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

Material disruptions to our supply chains, including changes in our relationships with suppliers, shortages in availability of materials, production delays, regulatory restrictions, public health crises, or other supply chain disruptions, whether due to our suppliers or customers, could have a material adverse effect on our operations and results. Increases in the costs of supplies could result in manufacturing interruptions, delays, inefficiencies or our inability to market products. In addition, our profit margins would decrease if the prices of purchased raw materials, component parts or finished goods increase and we are unable to pass on those increases to our customers. Supply chain disruptions may be exacerbated by other events and conditions, including conflicts in Europe and the Middle East,East (including Iran and surrounding countries), which could continue to adversely affect our ability to receive goods on a timely basis and increase our material costs. Short-term or sustained increases in market demand may exceed our suppliers’ production capacity or otherwise strain our supply chain. Our failure, or our suppliers’ failure, to meet the demand for raw materials and components could adversely affect our business and results of operations. Further disruptions to the supply chain because of other global or domestic events could materially adversely impact our operations and business. While we actively monitor and take steps to mitigate supply chain risk, there can be no assurance that our mitigation plans will prevent disruptions that may arise from shortages of materials that we use in the production of our products.

Our information technology systems are subject to the threat of cyber attacks, security breaches, computer hacking, as well as other damage, disruptions or shutdowns. Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise sensitive personal, proprietary or confidential information, create system disruptions or cause shutdowns. They also may be able to develop and deploy viruses, worms and other malicious software programs that attack our systems or otherwise exploit any security vulnerabilities. The rapid evolution and increased adoption of artificial intelligence technologies to carry out more sophisticated attacks may intensify our cybersecurity risk. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our customers’ data or our data, including our intellectual property and other confidential business information, employee information or our information technology systems. Our systems and the data stored on those systems may also be vulnerable to security incidents or security attacks, acts of vandalism or theft, coordinated attacks by activist entities, misplaced or lost data, human errors or other similar events that could negatively affect our systems and its data, as well as the data of our business partners. Further, third parties, such as hosted solution providers, that provide services to us, could also be a source of security risk in the event of a failure of their own security systems and infrastructure.

Our operations could be adversely affected by uncertain conditions in global or regional economies, including conflict (such as ongoing conflict in Europe and the Middle EastEast, including Iran and surrounding countries), higher inflation or interest rates, recession, natural disasters, impacts of and issues related to climate change, business disruptions, and our ability to adequately staff operations. Any future economic declines may result in decreased revenue, gross margins, earnings or growth rates or difficulty in managing inventory levels or collecting customer receivables. We also have experienced, and expect to continue to experience, increased competitive pricing pressure, raw material inflation and availability issues resulting in difficulties meeting customer demand. In addition, customer difficulties in the future could result from economic uncertainty or the deterioration of conditions in markets in which we operate, the cyclical nature of their respective businesses, such as in the oil and gas industry, or otherwise and, in turn, result in decreases in product demand, increases in bad debt write-offs, decreases in timely collection of accounts receivable and adjustments to our allowance for credit losses, resulting in material reductions to our revenues and net earnings.

Because we source and sell our products worldwide, our business is subject to risks associated with doing business internationally. These risks include the costs and difficulties of managing foreign entities, limitations on the repatriation and investment of funds, cultural differences that affect customer preferences and business practices, unstable political or economic conditions, geopolitical risks and demand or supply reactions from events that could include political crises and conflict (including in Europe and the Middle EastEast, including Iran and surrounding countries), war, a major terrorist attack, natural disasters, actual or threatened public health emergencies, trade protection measures and import or export licensing requirements, monetary policy, inflation, economic growth, recession, commodity prices, currency volatility, currency controls, and changes in tax laws.

We may incur indebtedness in the future under our credit facility with PNC Bank N.A. Our ability to make interest and scheduled principal payments on any such indebtedness and operate within restrictive covenants could be adversely impacted by changes in the availability, terms and cost of capital, changes in interest rates or changes in our credit ratings or our outlook. These changes could increase our cost of business, limiting our ability to pursue acquisition opportunities, react to market conditions and meet operational and capital needs, thereby placing us at a competitive disadvantage.

Substantial litigation and threats of litigation regarding intellectual property rights exist in the display systems and electronics industries. From time to time, third parties, including certain companies in the business of acquiring patents with the intention of aggressively seeking licensing revenue from purported infringers, have asserted and may in the future assert patent and/or other intellectual property rights to technologies that are important to our business. In any dispute involving products that we have sold, our customers could also become the target of litigation. We are obligated in many instances to indemnify and defend our customers if the products we sell are alleged to infringe any third party’s intellectual property rights. In some cases, depending on the nature of the claim, we may be able to seek indemnification from our suppliers for ourselves and our customers against such claims, but there is no assurance that we will be successful in obtaining such indemnification or that we are fully protected against such claims. Any infringement claim brought against us, regardless of the duration, outcome or size of damage award, could result in substantial cost, divert our management’s attention, be time consuming to defend, result in significant damage awards, cause product shipment delays, or require us to enter into royalty or other licensing agreements. See Note 13, Risks and Uncertainties, of the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information regarding specific legal matters related to our patents.

These potential lawsuits, with or without merit, may divert management’s attention, and we may incur significant expenses in our defense. In addition, we may be required to pay damages or settlements, become subject to injunctions or other equitable remedies, or determinedecide to abandon certain lines of business,business that may causehave a material adverse effect on our results of operations, financial position and cash flows.

