Treasury, the Federal Reserve and the FDIC. If financial institutions in which we hold funds for working capital were to fail, we cannot provide any assurances that such governmental agencies would take action to protect our uninsured deposits in a similar manner.

We also maintain cash equivalent investment accounts with other financial institutions in which we hold our cash equivalent investments and, if access to the funds we use for working capital is impaired, we may not be able to sell these investments or transfer funds from our investment accounts to new accounts on a timely basis sufficient to meet our working capital needs.

We generate a large portion of our sales from a small number of customers. If we were to lose one or more of our large customers, our operating results could sufferbe dramatically.materially and adversely affected.

During the year ended December 31, 2025, no customer accounted for more than 10% of our consolidated revenue. During the year ended December 31, 2024, one customer accounted for 13% of our consolidated revenue. This revenue was primarily generated by our Electronic Test segment. During the year ended December 31, 2023, this same customer accounted for 13% of our consolidated revenue. During the years ended December 31, 20242025 and 2023,2024, our ten largest customers accounted for approximately 45%36% and 42%45% of our consolidated revenue, respectively. The loss of any one or more of our largest customers, or a reduction in orders by a major customer could materially reduce our net revenues or otherwise materially affect our business, financial condition or results of operations.

In late February 2022, Russia initiated significant military action againstinvaded Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and trade actions against Russia. Recently, theThe U.S. also added sanctions to Belarus. The U.S. and certain other countries could impose further sanctions, trade restrictions and other retaliatory actions should the conflict continue or worsen. It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof, as well as any counter measures or retaliatory actions by Russia or its allies in response. The continuing conflict has caused regional instability and could cause geopolitical shifts and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy, which could materially adversely affect our financial condition or results of operations.

The conflict and actions taken in response to the conflict could increase our costs or disrupt our supply chain for certain unique materials. Specifically, Acculogic purchases certain parts from a key sole-source supplier in Belarus, which is bordered by Russia to the east and northeast and Ukraine to the south. In August 2024, the United States,U.S., Canada and the European Union added additional sanctions onwhich certainincluded companiesadding basedthis supplier to the list of prohibited entities in Belarus, including this key sole-source supplier.Belarus. We are complying with these sanctions and have not received materials from this supplier since the restrictionsissuance wereof announced.Executive AsOrder 14038. We have qualified a result,new wesupplier for these materials and have a limited supply of these parts.materials Weon arehand currentlyto insupport new production. Our first system incorporating these new materials was shipped to one of our customers at the processend of qualifying an alternate supplier for these parts. In addition, in December 2024, we submitted a request to the Officesecond quarter of Foreign Assets Control (“OFAC”) to allow us a temporary license to purchase a limited quantity of these parts from this supplier. This application is currently pending OFAC review. There can be no assurance that we will be granted a license by OFAC in a timely matter or at all, that if granted a license by OFAC that such supplier in Belarus will be willing or able to provide these parts on reasonable commercial terms or at all, or that we will be able to identify and qualify an alternative supplier for these parts in a timely matter or at all. If we cannot source this material from alternate suppliers for similar costs, our revenue and earnings could be adversely affected.2025.

The following discussion and analysis of our financial condition and results of operations and quantitative and qualitative disclosures should be read in conjunction with our audited consolidated financial statements and related notes included in this Report for the year ended December 31, 2024.2025. In addition, please refer to the discussion of our business and markets contained in “Part I, Item 1. Business” of this Report. Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a number of forward-looking statements that reflect our plans, estimates, and beliefs, all of which are based on our current expectations and could be affected by certain uncertainties, risks, and other factors described under “Cautionary Statement Regarding Forward-Looking Statements” and “Part I; Item 1A. Risk FactorsFactors,”, and elsewhere throughout this Annual Report. Our actual results could differ materially from those discussed in the forward-looking statements or from our prior results.

