Elmet : Quarterly Report for Quarter Ending July 3, 2026 (Form 10-Q)

About this update from The Elmet Group Co.

[{"type":"text","content":" Table of Contents \n UNITED STATES \n SECURITIES AND EXCHANGE COMMISSION \n Washington, D.C. 20549 \n FORM 10-Q (Mark One) \n ☒ \n QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 3, 2026 OR \n ☐ \n TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 \n For the transition period from ________ to _________ Commission file number: 001-43245 \n The Elmet Group Co. \n (Exact name of registrant as specified in its charter) \n Delaware \n 33-1881598 (State or other jurisdiction of \n incorporation or organization) \n (I.R.S. Employer \n Identification No.) 280 Fore Street, Suite 301 \n Portland, Maine \n 04101 (Address of principal executive offices) \n (Zip Code) (207) 518-6791 \n (Registrant's telephone number, in cluding area code) \n 2 Portland Fish Pier, Suite 214 \n Portland, Maine \n (Former name, former address and former fiscal year, if changed since last report) \n Securities registered pursuant to Section 12(b) of the Act: Title of Each Class: \n Trading Symbol(s) \n Name of Each Exchange on Which Registered Common Stock, par value $0.001 per share \n ELMT \n The Nasdaq Stock Market LLC \n Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ \n Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ \n Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of \"large accelerated filer,\" \"accelerated filer,\" \"smaller reporting company,\" and \"emerging growth company\" in Rule 12b-2 of the Exchange Act. Large accelerated filer \n ☐ \n Accelerated filer \n ☐ \n Non-accelerated filer \n ☒ \n Smaller reporting company \n ☒ \n Emerging growth company \n ☒ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ \n Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ \n As of August 10, 2026, there were 30,459,498 shares of common stock outstanding. Table of Contents \n THE ELMET GROUP CO. \n TABLE OF CONTENTS Page PART I - FINANCIAL INFORMATION 1 Item 1. Financial Statements 1 Unaudited Consolidated Balance Sheets 1 Unaudited Consolidated Statements of Operations 2 Unaudited Consolidated Statements of Comprehensive (Loss) Income 3 Unaudited Consolidated Statements of Changes in Stockholders' Equity 4 Unaudited Consolidated Statements of Cash Flows 5 Notes to Unaudited Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 51 Item 3. Quantitative and Qualitative Disclosures About Market Risk 86 Item 4. Controls and Procedures 86 PART II - OTHER INFORMATION 88 Item 1. Legal Proceedings 88 Item 1A. Risk Factors 88 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 88 Item 3. Defaults upon Senior Securities 88 Item 4. Mine and Safety Disclosure 88 Item 5. Other Information 89 Item 6. Exhibits 89 \n i Table of Contents \n FORWARD-LOOKING STATEMENTS \n This Quarterly Report on Form 10-Q (the \"Report\") contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical fact contained in this Report, including, without limitation, statements regarding our future results of operations or financial condition, business strategy and plans, expansion plans and strategy, economic conditions, both generally and in particular in the regions in which we operate or plan to operate, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as \"anticipate,\" \"believe,\" \"consider,\" \"contemplate,\" \"continue,\" \"could,\" \"estimate,\" \"expect,\" \"intend,\" \"may,\" \"plan,\" \"potential,\" \"predict,\" \"project,\" \"should,\" \"target,\" \"will\" or \"would\" or the negative of these words or other similar terms or expressions. \n You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled \" Risk Factors \" and elsewhere in this Report, including, but not limited to, the following: \n • our market opportunities and the potential growth of those markets; \n • our strategy, expected outcomes, and growth prospects; \n • trends in our operations, industry, and markets; \n • our ability to execute our growth strategy and successfully acquire and integrate potential acquisition targets; \n • our future profitability, indebtedness, liquidity, access to capital, and the terms of such capital, and financial condition; \n • the amount of, and our ability to service, our current and future indebtedness; \n • any inability to attract, train or retain employees with the requisite skills and experience; \n • failure by us or our employees to obtain and maintain necessary security clearances or certifications; \n • changes in U.S. government procurement, contract or other practices or the adoption by governments of new laws, rules, regulations and programs in a manner adverse to us; \n • the termination or nonrenewal of our government contracts and subcontracts, particularly those contracts with the U.S. government and the Department of War (\"DoW\"); \n • availability and volatility in the prices of raw materials and energy; \n • our ability to remain in compliance with extensive laws and regulations that apply to our business and operations; \n • the increased expenses associated with being a public company; \n • changes in estimates used in recognizing revenue; \n • internal system or service failures and security breaches, including cyber intrusions, ransom attacks or other information technology exposure; \n • inherent uncertainties and potential adverse developments in legal proceedings, including litigation, audits, reviews and investigations, which may result in materially adverse judgments, settlements or other unfavorable outcomes; \n • the ability to maintain the listing of our common stock on Nasdaq; \n • the future trading prices of our common stock; and \n • other risks, uncertainties and factors set forth in this Report, including those set forth under \" Risk Factors, \" and \" Management's Discussion and Analysis of Financial Condition and Results of Operations. \" \n ii Table of Contents \n Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Report. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements. \n In addition, statements that \"we believe\" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Report. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. \n The forward-looking statements made in this Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Report to reflect events or circumstances after the date of this Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments. \n OTHER PERTINENT INFORMATION \n Unless specifically set forth to the contrary, \"Company,\" \"we,\" \"us,\" \"our\" and similar terms refer to The Elmet Group Co. and its subsidiaries, unless the context indicates otherwise. \n iii Table of Contents \n PART I - FINANCIAL INFORMATION \n ITEM 1 - Financial Statements \n THE ELMET GROUP CO. \n CONSOLIDATED BALANCE SHEETS \n (UNAUDITED) \n (in thousands, except share data) July 3, \n 2026 \n December 31, \n 2025 \n Assets \n Current Assets: \n Cash \n $ \n 66,122 \n $ \n 1,759 \n Marketable securities \n 4,923 \n 202 \n Accounts receivable, net \n 34,483 \n 28,904 \n Government grant receivables \n 232 \n 1,690 \n Related party receivables \n 58 \n 426 \n Unbilled revenue \n 564 \n 2,621 \n Inventories, net \n 102,401 \n 69,697 \n Income tax receivable \n 3,766 \n - \n Prepaid expenses and other current assets \n 5,548 \n 4,774 \n Total current assets \n 218,097 \n 110,073 \n Property, plant and equipment, net \n 42,457 \n 42,342 \n Operating lease right-of-use assets \n 11,777 \n 10,586 \n Intangible assets, net \n 6,558 \n 7,184 \n Goodwill \n 4,527 \n 4,583 \n Deferred tax assets, net \n 88 \n - \n Other assets \n 724 \n 878 \n Total assets \n $ \n 284,228 \n $ \n 175,646 \n Liabilities and