The impactextent to which of these changes in trade policies may impact our business will depend on various factors, including (i) when trade measures are implemented, (ii) the ultimate amount, scope, nature, and duration of tariffs and other trade measures, and (iii) the extent to which the Company can mitigate impacts and pass on any increased costs associated with these changes. In addition, the impact of trade disruptions on general economic conditions and demand for electronic components is difficult to predict.

As of July 28,27, 2025,2026, Edward J. Richardson, our Chairman, Chief Executive Officer and President, beneficially owned approximately 98% of the outstanding shares of our Class B common stock, representing approximately 61% of the voting power of the outstanding common stock. This share ownership permits Mr. Richardson to exert control over the outcome of stockholder votes, including votes concerning the election of directors, by-law amendments, possible mergers, corporate control contests and other significant corporate transactions.

Our stock price has fluctuated in the past and may experience declines in the future as a result of the volatile nature of the stock market, developments in our business and/or factors outside of our control including certain of the risk factors discussed in this report. Many factors may cause the market price for our common stock to change, including: (i) our operating results as compared to investors’ expectations in any period, (ii) market perceptions concerning our future earnings prospects, (iii) adverse changes in general market conditions or economic trends and (iv) changes or events in our industry or the world, such as market reactions to public health issues, natural disasters, changes in global, national, or regional economies, inflation, governmental policies, political unrest, military action and armed conflicts (in Europe and the Middle EastEast, including Iran and surrounding countries), terrorist activities, political and social turmoil, civil unrest and other crises.

Results of Operations - an analysis and comparison of our consolidated results of operations for the fiscal years ended May 30, 2026, May 31, 2025,2025 and June 1, 2024 and May 27, 2023,2024, as reflected in our Consolidated Statements of Comprehensive Income.

Liquidity, Financial Position and Capital Resources - a discussion of our primary sources and uses of cash for the fiscal years ended May 30, 2026, May 31, 2025,2025 and June 1, 2024 and May 27, 2023,2024, and a discussion of changes in our financial position.

Some of the Company's products are manufactured in Chinaforeign countries and imported into the United States. Accordingly, the Company’s operations are subject to tariffs and other trade protection measures. The current U.S. administration has instituted certain changes, and may make additional changes, in trade policies that include the negotiation or termination of trade agreements, higher tariffs on imports into the U.S., and other measures affecting trade between the U.S. and other countries from which the Company imports. Due in part to these measures, some countries are changing their trade policies relating to goods imported from the U.S. These global trade disruptions and geopolitical tensions, together with any related downturns in the global economy, could dampen customer demand, increase market volatility, and impact currency exchange rates, all which could materially and adversely affect the Company’s financial performance.

The impactextent to which of these changes in trade policies may impact our business will depend on various factors, including (i) when trade measures are implemented, (ii) the ultimate amount, scope, nature, and duration of tariffs and other trade measures, and (iii) the extent to which the Company can mitigate impacts and pass on any increased costs associated with these changes. In addition, the impact of trade disruptions on general economic conditions and demand for electronic components is difficult to predict.

TheOur recentresults tarifffor modificationsfiscal did2026 were not materially impactimpacted ourby fiscalthe 2025changes results.in trade policies implemented by the U.S. However, it is possible that further tariffs may be imposed on imports of our products, including by other countries, or that our business will be impacted by changing trade relations among countries. Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers’ markets. However, if the Company is unable to successfully pass through the additional cost of these tariffs, or if the higher prices reduce demand for the Company's products, it will have a negative effect on the Company's sales and gross margins.

Power and Microwave Technologies ("PMT") combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies. As a designer, manufacturer, technology partner and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair - all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in 5G, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment. After the sale of certain assets to DirectMed, the Company continues to repair certain CT tubes and sells them exclusively to DirectMed pursuant to a supply agreement.

Canvys provides customized display solutions serving the corporate enterprise, financial, healthcare, industrial and medical original equipment manufacturers markets. Our engineers design, manufacture, source and support a full spectrum of solutions to match the needs of our customers. We offer long-term availability and proven custom display solutions that include touch screens, protective panels, custom enclosures, All-In-One computers, specialized cabinet finishes andfinishes, application specific software packages and certification services. Our volume commitments are lower than the large display manufacturers, making us the ideal choice for companies with very specific design requirements. We partner with both private label manufacturing companies and leading branded hardware vendors to offer the highest quality display and touch solutions and customized computing platforms.

Fiscal 2026 and fiscal 2025 each contained 52 weeks and fiscal 2024 contained 53 weeks.

Operating lossincome during fiscal 20252026 was $2.5$6.5 million, compared to an operating incomeloss of $0.3$2.5 million during fiscal 2024.2025.

Other income during fiscal 20252026 was $0.9$1.0 million, compared to other expenseincome of $0.2$0.9 million during fiscal 2024.2025.

Net lossincome during fiscal 20252026 was $1.1$6.4 million, compared to a net incomeloss of $0.1$1.1 million during fiscal 2024.2025.

During fiscal 2025,2026, consolidated net sales increased by 6.3%9.4% compared to fiscal 2024.2025. Sales for PMT increased by 7.0%,9.1%, GES sales increased by 23.6%,7.3%, and Canvys sales increased by 2.2% and Healthcare sales decreased by 23.1%.12.4%. The increase in PMT was mainly due to increasedstrong sales of engineered solutions for the semi-wafer fabrication products and increasesgrowth in RF and Wireless Components.Components and Semiconductor Wafer Fab market. The increase in GES was mainly due to an increase in new customers, new power management products, and increased market share, new products and new customer developmentshare for powercurrent management products focused on numerous green energy applications.products. The increase in Canvys was attributableprimarily due to higher sales in the North American markets. The decrease in Healthcare sales was due to the asset sale to DirectMed.