We are a global supplier of innovative test and process technology solutions for use in manufacturing and testing across a wide range of markets including semi,Semi, industrial,Auto/EV, automotive,Defense/Aerospace, lifeIndustrial, sciences,Life defenseSciences, Safety/aerospaceSecurity and security.Other. We have three operating segments which are also our reportable segments and reporting units: Electronic Test (which includes our semiconductor test equipment, robotics-basedflying electronic test equipmentprobe and applicationin-circuit support services and functional test equipment for production quality control and product developmenttesters), Environmental Technologies (which includes our thermal test, process and storage products) and Process Technologies (which includes our induction heating and video imaging products).

As discussed in “Part I; Item 1. Business; Markets,” we are focused on specific target markets which include both the front-end and back-end of the semiconductor manufacturing, industrial,Auto/EV, automotive,Defense/Aerospace, lifeIndustrial, sciences,Life defenseSciences, Safety/aerospaceSecurity and security.Other. The semiSemi market, which includes both the broader semiconductor market, as well as the more specialized ATE and wafer production sectors within the broader semiconductor market, has historically been the largest single market in which we operate. The semiSemi market is characterized by rapid technological change, competitive pricing pressures and cyclical market patterns and is subject to periods of significant expansion or contraction in demand. Our intention is to continue diversifying our markets, our product offerings within the markets we serve and our customer base across all of our markets with the goal of reducing our dependence on any one market, product or customer. In particular, we are seeking to reduce the impact of volatility in the semiSemi market on our results of operations.

InThe the past, the semiSemi market has beenis highly cyclical with recurring periods of oversupply, which often severely impact the semiSemi market’s demand for the products we manufacture and sell into the market. This cyclicality can cause wide fluctuations in both our orders and revenue and, depending on our ability to react quickly to these shifts in demand, can significantly impact our results of operations. Market cycles are difficult to predict and, because they are generally characterized by sequential periods of growth or declines in orders and revenue during each cycle, year-over-year comparisons of operating results may not always be as meaningful as comparisons of periods at similar points in either up or down cycles. These periods of heightened or reduced demand can shift depending on various factors impacting both our customers and the markets that they serve. In addition, during both downward and upward cycles in the semiSemi market, in any given quarter, the trend in both our orders and revenue can be erratic. This can occur, for example, when orders are canceled or currently scheduled delivery dates are accelerated or postponed by a significant customer or when customer forecasts and general business conditions fluctuate during a quarter.

As discussed “Part I; Item 1. Business; Strategy,” although the semiSemi market remains our largest market, as part of our strategy to grow our business, we are focused on several other key target markets where we believe our products address test and process requirements and where we believe there is significant potential for growth. These key target markets include theAuto/EV, industrial,Defense/Aerospace, automotive,Industrial, lifeLife sciences,Sciences, defenseSafety/aerospaceSecurity and security.Other. We believe that these markets are usually less cyclical than the semiSemi market. While market share statistics exist for some of these markets, due to the nature of our highly specialized product offerings in these markets, we do not expect broad market penetration in many of these markets and, therefore, do not anticipate developing meaningful market shares in most of these markets.

In addition, because of our limited market share, our orders and revenue in any given period in these markets do not necessarily reflect the overall trends in these markets. Consequently, we are continuing to evaluate buying patterns and opportunities for growth in these, and other,other marketsmarkets, that may affect our performance. The level of our orders and revenue in all of the markets we serve has varied in the past, and we expect will vary significantly in the future, as we work to build our presence in our current markets and establish new markets for our products.

On March 12, 2024, we entered into a stock purchase agreement to acquire all of the outstanding capital shares of Alfamation S.p.A., a leading global provider of state-of-the-art test and measurement solutions for the automotive,Auto/EV, lifeLife sciencesSciences and specialty consumer electronics markets. Alfamation™ was founded in 1991 and is headquartered in Milan, Italy. Alfamation™ also has a small sales and service subsidiary based in Suzhou City, China. Alfamation™ is part of our Electronic Test operating segment. The aggregate purchase price was approximately €20 million comprised of €18 million in cash (approximately $19.7 million) and 187,432 shares of our common stock (valued at $2.1 million based on the closing price of our stock on the date of acquisition). The cash portion of the purchase price was subject to customary working capital adjustments which were finalized in June 2024 and resulted in recording an additional €1290.1 thousandmillion (approximately $141$0.1 thousandmillion) of cash purchase price for assets delivered at closing in excess of agreed upon thresholds. The liabilities assumed in connection with the acquisition included debt of approximately €10.3 million, or $11.3 million. After all closing adjustments, the total purchase price was $21.9 million. We finalized our allocation of the purchase price to assets acquired and liabilities assumed during the fourth quarter of 2024.