Stockholders' Equity \n Current Liabilities: \n Accounts payable \n $ \n 27,390 \n $ \n 16,165 \n Accrued expenses and other current liabilities \n 17,417 \n 13,659 \n Related party payables \n 190 \n - \n Operating lease liabilities, current portion \n 956 \n 875 \n Current portion of long-term debt - related party \n - \n 2,319 \n Current portion of long-term debt \n 2,370 \n 7,755 \n Deferred government grants \n 2,358 \n 4,672 \n Deferred revenue \n 21,416 \n 14,853 \n Total current liabilities \n 72,097 \n 60,298 \n Operating lease liabilities, net of current portion \n 11,407 \n 10,247 \n Long-term debt, net of current portion \n 8,108 \n 28,455 \n Long-term debt, net of current portion - related party \n - \n 15,000 \n Deferred tax liabilities, net \n 4,075 \n - \n Other liabilities \n 998 \n 1,189 \n Total liabilities \n 96,685 \n 115,189 \n Commitments and Contingencies (Note 18) \n Stockholders' Equity: Preferred Stock - $0.001 par value; 20,000,000 shares authorized as of July 3, 2026 and December 31, 2025. No shares issued and outstanding as of July 3, 2026 and December 31, 2025 - \n - Class A Common Stock - $0.001 par value; 0 and 500,000,000 shares authorized as of July 3, 2026 and December 31, 2025, respectively; 0 and 20,122,721 shares issued and outstanding as of July 3, 2026 and December 31, 2025, respectively - \n 20 Class B Common Stock - $0.001 par value; 0 and 40,000,000 shares authorized as of July 3, 2026 and December 31, 2025, respectively; 0 and 466 shares issued and outstanding as of July 3, 2026 and December 31, 2025, respectively - \n - Common Stock - $0.001 par value; 540,000,000 and 0 shares authorized as of July 3, 2026 and December 31, 2025, respectively; 30,459,498 and 0 shares issued and outstanding as of July 3, 2026 and December 31, 2025, respectively 30 \n - \n Additional paid-in capital \n 147,058 \n 15,366 \n Retained earnings \n 40,507 \n 44,791 \n Accumulated other comprehensive (loss) income \n (52) \n 280 \n Total stockholders' equity \n 187,543 \n 60,457 \n Total liabilities and stockholders' equity \n $ \n 284,228 \n $ \n 175,646 The accompanying notes are integral to the unaudited consolidated financial statements . \n 1 Table of Contents \n THE ELMET GROUP CO. \n CONSOLIDATED STATEMENTS OF OPERATIONS \n (UNAUDITED) \n (in thousands, except share and per share data) Three Months Ended \n Six Months Ended \n July 3, \n 2026 \n June 30, \n 2025 \n July 3, \n 2026 \n June 30, \n 2025 \n Revenue \n $ \n 66,401 \n $ \n 49,130 \n $ \n 122,408 \n $ \n 95,517 \n Cost of goods sold \n 49,791 \n 38,983 \n 93,950 \n 76,759 \n Gross profit \n 16,610 \n 10,147 \n 28,458 \n 18,758 \n Operating expenses: \n General and administrative \n 17,780 \n 4,016 \n 24,848 \n 7,275 \n Research and development \n 4,321 \n 1,009 \n 5,171 \n 1,820 \n Sales and marketing \n 2,137 \n 1,876 \n 4,204 \n 3,559 \n Total operating expenses \n 24,238 \n 6,901 \n 34,223 \n 12,654 Operating (loss) income (7,628) \n 3,246 \n (5,765) \n 6,104 Other expense (income), net: Interest expense \n 127 \n 793 \n 740 \n 1,303 \n Interest expense - related party \n 233 \n 377 \n 860 \n 793 \n Change in fair value of derivative asset \n 881 \n - \n (2,214) \n - (Gain) loss on remeasurement of the fair value of marketable securities (445) \n 23 \n (1,081) \n 23 \n Other (income) expense, net \n (186) \n (77) \n (204) \n 2 Total other expense (income), net 610 \n 1,116 \n (1,899) \n 2,121 (Loss) income from continuing operations before taxes (8,238) \n 2,130 \n (3,866) \n 3,983 Income tax (benefit) provision (3,750) \n - \n 960 \n - \n (Loss) income from continuing operations \n (4,488) \n 2,130 \n (4,826) \n 3,983 \n Loss from discontinued operations \n - \n $ \n (890) \n $ \n - \n $ \n (1,546) \n Net (loss) income \n $ \n (4,488) \n $ \n 1,240 \n $ \n (4,826) \n $ \n 2,437 \n Net (loss) income per share: \n Basic \n $ \n (0.16) \n $ \n 0.06 \n $ \n (0.20) \n $ \n 0.12 \n Diluted \n $ \n (0.16) \n $ \n 0.06 \n $ \n (0.20) \n $ \n 0.12 \n Weighted average shares outstanding \n Basic \n 28,414,861 \n 20,123,187 \n 24,223,725 \n 20,123,187 \n Diluted \n 28,414,861 \n 20,268,282 \n 24,223,725 \n 20,196,135 The accompanying notes are integral to the unaudited consolidated financial statements. \n 2 Table of Contents \n THE ELMET GROUP CO. \n CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME \n (UNAUDITED) \n (in thousands) Three Months Ended \n Six Months Ended \n July 3, \n 2026 \n June 30, \n 2025 \n July 3, \n 2026 \n June 30, \n 2025 \n Net (loss) income \n $ \n (4,488) \n $ \n 1,240 \n $ \n (4,826) \n $ \n 2,437 \n Other comprehensive (loss) income: \n Foreign currency translation adjustments \n (36) \n 302 \n (332) \n 421 \n Total other comprehensive (loss) income \n (36) \n 302 \n (332) \n 421 \n Comprehensive (loss) income \n $ \n (4,524) \n $ \n 1,542 \n $ \n (5,158) \n $ \n 2,858 The accompanying notes are integral to the unaudited consolidated financial statements. \n 3 Table of Contents \n THE ELMET GROUP CO. \n CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY \n (UNAUDITED) \n (in thousands, except for share data) \n Class A \n Common Stock \n Class B \n Common Stock \n Common Stock Additional Paid-In \n Capital \n Retained \n Earnings Accumulated Other \n Comprehensive \n (Loss) \n Income Total Stockholders' \n Equity \n Shares \n Amount \n Shares \n Amount \n Shares \n Amount \n Balance as of December 31, 2025 \n 20,122,721 \n $ \n 20 \n 466 \n $ \n - \n - \n - \n $ \n 15,366 \n $ \n 44,791 \n $ \n 280 \n $ \n 60,457 \n Net loss \n - \n - \n - \n - \n - \n - \n - \n (338) \n - \n (338) \n Spinoff of subsidiary in connection with Reorganization \n - \n - \n - \n - \n - \n - \n - \n 542 \n - \n 542 \n Stock-based compensation \n - \n - \n - \n - \n - \n - \n 645 \n - \n - \n 645 \n Currency translation adjustment \n - \n - \n - \n - \n - \n - \n - \n - \n (296) \n (296) \n Balance as of April 3, 2026 \n 20,122,721 \n $ \n 20 \n 466 \n $ \n - \n - \n $ \n - \n $ \n 16,011 \n $ \n 44,995 \n $ \n (16) \n $ \n 61,010 Net loss - \n - \n - \n - \n - \n - \n - \n (4,488) \n - \n (4,488) \n Stock-based compensation \n - \n - \n - \n - \n - \n - \n 10,090 \n - \n - \n 10,090 \n Issuance of common stock upon vesting of restricted stock awards \n - \n - \n - \n - \n 153,500 \n - \n - \n - \n - \n - \n Issuance of common stock upon vesting of stock appreciation rights, net of shares withheld for taxes \n - \n - \n - \n - \n 326,135 \n - \n (4,371) \n - \n - \n (4,371) Proceeds from initial public offering, net of issuance costs and underwriter fees - \n - \n - \n 9,857,142 \n 10 \n 125,353 \n - \n - \n 125,363 Conversion of Class A Common Stock to Common Stock in connection with initial public offering (20,122,721) \n (20) \n - \n 20,122,721 \n 20 \n - \n - \n - \n - \n Repurchase and cancellation of Class B Common Stock \n - \n - \n (466) \n - \n - \n - \n (25) \n - \n - \n (25) \n Currency translation adjustment \n - \n - \n - \n - \n - \n - \n - \n - \n (36) \n (36) \n Balance as of July 3, 2026 \n - \n $ \n - \n - \n $ \n - \n 30,459,498 \n $ \n 30 \n $ \n 147,058 \n $ \n 40,507 \n $ \n (52) \n $ \n 187,543 Class A \n Common Stock \n Class B \n Common Stock \n Common Stock Additional Paid-In \n Capital \n Retained \n Earnings \n Accumulated Other \n Comprehensive (Loss) \n Income \n Total Stockholders' Equity Shares \n Amount \n Shares \n Amount \n Shares \n Amount \n Balance as of December 31, 2024 \n 20,122,721 \n $ \n 20 \n 466 \n $ \n - \n - \n $ \n - \n $ \n 13,915 \n $ \n 47,774 \n $ \n (116) \n $ \n 61,593 \n Income from continuing operations \n - \n - \n - \n - \n - \n - \n - \n 1,853 \n - \n 1,853 \n Loss from discontinued