During fiscal 2024,2025, consolidated net sales decreasedincreased by 25.2%6.3% compared to fiscal 2023.2024. Sales for PMT decreasedincreased by 21.7%,4.4%, GES sales decreased by 51.2%, Canvys sales decreased by 17.5% and Healthcare sales increased by 5.7%.23.6%, and Canvys sales increased by 2.2%. The decreaseincrease in PMT was mainly due to lowerincreased sales of engineered solutions for the semi-wafer fabrication products and increases in RF and microwaveWireless products.Components. The decreaseincrease in GES was mainly due to theincreased project-basedmarket natureshare, ofnew the wind turbine businessproducts and lowernew shipmentscustomer todevelopment EVfor locomotivepower customers,management includingproducts afocused largeon shipmentnumerous ofgreen batteryenergy modules made in fiscal 2023 that did not recur in fiscal 2024.applications. The decreaseincrease in Canvys was primarily dueattributable to lowerhigher sales in the North American market. The increase in Healthcare was primarily due to higher parts and CT tube sales.markets.

Consolidated gross profit was $60.0$71.3 million during fiscal 2024,2026, compared to $83.7$64.8 million during fiscal 2023.2025. Consolidated gross margin as a percentage of net sales was 30.5%31.2% for fiscal 2024,2026, compared to the 31.9%31.0% during fiscal 2023,2025, primarily due to unfavorablea favorable product mix and manufacturing under absorption for PMT, and unfavorable product mix for GES, favorable product mixGES and lower freight costs for Canvys and increased manufacturing under absorption for Healthcare. Gross margin during fiscal 2024 included expense related to inventory provisions of $0.4 million for PMT, $0.1 million for Canvys and $0.1 million for Healthcare.Canvys.

Net sales for PMT decreasedincreased 21.7%9.1% to $128.7$160.5 million during fiscal 20242026 from $164.3$147.1 million during fiscal 2023.2025. The decreaseincrease was mainly due to lowerstrong sales of semi-wafer fabrication products reflecting the cyclical slowdowngrowth in that market. RF and Wireless sales were also down due to a slowdown in the infrastructure business in Asia. However, the health of the business continues to be strong as we gain market share with new productsComponents and customers.Semiconductor Wafer Fab market. Gross margin as a percentage of net sales decreasedincreased to 30.1%31.2% during fiscal 20242026 as compared to 32.9%30.5% during fiscal 2023, primarily2025, due to unfavorablefavorable product mix and manufacturing under absorption.mix.

Net sales for GESCanvys decreasedincreased 51.2%12.4% to $23.2$37.3 million during fiscal 20242026, from $47.6$33.1 million during fiscal 2023.2025 The decrease reflected the project-based nature of the wind turbine business and was mainlyprimarily due to lowerhigher shipmentssales to EV locomotive customers as they struggled with lead-times of other products to completein the locomotivesNorth andAmerican ship to their end customers for Beta testing. Comparative sales were also impacted by a large shipment of battery modules in fiscal 2023 that did not recur in fiscal 2024.markets. Gross margin as a percentage of net sales decreased to 28.4%32.0% during fiscal 20242026 as compared to 28.8%32.9% during fiscal 2023, primarily2025 due to unfavorable product mix. However, like PMT we continue to gain market share in this segment.

Loss on Disposal of Healthcare Assets and OtherRelated Charges

A substantial portion of Healthcare assets were sold to DirectMed on January 24, 2025 that resulted in a total loss of $5.1 million for fiscal 2025. The loss on assets sold to DirectMed totaled $3.2 million and the Company recorded an impairment charge of $1.9 million for inventories, net and property, plant and equipment, net. In future periods, Healthcare financial results willare no longer be a standalone segmentsegment, andthey willhave bebeen consolidated into the PMT segment. Refer to Note 11, Disposal of Healthcare Assets and Related Charges, in Part II, Item 8 for more details.

Other income was $1.0 million during fiscal 2026, compared to other income of $0.9 million during fiscal 2025, compared to other expense of $0.2 million during fiscal 2024.2025. Fiscal 20252026 had $0.4$0.5 million of investment income compared to $0.3$0.4 million in fiscal 2024.2025. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. The foreign exchange gainloss reported for fiscal 20252026 totaled $0.5 million compared to a lossgain of $0.4$0.5 million for fiscal 2024.2025. We currently do not utilize derivative instruments to manage our exposure to foreign currency. Other income for fiscal 2026 also included a non-recurring gain of $0.9 million.

Income Tax Provision (Benefit) Provision

Our income tax provision (benefit) provision during fiscal 2025,2026, fiscal 2025 and fiscal 2024 andwas fiscal$1.1 2023 wasmillion, ($0.4) million, $0.1 million and $2.7$0.1 million, respectively. The effective income tax rates during fiscal 2025,2026, fiscal 2025 and fiscal 2024 andwere fiscal 2023 were14.6%, 25.4%, 61.4% and 10.8%,61.4%, respectively. The difference between the effective income tax rates as compared to the U.S. federal statutory rate of 21.0% during fiscal 2025,2026, fiscal 20242025 and fiscal 20232024 reflects changes in the geographical distribution of income (loss) and the impact of valuation allowance changes related to the realizability of our U.S. state net operating loss deferred tax assets.