As noted in “Part I; Item 2. Properties” and “Part II; Item 8. Financial Statements and Supplementary Data; Notes to Consolidated Financial Statements; Note (3) Acquisition,Acquisition; Note (9) Leases,” in connection with the acquisition, we have entered into a related-party lease agreement with the former owner of Alfamation™.

The following table sets forth, for the periods indicated, a breakdown of thedisaggregates revenue by market (in thousands).:

The following table sets forth, for the periods indicated, a breakdown of thedisaggregates orders received by market:

At December 31, 2024,2025, our backlog of unfilled orders for all products was approximately $39.5$53.9 million compared withto approximately $40.1$39.5 million at December 31, 2023. The decrease in our backlog reflects reduced demand for our products and, to a lesser extent, lead times returning to a more normalized pattern.2024. Our backlog includes customer orders that we have accepted, substantially all of which we expect to deliver in 2025.the next twelve months. While backlog is calculated on the basis of firm purchase orders, a customer may cancel an order or accelerate or postpone currently scheduled delivery dates. Our backlog may be affected by the tendency of customers to rely on short lead times available from suppliers, including us, in periods of depressed demand. In periods of increased demand, there is a tendency towards longer lead times that has the effect of increasing backlog. As a result, our backlog at a particular date is not necessarily indicative of sales for any future period.

Gross Margin. Gross margin wasincreased 42%60 basis points for the year ended December 31, 2024,2025, compared to 46%the insame 2023.prior year period. The current year period also includes the full year impact of Alfamation™ activity. In the fourth quarter of 2024, we refined and finalized our purchase price allocation for the Alfamation™ acquisition. Adjustments recorded included a $1.6 million increase in the cost of inventory acquired (“inventory step-up”), to reflect the fair value of work in process and finished goods at the acquisition date. As the related inventory was sold in 2024, this increase was charged to cost of goods sold in the fourth quarter of 2024 which negatively impacted gross margin for the fourth quarter and year ended December 31, 2024. The balancefull ofyear the decrease in our2024 gross margin primarily reflects higher fixed operating costs and increased direct labor as a result ofincluded the costsnegative attributable120 tobasis Alfamation™point andimpact higherfrom averagethe componentacquisition materialinventory costs,step-up. reflectingExcluding changesthe ininventory productstep-up, salesgross mix.margin for the year ended December 31, 2025 decreased 60 basis points driven by lower volume.

Information regarding the primary risks and uncertainties that could materially and adversely affect our future performance or could cause actual results to differ materially from those expressed or implied in our forward-looking statements, appears in “Part I; Item 1A; Risk Factors” of our 2025 Form 10-K. ThereOther than the following risk factor noted below, there have been no material changes from the risk factors set forth in our 2025 Form 10-K or subsequent Quarterly Reports on Form 10-Q.

In addition to historical information, this Quarterly Report on Form 10-Q for the period ended MarchJune 31,30, 2026 (this “Report”), including this management’s discussion and analysis (“MD&A”), contains statements that are considered “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements do not convey historical information, but relate to predicted or potential future events, such as statements of our plans, strategies and intentions, or our future performance or goals, projections of revenue, taxable earnings (loss), net earnings (loss), net earnings (loss) per share, capital expenditures and other financial items, that are based on management’s current expectations and estimates. Our forward-looking statements can often be identified by the use of forward-looking terminology such as “believe,” “continue,” “expect,” “may,” “could,” “will,” “plans,” “depending,” “seeking,” “anticipates,” “goal,” “objective,” “target,” “estimates,” “future,” “strategy,” “intended,” or variations of such words or similar terminology. Investors and prospective investors are cautioned that such forward-looking statements are only projections based on current expectations and estimates. These statements involve risks and uncertainties and are based upon various assumptions. Such risks and uncertainties include, but are not limited to:

•our ability to effectively remediate the material weaknesses in our internal control over financial reporting that we have identified or our failure to develop and maintain a proper and effective system of disclosure controls and internal control over financial reporting;

As noted in “Part I; Item 1; Financial Statements; Notes to Consolidated Financial Statements; Note (9) Debt,” our Loan Agreement with M&T Bank (“M&T”) contains financial covenants, including a fixed charge coverage ratio of not less than 1.25 to 1.0. The fixed charge coverage ratio is calculated over the trailing twelve months, so the net loss reported in the first, second and third quarters impacts our ability to meet this covenant in future periods notwithstanding our strong cash position. On August 5, 2025, we executed the Sixth Amendment to the Loan Agreement, which formally waives the fixed charge coverage ratio financial covenant for periods ending June 30, 2025 through and including March 31, 2026. DuringOn May 4, 2026, we executed the periodSeventh of this waiver we are requiredAmendment to request consent from M&T if we wish to utilize our Revolving Facility and we formally pledged a portion of our cash holdings equal to our total outstanding debt with M&T. At March 31, 2026 we had total debt of $2.8 million with M&T, held $2.8 million of restricted cash with M&T, and were in compliance with all covenants included in the Loan Agreement.Agreement, Byeffective Juneas of April 30, 20262026, weto projectextend havingour lessability thanto $2.0draw millionon totalthe debtTerm outstandingNote withthrough M&T.August 28, 2026.

In early October 2023, Hamas attacked Israel and Israel formally declared war in response to the attack. Although a cease-fire was declared in October 2025, hostilities continue. On February 28, 2026, the U.S. and Israel launched a coordinated military operation against Iran, and Iran has responded with attacks affecting certain Persian Gulf states as well as Israel. It is unclear when these continuing conflicts will end and these conflicts are likely to cause regional instability that could materially adversely affect global trade, regional economies and the global economy, which could materially adversely affect our financial condition and results of operations. Ambrell® has a sole source supplier of capacitors used in certain of our induction heating products that is located in Israel. This supplier is the sole source supplier of capacitors for numerous induction companies, and currently there are no viable alternatives available. We have been in frequent contact with our supplier since the conflicts with Hamas and in Iran began and have been advised that their operations are currently uninterrupted. We maintain a two-to-three month safety stock on these items. As of MarchJune 31,30, 2026, our supplier has indicated that they have large stock available at more than one facility in Israel, so they believe they have redundancies in place that will help ensure that the supply chain to their customers is uninterrupted. We continue to monitor the situation closely and are staying in close contact with our supplier. However, there can be no assurance that the situation will not worsen which could impact our ability to ship certain of our induction heating products which could have a material impact on our future results of operations.

We have qualified a new supplier for these materials in early 2025 and have a supply of these materials on hand to support new production. Our first system incorporating these new materials shipped to one of our customers at the end of the second quarter 2025.

Additionally, we have applied to the U.SU.S. Department of Treasury’s Office of Foreign Asset Control (“OFAC”) and Global Affairs Canada for permission to purchase materials from the Belarus supplier to support repairs and warranty claims for the existing units already in service with our customers. As of March 31, 2026, we have not yet received such permission from Global Affairs Canada. In December 2025, we received a license from OFAC allowing us to purchase a specified dollar amount of these parts from this supplier through June 30, 2026. Late in the first quarter of 2026, we determined that our license needed to be amended to include a director of this supplier who was also listed individually as a prohibited party by the U.S. government. We have requested this amendment as well as an extension of the license to allow purchases through the end of 2027. There can be no assurance that these amendments will be approved by OFAC or what the timing of any such approval would be. In June 2026, we received a permit from Global Affairs Canada. This permit is currently valid until June 15, 2028. However, because of the OFAC license expiration on June 30, 2026, we are still not able to enter into transactions with the Belarusian supplier until such time as the OFAC license is amended and extended.

