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What changed in INTEST CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of INTEST CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+268 added−263 removedSource: 10-K (2024-03-27) vs 10-K (2023-03-22)

Top changes in INTEST CORP's 2023 10-K

268 paragraphs added · 263 removed · 184 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

82 edited+30 added−23 removed66 unchanged
Biggest change($ in 000s) Years Ended Change 12/31/2022 12/31/2021 $ % Revenue Semi $ 68,422 58.6 % $ 54,937 64.7 % $ 13,485 24.5 % Industrial 10,038 8.6 % 7,314 8.6 % 2,724 37.2 % Automotive/EV 10,776 9.2 % 6,205 7.3 % 4,571 73.7 % Life Sciences 4,589 3.9 % 2,353 2.8 % 2,236 95.0 % Defense/Aerospace 7,006 6.0 % 5,043 6.0 % 1,963 38.9 % Security 3,241 2.8 % 699 0.8 % 2,542 363.7 % Other 12,756 10.9 % 8,327 9.8 % 4,429 53.2 % $ 116,828 100.0 % $ 84,878 100.0 % $ 31,950 37.6 % 5 During 2022, our revenue from semi grew $13.5 million or 25%, primarily reflecting growth in demand for our front-end solutions used in the wafer manufacturing process.
Biggest change($ in 000s) Years Ended Change 12/31/2023 12/31/2022 $ % Revenue Semi $ 65,735 53.3 % $ 68,422 58.6 % $ (2,687 ) -3.9 % Industrial 14,310 11.6 % 10,038 8.6 % 4,272 42.6 % Automotive/EV 9,895 8.0 % 10,776 9.2 % (881 ) -8.2 % Life Sciences 4,856 3.9 % 4,589 3.9 % 267 5.8 % Defense/Aerospace 12,537 10.2 % 7,006 6.0 % 5,531 78.9 % Security 3,688 3.0 % 3,241 2.8 % 447 13.8 % Other 12,281 10.0 % 12,756 10.9 % (475 ) -3.7 % $ 123,302 100.0 % $ 116,828 100.0 % $ 6,474 5.5 % 5 During 2023 our consolidated revenue grew $6.5 million or 6%.
This testing step has several names, including "front-end test," "wafer test," "wafer probe" or "wafer sort." In front-end test, an electronic handling device known as a wafer prober automatically positions the wafer under a probe card that is electronically connected to a "test head," which connects electrically to a test system.
This testing step has several names, including "front-end test," "wafer test," "wafer probe" or "wafer sort." In front-end testing, an electronic handling device known as a wafer prober automatically positions the wafer under a probe card that is electronically connected to a "test head," which connects electrically to a test system.
During front-end testing, there is a growing trend of thermally conditioning the wafer during test. Once the good ICs have been identified, they are packaged. The packaged ICs also require testing, called "back-end test" or "final test," to determine if they meet design and performance specifications.
During front-end testing, there is a growing trend of thermally conditioning the wafer. Once the good ICs have been identified, they are packaged. The packaged ICs also require testing, called "back-end test" or "final test," to determine if they meet design and performance specifications.
We generate a significant portion of our sales leads through our website as well as through trade show attendance where we display our products and technology. We also provide induction heating product support through our SmartCARE Service offering, which includes equipment repairs and training, preventative maintenance, enhanced warranties and spare parts.
We generate a significant portion of our sales leads through our website as well as through trade show attendance where we display our products and technology. 11 We also provide induction heating product support through our SmartCARE Service offering, which includes equipment repairs and training, preventative maintenance, enhanced warranties and spare parts.
Our products provide highly engineered, high quality and cost-effective test and process solutions which are delivered with a customer focus that are intended to drive a high level of customer satisfaction. Our strategy is to consistently develop unique and differentiated solutions through innovative new product development and acquisitions.
Our products provide highly engineered, high quality and cost-effective test and process technology solutions which are delivered with a customer focus that are intended to drive a high level of customer satisfaction. Our strategy is to consistently develop unique and differentiated solutions through innovative new product development and acquisitions.
With the LS Series manipulators, the undocking, movement of the test head and redocking can be done automatically through the computer controlled pendant. Our manipulator products generally range in price from approximately $12,000 to $85,000. Docking Hardware Products . We offer two lines of docking hardware products: fixed manual docking and IntelliDock pin and cup docking.
With the LS Series manipulators, the undocking, movement of the test head and redocking can be done automatically through the computer controlled pendant. Our manipulator products generally range in price from approximately $12,000 to $100,000. Docking Hardware Products . We offer two lines of docking hardware products: fixed manual docking and IntelliDock pin and cup docking.
The loss of any one or more of our largest customers, or a reduction in orders by a major customer, could materially reduce our revenue or otherwise materially affect our business, financial condition or results of operations. MANUFACTURING AND SUPPLY At December 31, 2022, our principal manufacturing operations consisted of assembly and testing at our facilities in in the U.S.
The loss of any one or more of our largest customers, or a reduction in orders by a major customer, could materially reduce our revenue or otherwise materially affect our business, financial condition or results of operations. MANUFACTURING AND SUPPLY At December 31, 2023, our principal manufacturing operations consisted of assembly and testing at our facilities in in the U.S.
In the life sciences industry, we provide image capture products, heating systems for medical device manufacturing and equipment for critical applications within the medical cold chain for pharmaceuticals. In the security industry, our image capture and data management technologies are used in a broad variety of applications.
In the life sciences industry, we provide image capture products, electronic test systems and heating systems for medical device manufacturing and equipment for critical applications within the medical cold chain for pharmaceuticals. In the security industry, our image capture and data management technologies are used in a broad variety of applications.
At December 31, 2022, we had manufacturing facilities in the U.S. in Massachusetts, New Jersey, and New York as well as outside the U.S. in Canada, Germany and the Netherlands. We provided service to our customers from sales and service personnel based in the U.S., Europe and Asia.
At December 31, 2023, we had manufacturing facilities in the U.S. in Massachusetts, New Jersey, and New York as well as outside the U.S. in Canada, Germany and the Netherlands. We provided service to our customers from sales and service personnel based in the U.S., Europe and Asia.
We believe this integrated approach to ATE facilitates smooth changeover from one tester to another, longer lives for interface components, better test results, increased ATE utilization and lower overall test costs. Robotics-Based Electronic Production Test Equipment. Our acquisition of Acculogic adds to our electronic test platform offerings beyond those which exclusively serve semi.
We believe this integrated approach to ATE facilitates smooth changeover from one tester to another, longer lives for interface components, better test results, increased ATE utilization and lower overall test costs. Robotics-Based Electronic Production Test Equipment. Acculogic adds to our electronic test platform offerings beyond those which exclusively serve the semi market.
Although, from time to time, certain components may be in short supply due to high demand or inability of vendors to meet quality or delivery requirements, we believe that all materials and components are available in adequate amounts from other sources. We conduct inspections of incoming raw materials, fabricated parts and components using sophisticated measurement equipment.
Although, from time to time, certain components may be in short supply due to high demand or inability of vendors to meet quality or delivery requirements, we believe that all materials and components are available in adequate amounts from other sources, except as noted above. We conduct inspections of incoming raw materials, fabricated parts and components using sophisticated measurement equipment.
Our tester interface products optimize the integrity of the signals transmitted between the test head and the device under test by being virtually transparent to the test signals, which results in increased accuracy of the test data and may thus enable improved test yields. 7 Compatibility and Integration .
Our tester interface products optimize the integrity of the signals transmitted between the test head and the device under test by being virtually transparent to the test signals, which results in increased accuracy of the test data and may thus enable improved test yields.
ENGINEERING AND PRODUCT DEVELOPMENT Our success depends on our ability to provide our customers with products and solutions that are well engineered and to design those products and solutions before, or at least no later than, our competitors. At December 31, 2022, we employed a total of 77 engineers engaged in engineering and product development.
ENGINEERING AND PRODUCT DEVELOPMENT Our success depends on our ability to provide our customers with products and solutions that are well engineered and to design those products and solutions before, or at least no later than, our competitors. At December 31, 2023, we employed a total of 84 engineers engaged in engineering and product development.
In the years ended December 31, 2022 and 2021, we spent approximately $7.5 million and $5.5 million, respectively, on engineering and product development. 12 PATENTS AND OTHER PROPRIETARY RIGHTS We intend to protect our technology by filing patent applications for the technologies that we consider important to our business.
In the years ended December 31, 2023 and 2022, we spent approximately $7.6 million and $7.5 million, respectively, on engineering and product development. PATENTS AND OTHER PROPRIETARY RIGHTS We intend to protect our technology by filing patent applications for the technologies that we consider important to our business.
In addition, all employees and third-party product development consultants agree not to disclose any private or confidential information relating to our technology, trade secrets or intellectual property. At December 31, 2022, we held 49 active U.S. patents and had three pending U.S. patent applications covering various aspects of our technology.
In addition, all employees and third-party product development consultants agree not to disclose any private or confidential information relating to our technology, trade secrets or intellectual property. At December 31, 2023, we held 30 active U.S. patents and had no pending U.S. patent applications covering various aspects of our technology.
EASYHEAT ™ Products: Our compact EASYHEAT™ induction heating systems with power ratings from 0.5kW to 10kW are manufactured by Ambrell and used to conduct fast, efficient, repeatable non-contact heating of metals or other electrically conductive materials in order to transform raw materials into finished parts. Prices generally range from $5,000 to $25,000.
EASYHEAT ™ Products: Our compact EASYHEAT™ induction heating systems with power ratings from 0.5kW to 10kW are manufactured by Ambrell and used to conduct fast, efficient, repeatable non-contact heating of metals or other electrically conductive materials in order to transform raw materials into finished parts.
Our customers use our products principally in production testing or process/manufacturing applications, although our ThermoStream(R) products traditionally have been used largely in engineering development and quality assurance. We believe that we sell to most of the major semiconductor manufacturers in the world. During the year ended December 31, 2022, no customer accounted for 10% or more of our consolidated revenue.
Our customers use our products principally in production testing or process/manufacturing applications, although our ThermoStream(R) products traditionally have been used largely in engineering development and quality assurance. We believe that we sell to most of the major semiconductor manufacturers in the world. During the year ended December 31, 2023, one customer accounted for 13% of our consolidated revenue.
During the year ended December 31, 2021, 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, 2021, no other customer accounted for 10% or more of our consolidated revenue.
This revenue was primarily generated by our Electronic Test segment. During the year ended December 31, 2023, no other customer accounted for 10% or more of our consolidated revenue. During the year ended December 31, 2022, no customer accounted for 10% or more of our consolidated revenue.
We expect to do this through a combination of organic growth and acquisitions. Our 5-Point Strategy is as follows: Global and Market Expansion. We believe we can provide significant and sustainable long-term growth by expanding our serviceable addressable market (“SAM”) and building a larger installed product base.
We expect to do this through a combination of organic growth and acquisitions. Our 5-Point Strategy is as follows: Global and Market Expansion. We believe our serviceable addressable market (“SAM”) is currently in excess of $2.0 billion and that we can provide significant and sustainable long-term growth by expanding our SAM and building a larger installed product base.
In Europe, sales managers at our office in Germany, as well as regional distributors and independent sales representatives, sell to semiconductor manufacturers and customers in other markets. We communicate with our distributors regularly and have trained them to sell and service our thermal products.
In the rest of Asia, our sales are handled through distributors. In Europe, sales managers at our office in Germany, as well as regional distributors and independent sales representatives, sell to semiconductor manufacturers and customers in other markets. We communicate with our distributors regularly and have trained them to sell and service our thermal products.
In Europe, these products and services are sold through manufacturer representatives and supported with direct employees based in our Hamburg, Germany facility. In Asia, these products and services are sold through a mixture of distributors and manufacturer representatives. Customer support is provided by trained distributors and supplemented by direct employees from North America and Europe.
Customer support is supplied by a team located throughout North America. In Europe, these products and services are sold through manufacturer representatives and supported with direct employees based in our Hamburg, Germany facility. In Asia, these products and services are sold through a mixture of distributors and manufacturer representatives.
These free-standing universal manipulators can hold a variety of test heads and enable an operator to reposition a test head for alternate use with any one of several probers or handlers on a test floor. 8 Our manipulator products incorporate a balanced floating-head design.
We offer three lines of manipulator products: the in2(R), the Cobal and the LS Series. These free-standing universal manipulators can hold a variety of test heads and enable an operator to reposition a test head for alternate use with any one of several probers or handlers on a test floor. Our manipulator products incorporate a balanced floating-head design.