NetAs of May 30, 2026, net deferred tax assets related to domestic state net operating loss ("NOL") carryforwards amounted to approximately $1.8 million and $1.9 million as of May 31, 2025 and $1.8 million as of June 1, 2024.2025. Net deferred tax assets related to foreign NOL carryforwards were $0.3 million as of May 30, 2026 and $0.1 million as of both May 31, 2025 and June 1, 2024 with various or indefinite expiration dates. During the fourth quarter of fiscal 2025,2026, we increaseddecreased the valuation allowance on the state net operating losses by $0.6$0.5 million resulting in a total valuation allowance against state net operating losses of $1.7$1.2 million.

We have historically determined that undistributed earnings of our foreign subsidiaries, to the extent of cash available, will be repatriated to the U.S. The deferred tax liabilities on the outside basis difference is now primarily withholding tax on future dividend distributions. There was no deferred tax liability related to undistributed earnings of our foreign subsidiaries in fiscal 20252026 and less than $0.1 million in fiscal 2024.2025.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to support a more likely than not assertion that its deferred tax assets will be realized. A significant component of objective evidence evaluated was the cumulative income or loss incurred in each jurisdiction over the three-year period ended May 31,30, 2025.2026. We considered other positive evidence in determining the need for a valuation allowance in the U.S. including the subpart F and GILTI inclusions of our foreign earnings, the changes in our business performance in recent years and the utilization of federal NOLs. The weight of this positive evidence is sufficient to outweigh other negative evidence in evaluating our need for a valuation allowance in the U.S. federal jurisdiction. As a result of the positive evidence outweighing the negative evidence for the year ended May 31,30, 2025,2026, no additional valuation allowance on the U.S. federal deferred tax items was recorded. As of May 31,30, 2025,2026, we recorded ana additional $0.6$0.5 million valuation allowance decrease on state NOLs as there was more negativepositive evidence which limitedsupporting the Company’s ability to utilize the state NOLs, including thehigher anticipatedbook expirationincome ofin somefiscal state NOLs prior to utilization2026 and legislationfiscal restrictions2027 for some states.projections.

As of May 31,30, 2025,2026, a valuation allowance of $2.8 million was recorded, representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance as of JuneMay 1,31, 20242025 was $2.1$2.8 million. The valuation allowance relates to state NOLs ($1.7$1.2 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.1$1.6 million). The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

In the normal course of business, we are subject to examination by taxing authorities throughout the world. Years prior to fiscal 20152016 are closed for examination under the statute of limitation for U.S. federal and U.S. state. In The Netherlands, years prior to fiscal 20202021 are closed for examination. We are under examination in Germany for fiscal years 2019 to 2022. DuringThe theCompany thirdis quarterunder ofaudit fiscal 2025, we received a notice from the State ofin Illinois for anfiscal income tax audit covering the period from June 2021 to May 2023. The Company has provided all the documentation requested2022 and isfiscal waiting to hear from the State of Illinois office for further action.2023. We have no other current open audits in the U.S.

The Company recorded $0.3$0.4 million related to uncertain tax positions as of May 31,30, 20252026 as compared to $0.3 million as of May 31, 2025 and $0.1 million as of June 1, 2024. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income. AccruedThe Company recognizes interest was included within theaccrued related to unrecognized tax liabilitybenefits lineand penalties in theoperating Consolidated Balance Sheets.expenses. We have recorded a liability of less than $0.1 million for interest as of May 30, 2026, May 31, 2025.2025 and June 1, 2024.

Cash and cash equivalents were $35.9$31.8 million at May 31,30, 2025.2026. Cash and cash equivalents by geographic area at May 31,30, 20252026 consisted of $19.5$11.7 million in North America, $7.7$11.4 million in Europe, $0.9$1.0 million in Latin America and $7.8$7.7 million in Asia/Pacific. The January 24, 2025 sale of certain Healthcare assets to DirectMed generated $8.0 million of cash, which we expect to use to support opportunities in our Green Energy Solutions business. No cash was repatriated to the United Stated in fiscal 2025. Although the Tax Cuts and Jobs Act generally eliminated federal income tax on future cash repatriation to the United States, cash repatriation may be subject to state and local taxes, withholding or similar taxes. See Note 9,8, Income Taxes, from the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for further information.

Cash and cash equivalents were $24.3$35.9 million at JuneMay 1,31, 2024.2025. Cash and cash equivalents by geographic area at JuneMay 1,31, 20242025 consisted of $7.1$19.5 million in North America, $7.3$7.7 million in Europe, $1.1$0.9 million in Latin America and $8.8$7.8 million in Asia/Pacific. WeThe January 24, 2025 sale of certain Healthcare assets to DirectMed generated $8.0 million of cash. No cash was repatriated $0.3 million to the United States in the second quarter of fiscal 2024 from our entity in Mexico.2025.