A significant portion of the additional purchases from the Belarus supplier are intended to support spare parts used for repairs and warranty claims for the existing units already in service with our customers. Those specific parts from the new supplier are not compatible with those existing units. There can be no assurance that we will be granted athe amended and extended license by OFAC or Global Affairs Canada in a timely manner or at all, or that if granted a license by OFAC or Global Affairs Canada that such supplier in Belarus will be willing or able to provide these parts on reasonable commercial terms or at all.

In addition, while the supply chain and logistics challenges that we encountered throughout 2022 have eased, uncertainty in the global trade environment remains. As a result, we expect that we may continue to experience increased prices, lack of availability and logistics delays from time to time for the foreseeable future. This occurred in the three months ended June 30, 2026, where we had certain material components perform differently than previous units, forcing us to diagnose, re-engineer and rebuild our systems to meet customer specifications, and in another case, a shipment of components arrived 45 days late resulting in a shift of our product delivery date. The actions we have taken and are continuing to take to mitigate these risks include qualifying new vendors as alternate sources in our supply chain, increasing our inventory of raw materials and ordering further in advance of when we expect to need materials than has been our practice in the past. We have also increased the prices that we charge our customers, where appropriate, and continue to work with our customers to find alternate options for the shipment of products where they control aspects of the logistics process. However, the environment in which we operate is dynamic and shifts rapidly at times, and the success of our efforts to mitigate and address the impacts on our business may not be successful. As a result, we could see increases in our costs or reduced revenues which would impact the level of our earnings in future periods.

As of MarchJune 31,30, 2026, except for the estimates considered for our awards with market conditions, there have been no significant changes to the accounting estimates that we have deemed critical. Our critical accounting estimates are more fully described in “Part I; Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; Critical Accounting Estimates” in our 2025 Form 10-K.

Three Months Ended MarchJune 31,30, 2026, Compared to Three Months Ended MarchJune 31,30, 2025

Compared with the prior-year period, revenue for the firstsecond quarter increased due primarily to growth in Defense/Aerospace, Life Sciences, Auto/EVEV, as the electronics content of modern vehicles continues to increase, and Semi,likewise the testing of those components offset partially offset by athe decreasedecreases primarily in Other.Semi. Sequentially, revenue increased compared to the trailing fourthfirst quarter, due primarily to increases in SemiAuto/EV and Auto/EV,Industrial, offset partially by asequential decreasedecreases primarily in IndustrialDefense/Aerospace, followingLife aSciences strongerand than normal fourth quarter.Semi.

Compared with the prior-year period, orders for the firstsecond quarter increased primarily in Semi and Defense/Aerospace partially offset by declines primarily in Auto/EV and Life Sciences. Sequentially, orders decreased primarily in Auto/EV and Defense/AerospaceAerospace, partially offset primarily by the declineincreases in Semi. Sequentially, orders decreased primarily in Life Sciences, Semi, OtherSemi and Safety/Security.Other.

At MarchJune 31,30, 2026, our backlog of unfilled orders for all products was $51.8$45.4 million compared to $38.2$37.9 million at MarchJune 31,30, 2025, and $53.9 million at December 31, 2025. Our backlog includes customer orders that we have accepted, substantially all of which we expect to deliver in the next twelve months. While backlog is calculated on the basis of firm purchase orders, a customer may cancel an order or accelerate or postpone currently scheduled delivery dates. Our backlog may be affected by the tendency of customers to rely on short lead times available from suppliers, including us, in periods of depressed demand. In periods of increased demand, there is a tendency towards longer lead times that has the effect of increasing backlog. As a result, our backlog at a particular date is not necessarily indicative of sales for any future period.

Gross margin increaseddecreased 400210 basis points in the three months ended MarchJune 31,30, 2026, compared to the same prior year period due to higherchanges volume, favorablein product mix and manufacturing efficiency initiatives.mix.

Selling expense for the three months ended MarchJune 31,30, 2026, declinedincreased compared to the prior year period due primarily to aincreased declinecommissions inand warrantypayroll expense.related merit increases.

Engineering and product development expense for the three months ended MarchJune 31,30, 2026, increased nominally compared to the prior year period due primarily to an increaseincreases in payrolloutside service costs and payroll related costs.merit increases.