See also the discussion of backlog in Part II, Item 7 under “Orders and Backlog.” EMPLOYEES At December 31, 2022, we had 346 employees (327 of which were full-time), including 161 in manufacturing operations, 139 in customer support/operations and 46 in administration. Substantially all of our key employees are highly skilled and trained technical personnel.
See also the discussion of backlog in Part II, Item 7 under “Orders and Backlog.” EMPLOYEES At December 31, 2023, we had 334 employees (323 of which were full-time), including 154 in manufacturing operations, 130 in customer support/operations and 50 in administration. Substantially all of our key employees are highly skilled and trained technical personnel.
Our U.S. patents expire at various times beginning in 2023 and extending through 2042. During 2022, two U.S. patents were issued and seven U.S. patents expired. We do not believe that the upcoming expiration of certain of our patents in 2023 will have a material impact on our business.
Our U.S. patents expire at various times beginning in 2024 and extending through 2039. During 2023, one U.S. patent was issued and 18 U.S. patents expired. We do not believe that the upcoming expiration of certain of our patents in 2024 will have a material impact on our business.
Our vision is to be the supplier of choice for innovative test and process technology solutions. Our mission is to leverage our deep industry knowledge and expertise to develop and deliver high quality, innovative customer solutions and superior support for complex global challenges.
In early 2021, we launched our 5-Point Strategy, our new corporate vision and our mission statement. Our vision is to be the supplier of choice for innovative test and process technology solutions. Our mission is to leverage our deep industry knowledge and expertise to develop and deliver high quality, innovative customer solutions and superior support for complex global challenges.
We plan to do this both through acquisitions as well as through leveraging current customer relationships, increasing our portfolio of product offerings and expanding our global footprint to better serve existing and new customers.
An important aspect of our 5-Point Strategy includes broadening and diversifying our customer base. We plan to do this both through acquisitions as well as through leveraging current customer relationships, increasing our portfolio of product offerings and expanding our global footprint to better serve existing and new customers.
Department of Defense. Our Canadian facility is compliant with the Canadian version of ITAR, enabling them to support the Canadian Department of Defense.
Department of Defense. Our Canadian facility is compliant with the Canadian Controlled Goods Program, enabling them to support the Canadian Department of Defense.
In addition, some of our engineers are assigned to new product research and development and have worked on such projects as the development of new types of universal manipulators, the redesign and development of new thermal products and the development of high-performance interfaces.
In addition, some of our engineers are assigned to new product research and development and have worked on such projects as the development of new types of universal manipulators, the redesign and development of new thermal products and the development of high-performance interfaces. 12 Since most of our products are customized, we consider substantially all of our engineering activities to be engineering and product development.
Technical support is provided to Asian customers primarily by employees based in Malaysia, the Philippines and Taiwan. Our robotics-based electronic test equipment and automated test programming services are sold in North America through a combination of internal sales staff and manufacturer representatives. Customer support is supplied by a team located throughout North America.
International sales representatives are responsible for sales, installation, support and trade show participation in their geographic market areas. Technical support is provided to Asian customers primarily by employees based in Malaysia, the Philippines and Taiwan. Our robotics-based electronic test equipment and automated test programming services are sold in North America through a combination of internal sales staff and manufacturer representatives.
Sales to semiconductor manufacturers and customers in other markets in the U.S. are handled through independent sales representative organizations. In Singapore and Malaysia, our sales and service are handled through our internal sales and service staff. In the rest of Asia, our sales are handled through distributors.
Sales to life sciences customers worldwide are handled directly by our own sales force and by our network of independent representatives and distributors. Sales to semiconductor manufacturers and customers in other markets in the U.S. are handled through independent sales representative organizations. In Singapore and Malaysia, our sales and service are handled through our internal sales and service staff.
We believe the COVID-19 pandemic and geopolitical tensions have made the high concentration of semiconductor manufacturing in China and Taiwan very apparent to more wealthy nations and has spurred the investment in expansion of this industry in areas outside of these regions. We believe that semiconductor manufacturers remain under pressure to maximize production yields and reduce testing costs.
We believe the COVID-19 pandemic and an increase in geopolitical tensions in recent years have made the high concentration of semiconductor manufacturing in China and Taiwan very apparent to more wealthy nations and has spurred the investment in expansion of this industry in areas outside of these regions.
This programming is quickly done with a digitized drawing of the device to be tested. Traditional in-circuit testing systems require a dedicated fixture for each board to be tested. Acculogic’s Flying Probe system can test a virtually unlimited number of boards without any hardware modifications. These systems generally sell for between $200,000 and $600,000.
This programming is done with computer-aided design or design data of the device to be tested. Traditional in-circuit testing systems require a dedicated fixture for each board to be tested. Acculogic’s Flying Probe system can test a virtually unlimited number of boards without any hardware modifications.
We are a global supplier of innovative test and process solutions for use in manufacturing and testing across a wide range of markets including automotive, defense/aerospace, industrial, life sciences, security and semiconductors (“semi”).
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 automotive, defense/aerospace, industrial, life sciences, security and semiconductors (“semi”). We have three operating segments which are also our reportable segments and reporting units: Electronic Test, Environmental Technologies and Process Technologies.
Acculogic BRiZ Automated Test and Programming Services : BRiZ is an automated test platform that can consolidate any variety of circuit board test and programming into a single, compact, low-cost test station.
These systems generally sell for between $250,000 and $800,000. 9 Acculogic BRiZ Automated Test and Programming Services : BRiZ is an automated test platform that can consolidate any variety of circuit board test and programming into a single, compact, low-cost test station. These platforms generally sell for between $50,000 and $250,000.
The primary raw materials used in fabricated parts are widely available. Substantially all of our components are purchased from multiple suppliers; however, certain raw materials and components are sourced from single suppliers.
The primary raw materials used in fabricated parts are widely available. Substantially all of our components are purchased from multiple suppliers; however, certain raw materials and components are sourced from single suppliers, as discussed further in Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations”.
Environmental Technologies Products : We market our Temptronic, Sigma Thermonics, and North Sciences (formerly Z-Sciences) brands under the umbrella name of inTEST Thermal Solutions and sales to ATE manufacturers are handled directly by our own sales force. Sales to life sciences customers worldwide are handled directly by our own sales force or by our network of independent representatives and distributors.
Customer support is provided by trained distributors and supplemented by direct employees from North America and Europe. Environmental Technologies Products : We market our Temptronic, Sigma Thermonics, and North Sciences brands under the umbrella name of inTEST Thermal Solutions and sales to ATE manufacturers are handled directly by our own sales force and our network of independent representatives and distributors.
Financial Information About Operating Segments and Geographic Areas Please see Note 19 to the consolidated financial statements included in Item 8 of this Report for additional data regarding revenue, profit or loss and total assets of each of our segments and revenue attributable to foreign countries. 10 MARKETING, SALES AND CUSTOMER SUPPORT We market and sell our products globally and across multiple markets, as previously discussed.
Financial Information About Operating Segments and Geographic Areas Please see Note 17 to the consolidated financial statements included in Item 8 of this Report for additional data regarding revenue, profit or loss and total assets of each of our segments and revenue attributable to foreign countries.
During 2022, our businesses continued to gain new customers in both the semi market and in our other target markets and we have expanded our sales and support network to regions of the world where we identified gaps in coverage. Including the impact of the Q4 2021 acquisitions, we believe our SAM is now in excess of $2.0 billion.
During 2023, our businesses continued to gain new customers in both the semi market and in our other target markets and we have expanded our sales and support network to regions of the world where we identified gaps in coverage.
As a stand-alone tool, ThermoStreams(R) provide a temperature-controlled air stream to rapidly change and stabilize the temperature of packaged ICs and other devices. Our MobileTemp Series combines our ThermoStream(R) products with our family of exclusive, high-speed ThermoChambers to offer thermal test systems with fast, uniform temperature control in a compact package enabling temperature testing at the test location.
Our MobileTemp Series combines our ThermoStream(R) products with our family of exclusive, high-speed ThermoChambers to offer thermal test systems with fast, uniform temperature control in a compact package enabling temperature testing at the test location.
We have strong customer relationships and believe service and support activities are valuable in strengthening customer satisfaction, loyalty and retention. Through ensuring that we serve our customers’ needs, whether by expanding service coverage and decreasing response time or through expanding and enhancing service offerings, we believe we can drive revenue growth and strengthen our customer relationships.
Through ensuring that we serve our customers’ needs, whether by expanding service coverage and decreasing response time or through expanding and enhancing service offerings, we believe we can drive revenue growth and strengthen our customer relationships. We expect to invest in resources to fill areas where we have identified gaps in service and support.
In China, Japan, the Philippines, South Korea, and Thailand, we sell through the use of independent sales representatives who are supervised by our internal sales staff. In Malaysia, Singapore and Taiwan, our sales are handled by our internal sales staff. International sales representatives are responsible for sales, installation, support and trade show participation in their geographic market areas.
Technical support is provided by our staff in the U.K. In China, Japan, the Philippines, South Korea, and Thailand, we sell through the use of independent sales representatives who are supervised by our internal sales staff. In Malaysia, Singapore and Taiwan, our sales are handled by our internal sales staff.
Per unit prices for these products can range from less than $100 to as much as $5,000 for a single unit. These products are generally purchased in higher volumes than our other products.
They provide custom solutions for OEMs and end users and specialize in meeting customer’s design specifications for imaging systems. Per unit prices for these products can range from less than $100 to as much as $5,000 for a single unit. These products are generally purchased in higher volumes than our other products.
Acculogic designs and manufactures robotics-based electronic test equipment and provides application support services for OEMs, contract electronic manufacturers and battery manufacturers. These systems are used to structurally test an electronic device. Structural testing is a confirmation that the device was manufactured properly. Acculogic’s Scorpion Flying Probe system can be quickly programmed to test almost any printed circuit board.
Acculogic designs and manufactures robotics-based electronic test equipment and provides application support services for OEMs, contract electronic manufacturers and battery manufacturers. These systems are used to structurally test an electronic device including printed circuit board assembly (“PCBA”) and battery interconnect test. Structural testing provides confirmation that the device was manufactured properly by confirming circuits are functioning properly.
We believe the semi market, a highly cyclical industry historically, is currently undergoing strong growth as a result of billions of dollars of investments in new fabrication (“fab”) facilities around the world.
We believe the semi market, an historically highly cyclical industry, will experience increased growth in the overall size of the market over the next several years as a result of billions of dollars of investments in new fabrication (“fab”) facilities around the world.
The industrial market is the broadest, most diverse area we serve with a majority of our products serving a variety of applications. Applications for our induction heating products include annealing, bonding, brazing, curing, forging, heat treating, melting and shrink-fitting. Applications for our thermal test and process products include pressure-sensor testing and cold-trap cooling for industrial processes.
We believe this market is growing, in part, due to recent global instability. The industrial market is the broadest, most diverse area we serve with a majority of our products serving a variety of applications. Applications for our induction heating products include annealing, bonding, brazing, curing, forging, heat treating, melting and shrink-fitting.
Products and equipment sold into semi are generally delineated as being part of either “front-end” or “back-end.” The roots of inTEST’s engineered product history are in the back-end of semi in integrated circuit (“IC”) testing.
MARKETS Overview We are focused on specific target markets which include automotive, defense/aerospace, industrial, life sciences, security and semi. Our largest market is semi. Products and equipment sold into semi are generally delineated as being part of either “front-end” or “back-end.” The roots of inTEST’s engineered product history are in the back-end of semi in integrated circuit (“IC”) testing.
Applications for both EKOHEAT(R) and EASYHEAT™ products include annealing, bonding, brazing, curing, forging, heat treating, melting, shrink-fitting, soldering and testing. Digital Streaming and Image Capturing Solutions. Our industrial-grade imaging solutions are designed and manufactured by Videology. They provide custom solutions for OEMs and end users and specialize in meeting customer’s design specifications for imaging systems.
Prices generally range from $5,000 to $25,000. 10 Applications for both EKOHEAT(R) and EASYHEAT™ products include annealing, bonding, brazing, curing, forging, heat treating, melting, shrink-fitting, soldering and testing. Digital Streaming and Image Capturing Solutions. Our industrial-grade imaging solutions are designed and manufactured by Videology.
Our principal competitors for liquid chillers include Huber Kältemaschinenbau AG, Julabo GmbH, Boyd Corporation, and Advanced Thermal Sciences Corporation. Our principal competitors for life sciences products include Panasonic Health Care Holdings Corporation, Haier Group Corporation, Thermo Fisher Scientific Corporation, and Eppendoerf AG.
Our principal competitors for liquid chillers include Huber Kältemaschinenbau AG, Julabo GmbH, Boyd Corporation, and Advanced Thermal Sciences Corporation.