operations \n - \n - \n - \n - \n - \n - \n - \n (656) \n - \n (656) \n Stockholder distributions \n - \n - \n - \n - \n - \n - \n - \n (1,550) \n - \n (1,550) \n Stockholder contribution - discontinued operations \n - \n - \n - \n - \n - \n - \n 100 \n - \n - \n 100 \n Currency translation adjustment \n - \n - \n - \n - \n - \n - \n - \n - \n 119 \n 119 \n Balance as of March 31, 2025 \n 20,122,721 \n $ \n 20 \n 466 \n $ \n - \n - \n $ \n - \n $ \n 14,015 \n $ \n 47,421 \n $ \n 3 \n $ \n 61,459 \n Income from continuing operations \n - \n - \n - \n - \n - \n - \n - \n 2,130 \n - \n 2,130 \n Loss from discontinued operations \n - \n - \n - \n - \n - \n - \n - \n (890) \n - \n (890) Stock-based compensation - \n - \n - \n - \n - \n - \n 383 \n - \n - \n 383 \n Stockholder distributions \n - \n - \n - \n - \n - \n - \n (5,283) \n - \n (5,283) \n Currency translation adjustment \n - \n - \n - \n - \n - \n - \n - \n 302 \n 302 \n Balance as of June 30, 2025 \n 20,122,721 \n $ \n 20 \n 466 \n $ \n - \n - \n $ \n - \n $ \n 14,398 \n $ \n 43,378 \n $ \n 305 \n $ \n 58,101 The accompanying notes are integral to the unaudited consolidated financial statements. \n 4 Table of Contents \n THE ELMET GROUP CO. \n CONSOLIDATED STATEMENTS OF CASH FLOWS \n (UNAUDITED) \n (in thousands) Six Months Ended \n July 3, \n 2026 \n June 30, \n 2025 \n Cash flows from operating activities: \n Net (loss) income \n $ \n (4,826) \n $ \n 2,437 \n Loss from discontinued operations \n - \n (1,546) \n (Loss) income from continuing operations \n (4,826) \n 3,983 Adjustments to reconcile (loss) income from continuing operations to net cash (used in) provided by operating activities: \n Deferred income taxes, net 3,987 \n - \n Change in fair value of derivative asset \n (2,214) \n - \n Depreciation and amortization \n 3,779 \n 3,215 \n Stock-based compensation \n 10,735 \n 383 \n Noncash operating lease expense \n 469 \n 440 \n Noncash interest expense \n 17 \n 14 \n Provision for excess and obsolete inventories \n 33 \n (1) \n Change in fair value of interest rate collars \n (56) \n 51 \n Unrealized (gain) loss on marketable securities \n (1,081) \n 23 \n Change in operating assets and liabilities: \n Accounts receivable \n (5,588) \n 7,607 \n Unbilled revenue \n 2,057 \n (4,059) \n Inventories \n (32,763) \n (10,780) \n Related party receivables \n 291 \n - \n Income tax receivable \n (3,766) \n - \n Prepaid expenses and other current assets \n (2,378) \n (527) \n Other assets \n 134 \n 5 \n Accounts payable \n 12,250 \n 885 \n Accrued expenses and other current liabilities \n 5,004 \n 4,181 \n Operating lease liabilities \n (418) \n (381) \n Related party payables \n 190 \n - \n Deferred revenue \n 6,570 \n 3,975 \n Other liabilities \n 2 \n 10 Net cash (used in) provided by operating activities from continuing operations (7,572) \n 9,024 \n Net cash used in operating activities from discontinued operations \n - \n (2,742) Net cash (used in) provided by operating activities (7,572) \n 6,282 \n Cash flows from investing activities: \n Purchase of shares upon exercise of call option \n (1,426) \n - Purchases of property, plant and equipment, net of grant proceeds (see Note 7 - Government Grants ) (3,141) \n (4,602) \n Net cash used in investing activities from continuing operations \n (4,567) \n (4,602) \n Net cash used in investing activities from discontinued operations \n - \n (110) \n Net cash used in investing activities \n (4,567) \n (4,712) \n Cash flows from financing activities: \n Proceeds from initial public offering, net of underwriting discount and offering costs \n 125,363 \n - \n Payments of principal on revolving credit facility \n (99,882) \n (326) \n Proceeds from revolving credit facility \n 76,441 \n 6,522 \n Payments of principal on long-term debt \n (1,783) \n (4,231) \n Payments of principal on long-term debt - related party \n (17,294) \n - \n Cash distributions paid to stockholders \n - \n (6,833) \n Payments of deferred consideration \n (73) \n - \n Payments of contingent consideration \n (49) \n - \n Employee taxes paid on shares withheld for tax-withholding purposes \n (4,371) \n - Payments of principal on revolving credit facility - related party (1,771) \n (1,559) Repurchase of Class B Common Stock (25) \n - \n Payments of principal on finance leases \n (16) \n (25) Net cash provided by (used in) financing activities from continuing operations 76,540 \n (6,452) \n Net cash provided by financing activities from discontinued operations \n - \n 103 Net cash provided by (used in) financing activities 76,540 \n (6,349) \n Effects of exchange rate changes on cash \n (38) \n 42 \n Net increase (decrease) in cash \n $ \n 64,363 \n $ \n (4,737) \n Cash at beginning of period \n 1,759 \n 6,532 \n Cash at end of period \n $ \n 66,122 \n $ \n 1,795 \n Reconciliation of cash at beginning of period: \n Cash at beginning of period - continuing operations \n $ \n 1,759 \n $ \n 3,608 \n Cash at beginning of period - discontinued operations \n - \n 2,924 \n Cash at beginning of period \n $ \n 1,759 \n $ \n 6,532 \n Reconciliation of cash at end of period: \n Cash at end of period - continuing operations \n $ \n 66,122 \n $ \n 1,620 \n Cash at end of period - discontinued operations \n - \n 175 \n Cash at end of period \n $ \n 66,122 \n $ \n 1,795 \n Supplemental non-cash investing and financing activities: \n Purchases of property, plant and equipment included in accounts payable and accrued expenses \n $ \n 684 \n $ \n 280 Contracted government grants not yet received $ \n 1,273 \n $ \n - \n Right-of-use assets obtained in exchange for new operating lease liabilities \n 1,660 \n - \n Supplemental disclosure of cash flow information: \n Cash paid for interest \n $ \n 1,674 \n $ \n 1,834 Cash paid for income taxes $ \n 700 \n $ \n - The accompanying notes are integral to the unaudited consolidated financial statements. \n 5 Table of Contents \n THE ELMET GROUP CO. \n NOTES TO CONSOLIDATED FINANCIAL STATEMENTS \n (UNAUDITED) \n 1. BUSINESS AND ORGANIZATION \n Description of the Business \n The accompanying consolidated financial statements include the accounts of The Elmet Group Co. and its consolidated subsidiaries (collectively the \"Company\"). The Company operates the following business units: \n The Company's Critical Materials Components (\"CMC\") division, which operates under the name Elmet Technologies, has manufacturing facilities in Lewiston, Maine, Euclid, Ohio and Coldwater, Michigan, was established in 1929 and is a United States owned and operated, fully integrated manufacturer of critical refractory materials specializing in tungsten, molybdenum, and specialized alloys such as heavy tungsten, titanium-zirconium-molybdenum, HCT (potassium doped) molybdenum and lanthanated molybdenum. The CMC division's products are primarily used in high-temperature, high-stress industrial and technological applications such as satellites, missiles, hypersonic weapons, submarines, advanced missile and drone fragmentation, nuclear fission, nuclear fusion development, aircraft, medical imaging, advanced electronics, semiconductor equipment, heat treatment furnaces, vacuum processing, and glass manufacturing industries. The CMC division's offerings also include specialized precision machining and fabrication services of its metals. \n The Company's Engineered Microwave Products (\"EMP\") division, which operates under the name Microwave Techniques, has manufacturing facilities in Gorham, Maine, Nashua, New Hampshire, and Hamburg, Germany. The EMP division provides a mix of highly engineered radio frequency (\"RF\") systems, components and engineering services. The EMP division's