On MarchOctober 20,7, 2023,2025, the Company established a senior, secured revolving credit facility agreement withexecuted a three-year term in an aggregate principal amount notextension to exceed $30 million, including a swingline loan and a letter of credit sub-facility (collectively, the "Revolving Credit Facility") with PNC Bank N. A. This Credit Agreement was amended bythrough the FirstSecond Amendment to the Credit Agreement datedwith Aprila 9,maximum 2025.borrowing limit of $20 million. The terms of the new agreement are similar to the previous Credit Agreement. See Note 6, Revolving Credit Facility, included in the notes to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10K for further information. The Revolving Credit Facility is guaranteed by the Company's domestic subsidiaries. Proceeds of the borrowings under the Revolving Credit Facility, if any, are expected to be used for working capital and general corporate purposes of the Company and its subsidiaries. TheThere Companywere utilizedno $1.0drawings millionor repayments under the Revolving Credit Facility as of theMay credit30, line and repaid that $1.0 million during fiscal 2025. As of the end of fiscal 20252026 and through the report release date,date. noNo amounts were outstanding under the Revolving Credit Facility.Facility as of May 30, 2026, and through the report release date.

Cash used by investing activities of $3.1 million during fiscal 20242026 was due to the $4.0$4.4 million ofin capital expenditures.expenditures Thosepartially capitaloffset by $1.3 million proceeds from the sale of Healthcare assets and related charges. Capital expenditures were primarily related to our IT system and LaFox manufacturing businessand facilities. LaFox manufacturing primarily supports the PMT and facilityGES renovation and IT systems.segments.

Cash flow from financing activities primarily consistsconsisted of cash dividends paid.

Lease obligations are related to certain warehouse and office facilities and vehicles under non-cancelable operating leases.

Results of Operations – an analysis and comparison of our consolidated results of operations for the three month and sixnine month periods ended NovemberFebruary 29,28, 20252026 and NovemberMarch 30,1, 2024,2025, as reflected in our Unaudited Consolidated Statements of Comprehensive Income (Loss) Income..

Liquidity, Financial Position and Capital Resources – a discussion of our primary sources and uses of cash for sixnine month periods ended NovemberFebruary 29,28, 20252026 and NovemberMarch 30,1, 2024,2025, and a discussion of changes in our financial position.

The impactextent to which of these changes in trade policies may impact our business will depend on various factors, including (i) when trade measures are implemented, (ii) the ultimate amount, scope, nature, and duration of tariffs and other trade measures, and (iii) the extent to which the Company can mitigate impacts and pass on any increased costs associated with these changes. In addition, the impact of trade disruptions on general economic conditions and demand for electronic components is difficult to predict.

The recent tariff modifications did not materially impact ourOur results for the first sixnine months of fiscal 2026.2026 were not materially impacted by the changes in trade policies implemented by the U.S. However, it is possible that further tariffs may be imposed on imports of our products, including by other countries, or that our business will be impacted by changing trade relations among countries. Management continues to work with its suppliers as well as its customers to mitigate the impact of the tariffs on our customers’ markets.markets, including with respect to tariff refund claims. However, if the Company is unable to successfully pass through the additional cost of these tariffs, or if the higher prices reduce demand for the Company's products, it will have a negative effect on the Company's sales and gross margins.

Power and Microwave Technologies ("PMT") combines our core engineered solutions capabilities, power grid and microwave tube business with new disruptive RF, Wireless and Power technologies. As a designer, manufacturer, technology partner and authorized distributor, PMT’s strategy is to provide specialized technical expertise and engineered solutions based on our core engineering and manufacturing capabilities on a global basis. We provide solutions and add value through design-in support, systems integration, prototype design and manufacturing, testing, logistics and aftermarket technical service and repair - all through our existing global infrastructure. PMT’s focus is on products for power, RF and microwave applications for customers in 5G, aviation, broadcast, communications, industrial, marine, medical, military, scientific and semiconductor markets. PMT focuses on various applications including broadcast transmission, CO2 laser cutting, diagnostic imaging, dielectric and induction heating, high energy transfer, high voltage switching, plasma, power conversion, radar and radiation oncology. PMT also offers its customers technical services for both microwave and industrial equipment. After the sale of certain assets to DirectMed, the Company continues to manufacture and repair certain CT tubes and sells them exclusively to DirectMed pursuant to a supply agreement.

Financial Summary – Three Months Ended NovemberFebruary 29,28, 20252026

The secondthird quarter of fiscal 2026 and fiscal 2025 both contained 13 weeks.

Net sales during the secondthird quarter of fiscal 2026 were $52.3$55.5 million, an increase of 5.7%,3.1%, compared to net sales of $49.5$53.8 million during the secondthird quarter of fiscal 2025.

Gross margin decreasedincreased to 30.8%31.9% during the secondthird quarter of fiscal 2026 compared to 31.0% during the secondthird quarter of fiscal 2025.

Selling, general and administrative expenses were $15.9$16.2 million or 30.5%29.2% of net sales during the secondthird quarter of fiscal 2026 compared to $16.0$14.5 million or 32.3%26.9% of net sales during the secondthird quarter of fiscal 2025.

Operating income during the secondthird quarter of fiscal 2026 was $0.1$1.5 million compared to an operating loss of $0.7$2.7 million during the secondthird quarter of fiscal 2025.

Net lossincome during the secondthird quarter of fiscal 2026 was $0.1$0.9 million compared to a net loss of $0.8$2.1 million during the secondthird quarter of fiscal 2025.

Financial Summary – SixNine Months Ended NovemberFebruary 29,28, 20252026

The first sixnine months of fiscal 2026 and fiscal 2025 both contained 2639 weeks.

Net sales during the first sixnine months of fiscal 2026 were $106.9$162.4 million, an increase of 3.6%,3.4%, compared to net sales of $103.2$157.0 million during the first sixnine months of fiscal 2025.