With our acquisition of Z-Sciences (now North Sciences) we have expanded our product offerings to include high-performance biomedical freezer, refrigerators and mobile storage solutions that meet versatile applications, including ultra-cold storage solutions for biological sample banks, blood safety, vaccine safety, medical supplies and reagent safety. Induction Heating.
Our North Sciences offerings include high-performance biomedical freezer, refrigerators and mobile storage solutions that meet versatile applications, including ultra-cold storage solutions for biological sample banks, blood safety, vaccine safety, medical supplies and reagent safety. 7 Induction Heating. Our induction heating products are used in process applications where precision-controlled heating is needed.
A hallmark of our products has been, and continues to be, compatibility with a wide variety of ATE. Our manipulator and docking hardware products are all designed to be used with otherwise incompatible ATE.
Our interface product offerings have recently been expanded to serve the growing market for testing higher powered devices. A hallmark of our semi market product offerings has been, and continues to be, compatibility with a wide variety of ATE. Our manipulator and docking hardware products are all designed to be used with otherwise incompatible ATE.
We believe a number of drivers are creating more opportunity for our highly-engineered solutions in these markets. In the automotive market, we provide solutions that help in the quality and productivity of electric vehicle (“EV”) manufacturing. Our solutions include induction heating solutions for motor manufacturing and automated test equipment for battery cells.
Other Markets We provide a variety of solutions to our automotive, defense/aerospace, industrial, life sciences, and security markets. We believe a number of drivers are creating more opportunity for our highly-engineered solutions in these markets. In the automotive market, we provide solutions that help in the quality and productivity of both internal combustion and electric vehicle (“EV”) manufacturing.
Finally, we intend to foster diversity, equity and inclusion and provide opportunities for career development so as to maximize employee engagement, all of which is necessary to achieving our corporate vision. In 2022, we added a new HR leader at the corporate level to help drive these initiatives and advance the cultural transformation that is underway.
Finally, we intend to foster diversity, equity and inclusion and provide opportunities for career development so as to maximize employee engagement, all of which is necessary to achieving our corporate vision.
Our newest manipulator and docking hardware designs offer automated capabilities that allow for reduced downtime and increased productivity through predictable and repeatable production setup with reduced risk of operator error.
Our docking hardware products offer precise control over the connection to test sockets, probing assemblies and interface boards, reducing downtime and minimizing costly damage to fragile components. Our newest manipulator and docking hardware designs offer automated capabilities that allow for reduced downtime and increased productivity through predictable and repeatable production setup with reduced risk of operator error.
We acquire our sales from repeat long-term customers, new leads through our website, regional sales managers and distributors as well as through trade show attendance where we display our products and technology. 11 CUSTOMERS We market our products to end users including semiconductor manufacturers, third-party foundries and test and assembly providers, as well as to OEMs, which include ATE manufacturers and their third-party outsource manufacturing partners.
CUSTOMERS We market our products to end users including semiconductor manufacturers, third-party foundries and test and assembly providers, as well as to OEMs, which include ATE manufacturers and their third-party outsource manufacturing partners.
Designed to be broadly applicable through more standardized platforms, these solution platforms enable late-stage configuration to address each customers’ unique requirements. We believe creating more standardization to increase market availability will drive growth and reduce costs by enabling us to increase the breadth and depth of our customer base.
We believe creating more standardization to increase market availability will drive growth and reduce costs by enabling us to increase the breadth and depth of our customer base.
In periods of increased demand, there is a tendency towards longer lead times, which has the effect of increasing backlog. As a result of these factors, our backlog at a particular date is not necessarily indicative of sales for any future period.
As a result of these factors, our backlog at a particular date is not necessarily indicative of sales for any future period.
The Thermonics brand is now used to market a family of process chillers for test and industrial applications. Ultra-Cold Storage Solutions.
Thermonics' products provide a range of precision temperature forcing systems and have been melded into Temptronic's ATS ThermoStream product line. The Thermonics brand is now used to market a family of process chillers for test and industrial applications. Ultra-Cold Storage Solutions.
These platforms generally sell for between $50,000 and $250,000. 9 Environmental Technologies Products ThermoStream(R) Products : Our ThermoStream(R) products are used in the semi market as a stand-alone temperature management tool, or in a variety of electronic test applications as part of our MobileTemp systems.
Environmental Technologies Products ThermoStream(R) Products : Our ThermoStream(R) products are used in the semi market as a stand-alone temperature management tool, or in a variety of electronic test applications as part of our MobileTemp systems. ThermoStream(R) products provide a source of heated and cooled air that can be directed over the component or device under test.
There is no competitor that has over 5% share of the current market. 13 BACKLOG At December 31, 2022, our backlog of unfilled orders for all products was $46.8 million compared with $34.1 million at December 31, 2021. Our backlog consists of purchase orders that we have accepted, substantially all of which we expect to deliver in 2023.
Our digital streaming and image capturing solutions products compete in a large space with multiple small competitors. There is no competitor that has over 5% share of the current market. BACKLOG At December 31, 2023, our backlog of unfilled orders for all products was $40.1 million compared with $46.8 million at December 31, 2022.
Videology also offers OEMs imaging solutions designed to the customers’ specifications and that can interface with the customers’ software. Scalable, Universal, High Performance Interface Technology . Our universal test head manipulators provide a high degree of positioning flexibility with a minimum amount of effort. As a result, our products can be used in virtually any test setting.
Our universal test head manipulators provide a high degree of positioning flexibility with a minimum amount of effort. As a result, our products can be used in virtually any test setting. Our manipulator products are designed to accommodate the increased size of test heads and can now supporting test heads weighing up to 1200kg.
Technical support is provided to North American customers and independent sales representatives by employees based in New Jersey, California and Texas. In Europe, we sell to semiconductor and ATE manufacturers through our internal sales staff. Technical support is provided by our staff in the U.K.
In addition, our sales account managers are responsible for pricing, quotations, proposals and transaction negotiations, and they assist with applications engineering and custom product design. Technical support is provided to North American customers by employees based in New Jersey, California and Texas. In Europe, we sell to semiconductor and ATE manufacturers through our internal sales staff.
We also will consider new technologies that replicate the highly engineered, high quality and differentiated solutions of our current product portfolio for test and process solutions. Our focus is on expanding our electronic test capabilities, widening our thermal test capabilities in areas such as environmental test, and building our processing technologies offerings with expanded imaging and heating capabilities.
Our acquisition strategy is to add to our current solutions by expanding capabilities, such as expanded induction heating frequency or refrigeration temperature range, and to expand our geographic presence. We also will consider new technologies that replicate the highly engineered, high quality and differentiated solutions of our current product portfolio for test and process solutions.
Our Environmental Technologies segment consists of inTEST Thermal Solutions (“iTS”), which manufactures and sells products under the Temptronic, Sigma, Thermonics and North Sciences brand names and has operations in Massachusetts, Germany and Singapore. Customers use the thermal solutions produced by iTS for product development, characterization and production test.
Acculogic’s product offerings include robotics-based electronic test equipment and application support services used primarily in defense/aerospace, automotive, battery, life sciences and electronic manufacturing services industries. Our Environmental Technologies segment consists of inTEST Thermal Solutions (“iTS”), which manufactures and sells products under the Temptronic, Sigma, Thermonics and North Sciences brand names and has operations in Massachusetts, Germany and Singapore.
As technology advances and ICs become increasingly more complex, we believe the need for increased capabilities in the test process should drive greater demand for our equipment.
As technology advances and ICs become increasingly more complex, we believe the need for increased capabilities in the test process should drive greater demand for our equipment. We expect that more front-end testing is going to be required in order to ensure maximum yield from the massive capital investments being made in fab expansion.
Semiconductor manufacturers use our inTEST EMS solutions in back-end testing where our mechanical and electrical products serve production testing of wafers and specialized packaged ICs. These ICs include microprocessors, digital signal processing chips, mixed signal devices, MEMS (Micro-Electro-Mechanical Systems), application specific ICs and specialized memory ICs, and are used primarily in the automotive, consumer electronics, industrial, and mobile communication markets.
These ICs include microprocessors, digital signal processing chips, mixed signal devices, MEMS (Micro-Electro-Mechanical Systems), application specific ICs and specialized memory ICs, and are used primarily in the automotive, consumer electronics, industrial, and mobile communication markets. Our products are a combination of standard designs based on industry requirements and those designed specifically to meet a customer's particular combination of ATE.
Our internal sales account managers handle sales to ATE manufacturers and are responsible for a portfolio of customer accounts and for managing certain independent sales representatives. In addition, our sales account managers are responsible for pricing, quotations, proposals and transaction negotiations, and they assist with applications engineering and custom product design.
North American sales representatives also coordinate product installation and support with our technical staff and participate in trade shows. Our internal sales account managers handle sales to ATE manufacturers and are responsible for a portfolio of customer accounts and for managing certain independent sales representatives.
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 shorter lead times available from suppliers, including us, in periods of depressed demand.
Our backlog may be affected by the tendency of customers to rely on shorter 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, which has the effect of increasing backlog.
We believe there is a strong global growth trend in EVs and that our differentiated solutions can be applied with more customers in more geographic regions. In the defense/aerospace industry, we provide ATE to prime and subcontract manufacturers to ensure quality control is maintained while also providing quicker, more accurate test times of electronic circuit boards.
In the defense/aerospace industry, we provide ATE to prime and subcontract manufacturers to ensure quality control is maintained while also providing quicker, more accurate test times of electronic circuit boards. We also provide solutions for thermal testing of equipment to ensure it will function over the specified temperature range.
North American and European semiconductor manufacturers, as well as third-party foundries, test and assembly providers, have located most of their back-end factories in Southeast Asia. The front-end wafer fabrication plants of U.S. semiconductor manufacturers are primarily in the U.S. Likewise, European, Taiwanese, South Korean and Japanese semiconductor manufacturers generally have located their wafer fabrication plants in their respective countries.
The front-end wafer fabrication plants of U.S. semiconductor manufacturers are primarily in the U.S. Likewise, European, Taiwanese, South Korean and Japanese semiconductor manufacturers generally have located their wafer fabrication plants in their respective countries. Electronic Test Products : In North America, we sell our inTEST EMS products to semiconductor manufacturers through internal account representatives and independent, commissioned sales representatives.
ThermoStream(R) products provide a source of heated and cooled air that can be directed over the component or device under test. These systems are capable of controlling temperatures to within +/- 0.1 degree Celsius over a range of -100 degrees Celsius to as high as +300 degrees Celsius within 1.0 degree Celsius of accuracy.
These systems are capable of controlling temperatures to within +/- 0.1 degree Celsius over a range of -100 degrees Celsius to as high as +300 degrees Celsius within 1.0 degree Celsius of accuracy. As a stand-alone tool, ThermoStreams(R) provide a temperature-controlled air stream to rapidly change and stabilize the temperature of packaged ICs and other devices.
Applications for our EKOHEAT(R) or EASYHEAT™ induction heating products include annealing, bonding, brazing, curing, forging, heat treating, melting, shrink-fitting, crystal growing, semi-wafer heating and material testing. Digital Streaming and Image Capturing Solutions. Our acquisition of Videology added industrial-grade circuit board mounted digital imaging solutions, Zoom Block cameras and complete image capture systems.
Customers use our induction heating products in conjunction with other technologies in various manufacturing environments to improve production efficiencies and reduce or eliminate greenhouse gas emissions. Applications for our EKOHEAT(R) or EASYHEAT™ induction heating products include annealing, bonding, brazing, curing, forging, heat treating, melting, shrink-fitting, crystal growing, semi-wafer heating and material testing. Digital Streaming and Image Capturing Solutions.
We believe the trend toward the use of green energy, automation, increased productivity and expanding manufacturing technology present opportunities for us to help our customers solve their complex challenges. OUR SOLUTIONS We focus our development efforts on designing and producing high quality products that provide superior performance and cost-effectiveness.
Applications for our thermal test and process products include pressure-sensor testing, printed circuit board testing and cold-trap cooling for industrial processes. We believe the trend toward the use of green energy, automation, increased productivity and expanding manufacturing technology present opportunities for us to help our customers solve their complex challenges.
Our principal competitors for EKOHEAT(R) and EASYHEAT™ products are Inductotherm Corporation, Park-Ohio Holdings, EFD Induction Corporation, Trumpf Huettinger GmbH, Ultraflex Power Technologies and CEIA SpA. Our digital streaming and image capturing solutions products compete in a large space with multiple small competitors.
Our principal competitors for life sciences products include Panasonic Health Care Holdings Corporation, Haier Group Corporation, Thermo Fisher Scientific Corporation, and Eppendoerf AG. 13 Our principal competitors for EKOHEAT(R) and EASYHEAT™ products are Inductotherm Corporation, Park-Ohio Holdings, EFD Induction Corporation, Trumpf Huettinger GmbH, Ultraflex Power Technologies and CEIA SpA.