products include a wide range of RF generators, waveguides and coaxial components, ultra-high vacuum components, and industrial microwave systems. The EMP division products are primarily used in missile tracking systems, directed energy systems, nuclear fusion development, aircraft, radar systems, medical imaging, semiconductor equipment, vacuum processing, synthetic diamond manufacturing and high temperature material and food processing industries. The EMP division also provides engineered components to multiple national, collegiate and international physics laboratories in support of high energy research. \n Polymer Laboratories LLC (\"Poly Labs\") was a consolidated subsidiary, majority-owned by the Company's wholly-owned subsidiary, Anania & Associates, which operated a manufacturing facility in Lewiston, Maine and manufactured highly engineered and molded polyurethane, self-skinning polyurethane, and small precise-pour polyurethane. Anania & Associates divested its interest in Poly Labs to Anania & Associates' individual stockholders on October 1, 2025 and is classified as discontinued operations within these consolidated financial statements. See Note 5 - Discontinued Operations for more details. \n Reorganization \n On January 2, 2026, the Company effected a reorganization (the \"Reorganization\") whereby Anania & Associates and its noncontrolling interest holders contributed their ownership interests in Anania & Associates and its consolidated subsidiaries in exchange for shares of common stock in the Company. The Reorganization was a reorganization of entities under common control as Anania & Associates and the Company were controlled by the Company's Chief Executive Officer (\"CEO\") before and after the Reorganization. As a result, the Reorganization was accounted for in a manner similar to a pooling of interests with the assets and liabilities of Anania & Associates and its consolidated subsidiaries being carried over at their historical amounts. The historical consolidated financial statements of Anania & Associates were retrospectively recast to reflect the results as if the Company owned Anania & Associates and its consolidated subsidiaries as of January 1, 2025, including the capitalization of the Company as if the Reorganization occurred as of such date. In connection with the Reorganization, Anania & Associates Investment Company LLC, an immaterial subsidiary of Anania & Associates, was no longer controlled by the Company and was deconsolidated on January 2, 2026. The deconsolidation was recognized as a spinoff and the impact of $0.5 million was recognized within equity. In connection with the Reorganization, the Company's tax status changed from an S-corporation to a C-corporation. \n Initial Public Offering \n On April 23, 2026, the Company completed its initial public offering (\"IPO\") of an aggregate of 9,857,142 shares of its common stock at a public offering price of $14.00 per share, which includes 1,285,714 sold by the Company pursuant to the exercise of the underwriters' over-allotment option that was exercised in full. The IPO resulted in net proceeds to the Company of $128.2 million after deducting the underwriting discounts and commissions and before deducting offering \n 6 Table of Contents \n costs of $2.8 million, which were charged to additional paid-in capital as a reduction of the net proceeds received from the IPO. In connection with the IPO, the Company also granted the representative of the underwriters, a warrant to purchase up to 147,857 shares of the Company's common stock (the \"Underwriter's Warrant\") that has an exercise price equal to 125% of the public offering price of $14.00 per share, or $17.50 per share. The Underwriter's Warrant is not exercisable for a period of 180 days following the IPO date and expires four years from the date of issuance, or April 24, 2030. In connection with the IPO, the Company redeemed all issued and outstanding shares of Class B common stock for less than $0.1 million and consolidated its two classes of common stock, Class A and Class B, into a single class of $0.001 par value common stock. \n 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES \n Basis of Presentation \n The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (\"GAAP\") for interim financial information. The Company's consolidated financial statements include the accounts of the Company and all entities that are wholly-owned by the Company. All significant intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements are presented in United States dollars, which represent the Company's reporting currency. Unless otherwise noted, dollars are in thousands. \n The accompanying consolidated balance sheet as of July 3, 2026, the consolidated statements of operations, the consolidated statements of comprehensive (loss) income and the consolidated statements of changes in stockholders' equity for the three and six months ended July 3, 2026 and June 30, 2025, and the consolidated statements of cash flows for the six months ended July 3, 2026 and June 30, 2025 are unaudited. The consolidated balance sheet as of December 31, 2025 included herein is unaudited as it was derived from the audited consolidated balance sheet of Anania & Associates and subsidiaries (a/k/a The Elmet Group Co.) and as of December 31, 2025 due to the impact of the Reorganization. \n The unaudited interim consolidated financial statements have been prepared on a basis consistent with the Anania & Associates and subsidiaries (a/k/a The Elmet Group Co.), except with respect to equity structure and taxes, audited annual consolidated financial statements as of and for the year ended December 31, 2025, and, in the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair statement of the Company's financial position as of July 3, 2026, the results of operations for the three and six months ended July 3, 2026 and June 30, 2025, comprehensive (loss) income for the three and six months ended July 3, 2026 and June 30, 2025, cash flows for the six months ended July 3, 2026 and June 30, 2025, and changes in stockholders' equity for the three and six months ended July 3, 2026 and June 30, 2025. The financial data and other information disclosed in these notes related to the three and six months ended July 3, 2026 and June 30, 2025 are also unaudited. The results for the three and six months ended July 3, 2026 are not necessarily indicative of results to be expected for the year ending January 1, 2027 or any other period. The accounting policies followed for the unaudited interim consolidated financial statements are consistent with the annual consolidated financial statements. \n These unaudited consolidated financial statements should be read in conjunction with the Anania & Associates and subsidiaries (a/k/a The Elmet Group Co.) audited consolidated financial statements and the notes thereto for the year ended December 31, 2025, which are included in the Company's Registration Statement on Form S-1 filed with the Securities and Exchange Commission (\"SEC\"), as amended and supplemented, and declared effective on April 22, 2026. \n Change in Fiscal Calendar \n Beginning in fiscal 2026, the Company changed its fiscal calendar to adopt a 4-4-5 fiscal calendar, whereby each fiscal quarter consists of thirteen weeks grouped into two four-week months and one five-week month. This change was implemented to better align the Company's accounting operations with quarterly public reporting requirements and to improve comparability of financial performance. Under the new fiscal calendar, the Company's fiscal year ends on the Friday closest to December 31st. The