General and administrative expense for the three months ended MarchJune 31,30, 2026, increased compared to the prior year period due primarily to an increaseincreases in payroll related merit increases and payrollincreased relatedstock costs.based compensation costs as a result of the June 17, 2026 equity modification for awards granted to independent directors in March 2026, offset partially by a decrease resulting from the change in fair value of the contingent consideration.

Amortization of acquired intangible assets for the three months ended MarchJune 31,30, 2026, decreased compared to the prior year period due to the declining pattern of benefit for the assets,assets and the May 2026 completion of amortization of intangible assets from the Ambrell® acquisition, offset partially by the impact of changes in foreign exchange rates.

Restructuring costs for the three months ended MarchJune 31,30, 2026, are primarilythe residual facility related costs from the costsVideology associatedConsolidation withof the Netherlands operations into our CEOUS transition.operations in Mansfield, MA. The restructuring costs for the three months ended MarchJune 31,30, 2025 represent severance and retention accruals along with the payroll-related costs recognized for the Videology Consolidation ofas well as costs related to the Netherlandsleadership operationstransition intoin our USEnvironmental operationsTechnologies in Mansfield, MA.division. See “Part I; Item 1. Financial Statements; Notes to Consolidated Financial Statements; Note (15) Restructuring” for further details.

Income Tax Expense (Benefit)

On a quarterly basis, we record income tax expense or (benefit) based on the expected annualized effective tax rate for the various taxing jurisdictions in which we operate our businesses. ForDue to the unusually large number of stock option exercises during the three months ended MarchJune 31,30, 2026, we recordedrecognized a discrete tax benefit in the period related to difference between the book and tax expense based on ourthose pre-taxexercises, earnings and expected annualized rate, whereasresulting in the comparable period we reported a pre-tax loss. The increase in the effectivenet tax ratebenefit for the currentquarter and year period is due to limitationsdate on certain current year deductions related to the prior year's net operating loss carry-over applied to current year taxable income.periods. There were no other unusual tax adjustments recorded in either period.

At MarchJune 31,30, 2026, we have not borrowed any amounts under the $10.0 million Revolving Facility. Our borrowings under the Term Note are discussed below and our available drawing capacity under the Term Note at MarchJune 31,30, 2026, was $30.0 million. The principal balance of the Revolving Facility and the principal balance of any amount drawn under the Term Note accrues interest based on the Secured Overnight Financing Rate or a bank-defined base rate plus an applicable margin, depending on leverage. The Loan Agreement includes customary affirmative, negative and financial covenants, including a maximum ratio of consolidated funded debt to consolidated EBITDA of not more than 3.0 to 1.0 and a fixed charge coverage ratio of not less than 1.25 to 1.0. Our obligations under the Loan Agreement are secured by liens on substantially all of our tangible and intangible assets.

On August 5, 2025, we executed the Sixth Amendment to the Loan Agreement, which formally waives the fixed charge coverage ratio financial covenant for periods ending June 30, 2025 through and including March 31, 2026. During the period of this waiver we arewere required to request consent from M&T if we wish to utilize our Revolving Facility and we formally pledged a portion of our cash holdings equal to our total outstanding debt with M&T. At March 31, 2026 we were holding $2.8 million of total debt with M&T. At March 31, 2026, we were in compliance with all of the covenants included in the Loan Agreement.

On December 29, 2021, we drew $8.5 million under the Term Note to finance the acquisition of Acculogic. We did not enter into an interest rate swap agreement with M&T related to this draw. The annual interest rate we expect to pay for this draw under the Term Note is variable. At MarchJune 31,30, 2026, it was 5.8% based on current leverage.

At MarchJune 31,30, 2026, Alfamation™’s debt was $5.7$4.5 million, including $3.4$2.5 million that is backed by Alfamation™’s accounts receivable. The reduction since the acquisition date represents repayments of short-term instruments and principal payments on long-term debt, net of new borrowings that are backed by Alfamation™’s accounts receivable. The short-term variable financing rate at MarchJune 31,30, 2026, was 3.2%.3.5%. At MarchJune 31,30, 2026, the weighted average interest rate payable on the bank issued term loans was 0.7%0.6% for fixed rate debt and 4.0%4.2% for variable rate debt and the overall weighted average interest rate for the bank issued term loans was 3.3%.3.5%.