Our ThermoStream(R) products are used by manufacturers in a number of markets to stress test a variety of semiconductor and electronic components, printed circuit boards and sub-assemblies. Factors motivating manufacturers to use temperature testing include design characterization, failure analysis and quality control, as well as determining performance under extreme operating temperatures, all of which contribute to manufacturing cost savings.
Factors motivating manufacturers to use temperature testing include design characterization, failure analysis and quality control, as well as determining performance under extreme operating temperatures, all of which contribute to manufacturing cost savings. Our thermal platforms and temperature chambers, sold under our Sigma Systems product line, can accommodate large thermal masses and are found in both laboratory and production environments.
We seek to address each manufacturer's individual needs through innovative and customized designs, use of the best materials available, quality manufacturing practices and personalized service. We design solutions to overcome the evolving challenges facing the semi market and other markets that we serve, which we believe provide the following advantages: Temperature-Controlled Testing .
OUR SOLUTIONS We focus our development efforts on designing and producing high quality products that provide superior performance and cost-effectiveness. We seek to address each manufacturer's individual needs through innovative and customized designs, use of the best materials available, quality manufacturing practices and personalized service.
Our Process Technologies segment consists of (i) Ambrell which has operations in New York, the Netherlands and the U.K and (ii) Videology, which has operations in Massachusetts and the Netherlands. Ambrell provides customers with induction heating solutions for a wide variety of manufacturing processes. Videology is a designer, developer and manufacturer of digital streaming and image capturing solutions.
Ambrell provides customers with induction heating solutions for a wide variety of manufacturing processes. Videology is a designer, developer and manufacturer of digital streaming and image capturing solutions. Our Process Technologies segment provides these solutions across an array of markets including automotive, defense/aerospace, industrial, life sciences, security and semiconductor. Electronic Test Products Manipulator Products.
This segment also offers ultra-cold storage solutions for the life sciences cold chain market. Our Environmental Technologies segment provides these solutions across an array of markets including automotive, defense/aerospace, industrial, life sciences and semiconductor.
Our Environmental Technologies segment provides these solutions across an array of markets including automotive, defense/aerospace, industrial, life sciences and semiconductor. 8 Our Process Technologies segment consists of (i) Ambrell which has operations in New York, the Netherlands and the U.K. and (ii) Videology, which has operations in Massachusetts and the Netherlands.
Innovation and Differentiation . Our 5-Point Strategy focuses on leveraging our engineering know-how and expertise to deliver innovative solutions which we believe will outperform those of our competitors. We continue to invest in engineering resources with the goal of developing new and unique solutions to help solve our customers’ most complex challenges in their manufacturing and quality processes.
Currently, revenue from products shipped to Asia–Pacific represents approximately 35% of our consolidated total revenue. Innovation and Differentiation . Our 5-Point Strategy focuses on leveraging our engineering know-how and expertise to deliver innovative solutions which we believe will outperform those of our competitors.
Prior period information has been reclassified to be comparable to the current period’s presentation. Our Electronic Test segment consists of (i) inTEST EMS which has operations in New Jersey and California, and (ii) Acculogic, which has operations in Canada, California and Germany.
Our Electronic Test segment consists of (i) inTEST EMS which has operations in New Jersey and California, and (ii) Acculogic, which has operations in Canada, California and Germany. Semiconductor manufacturers use our inTEST EMS solutions in back-end testing where our mechanical and electrical products serve production testing of wafers and specialized packaged ICs.
In 2022, we focused on the integration of the acquisitions that occurred in the fourth quarter of 2021. We continue to assess target companies to drive further inorganic growth in support of our 5-year plan. Talent and Culture .
Our focus is on expanding our electronic test capabilities, widening our thermal test capabilities in areas such as environmental test, and building our processing technologies offerings with expanded imaging and heating capabilities. We continue to assess target companies to drive further inorganic growth in support of our 5-year plan. Talent and Culture .

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny increase in these costs, or unanticipated liabilities arising from, among other things, discovery of previously unknown conditions or more aggressive enforcement actions, could adversely affect our results of operations, and there is no assurance that they will not exceed our reserves or have a material adverse effect on our financial condition.
Biggest changeAny increase in these costs, or unanticipated liabilities arising from, among other things, discovery of previously unknown conditions or more aggressive enforcement actions, could adversely affect our results of operations, and there is no assurance that they will not exceed our reserves or have a material adverse effect on our financial condition. 17 We have identified a material weakness in our internal control over financial reporting, and if our remediation of such material weakness is not effective, or if we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
In addition to these changing cycles of demand, other factors that have caused our quarterly operating results to fluctuate in the past or that may cause fluctuations and losses in the future, include: ● costs related to due diligence and transaction-related expenses for a proposed acquisition that does not get completed; ● costs and timing of integration of our acquisitions and plant consolidations and relocations; ● changes in demand in the markets we serve including the automotive, defense/aerospace, industrial, life sciences and security markets; ● the state of the U.S. and global economies; ● changes in the buying patterns of our customers including any changes in the rate of, and timing of, purchases by our customers; ● the impact of interruptions in our supply chain caused by external factors; ● changes in our market share; 22 ● the impact of COVID-19 or any other pandemic on our business; ● the technological obsolescence of our inventories; ● quantities of our inventories greater than is reasonably likely to be utilized in future periods; ● fluctuations in the level of product warranty charges; ● competitive pricing pressures; ● excess manufacturing capacity; ● our ability to control operating costs; ● delays in shipments of our products; ● the mix of our products sold; ● the mix of customers and geographic regions where we sell our products; ● changes in the level of our fixed costs; ● costs associated with the development of our proprietary technology; ● our ability to obtain raw materials or fabricated parts when needed; ● increases in costs of component materials; ● cancellation or rescheduling of orders by our customers; ● changes in government regulations; and ● geopolitical instability.
In addition to these changing cycles of demand, other factors that have caused our quarterly operating results to fluctuate in the past or that may cause fluctuations and losses in the future, include: ● costs related to due diligence and transaction-related expenses for a proposed acquisition that does not get completed; ● costs and timing of integration of our acquisitions and plant consolidations and relocations; ● changes in demand in the markets we serve including the automotive, defense/aerospace, industrial, life sciences and security markets; ● the state of the U.S. and global economies; ● changes in the buying patterns of our customers including any changes in the rate of, and timing of, purchases by our customers; ● the impact of interruptions in our supply chain caused by external factors; ● changes in our market share; ● the impact of COVID-19 or any other pandemic on our business; ● the technological obsolescence of our inventories; ● quantities of our inventories greater than is reasonably likely to be utilized in future periods; ● fluctuations in the level of product warranty charges; ● competitive pricing pressures; ● excess manufacturing capacity; ● our ability to control operating costs; ● delays in shipments of our products; ● the mix of our products sold; ● the mix of customers and geographic regions where we sell our products; ● changes in the level of our fixed costs; ● costs associated with the development of our proprietary technology; ● our ability to obtain raw materials or fabricated parts when needed; ● increases in costs of component materials; ● cancellation or rescheduling of orders by our customers; ● changes in government regulations; and ● geopolitical instability.
We may not be able to execute our acquisition strategy and our future growth may be limited if: ● we are unable to identify suitable businesses, technologies or products to acquire; ● we do not have sufficient cash or access to required capital at the necessary time; ● we are unwilling or unable to outbid larger companies with greater resources; or 14 ● we are unable to successfully close proposed acquisitions.
We may not be able to execute our acquisition strategy and our future growth may be limited if: ● we are unable to identify suitable businesses, technologies or products to acquire; ● we do not have sufficient cash or access to required capital at the necessary time; ● we are unwilling or unable to outbid larger companies with greater resources; or ● we are unable to successfully close proposed acquisitions.
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. 17 We are subject to significant environmental, health and safety laws and regulations and related compliance expenditures and liabilities.
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. We are subject to significant environmental, health and safety laws and regulations and related compliance expenditures and liabilities.
We may incur significant expenses related to due diligence or other transaction-related expenses for a proposed acquisition that may not be completed, which may have a material adverse effect on our financial condition and results of operations. Our acquisition strategy involves financial and management risks which may adversely affect our results in the future.
We may incur significant expenses related to due diligence or other transaction-related expenses for a proposed acquisition that may not be completed, which may have a material adverse effect on our financial condition and results of operations. 14 Our acquisition strategy involves financial and management risks which may adversely affect our results in the future.
With respect to the acquisitions we completed in 2021 and if we acquire additional businesses, technologies or products, we will face the following additional risks: ● acquisitions could divert management's attention from daily operations or otherwise require additional management, operational and financial resources; ● we might not be able to integrate acquisitions into our business successfully or operate acquired businesses profitably; ● we may realize substantial acquisition related expenses that would reduce our net earnings in future years; ● we may not realize the expected benefits of such acquisitions; ● our investigation of potential acquisition candidates may not reveal problems and liabilities of the companies and businesses that we acquire; ● any acquisitions may pose risks associated with entry into new geographic markets, including outside the U.S., distribution channels, lines of business or product categories, where we may not have significant or any prior experience and where we may not be as successful or profitable as we are in businesses and geographic regions where we have greater familiarity and brand recognition; ● an acquisition may result in disparate information technology, internal control, financial reporting and record-keeping systems; ● an acquisition may result in employee anxiety, morale and/or engagement issues and employees not familiar with our business; ● an acquisition may result in the loss of our or the acquired company’s key personnel, customers, distributors or suppliers; and ● we may become exposed to litigation or claims associated with an acquisition.
If we acquire additional businesses, technologies or products, we will face the following additional risks: ● acquisitions could divert management's attention from daily operations or otherwise require additional management, operational and financial resources; ● we might not be able to integrate acquisitions into our business successfully or operate acquired businesses profitably; ● we may realize substantial acquisition related expenses that would reduce our net earnings in future years; ● we may not realize the expected benefits of such acquisitions; ● our investigation of potential acquisition candidates may not reveal problems and liabilities of the companies and businesses that we acquire; ● any acquisitions may pose risks associated with entry into new geographic markets, including outside the U.S., distribution channels, lines of business or product categories, where we may not have significant or any prior experience and where we may not be as successful or profitable as we are in businesses and geographic regions where we have greater familiarity and brand recognition; ● an acquisition may result in disparate information technology, internal control, financial reporting and record-keeping systems; ● an acquisition may result in employee anxiety, morale and/or engagement issues and employees not familiar with our business; ● an acquisition may result in the loss of our or the acquired company’s key personnel, customers, distributors or suppliers; and ● we may become exposed to litigation or claims associated with an acquisition.
Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms, or at all. 16 RISKS RELATED TO OUR MARKETS Our sales are affected by the cyclicality of the semi market, which causes our operating results to fluctuate significantly.
Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms, or at all. RISKS RELATED TO OUR MARKETS Our sales are affected by the cyclicality of the semi market, which causes our operating results to fluctuate significantly.
There can be no assurance that we will be successful in implementing effective strategies to counter these shifts. 19 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 suffer dramatically.
There can be no assurance that we will be successful in implementing effective strategies to counter these shifts. 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 suffer dramatically.
If we become involved in a dispute, neither the third parties nor the courts are bound by our counsel's conclusions. If we are unable to protect our intellectual property, we may lose a valuable asset or may incur costly litigation to protect our rights.
If we become involved in a dispute, neither the third parties nor the courts are bound by our counsel's conclusions. 21 If we are unable to protect our intellectual property, we may lose a valuable asset or may incur costly litigation to protect our rights.
See “Management's Discussion and Analysis of Financial Condition and Results of Operations – Overview – Credit Facility” and Note 12 to our consolidated financial statements in this Report for a discussion of the material terms of our credit facility. 18 We hold our cash and cash equivalents that we use to meet our working capital needs in deposit accounts that could be adversely affected if the financial institutions holding such funds fail.
See “Management's Discussion and Analysis of Financial Condition and Results of Operations – Overview – Credit Facility” and Note 10 to our consolidated financial statements in this Report for a discussion of the material terms of our credit facility. 18 We hold our cash and cash equivalents that we use to meet our working capital needs in deposit accounts that could be adversely affected if the financial institutions holding such funds fail.
If we fail to accurately assess and successfully integrate any recent or future acquisitions, we may not achieve the anticipated benefits, which could result in lower revenue, unanticipated operating expenses, and increased losses.
If we fail to accurately assess and successfully integrate any recent or future acquisitions, we may not achieve the anticipated benefits, which could result in lower revenue, unanticipated operating expenses, and financial losses.
There were no payments due for the year ended December 31, 2022. 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.