Company's last fiscal year-end under the prior calendar-year convention was December 31, 2025, and fiscal periods beginning January 1, 2026 are reported under the new 4-4-5 fiscal calendar. As a result of this change, the Company's second fiscal quarter, and the three and six month periods presented in these unaudited consolidated financial statements ended July 3, 2026, include an additional number of days compared to the prior-year periods ended June 30, 2025. Accordingly, results for these periods may not be fully comparable to those of the prior year periods primarily due to the change in the number of days included in the periods. Subsidiaries that have a fiscal year-end different from that of the Company are consolidated using financial statements for periods that are within three months of the Company's fiscal year-end, with adjustments for material transactions, if any. \n 7 Table of Contents \n Foreign Currency Translation \n The financial statements of the Company's foreign subsidiaries, where the local currency is the functional currency, are translated using exchange rates in effect at the end of the year for assets and liabilities and average exchange rates during the year for results of operations. The resulting foreign currency translation adjustment is included in stockholders' equity as accumulated other comprehensive (loss) income. \n Foreign currency gains and losses resulting from transactions denominated in foreign currencies are reflected in general and administrative expense in the accompanying consolidated statements of operations. For the three and six months ended July 3, 2026 and June 30, 2025, foreign currency gains and losses were immaterial. \n Accounting Estimates \n The preparation of these consolidated financial statements in conformity with GAAP requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates. Significant items subject to estimates and assumptions include those related to over-time revenue recognition, the valuation of stock-based compensation, the valuation of inventory and related reserves, and the assessment of recoverability of goodwill. \n Some of these estimates can be subjective and complex and, consequently, actual results may differ from these estimates under different assumptions or conditions. While for any given estimate or assumption made by the Company's management there may be other estimates or assumptions that are reasonable, the Company believes that, given the current facts and circumstances present as of the date of these consolidated financial statements, it is unlikely that applying any such other reasonable estimate or assumption would materially impact the consolidated financial statements herein. \n Cash \n Cash represents cash held in banks, which are stated at cost, which approximate fair value. The Company may have bank balances in excess of federally insured amounts; however, the Company deposits its cash with high credit-quality institutions to minimize credit risk exposure. As of July 3, 2026 and December 31, 2025, included within cash was approximately $0.2 million and $0.5 million, respectively, of cash held at a bank in Germany. The Company does not have any cash equivalents as of July 3, 2026 and December 31, 2025. \n Marketable Securities \n Marketable securities are comprised of investments in equity securities. The Company records its marketable securities at fair value based on the quoted market prices of the securities. Gains and losses resulting from the change in fair value of marketable securities are included in (gain) loss on remeasurement of fair value of marketable securities, net in the consolidated statements of operations. \n Accounts Receivable, net \n Accounts receivable, net consists of amounts owed by commercial companies and government agencies. Accounts receivable is stated net of the allowance for credit losses. \n Accounts receivable is carried at historical cost, less any write-offs and the allowance for credit losses. The Company records an allowance for credit losses for those accounts receivable balances considered to be uncollectible based upon management's assessment of collectability, which considers historical write-off experience and any specific risks identified in customer collection matters. Bad debts are written off against the allowance. Additions to the allowance for credit losses are charged to bad debt expense within general and administrative expense in the accompanying consolidated statements of operations. \n 8 Table of Contents \n The following table summarizes the activity related to the Company's allowance for credit losses during the six months ended July 3, 2026 and June 30, 2025 (in thousands): Three Months \n Ended \n July 3, \n 2026 \n Three Months \n Ended \n June 30, \n 2025 \n Six Months \n Ended \n July 3, \n 2026 \n Six Months \n Ended \n June 30, \n 2025 \n Beginning balance \n $ \n 265 \n $ \n 237 \n $ \n 263 \n 242 \n Write-offs of receivables \n - \n - \n - \n - \n Increase in allowance for credit losses \n 40 \n 58 \n 42 \n 53 \n Ending balance \n $ \n 305 \n $ \n 295 \n $ \n 305 \n 295 The Company does not typically require collateral from its customers; however, certain customer contracts require milestone payments or prepayments. Although concentrations of credit risk exist with respect to certain customers, management believes this risk is mitigated through ongoing collection activity and credit evaluations performed on new and existing customers. Accounts receivable generally have contractual terms of 30 to 90 days and do not bear interest. \n Concentrations of Credit Risk \n Credit risk is the risk of loss from amounts owed by customers and financial counterparties. Credit risk can occur at multiple levels; as a result of broad economic conditions, challenges within specific sectors of the economy, or from issues affecting individual companies. Financial instruments that potentially subject the Company to credit risk consist of cash, accounts receivable and unbilled revenue. \n The Company performs ongoing credit evaluations of its customers and maintains an allowance for credit losses. Unbilled revenue includes amounts due from customers for performance obligations that have been satisfied but for which amounts have not been billed. The Company has historically not experienced any significant losses related to the collection of its accounts receivable or unbilled revenue. \n As of July 3, 2026, one customer accounted for more than 10% of the Company's accounts receivable, net balance, representing approximately 18% of the Company's total balance. As of December 31, 2025, one customer accounted for more than 10% of the Company's accounts receivable, net balance, representing approximately 15% of the Company's total balance. For the three and six months ended July 3, 2026, there was one customer that accounted for approximately 11% of the Company's total revenue for the period. For the three months ended June 30, 2025, there were no customers that accounted for more than 10% of the Company's total revenue. For the six months ended June 30, 2025, there was one customer who accounted for approximately 10% of the Company's total revenue for the period. \n Concentrations of Significant Vendors \n The Company believes that potential exposure related to concentrations of risk with significant vendors is mitigated, as management considers alternative sources of supply to be readily available. For the three and six months ended July 3, 2026, two vendors accounted for more than 10% of the Company's total expenditures, and accounts payable to these vendors represented approximately 36% and 22% of the Company's