Gross margin increased to 30.9%31.2% during the first sixnine months of fiscal 2026 compared to 30.8% during the first sixnine months of fiscal 2025.

Selling, general and administrative expenses were $31.9$48.1 million or 29.8%29.6% of net sales during the first sixnine months of fiscal 2026 compared to $32.1$46.6 million or 31.1%29.7% of net sales during the first sixnine months of fiscal 2025.

Operating income during the first sixnine months of fiscal 2026 was $1.1$2.6 million compared to an operating loss of $0.4$3.1 million during the first sixnine months of fiscal 2025.

Net income during the first sixnine months of fiscal 2026 was $1.8$2.7 million compared to a net loss of $0.2$2.2 million during the first sixnine months of fiscal 2025.

Net sales by segment and percentage change during the secondthird quarter and first sixnine months of fiscal 2026 and fiscal 2025 were as follows (in thousands):

During the secondthird quarter of fiscal 2026, consolidated net sales increased 5.7%3.1% compared to the secondthird quarter of fiscal 2025. Sales for PMT decreasedincreased 4.0%,9.7%, sales for GES increaseddecreased 39.0%5.4% and sales for Canvys increaseddecreased 28.1%.13.5%. The decreaseincrease in PMT was mainlyprimarily due to a declineincreases in Electronboth Deviceour semiconductor equipment and Healthcare products partially offset by higher RF and /Microwave products.component segments The increasedecrease in GES was mainly due to salesa ofdecrease Powerin Managementlegacy products.tube customers offset by increase in market share through new products and territory expansion. The increasedecrease in Canvys was attributable to higherlower sales in the North American markets.

During the first sixnine months of fiscal 2026, consolidated net sales increased 3.6%3.4% compared to the first sixnine months of fiscal 2025. Sales for PMT decreasedincreased 0.5%,2.8%, sales for GES increased 10.7%4.3% and sales for Canvys increased 17.7%.5.6%. The decreaseincrease in PMT was mainlyprimarily due to a declineincreases in Electronboth Device and Healthcare products partially offset by higherour semiconductor equipment and RF and /Microwave products.component segments. The increase in GES was mainly due to salesan ofincrease Powerin Managementmarket products.share through current and new products with territory expansion. The increase in Canvys was attributable to higherincreased sales in the North American and European markets.

Gross profit by segment and percentage of net sales for the secondthird quarter and first sixnine months of fiscal 2026 and fiscal 2025 were as follows (in thousands):

Consolidated gross profit increased to $33.0$17.7 million during the firstthird six monthsquarter of fiscal 2026 compared to $31.8$16.7 million during the firstthird six monthsquarter of fiscal 2025. Consolidated gross margin as a percentage of net sales during the firstthird six monthsquarter of fiscal 2026 increased to 30.9%31.9% when compared to 30.8%31.0% during the firstthird six monthsquarter of fiscal 2025. This margin increase was mainly due to favorable product mix and improved manufacturing absorption in PMT, unfavorable product mix in GESGES, and unfavorable productmanufacturing mixabsorption and higher freight costs in Canvys.

PMT net sales decreasedincreased 4.0%9.7% to $35.2$38.7 million during the secondthird quarter of fiscal 2026 from $36.7$35.3 million during the second quarter of fiscal 2025. The decrease was due primarily to a decline in the Electron Device and Healthcare products partially offset by increased growth in our RF and Microwave component products. The decline in Healthcare sales, which only included CT tubes, was due to the sale of assets to DirectMed in the third quarter of fiscal 2025. The increase was due primarily to increases in both our semiconductor equipment and RF/Microwave component segments. Gross margin as a percentage of net sales decreasedincreased to 30.4%32.1% during the secondthird quarter of fiscal 2026 as compared to 30.7%29.9% during the secondthird quarter of fiscal 2025 due to product mix and lowerimproved manufacturing absorption.

PMT net sales decreasedincreased 0.5%2.8% to $74.3$113.0 million during the first sixnine months of fiscal 2026 from $74.7$110.0 million during the first sixnine months of fiscal 2025. The decreaseincrease was due primarily to a decline in the Electron Device and Healthcare products partially offset by increases in semiconductorsboth our semiconductor equipment and strong growth in our RF and /Microwave products.component The decline in Healthcare sales, which only included CT tubes, was due to the sale of assets to DirectMed in the third quarter of fiscal 2025.segments. Gross margin as a percentage of net sales increased to 30.9%31.3% during the first sixnine months of fiscal 2026 as compared to 30.4%30.2% during the first sixnine months of fiscal 2025 due to product mix.

GES net sales increaseddecreased 39.0%5.4% to $8.3$8.8 million during the secondthird quarter of fiscal 2026 from $6.0$9.3 million during the secondthird quarter of fiscal 2025. The increasedecrease reflected thea strong adoptiondecrease in thelegacy tube customers offset by an increase in market ofshare Powerthrough Managementnew products.products and territory expansion. Gross margin as a percentage of net sales decreased to 30.3%30.8% during the secondthird quarter of fiscal 2026 as compared to 32.0%32.8% during the secondthird quarter of fiscal 2025 due to product mix.

GES net sales increased 10.7%4.3% to $15.6$24.4 million during the first sixnine months of fiscal 2026 from $14.1$23.3 million during the first sixnine months of fiscal 2025. The increase reflectsreflected thean strong adoptionincrease in the market ofshare Powerthrough Managementcurrent products.and new products with territory expansion. Gross margin as a percentage of net sales decreased to 30.0%30.3% during the secondthird quarter of fiscal 2026 as compared to 30.5%31.4% during the secondthird quarter of fiscal 2025 due to product mix.