There were no payments due for the years ended December 31, 2022 or 2023. 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.
Although we have been the target of security breaches in the past, 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.
Although we have been and continue to be the target of security breaches, 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.
The additional payments will be based on a percent of net invoices for which payments have been received on systems sold to EV or battery customers in excess of 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 $3.7 million at December 31, 2022.
The additional payments will be based on a percent of net invoices for which payments have been received on systems sold to EV battery customers in excess of 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 $3.8 million at December 31, 2023.
During the year ended December 31, 2022, no customer accounted for 10% or more of our consolidated revenue. During the year ended December 31, 2021, 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, 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, no other customer accounted for 10% or more of our consolidated revenue.
During the year ended December 31, 2021, no other customer accounted for 10% or more of our consolidated revenue. Our ten largest customers accounted for approximately 43% of our consolidated revenue in each of the years ended December 31, 2022 and 2021.
During the year ended December 31, 2022, no customer accounted for 10% or more of our consolidated revenue. During the years ended December 31, 2023 and 2022, our ten largest customers accounted for approximately 42% and 43% of our consolidated revenue, respectively.
At a minimum, the continuing conflict is likely to cause regional instability, 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 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.
In addition to the cyclicality of the semi market, demand for our products and our gross and net operating margins have also been affected by changes in the buying patterns of our customers.
Such changes in patterns are difficult to predict and may not be immediately apparent. In addition to the cyclicality of the semi market, demand for our products and our gross and net operating margins have also been affected by changes in the buying patterns of our customers.
The contingent consideration adjustment we record quarterly may cause increased variability in our future results of operations, which may cause fluctuations in our stock price. 15 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.
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.
Our foreign subsidiaries generated 19% and 12% of consolidated revenue in 2022 and 2021, respectively. Revenue from foreign customers totaled $67.7 million, or 58% of consolidated revenue in 2022, and $58.1 million, or 68% of consolidated revenue in 2021. We expect our revenue from foreign customers will continue to represent a significant portion of total revenue.
Revenue from foreign customers totaled $78.1 million, or 63% of consolidated revenue in 2023, and $67.7 million, or 58% of consolidated revenue in 2022. We expect our revenue from foreign customers will continue to represent a significant portion of total revenue.
In addition to the risks generally associated with sales and operations in the U.S., sales to customers outside the U.S. and operations in foreign countries are subject to additional risks, which may, in the future, affect our operations.
In addition to the risks generally associated with sales and operations in the U.S., sales to customers outside the U.S. and operations in foreign countries are subject to additional risks, which may, in the future, affect our operations. These risks include: ● the effects of certain foreign customers being added to the list of restricted customers by the U.S.
If we are unable to repatriate the earnings of our subsidiaries, it could have an adverse impact on our ability to redeploy earnings in other jurisdictions where they could be used more profitably.
If we are unable to repatriate the earnings of our subsidiaries, it could have an adverse impact on our ability to redeploy earnings in other jurisdictions where they could be used more profitably. RISKS RELATED TO INTELLECTUAL PROPERTY Claims of intellectual property infringement by or against us could seriously harm our businesses.
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.
While the global supply chain seems to have returned to a more normalized state as of the end of 2023, 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.
We may not be able to effectively manage our growth and operations, which could materially and adversely affect our business. 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.
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.
Conversely, semiconductor manufacturers increase capital expenditures when market demand requires the addition of new or expanded production capabilities or the reconfiguration of existing fabrication facilities to accommodate new products. These market changes have contributed in the past, and will likely continue to contribute in the future, to fluctuations in our operating results.
Conversely, semiconductor manufacturers increase capital expenditures when market demand requires the addition of new or expanded production capabilities or the reconfiguration of existing fabrication facilities to accommodate new products.
In addition, the conflict and actions taken in response to the conflict could increase our costs or disrupt our supply chain for certain material which Acculogic currently acquires from a key sole-source supplier in Belarus. If we cannot find an alternate supplier for this material, our revenue and earnings could be adversely affected.
In addition, the conflict and actions taken in response to the conflict could increase our costs or disrupt our supply chain for certain material which Acculogic currently primarily acquires from one supplier in Belarus.
If we are unable to enter into royalty or licensing agreements with satisfactory terms, our business could suffer.
We may have to enter into royalty or licensing agreements with third parties who claim infringement. These royalty or licensing agreements, if available, may be costly to us. If we are unable to enter into royalty or licensing agreements with satisfactory terms, our business could suffer.
We seek to make additional acquisitions that will further expand our product lines as well as strengthen our positions in served markets and provide expansion into new markets.
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 served markets and provide expansion into new markets.
We seek to further diversify the markets for our products in order to increase the proportion of our sales attributable to markets which are less subject to cyclicality than the semi market. If we are unable to do so, our future performance will remain substantially exposed to the fluctuations of the cyclicality of the semi market.
These market changes have contributed in the past, and will likely continue to contribute in the future, to fluctuations in our operating results. 16 We seek to further diversify the markets for our products in order to increase the proportion of our sales attributable to markets which are less subject to cyclicality than the semi market.
These claims, regardless of merit, may consume valuable management time, result in costly litigation or cause product shipment delays. Any of these factors could seriously harm our business and operating results. We may have to enter into royalty or licensing agreements with third parties who claim infringement. These royalty or licensing agreements, if available, may be costly to us.
From time to time, we may be forced to respond to or prosecute intellectual property infringement claims to defend or protect our rights or a customer's rights. These claims, regardless of merit, may consume valuable management time, result in costly litigation or cause product shipment delays. Any of these factors could seriously harm our business and operating results.
Any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan, could disrupt our business operations and materially and adversely affect our results of operations.
Any deterioration in the relations between Taiwan and China, and other factors affecting military, political or economic conditions in Taiwan, could disrupt our business operations and materially and adversely affect our results of operations. 19 RISKS RELATED TO OUR CUSTOMER BASE Changes in the buying patterns of our customers have affected, and may continue to affect, demand for our products and our gross and net operating margins.
At December 31, 2022, the contingent consideration liability on our balance sheet was USD $1.4 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.
At December 31, 2023, the contingent consideration liability on our balance sheet was USD $1.1 million which was its estimated fair value at that date.
A substantial portion of our customers are located outside the U.S., which exposes us to foreign political and economic risks. We have operated internationally for many years and expect to expand our international operations to continue expansion of our sales and service to our non-U.S. customers.
We have operated internationally for many years and expect to expand our international operations to continue expansion of our sales and service to our non-U.S. customers. Our foreign subsidiaries generated 24% and 19% of consolidated revenue in 2023 and 2022, respectively.
We sell certain of our products in markets other than the semi market, including the automotive, defense/aerospace, industrial, life sciences and security markets. During 2022 and 2021, our sales to markets other than the semi market were $48.0 million and $30.0 million, respectively, and represented 41% and 35% of our consolidated revenue, respectively.
During 2023 and 2022, our sales to markets other than the semi market were $57.6 million and $48.4 million, respectively, and represented 47% and 42% of our consolidated revenue, respectively.
At December 31, 2022, $5.0 million, or 37%, of our cash and cash equivalents was held by our foreign subsidiaries. We also had $1.1 million of restricted cash that is discussed in Note 2 to our consolidated financial statements in this Report that was held by one of our subsidiaries in the Netherlands.
At December 31, 2023, $5.8 million, or 13% of our cash and cash equivalents was held by our foreign subsidiaries.
Removed
A key element of our growth strategy is to acquire businesses, technologies or products that are complementary to our current product offerings. For example, we completed the acquisitions of Z-Sciences (now North Sciences), Videology and Acculogic in 2021.
Added
The contingent consideration adjustment we record quarterly may cause increased variability in our future results of operations, which may cause fluctuations in our stock price.
Removed
RISKS RELATED TO OUR CUSTOMER BASE Changes in the buying patterns of our customers have affected, and may continue to affect, demand for our products and our gross and net operating margins. Such changes in patterns are difficult to predict and may not be immediately apparent.
Added
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. 15 We may not be able to effectively manage our growth and operations, which could materially and adversely affect our business.
Removed
These risks include: ● the effects of COVID-19 on markets outside the U.S.; 20 ● the effects of certain foreign customers being added to the list of restricted customers by the U.S.
Added
If we are unable to do so, our future performance will remain substantially exposed to the fluctuations of the cyclicality of the semi market. We sell certain of our products in markets other than the semi market, including the automotive, defense/aerospace, industrial, life sciences and security markets.
Removed
RISKS RELATED TO COVID-19 Our business, results of operations and financial condition and the market price of our common stock have been and may continue to be adversely affected by the COVID-19 pandemic.
Added
We determined that our internal control over financial reporting and disclosure controls and procedures were not effective as of September 30, 2023 as a result of the material weakness related to recognition of revenue related to the sale of discontinued material/components purchased on behalf of customers where the associated materials/components were still physically located with us and the materials/components are expected to be applied to future product orders for these customers, as discussed in Part II, Item 9A of this Annual Report on Form 10-K.
Removed
While the negative impact of COVID-19 on our business was further reduced in 2022, the spread of the virus or variants of the virus could worsen and one or more of our significant customers or suppliers could be impacted, or significant additional governmental regulations and restrictions could be imposed, thus negatively impacting our business in the future.
Added
This material weakness has not been remediated and accordingly our internal control over financial reporting and disclosure controls and procedures remains ineffective. Management is actively engaged in the planning for, and implementation of, remediation efforts to address our material weakness but there can be no assurance that those efforts will be successful.
Removed
We have had occasions where one or more employees have contracted COVID-19 and entered our facilities while infected.
Added
Refer to Part II, Item 9A for further details of the material weakness and remediation efforts.
Removed
We have managed these occurrences with minimal disruption to our business while protecting other employees, but there can be no assurances that we can avoid similar occurrences in the future or that, in such cases, we can avoid significant disruption of our operations as a result of such occurrences.
Added
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a timely basis.
Removed
Should this occur, or should we have employees who become ill or otherwise are unable to work as a result of COVID-19, we may experience limitations in employee resources or may be required to close affected facilities for a time to clean and disinfect appropriately, and allow employees to quarantine, as appropriate.
Added
As such, if we do not remediate this material weakness in a timely manner, or if additional material weaknesses in our internal control over financial reporting are discovered, they may adversely affect our ability to record, process, summarize and report financial information timely and accurately and our financial statements may contain material misstatements or omissions.
Removed
We rely on a relatively few number of customers for a significant portion of our sales. The spread of the virus or variants of the virus could worsen and one or more of our significant customers could be impacted.
Added
Additionally, our internal control environment and remediation efforts do not provide absolute assurance with regard to timely detecting or preventing control deficiencies and thus do not insulate us from any failure to meet our financial reporting obligations.
Removed
If one or more of our significant customers is negatively impacted, our business, results of operations and financial condition will be adversely affected.
Added
It is possible that additional control deficiencies could be identified by our management or by our independent registered public accounting firm in the future or may occur without being identified.
Removed
In addition, the aftermarket service and support that we provide to our customers has been adversely affected by COVID-19 in the past due to travel restrictions and limitations on visitors allowed into customer facilities, which resulted in some of these activities being reduced or suspended.
Added
Such a failure could require us to incur the expense of remediation, result in regulatory scrutiny, investigations or enforcement actions, cause investors to lose confidence in our reported financial condition and have a negative effect on the trading price of our common stock, lead to a default under our indebtedness, and otherwise have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Removed
If the spread of the virus or variants of the virus were to worsen and travel restrictions and limitations were to be reinstated, this portion of our business could be adversely affected in the future. 21 Generally, global supply chains and the timely availability of products have been materially disrupted by quarantines, factory slowdowns or shutdowns, border closings and travel restrictions resulting from COVID-19 in the past.
Added
Further, if we are unable to conclude that our internal control over financial reporting is effective, or, if and when required, our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial statements, the market price of our common stock could be adversely affected, our common stock could become subject to delisting and we could become subject to litigation or investigations by the stock exchange or exchanges on which our securities are listed, the SEC or other regulatory authorities, any of which could require additional financial and management resources.
Removed
If the spread of the virus or variants worsens and one or more of our significant suppliers is negatively impacted in the future, we could experience delays in receipt of materials or price increases in the future which could have a material negative impact on our business, results of operations and financial condition.
Added
We cannot assure you that the measures we have taken to date, and actions we may take in the future, will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or that they will prevent or avoid potential future material weaknesses.
Removed
The adverse effects of COVID-19 on our business could be material in future periods, particularly if there are significant and prolonged economic slowdowns in regions where we derive a significant amount of our revenue or profit, or where our suppliers are located, or if we are forced to close facilities and limit or cease manufacturing operations for extended periods of time.