total accounts payable as of July 3, 2026. For three and the six months ended June 30, 2025, one vendor accounted for more than 10% of the Company's total expenditures. As of December 31, 2025, accounts payable to this one vendor represented approximately 22% of the Company's total accounts payable. \n Inventories, net \n Inventories include material, direct labor and related manufacturing overhead, and are stated at the lower of cost, determined on a first-in, first-out basis and average cost, or net realizable value determined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company records inventory when it takes delivery and title to the product according to the terms of each supply contract. \n The Company adjusts inventory carrying value for the estimated difference between the cost of inventory and the estimated net realizable value based upon assumptions about future demand and selling price. The Company also analyzes its inventory levels on each reporting date for excess and obsolete inventory. The Company's analysis requires judgment and is based on factors including, but not limited to, recent historical activity, anticipated or forecasted demand for its products, competitiveness of product offerings, and market conditions. In doing so, the Company compares on-hand balances to \n 9 Table of Contents \n anticipated usage using recent historical activity as well as judgments and estimates about anticipated or forecasted demand. If estimates of customer demand diminish further or market conditions become less favorable than those projected by the Company, additional inventory adjustments may be required, subject to judgment and estimation. At the point of a loss recognition, a new, lower cost basis for that inventory is established, and subsequent changes in facts and circumstances do not result in the restoration or increase in that newly established basis. \n As of July 3, 2026 and December 31, 2025, inventory, net of reserves, consisted of the following (in thousands): July 3, \n 2026 \n December 31, \n 2025 \n Finished goods \n $ \n 45,383 \n $ \n 30,946 \n Work-in-progress \n 28,761 \n 27,919 \n Raw materials \n 28,257 \n 10,832 \n Inventory, net \n $ \n 102,401 \n $ \n 69,697 As of July 3, 2026 and December 31, 2025, the Company had inventory reserves of approximately $6.1 million and $6.2 million, respectively, based on the evaluation of its ending inventory on hand for excess quantities and obsolescence. \n Property, Plant and Equipment, net \n Property, plant and equipment are recorded at cost and depreciated over their estimated useful lives using the straight-line method. Repairs and maintenance costs are expensed as incurred, whereas major improvements are capitalized as additions to property and equipment. \n The Company accounts for depreciation and amortization using the straight-line method to allocate the cost of property, plant and equipment over their estimated useful lives as follows: Estimated Useful Life (in Years) \n Buildings \n 25 \n Building improvements 3 - 12 Machinery and equipment 3 - 7 Furniture, fixtures and vehicles 3 - 5 Leasehold improvements \n Shorter of the estimated useful life or the remaining lease term The Company reviews the estimated useful lives of its property, plant and equipment at the end of each reporting period, or whenever events or changes in circumstances indicate a review is warranted. \n Government Grants \n The Company has entered into multiple subcontract agreements with multiple contract administrators engaged by the U.S. Government, to perform prototype development, manufacturing process enhancements, and capital equipment build-outs in support of Department of War programs. Under the terms of these agreements, the Company is reimbursed for qualifying costs incurred, including equipment, labor, materials, and manufacturing expenses, plus a nominal contractual profit margin. The Company accounts for these agreements as government grants. \n Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions of the grant and the Company will receive the grant. Generally, government grants fall into two categories: grants related to assets and grants related to income. \n Grants related to assets are government grants for the purchase of long-lived assets. The Company accounts for grants related to assets by reducing the carrying amount of the asset by the amount of the grant. The Company recognizes the grant in profit or loss over the life of the depreciable asset as a reduction to depreciation expense. \n Grants related to income are any grants that are not considered grants related to assets. Grants related to income are recognized in profit or loss within revenue upon meeting the recognition criteria, as the Company's operations continuously support such grant programs. \n 10 Table of Contents \n Business Combinations \n The purchase price for each acquisition is allocated to the assets acquired and liabilities assumed primarily based on their estimated fair values at the date of acquisition. The excess of (i) the total consideration transferred over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the consideration transferred is less than the fair value of the net assets of the acquiree, the difference is recognized directly in the consolidated statements of operations as a bargain purchase gain. During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed. The consolidated financial statements include the results of operations of an acquired business after the completion of the acquisition. \n Goodwill \n Goodwill represents the excess of the purchase price of an acquired entity over the amounts assigned to assets and liabilities assumed, in a business combination. The Company's goodwill is assigned entirely to one reporting unit: the Company's EMP operating segment. \n Goodwill is not amortized and must be tested for impairment at least annually, or more frequently if events or circumstances indicate that it may be impaired. Goodwill is tested for impairment annually on the first day of the fourth quarter of our fiscal year at the reporting unit level. The Company performs a qualitative assessment to determine whether further impairment testing is necessary. Factors considered include macroeconomic, industry and market conditions, cost factors that would have a negative effect on earnings and cash flows, legal and regulatory environment, historical financial performance and significant changes in the Company's operations or brand. If the qualitative assessment indicates that it is more likely than not that an impairment exists, then a quantitative assessment is performed. In the quantitative assessment for goodwill, an assessment is performed to determine the fair value of the reporting unit. If the carrying value of the reporting unit exceeds the estimated fair value, an impairment charge is recognized in an amount equal to that excess. \n As quoted market prices are not available for the Company's reporting unit, the fair value of the reporting unit is determined using a discounted cash flow model (income approach). This method uses various assumptions that are specific to a reporting unit in order to determine fair value. While the Company believes that estimates of future cash flows are reasonable, changes in assumptions could significantly affect valuations and result in impairments in the future. The most significant assumption involved in the Company's determination of fair value is the cash flow projections of the reporting unit. If the estimates of future cash flows for the reporting unit may be insufficient to support the carrying value of the reporting unit, the Company