Total interest expense for the threesix months ended MarchJune 31,30, 2026 and 2025, related to our various debt arrangements was $0.1 million and $0.2$0.3 million, respectively.

As of MarchJune 31,30, 2026, $9.7$10.3 million, or 76%,47%, of our cash and cash equivalents was held by our foreign subsidiaries. We currently expect our cash and cash equivalents, in combination with the borrowing capacity available under our Revolving Facility and the anticipated net cash to be provided by our operations in the next twelve months to be sufficient to support our short-term working capital requirements and other corporate requirements. Our Revolving Facility is discussed in “Note (9) Debt” to our Consolidated Financial Statements in this Report.

Our material short-term cash requirements include payments due under our various lease agreements, recurring payroll and benefits obligations to our employees, purchase commitments for materials that we use in the products we sell and principal and interest payments on our debt. We estimate that our short-term working capital requirements currently range between $8.0 million and $10.0 million. We expect our current cash and cash equivalents, in combination with the borrowing capacity available under our Revolving Facility and the anticipated net cash to be provided by our operations to be sufficient to support these additional investments as well as our current short-term cash requirements. As discussed above in “Credit Facility” and in “Note (9) Debt”, on August 5, 2025 we formally pledged a portion of our cash holdings equal to our total outstanding debt with M&T. AtThe Marchwaiver 31,has 2026expired and at June 30, 2026, we were holdingin $2.8 million of total debtcompliance with M&T.all covenants included in the Loan Agreement. On May 4, 2026, we amended the Credit Facility,effectiveFacility, effective as of April 30, 2026, to extend our ability to draw on the Term Note through August 28, 2026.

Our current strategy for growth includes pursuing acquisition opportunities for complementary businesses, technologies or products. As previously discussed, we currently anticipate that any additional long-term cash requirements related to our strategy would be funded through a combination of our cash and cash equivalents, the remaining availability under the Term Note or by issuing equity. The borrowing availability under the Term Note wasis expandeddiscussed in Septemberfurther 2022 as discussed above anddetail in “Note (9) Debt” to our Consolidated Financial Statements in this Report.

Operating Activities: Net cash usedprovided inby operating activities for the threesix months ended MarchJune 31,30, 2026, was $3.3$3.0 million, ana increased usagedecrease of $8.9$1.8 million compared to the prior year period. The increasedecrease was driven primarily by the changes in accounts receivable, driven by increased revenue outpacing the rate of collections period-over-period, along with the change in accounts payable, offset partially by the increase in net earnings from the comparative period and the increase in the change in domesticinventory andfrom foreignthe taxescomparative payable.period.

Investing Activities: Net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026, was $0.6$1.0 million, an increased usage of $0.4 million compared to the prior year period.period Capitaldue expendituresto forincreased propertycapital and equipment were consistent in both periods.expenditures.

Financing Activities: Net cash provided by financing activities for the threesix months ended MarchJune 31,30, 2026, was $1.7$2.3 million, whereas we reported a cash usage in financing activities of $3.4$5.6 million for the prior year period. During the threesix months ended MarchJune 31,30, 2026, we reported short term borrowings, net of repayments, of $2.2$0.9 million, which is related to the short-term variable financing used at Alfamation™. We did not have any stock repurchases under the March 5, 2025 renewal of the previously expired share repurchase plan in either the current year or prior year periods. As a result of our stock price increase between January 1, 2026 and MarchJune 31,30, 2026, we saw an increase in stock option exercise activity, which resulted in an increased cash inflow of $0.5$3.4 million compared to the prior year period.

See “Part I; Item 1. Financial Statements; Notes to Consolidated Financial Statements; Note (2) Summary of Significant Accounting Policies and (tu) Effect of Recently Issued Amendments to Authoritative Accounting Guidance Not Yet Adopted” for information concerning the implementation and impact of new or recently adopted accounting standards.