Added
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future.
Removed
We could experience delays in receipt of customer orders, cancellation or postponement of existing orders. Further, as a result of COVID-19, our ability to fulfill orders within the proposed parameters at the time of order, including within the approximated timeline and estimated cost, may be negatively affected.
Added
Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of financial statements for prior periods.
Removed
This could lead to a reduction in revenue and/or an increase in our cost of revenues in future periods and could have a material adverse effect on our business, results of operations and financial condition.
Added
If we cannot source this material from alternate suppliers for similar costs, our revenue and earnings could be adversely affected. 20 We have a sole source supplier of components in Israel and the current Hamas-Israel conflict could disrupt our supply chain or cause other adverse effects on our revenue and earnings.
Removed
COVID-19 has also led to extreme volatility in capital markets and has adversely affected, and may adversely affect, the market price of our common stock in the future.
Added
In early October 2023, Hamas attacked Israel and Israel formally declared war in response to the attack. The conflict is ongoing, and it is unclear when it might end.
Removed
As a result of any negative impact of COVID-19 on our business, results of operations, financial condition and cash flows, we may determine that our goodwill and long-lived assets are impaired, which would result in recording an impairment charge. The amount of any such impairment charge could be material.
Added
The continuing conflict is likely to cause regional instability and could materially adversely affect global trade, regional economies and the global economy, which could materially adversely affect our financial condition and results of operations. Our subsidiary, Ambrell has a sole source supplier of capacitors used in certain of our induction heating products that is located in Israel.
Removed
RISKS RELATED TO INTELLECTUAL PROPERTY Claims of intellectual property infringement by or against us could seriously harm our businesses. From time to time, we may be forced to respond to or prosecute intellectual property infringement claims to defend or protect our rights or a customer's rights.
Added
This supplier is the sole source supplier of capacitors for numerous induction companies, and currently there are not viable alternatives available.
Added
There can be no assurance that the situation will not worsen, which could impact our ability to assemble and ship certain of our induction heating products which could have a material impact on our results of operations in future periods. A substantial portion of our customers are located outside the U.S., which exposes us to foreign political and economic risks.

Item 2. Properties

Properties — owned and leased real estate

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Biggest change(1) During the fourth quarter of 2020, we consolidated all manufacturing operations for our EMS segment into our facility in Mt. Laurel, New Jersey, as more fully discussed in Note 5 to our consolidated financial statements for the year ended December 31, 2022 in this Report. In August 2021, we subleased this facility for the balance of the term.
Biggest changeLaurel, New Jersey, as more fully discussed in Note 5 to our consolidated financial statements for the year ended December 31, 2022 in our Annual Report on Form 10-K that was filed with the SEC on March 22, 2023. In August 2021, we subleased this facility for the balance of the term.
Item 2. PROPERTIES At December 31, 2022, we leased thirteen facilities worldwide. The following chart provides information regarding each of our principal facilities that we leased at December 31, 2022: Location Lease Expiration Approx.
Item 2. PROPERTIES At December 31, 2023, we leased thirteen facilities worldwide. The following chart provides information regarding each of our principal facilities that we leased at December 31, 2023: Location Lease Expiration Approx.
Laurel, NJ April 2031 33,650 Corporate headquarters and Electronic Test segment operations Ontario, Canada February 2028 16,437 Electronic Test segment operations (primary facility for Acculogic Inc.) Fremont, CA November 2025(1) 15,746 Formerly Electronic Test segment sales and engineering All of our facilities have space to accommodate our needs for the foreseeable future.
Laurel, NJ April 2031 33,650 Corporate headquarters and Electronic Test segment operations Penang, Malaysia March 2027 (1) 25,000 Applications engineering, product development and localized manufacturing for nearly all inTEST brands Ontario, Canada February 2028 16,437 Electronic Test segment operations (primary facility for Acculogic Inc.) Fremont, CA November 2025 (2) 15,746 Formerly Electronic Test segment sales and engineering All of our facilities have space to accommodate our needs for the foreseeable future.
Added
(1) Expected to commence operations in the second half of 2024. (2) During the fourth quarter of 2020, we consolidated all manufacturing operations for our EMS segment into our facility in Mt.
Added
As described further in Item 1, “Business—Acquisition,” effective March 12, 2024, in connection with our acquisition of Alfamation, we leased an additional facility for that operation. That facility is approximately 51,817 square feet and is located in Milan, Italy. The initial lease term expires on March 12, 2030, and renews automatically unless terminated by either party. 23

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+2 added−4 removed1 unchanged
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plan Information regarding securities authorized for issuance under equity compensation plans is included in Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” under the caption “Equity Compensation Plan Information.”
Biggest change“Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” under the caption “Equity Compensation Plan Information.”
Purchases of Equity Securities There were no shares of our common stock repurchased by us or on our behalf during the three months ended December 31, 2022.
Purchases of Equity Securities There were no shares of our common stock repurchased by us or on our behalf during the three months ended December 31, 2023.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Common Stock Our common stock is traded on NYSE American LLC (“NYSE American”) under the symbol "INTT." On March 15, 2023, the closing price for our common stock as reported on the NYSE American was $15.84.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Common Stock Our common stock is traded on NYSE American LLC (“NYSE American”) under the symbol "INTT." On March 1, 2024, the closing price for our common stock as reported on the NYSE American was $12.16.
At March 15, we had 11,121,359 shares outstanding that were held by approximately 1,000 beneficial and record holders. No dividends were paid on our common stock in the years ended December 31, 2022 or 2021. We do not currently plan to pay cash dividends in the foreseeable future.
At March 1, we had 12,164,698 shares outstanding that were held by approximately 1,000 beneficial and record holders. No dividends were paid on our common stock in the years ended December 31, 2023 or 2022. We do not currently plan to pay cash dividends in the foreseeable future.
Removed
On July 31, 2019, our Board of Directors authorized the repurchase of up to $3 million of our common stock from time to time on the open market, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in privately negotiated transactions pursuant to a newly authorized stock repurchase plan (the “2019 Repurchase Plan”).
Added
On November 20, 2023, our Board of Directors authorized a share repurchase plan (the “Repurchase Plan”) whereby we may repurchase shares of our common stock on the open market with a total aggregate repurchase amount of up to $10 million until November 2024. We are not obligated to purchase any common stock under the Repurchase Plan.
Removed
Repurchases are to be made under a Rule 10b5-1 plan entered into with RW Baird & Co., which permits shares to be repurchased when we might otherwise be precluded from doing so under insider trading laws and our internal trading windows.
Added
Further, the Repurchase Plan may be suspended or discontinued at any time without prior notice. As of December 31, 2023, no shares had been repurchased under the Repurchase Plan. Securities Authorized for Issuance Under Equity Compensation Plan Information regarding securities authorized for issuance under equity compensation plans is included in Item 12.
Removed
The 2019 Repurchase Plan does not obligate us to purchase any particular amount of common stock and can be suspended or discontinued at any time without prior notice. The 2019 Repurchase Plan is funded using our operating cash flow or available cash. Purchases began on September 18, 2019 under this plan.
Removed
On March 2, 2020, we suspended repurchases under the 2019 Repurchase Plan. From the adoption of the 2019 Repurchase Plan through the suspension of the plan, we repurchased a total of 243,075 shares at a cost of $1.2 million, which includes fees paid to our broker of $6,000. All of the repurchased shares were retired.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

60 edited+30 added−33 removed63 unchanged
Biggest changeYears Ended December 31, Change 2022 2021 $ % Revenue: Semi $ 68,422 $ 54,937 $ 13,485 24.5 % Industrial 10,038 7,314 2,724 37.2 % Auto/EV 10,776 6,205 4,571 73.7 % Life Sciences 4,589 2,353 2,236 95.0 % Defense/Aerospace 7,006 5,043 1,963 38.9 % Security 3,241 $ 699 2,542 363.7 % Other 12,756 8,327 4,429 53.2 % $ 116,828 $ 84,878 $ 31,950 37.6 % Total consolidated revenue for the year ended December 31, 2022 was $116.8 million compared to $84.9 million in 2021, an increase of $32.0 million or 38% as compared to 2021.
Biggest change($ in 000s) Years Ended Change 12/31/2023 12/31/2022 $ % Revenue Semi $ 65,735 53.3 % $ 68,422 58.6 % $ (2,687 ) -3.9 % Industrial 14,310 11.6 % 10,038 8.6 % 4,272 42.6 % Automotive/EV 9,895 8.0 % 10,776 9.2 % (881 ) -8.2 % Life Sciences 4,856 3.9 % 4,589 3.9 % 267 5.8 % Defense/Aerospace 12,537 10.2 % 7,006 6.0 % 5,531 78.9 % Security 3,688 3.0 % 3,241 2.8 % 447 13.8 % Other 12,281 10.0 % 12,756 10.9 % (475 ) -3.7 % $ 123,302 100.0 % $ 116,828 100.0 % $ 6,474 5.5 % Total consolidated revenue for the year ended December 31, 2023 was $123.3 million compared to $116.8 million in 2022, an increase of $6.5 million or 6%.
We have no significant commitments for capital expenditures for 2023; however, depending upon changes in market demand or manufacturing and sales strategies, we may make such purchases or investments as we deem necessary and appropriate. These additional cash requirements would be funded by our cash and cash equivalents, anticipated net cash to be provided by operations and our Credit Facility.
We have no significant commitments for capital expenditures for 2024; however, depending upon changes in market demand or manufacturing and sales strategies, we may make such purchases or investments as we deem necessary and appropriate. These additional cash requirements would be funded by our cash and cash equivalents, anticipated net cash to be provided by operations and our Credit Facility.
Under the Amended Loan Agreement, the maturity date of the Term Note and Revolving Facility were also extended to September 19, 2027 (the “Contract Period”). At December 31, 2022, we had not borrowed any amounts under the $10 million Revolving Facility. Our borrowings under the Term Note are discussed below and occurred prior to entering into the Amended Loan Agreement.
Under the Amended Loan Agreement, the maturity date of the Term Note and Revolving Facility were also extended to September 19, 2027 (the “Contract Period”). At December 31, 2023, we had not borrowed any amounts under the $10 million Revolving Facility. Our borrowings under the Term Note are discussed below and occurred prior to entering into the Amended Loan Agreement.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 Annual Report on Form 10-K for the year ended December 31, 2022.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 Annual Report on Form 10-K for the year ended December 31, 2023.
Our indefinite-lived intangible assets were trademarks and trade names carried at $8.4 million at each of December 31, 2022 and 2021, respectively. We did not record any impairment charges related to our indefinite-lived intangible assets during 2022 or 2021.
Our indefinite-lived intangible assets were trademarks and trade names carried at $8.4 million at each of December 31, 2023 and 2022, respectively. We did not record any impairment charges related to our indefinite-lived intangible assets during 2023 or 2022.
Under the Amended Loan Agreement, the maximum loan amount that we may borrow under the Term Note increased from $25 million to $50.5 million, which raises the available funding at December 31, 2022 to $30 million.
Under the Amended Loan Agreement, the maximum loan amount that we may borrow under the Term Note increased from $25 million to $50.5 million, which raises the available funding at December 31, 2023 to $30 million.
We also anticipate making investments in our business in the next twelve months including hiring of additional staff, updates to our website and other systems and investments related to our geographic and market expansion efforts. We estimate that our minimum short-term working capital requirements currently range between $8.0 million and $10.0 million.
We anticipate making investments in our business in the next twelve months including hiring of additional staff, updates to our systems and investments related to our geographic and market expansion efforts. We estimate that our minimum short-term working capital requirements currently range between $8.0 million and $10.0 million.
We did not record any impairment charges related to our goodwill during 2022 or 2021. 31 Indefinite-lived intangible assets are assessed for impairment at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
We did not record any impairment charges related to our goodwill during 2023 or 2022. Indefinite-lived intangible assets are assessed for impairment at least annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired.
At December 31, 2022 and 2021, the contingent consideration liability on our balance sheet was $1.4 million and $930,000, respectively. The current portion of this liability at December 31, 2022 and 2021 was $324,000 and $0, respectively, and was included in Other Current Liabilities. Income Taxes The asset and liability method is used in accounting for income taxes.
At December 31, 2023 and 2022, the contingent consideration liability on our balance sheet was $1.1 million and $1.4 million, respectively. The current portion of this liability at December 31, 2023 and 2022 was $0 and $324,000, respectively, and was included in Other Current Liabilities. Income Taxes The asset and liability method is used in accounting for income taxes.
Accordingly, for 2022, we have three operating segments which are also our reportable segments and reporting units: Electronic Test (which includes our semiconductor test equipment, flying probe and in-circuit testers), Environmental Technologies (which includes our thermal test, process and storage products) and Process Technologies (which includes our induction heating and video imaging products).