Canvys net sales increaseddecreased 28.1%13.5% to $8.8$8.0 million during the secondthird quarter of fiscal 2026 from $6.9$9.2 million during the secondthird quarter of fiscal 2025, primarily due to higherlower sales in the North American markets. Gross margin as a percentage of net sales increaseddecreased to 32.6%32.2% during the secondthird quarter of fiscal 2026 from 31.7%33.2% during the secondthird quarter of fiscal 2025 primarily due to aunfavorable favorablemanufacturing productabsorption mix.and higher freight costs.

Canvys net sales increased 17.7%5.6% to $17.0$25.0 million during the first sixnine months of fiscal 2026 from $14.5$23.7 million during the first sixnine months of fiscal 2025, due to higherincreased sales in both North American andthe European markets. Gross margin as a percentage of net sales decreased to 31.8%31.9% during the first sixnine months of fiscal 2026 from 33.1% during the first sixnine months of fiscal 2025 primarily due to product mix and higher freight costs.

Selling, general and administrative expenses (“SG&A”) decreasedincreased to $15.9$16.2 million for the secondthird quarter of fiscal 2026 when compared to $16.0$14.5 million for the year ago quarter mainly due to lowerincreased travelsalaries, expenses.medical benefits, travel, and higher incentives due to sales growth. Expressed as a percentage of net sales, SG&A was 30.5%29.2% for the secondthird quarter of fiscal 2026 compared to 32.3%26.9% in the secondthird quarter of fiscal 2025.

SG&A decreasedincreased to $31.9$48.1 million for the first sixnine months of fiscal 2026 when compared to $32.1$46.6 million for the first sixnine months of fiscal 2025 primarilymainly asdue ato resultincreased ofsalaries, lowerlegal travelexpenses, expenses.and higher incentives due to sales growth. Expressed as a percentage of net sales, SG&A was 29.8%29.6% for the first sixnine months of fiscal 2026 compared to 31.1%29.7% in the first sixnine months of fiscal 2025.

Other income and expense primarily includes interest income, foreign exchange gains and foreign exchange losses. Our foreign exchange gains and losses are primarily due to the translation of U.S. dollars held in non-U.S. entities. We currently do not utilize derivative instruments to manage our exposure to foreign currency.

Other expense during the secondthird quarter of fiscal 2026 totaled $0.3 million compared to other expense of $0.4$0.3 million for secondthird quarter of fiscal 2025. The decrease from the year ago quarter was mainly due to higher interest income.

Other income during the first sixnine months of fiscal 2026 totaled $1.0$0.7 million, compared to other expense of $0.1$0.4 million when compared tofor the first sixnine months of fiscal 2025.The increase from fiscal 2025 was mainly due to a non-recurring gain of $0.9 million.

Income Tax Provision (Benefit)

We recorded an income tax provision of $0.3 million and an income tax benefit of $0.2$1.0 million for the firstthird six monthsquarter of fiscal 2026 and the firstthird six monthsquarter of fiscal 2025, respectively. The effective income tax rate during the firstthird six monthsquarter of fiscal 2026 was a tax provision of 16.2%25.3% as compared to a tax benefit of 60.4%33.4% during the firstthird six monthsquarter of fiscal 2025. The difference in rate during the firstthird six monthsquarter of fiscal 2026 as compared to the firstthird six monthsquarter of fiscal 2025 reflects changes in our geographical distribution of income (loss). and the nonrecurring healthcare asset sale loss in the third quarter of fiscal 2025. The 16.2%25.3% effective income tax rate differs from the federal statutory rate of 21% as a result of our geographical distribution of income (loss) and the utilizationimpact of thepermanent U.S. research and development credit.items.

The Company's reserve for uncertain tax positions totaled $0.3 million as of NovemberFebruary 29,28, 2025,2026, and May 31, 2025. We record interest related to uncertain tax positions in the income tax expense line item within the Consolidated Statements of Comprehensive Income (Loss) Income.. Accrued interest was included within the related tax liability line in the Consolidated Balance Sheets. We have recorded a liability of less than $0.1 million for interest as of NovemberFebruary 29,28, 20252026 and May 31, 2025.

The Company maintains a valuation allowance representing the portion of the deferred tax asset that management does not believe is more likely than not to be realized. The valuation allowance was $2.9 million as of NovemberFebruary 29,28, 2025,2026, and $2.8 million as of May 31, 2025. The valuation allowance relates to state NOLs ($1.7 million) and deferred tax assets in foreign jurisdictions where historical taxable losses have been incurred ($1.2 million). The amount of the deferred tax asset that is not considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are increased, or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.

We have considered the impact of the One Big Beautiful Bill Act (“OBBBA”) on the Company’s annual effective tax rate. The impact of OBBBA on the annual effective tax rate includes the reduction in the research and development credit from the Section 280c election. These changes did not have a significant impact to the annual effective tax rate. However, the enactment of the OBBBA introduced several significant tax law modifications that, while not affecting the annual effective tax rate, do have other implications for the Company. The OBBBA makes permanent key elements of the 2017 Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing pursuant to IRC §174 for fiscal year beginning after December 31, 2024. The Company ishas currently evaluatingreflected the futurechange impactin tax law in its annual effective tax rate through the reduction of OBBBA on its financialresearch position.and development credit under IRC Section 41 through the IRC Section 280C(c)(2) election. The Company will evaluate other OBBBA-related items at year end as part of determining taxable income, including bonus depreciation, domestic research cost expensing pursuant to IRC §174, and any other applicable elections available under OBBBA.