will reassess its conclusions related to fair value and the recoverability of goodwill. \n The Company did not record any impairment of goodwill during the three and six months ended July 3, 2026 and June 30, 2025. \n Intangible Assets \n Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date. The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors considered when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company's long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Intangible assets that are deemed to have finite lives are amortized. \n Intangible assets consist primarily of patents, customer relationships, and trademarks, all of which are finite lived assets, see Note 9 - Goodwill and Intangible Assets for further information surrounding the useful lives of identified intangible assets. \n Impairment of Long-Lived Assets \n Long-lived assets consist primarily of property, plant and equipment, right-of-use assets and finite-lived intangible assets. The Company reviews the carrying amount of a long-lived asset or asset group when there is an indication of impairment. Impairment indicators include a significant decrease in the market price, a significant adverse change in the manner in which an asset or asset group is being used, a significant adverse change in legal factors or in the business climate, an accumulation of costs in excess of the amount originally expected for the acquisition or development of an asset or asset group, a current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of an asset or asset group, and/or a current \n 11 Table of Contents \n expectation that, more likely than not, an asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. \n If indicators are present, the Company will perform a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the asset or asset group in question to the carrying amounts. If the undiscounted cash flows used in the test for recoverability are less than the asset or asset group's carrying amount, the Company will determine the fair value of the asset or asset group and recognize an impairment loss if the carrying amount exceeds its fair value. No impairment charges related to long-lived assets were recorded for the three and six months ended July 3, 2026 and June 30, 2025. \n Debt Issuance Costs \n The Company's debt issuance costs include expenditures necessary to obtain debt financing. Debt issuance costs include legal and other loan costs incurred by the Company for its financing agreements. Debt issuance costs related to the Company's debt are recorded as an offset to the related liability and amortized over the term of the applicable financing instruments over a straight-line basis, which approximates the effective interest method, over the estimated term of the debt. As of July 3, 2026 and December 31, 2025, the unamortized debt issuance costs were approximately $0.1 million, which were included within long-term debt, net of current portion on the Company's consolidated balance sheets. \n Deferred Offering Costs \n Deferred offering costs represent legal, accounting and other costs directly attributable to the IPO. Deferred offering costs are included in prepaid expenses and other current assets on the Company's consolidated balance sheets and were deferred until the completion of the IPO, at which time they were reclassified to additional paid-in capital as a reduction of the initial public offering proceeds. In April 2026, approximately $1.1 million of deferred offering costs were reclassified to additional paid-in capital, included within proceeds from the initial public offering, net of issuance costs and underwriter fees in the consolidated statement of changes in stockholders' equity for the three months ended July 3, 2026. As of July 3, 2026 and December 31, 2025, approximately $0.0 million and $0.9 million, respectively, of deferred offering costs were capitalized. \n Leases \n The Company determines if an arrangement is or contains a lease at inception by assessing whether the arrangement contains an identified asset and whether it has the right to control the identified asset for a period of time in exchange for consideration. The Company has control of the asset if it has the right to direct the use of the asset and obtains substantially all of the economic benefits from the use of the asset throughout the period of use. As a practical expedient, the Company does not recognize a right-of-use (\"ROU\") asset or lease obligation for leases with a lease term of 12 months or less. \n ROU assets represent the Company's right to use the underlying leased assets over the lease term, while lease liabilities represent the Company's obligation to make lease payments under the lease arrangements. Lease liabilities are recognized at the lease commencement date based on the present value of future lease payments. Corresponding ROU assets are initially measured at the amount of the lease liability, adjusted for any lease payments made at or before lease commencement, less any lease incentives received and plus any initial direct costs incurred. \n The Company classifies a lease as a finance lease when it meets any of the following criteria at the lease commencement date: (1) the lease transfers ownership of the underlying asset to the Company by the end of the lease term; (2) the lease grants the Company an option to purchase the underlying asset that the Company is reasonably certain to exercise; (3) the lease term is for the major part of the remaining economic life of the underlying asset (the Company considers a major part to be 75% or more of the remaining economic life of the underlying asset); (4) the present value of the sum of the lease payments and any residual value guaranteed by the Company equals or exceeds substantially all of the fair value of the underlying asset (the Company considers substantially all the fair value to be 90% or more of the fair value of the underlying asset amount); or (5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. When none of the criteria above are met, the Company classifies the lease as an operating lease. \n As the implicit rate in the Company's lease arrangements is generally not readily determinable, the Company uses its incremental borrowing rate at the lease commencement date to calculate the present value of lease payments. For any operating or finance leases, where the lease's implicit rates were not readily available, the Company determined the incremental borrowing rate, which is based on the United States treasury rate that aligns with the applicable lease term plus a credit spread associated with the Company's credit rating. \n 12 Table of Contents \n The lease terms may include options to extend or terminate the lease when it is reasonably certain the Company will exercise any such options. Lease contracts may include lease components and non-lease components. The Company has elected the practical expedient to combine lease and non-lease components. Lease payments can also include fixed payments, variable payments that depend on an index or rate known at the commencement date, and extension option payments or purchase options which the Company is reasonably certain to exercise. \n Operating lease costs are recognized on a straight-line basis over the lease term as general and administrative expense within consolidated statements of operations. Finance lease ROU assets are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the underlying asset and are included in general and administrative expense within the consolidated statements of operations, with the exception of interest expense related to finance