We have three operating segments which are also our reportable segments and reporting units: Electronic Test (which includes our semiconductor test equipment, flying probe and in-circuit testers), Environmental Technologies (which includes our thermal test, process and storage products) and Process Technologies (which includes our induction heating and video imaging products).
Our Revolving Facility is discussed in Note 12 to our consolidated financial statements. 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.
Our Revolving Facility is discussed in Note 10 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.
The additional payments will be based on a percent of net invoices for which payments have been received on systems sold to EV or battery customers in excess of CAD $2.5 million per year in each of the five years. There was no payment due to the seller for the year ended December 31, 2022.
The additional payments will be based on a percent of net invoices for which payments have been received on systems sold to EV or battery customers in excess of CAD $2.5 million per year in each of the five years. There were no payments due to the seller for the years ended December 31, 2022 or 2023.
The contingent consideration for Acculogic 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 contingent consideration liability 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.
Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge. At December 31, 2022 and 2021, goodwill was $21.6 million and $21.4 million, respectively.
Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge. At December 31, 2023 and 2022, goodwill was $21.7 million and $21.6 million, respectively.
At December 31, 2022 and 2021, finite-lived intangibles and long-lived assets were $19.1 million and $21.8 million, respectively. We did not record any impairment charges related to our long-lived assets during 2022 or 2021. Contingent Consideration Liabilities The contingent consideration liabilities on our balance sheet are accounted for in accordance with the guidance in ASC 820 (Fair Value Measurement).
At December 31, 2023 and 2022, finite-lived intangibles and long-lived assets were $16.4 million and $19.1 million, respectively. We did not record any impairment charges related to our long-lived assets during 2023 or 2022. 31 Contingent Consideration Liabilities The contingent consideration liabilities on our balance sheet are accounted for in accordance with the guidance in ASC 820 (Fair Value Measurement).
The actions we are taking 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.
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.
If any of the significant assumptions were changed, materially different results could occur, which could significantly change the amount of the deferred tax valuation allowance established. At December 31, 2022 we had a net deferred tax asset of $280,000. At December 31, 2021, we had a net deferred tax liability of $1.4 million.
If any of the significant assumptions were changed, materially different results could occur, which could significantly change the amount of the deferred tax valuation allowance established. At December 31, 2023 and 2022 we had a net deferred tax asset of $1.4 million and $280,000, respectively.
Our criteria identify excess material as the quantity of material on hand that is greater than the average annual usage of that material over the prior three years. Effective January 1, 2021, our criteria identify obsolete material as material that has not been used in a work order during the prior twenty-four months.
Our criteria identify excess material as the quantity of material on hand that is greater than the average annual usage of that material over the prior three years and obsolete material as material that has not been used in a work order during the prior twenty-four months.
War in Ukraine, Inflation and Global Supply Chain Constraints The ongoing war between Russia and Ukraine continues to contribute to global inflationary pressures and the availability of certain raw materials produced in that region, further exacerbating global supply chain challenges that emerged after the onset of the COVID-19 pandemic as described below.
The ongoing war between Russia and Ukraine continues to contribute to global inflationary pressures and the availability of certain raw materials produced in that region, further exacerbating global supply chain challenges that emerged after the onset of the COVID-19 pandemic.
During this same period we received $197,000 as a result of purchases of our stock that were made by our employees under the the inTEST Corporation Employee Stock Purchase Plan and $38,000 as a result of the exercise of options to purchase our stock by employees.
During this same period, we also received $978,000 as a result of the exercise of options to purchase our stock by employees and $174,000 as a result of purchases of our stock that were made by our employees under the inTEST Corporation Employee Stock Purchase Plan.
During this same period, we had non-cash charges of $4.7 million for depreciation and amortization (which included $1.2 million of amortization related to right-of-use ("ROU") assets) and $1.8 million for deferred compensation expense related to stock-based awards. We also recorded a $1.7 million deferred income tax benefit during 2022.
During this same period, we had non-cash charges of $4.7 million for depreciation and amortization (which included $1.6 million of amortization related to right-of-use (“ROU”) assets and $2.0 million for deferred compensation expense related to stock-based awards. We also recorded a $1.2 million deferred income tax benefit during 2023.
The maximum payment over the five-year period is capped at CAD $5.0 million, which equates to approximately $3.7 million at December 31, 2022.
The maximum payment over the five-year period is capped at CAD $5.0 million, which equates to approximately $3.8 million at December 31, 2023.
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 December 31, 2022 it was approximately 4.0% based on current leverage. Effective March 1, 2023, this rate had increased to approximately 6.7%.
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 December 31, 2023, it was approximately 7.4% based on current leverage.
These unobservable inputs reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. Our contingent consideration liabilities are a result of our acquisitions of Z-Sciences on October 6, 2021, and Acculogic on December 21, 2021.
These unobservable inputs reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. Our contingent consideration liability is a result of our acquisition of Acculogic on December 21, 2021.
For the year ended December 31, 2022, we recorded income tax expense of $1.7 million compared to $1.1 million in 2021. Our effective tax rate was 17% for 2022 compared to 13% for 2021.
For the year ended December 31, 2023, we recorded income tax expense of $1.7 million in each of the years ended December 31, 2023 and 2022. Our effective tax rate was 15% for 2023 compared to 17% for 2022.
Inventory Valuation Inventories are valued at cost on a first-in, first-out basis, not in excess of market value. Cash flows from the sale of inventories are recorded in operating cash flows. On a quarterly basis, we review our inventories and record excess and obsolete inventory charges based upon our established objective excess and obsolete inventory criteria.
Cash flows from the sale of inventories are recorded in operating cash flows. On a quarterly basis, we review our inventories and record excess and obsolete inventory charges based upon our established objective excess and obsolete inventory criteria.
The discussion and analysis that follows, therefore, is presented on a consolidated basis and includes discussion of factors unique to a particular operating segment where significant to an understanding of that segment. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenue.
Separate discussions and analyses for each segment would be repetitive. The discussion and analysis that follows, therefore, is presented on a consolidated basis and includes discussion of factors unique to a particular operating segment where significant to an understanding of that segment. Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenue.
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.
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.
Given that both orders and backlog are operational measures and our methodology for calculating orders and backlog do not meet the definition of a non-GAAP measure, as that term is defined by the SEC, a quantitative reconciliation for each is not required or provided.
Given that both orders and backlog are operational measures and our methodology for calculating orders and backlog do not meet the definition of a non-GAAP measure, as that term is defined by the SEC, a quantitative reconciliation for each is not required or provided. 26 The following table sets forth, for the periods indicated, a breakdown of the orders received by market (in thousands).
Our deferred tax valuation allowance at December 31, 2022 and 2021 was $180,000 and $64,000, respectively. 32 Off-Balance Sheet Arrangements There were no off-balance sheet arrangements during the year ended December 31, 2022 that have or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.
Off-Balance Sheet Arrangements There were no off-balance sheet arrangements during the year ended December 31, 2023 that have or are reasonably likely to have, a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.
The borrowing availability under the Term Note was expanded in September 2022 as discussed above and in Note 12 to our consolidated financial statements in this Report. Cash Flows Operating Activities. Net cash used in operations for the year ended December 31, 2022 was $1.4 million. For the year ended December 31, 2022, we recorded net earnings of $8.5 million.
The borrowing availability under the Term Note was expanded in September 2022 as discussed above and in Note 10 to our consolidated financial statements in this Report. Cash Flows Operating Activities. Net cash provided by operations for the year ended December 31, 2023 was $16.2 million. For the year ended December 31, 2023, we recorded net earnings of $9.3 million.
Acculogic purchases certain material from a key sole-source supplier in Belarus, which is bordered by Russia to the east and northeast and Ukraine to the south. We estimate that we currently have a six-to-nine-month supply of this material. We are currently in the process of qualifying an alternate supplier for this material.
Acculogic purchases certain material from a key sole-source supplier in Belarus, which is bordered by Russia to the east and northeast and Ukraine to the south. At present, we are still receiving shipments from this supplier, and we estimate that we have a six-to-nine-month supply of these parts that we are maintaining.
Revenue was $116.8 million for the year ended December 31, 2022 compared to $84.9 million in 2021, an increase of $32.0 million or 38%. We believe this increase reflects the factors previously discussed in the Overview section above. Gross Margin. Gross margin was 46% for the year ended December 31, 2022 compared to 49% in 2021.
Revenue was $123.3 million for the year ended December 31, 2023 compared to $116.8 million in 2022, an increase of $6.5 million or 6%. We believe this increase reflects the factors previously discussed in the Overview section above. Gross Margin. Gross margin was 46% in each of the years ended December 31, 2023 and 2022.
Some of these accounting estimates and assumptions are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that future events affecting them may differ markedly from what had been assumed when the financial statements were prepared.
Some of these accounting estimates and assumptions are particularly sensitive because of their significance to our consolidated financial statements and because of the possibility that future events affecting them may differ markedly from what had been assumed when the financial statements were prepared. 30 Inventory Valuation Inventories are valued at cost on a first-in, first-out basis, not in excess of market value.
We use cash to fund growth in our operating assets, for new product research and development, for acquisitions and for stock repurchases. 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, our Credit Facility or by issuing equity.
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, our Credit Facility or by issuing equity.
Prior period information has been reclassified to be comparable to the current period’s presentation. All of our operating segments have multiple products that we design, manufacture and market to our customers. Due to a number of factors, our products have varying levels of gross margin.
All of our operating segments have multiple products that we design, manufacture and market to our customers. Due to a number of factors, our products have varying levels of gross margin.
Our obligations under the Amended Loan Agreement are secured by liens on substantially all of our tangible and intangible assets. At December 31, 2022, we were in compliance with all of the covenants included in the Credit Facility. At this date, our consolidated funded debt to consolidated EBITDA ratio was 1.0 and our fixed charge coverage ratio was 3.1.
Our obligations under the Amended Loan Agreement are secured by liens on substantially all of our tangible and intangible assets. At December 31, 2023, we were in compliance with all of the covenants included in the Credit Facility. At December 31, 2023, we were in compliance with debt covenants of the Amended Loan Agreement.
During 2022, our fixed operating costs increased $3.5 million compared to 2021, however, these costs represented 12% of revenue in both 2022 and 2021 as they were better absorbed by the higher revenue levels in 2022. Approximately $2.0 million of this increase is attributable to acquired businesses.
During 2023, our fixed operating costs increased $1.6 million compared to 2022, however, these costs represented 12% of revenue in both 2023 and 2022 as they were better absorbed by the higher revenue levels in 2023.
We have increased, and may further increase, the prices that we charge our customers as a result of increased raw material expenses. We are also working with our customers to find alternate options for the shipment of products where they control aspects of the logistics process.
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.
Goodwill is assessed for impairment at least annually in the fourth quarter, on a reporting unit basis, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired.
Finite-lived intangible assets are amortized over their estimated useful economic life and are carried at cost less accumulated amortization. Goodwill is assessed for impairment at least annually in the fourth quarter, on a reporting unit basis, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired.
We define orders as purchase orders that we have accepted from our customers. Orders are recorded based on the date received and accepted by us.
Orders and Backlog We use orders and backlog as key performance metrics to analyze and measure our financial performance and results of operations. We define orders as purchase orders that we have accepted from our customers. Orders are recorded based on the date received and accepted by us.
These shares are classified as treasury stock on our consolidated balance sheets. 30 New or Recently Adopted Accounting Standards See Note 2 to the consolidated financial statements for information concerning the implementation and impact of new or recently adopted accounting standards.
New or Recently Adopted Accounting Standards See Note 2 to the consolidated financial statements for information concerning the implementation and impact of new or recently adopted accounting standards.
Our primary historical source of liquidity and capital resources has been cash flow generated by our operations. In 2021, we also utilized our Credit Facility, which is discussed below, to fund our acquisitions. We manage our businesses to maximize operating cash flows as our primary source of liquidity for our short-term cash requirements, as discussed below.
The cyclical and volatile nature of demand for ATE makes estimates of future revenues, results of operations and net cash flows difficult. Our primary historical source of liquidity and capital resources has been cash flow generated by our operations. In 2021, we also utilized our Credit Facility, which is discussed below, to fund our acquisitions.
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. See Note 13 to our consolidated financial statements for further detail of the difference between our effective tax rates in 2022 and 2021 and the statutory tax rate of 21%.
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.
Interest expense for the years ended December 31, 2022 and 2021 was $635,000 and $89,000, respectively. 29 Liquidity Our cash and cash equivalents and working capital were as follows (in thousands): December 31, 2022 2021 Cash and cash equivalents $ 13,434 $ 21,195 Working capital $ 33,182 $ 27,005 At December 31, 2022, $5.0 million, or 37%, of our cash and cash equivalents was held by our foreign subsidiaries.