Net lossincome during the secondthird quarter of fiscal 2026 was $0.1$0.9 million, or $.01$0.07 per diluted common share and $.01$0.06 per Class B diluted common share as compared to a net loss of $0.8$2.1 million during the secondthird quarter of fiscal 2025 or $0.05$0.15 per diluted common share and $0.05$0.13 per Class B diluted common share.

Net income during the first sixnine months of fiscal 2026 was $1.8$2.7 million, or $0.12$0.19 per diluted common share and $0.11$0.17 per Class B diluted common share as compared to a net loss of $0.2$2.2 million during the first sixnine months of fiscal 2025 or $0.01$0.16 per diluted common share and $0.01$0.14 per Class B diluted common share.

Cash and cash equivalents were $33.1$29.5 million at NovemberFebruary 29,28, 2025.2026. Cash and cash equivalents by geographic area on NovemberFebruary 29,28, 20252026 consisted of $10.5$11.2 million in North America, $12.5$9.7 million in Europe, $0.8 million in Latin America and $9.3$7.8 million in Asia/Pacific. No cash was repatriated to the United States in the first sixnine months of fiscal 2026. Although the Tax Cuts and Jobs Act generally eliminated federal income tax on future cash repatriation to the United States, cash repatriation may be subject to state and local taxes, withholding or similar taxes.

On October 7, 2025, the Company executed a three-year extension to the PNC Credit Agreement through the Second Amendment to the Credit Agreement with a maximum borrowing limit of $20 million. The terms of the new agreement are similar to the previous Credit Agreement. See Note 5, Revolving Credit Facility, included in Part I, Item 1 for further information. The Revolving Credit Facility is guaranteed by the Company's domestic subsidiaries. Proceeds of the borrowings under the Revolving Credit Facility, if any, are expected to be used for working capital and general corporate purposes of the Company and its subsidiaries. There were no drawings or repayments under the Revolving Credit Facility as of NovemberFebruary 29,28, 20252026 and through the report release date. No amounts were outstanding under the Revolving Credit Facility as of NovemberFebruary 29,28, 2025,2026, and through the report release date.

Operating activities generatedused $1.3$1.4 million of cash during the first sixnine months of fiscal 2026. We had a net income of $1.8$2.7 million during the first sixnine months of fiscal 2026, which included non-cash share-based compensation expense of $1.0$1.3 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of $0.2$0.3 million, unrealized foreign exchange gain of $0.2$0.4 million, and depreciation and amortization expense of $1.9$2.9 million associated with our property, plant and equipment and intangible assets. Changes in our operating assets and liabilities utilized $3.4$8.2 million in cash during the first sixnine months of fiscal 2026, net of foreign currency exchange gains and losses, included an increase in accounts receivable of $3.2$2.5 million, an increase in inventories of $1.5$3.0 million, an increase in prepaid expenses and other assets of $2.9 million and an increase in accounts payable and accrued liabilities of $4.4$0.8 million. The increase in accounts receivable was primarily due to the higher level of sales. The changes in accounts payable and accrued liabilities were timing related.

Operating activities generated $5.9$10.5 million of cash during the first sixnine months of fiscal 2025. We had a net loss of $0.2$2.2 million during the first sixnine months of fiscal 2025, which included non-cash stock-based compensation expense of $0.9$1.2 million associated with the issuance of stock option and restricted stock awards, inventory reserve provisions of $0.2$0.3 million, unrealized foreign exchange gainloss of $0.2$0.4 million andmillion, depreciation and amortization expense of $2.1$3.0 million associated with our property, plant and equipment and intangible assets.assets and the disposal loss on Healthcare assets of $4.9 million. Changes in our operating assets and liabilities generated $3.2$2.8 million in cash during the first sixnine months of fiscal 2025, net of foreign currency exchange gains and losses, included an increase in accounts payable and accrued liabilities of $5.2$3.1 million, an increase in accounts receivable of $1.1$1.5 million and ana increasedecrease in inventories of $1.7$1.1 million. The increase in accounts receivable was primarily due to the higher level of sales. The changes in accounts payable and accrued liabilities were timing related.

Cash used in investing activities of $2.6$3.4 million during the first sixnine months of fiscal 2026 was due to capital expenditures. Capital expenditures were primarily related to our IT system and LaFox manufacturing and facilities. LaFox manufacturing primarily supports the PMT and GES segments.

Cash usedprovided in investing activities of $1.4$5.0 million during the first sixnine months of fiscal 2025 was due to the $7.0 million of proceeds from the disposal of the Healthcare assets and $2.0 million offset for capital expenditures. Capital expenditures were primarily related to our IT system and LaFox manufacturing and facilities. LaFox manufacturing primarily supports the PMT and GES segments.

Cash used in financing activities of $1.6$2.2 million during the first sixnine months of fiscal 2026 primarily resulted from $1.7$2.6 million of dividend payments to stockholders partially offset by $0.2$0.4 million of proceeds from the issuance of stock.

Cash used in financing activities of $1.6$2.4 million during the first sixnine months of fiscal 2025 primarily resulted from $1.7$2.6 million of dividend payments to stockholders partially offset by $0.3 million of proceeds from the issuance of stock.