Liquidity Our cash and cash equivalents and working capital were as follows (in thousands): December 31, 2023 2022 Cash and cash equivalents $ 45,260 $ 13,434 Working capital $ 61,479 $ 33,182 29 At December 31, 2023, $5.8 million, or 13%, of our cash and cash equivalents was held by our foreign subsidiaries.
Credit Facility As discussed in the Overview and in Note 12 to our consolidated financial statements in this Report, on October 15, 2021, we entered into the Loan Agreement with M&T.
We received net proceeds from the sale of these shares of $19.2 million after payment of commissions of 3.0% of the gross proceeds and other fees related to the sale of these shares. Credit Facility As discussed in Note 10 to our consolidated financial statements in this Report, on October 15, 2021, we entered into the Loan Agreement with M&T.
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.
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.
Liquidity and Capital Resources As discussed more fully in the Overview, our business and results of operations are substantially dependent upon the demand for ATE by semiconductor manufacturers and companies that specialize in the testing of ICs. The cyclical and volatile nature of demand for ATE makes estimates of future revenues, results of operations and net cash flows difficult.
See Note 11 to our consolidated financial statements for further detail of the difference between our effective tax rates in 2023 and 2022 and the statutory tax rate of 21%. 28 Liquidity and Capital Resources As discussed more fully in the Overview, our business and results of operations are substantially dependent upon the demand for ATE by semiconductor manufacturers and companies that specialize in the testing of ICs.
Prior to January 1, 2021, these criteria identified obsolete material as material that had not been used in a work order during the prior twelve months. In certain cases, additional excess and obsolete inventory charges are recorded based upon current market conditions, anticipated product life cycles, new product introductions and expected future use of the inventory.
In certain cases, additional excess and obsolete inventory charges are recorded based upon current market conditions, anticipated product life cycles, new product introductions and expected future use of the inventory. The excess and obsolete inventory charges we record establish a new cost basis for the related inventories.
We also acquired $10,000 of stock as a result of shares withheld by us from employees to satisfy tax liabilities incurred by them as a result of vesting of restricted stock awards.
During 2023, we made principal payments on our Term Note totaling $4.1 million and acquired $687,000 of stock as a result of shares withheld by us from employees to satisfy tax liabilities incurred by them as a result of vesting of restricted stock awards. These shares are classified as treasury stock on our consolidated balance sheets.
At December 31, 2022, our backlog of unfilled orders for all products was approximately $46.8 million compared with approximately $34.1 million at December 31, 2021.
These declines were partially offset by increases in demand from customers in the industrial and defense/aerospace markets. At December 31, 2023, our backlog of unfilled orders for all products was approximately $40.1 million compared with approximately $46.8 million at December 31, 2022.
The remaining $1.5 million increase primarily reflects higher levels of salary and benefits expense as we made headcount investments to support the higher revenue levels in 2022 and the execution of our 5-Point Strategy. Selling Expense.
The $1.6 million increase primarily reflects higher levels of salary and benefits expense as we made headcount investments to support the higher revenue levels in 2023. To a lesser extent there were also increases in depreciation, reflecting a higher fixed asset base, and travel, reflecting the increased business activity. Selling Expense.
In addition, while we have been able to mitigate a significant portion of the supply chain and logistics challenges that we encountered in 2022, we expect to continue to experience increased prices, lack of availability and logistics delays to varying degrees for the foreseeable future.
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.
Years Ended December 31, Change 2022 2021 $ % Orders: Semi $ 73,070 $ 68,464 $ 4,606 6.7 % Industrial 10,554 9,001 1,553 17.3 % Auto/EV 9,899 7,466 2,433 32.6 % Life Sciences 5,705 2,413 3,292 136.4 % Defense/Aerospace 10,261 4,904 5,357 109.2 % Security 4,386 1,691 2,695 159.4 % Other 15,701 8,003 7,698 96.2 % $ 129,576 $ 101,942 $ 27,634 27.1 % Total consolidated orders for the year ended December 31, 2022 were $129.6 million compared to $101.9 million in 2021, an increase of $27.6 million, or 27%.
Years Ended December 31, Change 2023 2022 $ % Orders: Semi $ 59,297 $ 73,070 $ (13,773 ) -18.8 % Industrial 14,980 10,554 4,426 41.9 % Auto/EV 10,193 9,899 294 3.0 % Life Sciences 4,353 5,705 (1,352 ) -23.7 % Defense/Aerospace 13,386 10,261 3,125 30.5 % Security 2,945 4,386 (1,441 ) -32.9 % Other 11,478 15,701 (4,223 ) -26.9 % $ 116,632 $ 129,576 $ (12,944 ) -10.0 % Total consolidated orders for the year ended December 31, 2023 were $116.6 million compared to $129.6 million in 2022, a decrease of $12.9 million, or 10%.
Engineering and Product Development Expense. Engineering and product development expense was $7.5 million for the year ended December 31, 2022 compared to $5.5 million in 2021, an increase of $2.0 million, or 36%. The acquired businesses account for approximately $1.7 million of this increase. The remaining increase primarily reflects headcount investments. General and Administrative Expense.
Engineering and product development expense was $7.6 million for the year ended December 31, 2023 compared to $7.5 million in 2022, an increase of $89,000, or 1%, primarily reflecting an increase in materials used in product development projects and fees paid to third parties to assist in our development efforts.
Selling expense was $15.9 million for the year ended December 31, 2022 compared to $11.1 million in 2021, an increase of $4.8 million or 44%. The acquired businesses account for approximately $2.9 million of this increase. The remaining increase primarily reflects headcount investments, higher levels of commission expense and increased travel and advertising costs across all our segments.
Selling expense was $17.6 million for the year ended December 31, 2023 compared to $15.9 million in 2022, an increase of $1.7 million or 11%. The increase primarily reflects higher salary and benefits expense, reflecting annual merit adjustments and additional headcount investments, along with higher levels of commission expense as a result of the growth in revenue in 2023.
However, the situation is evolving and shifting rapidly at times, and the success of our efforts to mitigate and address the impacts on our business may not be successful.
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.
Results of Operations The results of operations for our three operating segments are generally affected by the same factors described in the Overview section above. Separate discussions and analyses for each segment would be repetitive.
Please refer to Part I, Item 1A in this Report for further discussion of the risks associated with our business operations, including risks associated with foreign operations. Results of Operations The results of operations for our three operating segments are generally affected by the same factors described in the Overview section above.
Goodwill, Intangible and Long-Lived Assets We account for goodwill and intangible assets in accordance with Accounting Standards Codification ("ASC") Topic 350 (Intangibles- Goodwill and Other). Finite-lived intangible assets are amortized over their estimated useful economic life and are carried at cost less accumulated amortization.
During 2023 and 2022, we recorded inventory obsolescence charges for excess and obsolete inventory of $544,000 and $771,000, respectively. Goodwill, Intangible and Long-Lived Assets We account for goodwill and intangible assets in accordance with Accounting Standards Codification ("ASC") Topic 350 (Intangibles- Goodwill and Other).
General and administrative expense was $19.3 million for the year ended December 31, 2022 compared to $15.9 million in 2021, an increase of $3.4 million, or 22%. The acquired businesses account for approximately $2.0 million of this increase, excluding amortization expense. During 2021, we incurred $1.9 million of transaction expenses related to acquisitions and costs associated with financing activities.
These increases were offset somewhat by a decrease in salary and benefits expense as we had open positions in 2023 that were filled in the comparable prior period. General and Administrative Expense. General and administrative expense was $21.3 million for the year ended December 31, 2023 compared to $19.3 million in 2022, an increase of $2.0 million, or 11%.
Removed
During the year ended December 31, 2021, we managed our business as two operating segments which were also our reportable segments and reporting units: Thermal and EMS. Effective January 1, 2022, we reorganized our operating segments to better align with our plan to manage and report our business going forward.
Added
Acquisition On March 12, 2024 we entered into a stock purchase agreement to acquire all of the outstanding capital shares of Alfamation S.p.A., (“Alfamation”), a leading global provider of state-of-the-art test and measurement solutions for the automotive, life sciences and specialty consumer electronics markets. Alfamation was founded in 1991 and is headquartered in Milan, Italy.
Removed
This change in our operating and reporting structure reflects the evolution of our business, particularly as a result of the broadening of our product portfolio through the acquisitions we completed in the fourth quarter of 2021, which are discussed more fully in Note 3 to our consolidated financial statements in this Report.
Added
Alfamation also has a small sales and service subsidiary based in Suzhou City, China. Alfamation will become a part of our Electronic Test operating segment.
Removed
Acquisitions During 2021, we completed three acquisitions, North Sciences on October 6, 2021, Videology on October 28, 2021 and Acculogic on December 21, 2021. These acquisitions expanded our technology offerings, diversified our markets and customers and expanded our presence into Europe.
Added
The aggregate purchase price was approximately €20 million comprised of approximately €18 million in cash, 187,432 shares of our common stock and an additional approximately €542,000 in cash for assets delivered at closing in excess of agreed upon thresholds. On the closing date, this equated to a total purchase price of approximately $22.4 million.
Removed
North Sciences is included in our Environmental Technologies segment, Videology is included in our Process Technologies segment and Acculogic is included in our Electronic Test segment. These acquisitions are discussed further in Note 3 to our consolidated financial statements in this Report. Their results have been included in our consolidated results as of their respective acquisition dates.
Added
In connection with the acquisition, we have entered into a lease agreement (the “Lease Agreement”) with the former owner of Alfamation. The Lease Agreement will last for six years starting on March 12, 2024 and will be automatically renewed for the same period of time unless terminated by either party.
Removed
In order to fund a portion of these acquisitions, we utilized our delayed draw term note that is part of our credit facility. This credit facility is discussed further in Note 12 to our consolidated financial statements in this Report and in Liquidity and Capital Resources below.
Added
Under the terms of the Lease Agreement, Alfamation will lease warehouse and office space totaling about 51,817 square feet. Alfamation will pay a yearly lease payment of €231,312 broken up into four equal payments. At the date of the signing of the Lease Agreement, the yearly lease payment equated to approximately $253,000.
Removed
Revenue from acquired businesses in 2021 (from the respective dates of acquisition through December 31, 2021) was $1.5 million. Revenue from acquired businesses in 2022 was $19.7 million. Acquired businesses contributed significantly to the increases in industrial, auto/EV, life sciences, defense/aerospace and security in 2022 as compared to 2021.
Added
The increase in revenue for 2023 as compared to 2022 primarily reflects increased demand for our thermal test solutions from customers in the defense/aerospace and industrial markets, and, to a lesser extent, increased demand for our induction heating solutions from customers in the industrial market. These increases were partially offset by declines in demand from the semi market.
Removed
The $13.5 million increase in revenue from the semi market primarily reflects strength in demand for our induction heating technology solutions for silicon carbide (SiC) crystal growth applications. 26 Orders and Backlog We use the following key performance metrics to analyze and measure our financial performance and results of operations: orders and backlog.
Added
While demand from our customers in both the front-end and back-end of the semi market remained strong throughout most of 2023, we experienced declines in revenue from both these sectors of the semi market in the fourth quarter of 2023.
Removed
The following table sets forth, for the periods indicated, a breakdown of the orders received by market (in thousands).
Added
We attribute these declines to the cyclical slowdown in the semi market which has been impacting this market as a whole for most of 2023 but which had not yet impacted us significantly as certain specific customers to which we sell many of our products in this market had continued to place orders with us.
Removed
Orders from acquired businesses in 2021 (from the respective dates of acquisition through December 31, 2021) totaled $2.5 million. Orders from acquired businesses in 2022 totaled $21.8 million. Acquired businesses contributed significantly to the increases in industrial, auto/EV, life sciences, defense/aerospace and security in 2022 as compared to 2021.
Added
Our orders from the semi market decreased $13.8 million, primarily reflecting the aforementioned decline in demand in this market in 2023, which impacted us most significantly in the fourth quarter of the year. We also experienced declines in demand from the security and life sciences markets, as well as other markets we serve.
Removed
The $4.6 million increase in orders from the semi market primarily reflects strength in demand for our products used in back-end test as well as the impact of the acquisition of Acculogic, which accounted for approximately $1.3 million of orders from the semi market in 2022.
Added
The decrease in our backlog reflects reduced demand for our products and, to a lesser extent, lead times returning to a more normalized pattern. During 2022 our lead times were much longer than they have been historically as global supply chain challenges significantly impacted availability of products for both us and most of our customers.

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