leases, which is recognized using the effective interest method over the lease term, and is included in interest expense within the consolidated statements of operations. \n Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current portion, and operating lease liabilities, net of current portion in the Company's consolidated balance sheets. Finance leases are not material and are included in other assets, accrued expense and other current liabilities, and other liabilities in the Company's consolidated balance sheets. \n Revenue Recognition \n The Company typically generates revenue from contracts with customers related to manufactured products, as described in Note 1 - Business and Organization . Revenue is recognized when control of the goods and services provided is transferred to the Company's customers and in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods and services. The Company applies the following five-step framework: \n Step 1: Identify the contract(s) with a customer: \n A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party's rights regarding the products to be transferred and identifies the payment terms related to those products, (ii) the contract has commercial substance and (iii) the Company determines that collection of substantially all consideration for products that are transferred is probable based on the customer's intent and ability to pay the promised consideration. The Company's contracts are typically in the form of a purchase order and/or a statement of work. For certain large customers, the Company may also enter into master service agreements that define general terms but are not customer commitments to purchase until coupled with a purchase order and/or statement of work. The Company applies judgment in determining the customer's ability and intention to pay, which is based on a variety of factors including the customer's historical payment experience or published credit and financial information pertaining to the customer. \n Step 2: Identify the performance obligations in the contract: \n Performance obligations promised in a contract are identified based on the products and services that will be transferred. A product or service is distinct if both a) the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and b) is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised products or services, the Company must apply judgment to determine whether the products or services meet the criteria to be distinct. \n If these criteria are not met the promised products or services are accounted for as a combined performance obligation. Substantially all of the Company's revenue is derived from the sale of manufactured products. The Company's revenue contracts typically include one performance obligation: the delivery of a manufactured product. \n The Company provides an assurance-based warranty on certain products that is not accounted for as a separate performance obligation. Warranty expense was not material for the three and six months ended July 3, 2026 and June 30, 2025. \n Step 3: Determine the transaction price: \n The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring products to the customer. The Company's contracts are fixed-fee arrangements, agreed to at contract inception. The Company's contracts may include variable consideration related to early pay discounts, sales returns or certain development-related contracts, which result in pricing based on actual hours incurred. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the \n 13 Table of Contents \n transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the Company's judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. Variable consideration in the Company's revenue contracts was not material during the three and six months ended July 3, 2026 and June 30, 2025. \n In most instances, payments are due net 30 to 90 days from the customer's receipt of the invoice. This payment schedule aligns with standard commercial payment terms and does not significantly advance or delay payment in a way that would provide either party a significant financing benefit. Payments are neither explicitly nor implicitly structured to function as financing for the goods or services supplied under the contract. Based on these factors, there is no significant financing component in the Company's contracts. \n The Company has elected to record taxes collected from customers on a net basis and as a result sales taxes are excluded from the transaction price and therefore are not included in revenue or costs of revenue. \n The Company has elected to account for shipping and handling activities as a fulfillment cost and includes any fees received for shipping and handling as part of the transaction price and recognizes revenue when the related performance obligation is satisfied. \n Step 4: Allocate the transaction price to the performance obligations in the contract: \n The Company allocates the transaction price to each performance obligation based on its relative standalone selling price (\"SSP\"), which represents the price the Company would charge to sell the promised good or service separately to a customer. The Company's contracts typically include one performance obligation, and the allocation of transaction price is not necessary. \n Step 5: Recognize revenue when (or as) the Company satisfies a performance obligation: \n The Company satisfies performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised product or service to a customer. \n Revenue is recognized over time as work progresses when the Company is entitled to the reimbursement of costs plus a reasonable profit for work performed for which the Company has no alternative use. For these performance obligations that are satisfied over time, the Company generally recognizes revenue using an input method with revenue amounts being recognized proportionately as costs are incurred relative to the total expected costs to satisfy the performance obligation. The Company believes that costs incurred as a portion of total estimated costs is an appropriate measure of progress towards satisfaction of the performance obligation since this measure reasonably depicts the progress of the work effort. \n Revenue for performance obligations that are not recognized over time are recognized at the point in time when control transfers to the customer. For performance obligations that are satisfied at a point in time, the Company evaluates the point in time when the customer can direct the use of, and obtain the benefits from, the products and services. \n Contract Assets and Contract Liabilities \n The Company's contract assets and liabilities primarily relate to the timing differences between cash received from a customer in connection with contractual rights to invoicing and the timing of revenue recognition following completion of performance obligations. The Company's accounts receivable balance is made up entirely of customer contract-related balances. Contract assets and contract liabilities are included in unbilled revenue and deferred revenue, respectively, on the consolidated balance sheets. \n The Company is required to capitalize certain costs to obtain customer contracts and costs to fulfill customer contracts. These costs consist primarily of sales commissions. Such costs are required to be amortized to expense on a systemic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. As a practical expedient, the Company recognizes any incremental costs to obtain a contract as an expense when incurred if the amortization period of the asset is one year or less. During the three and six months ended July 3, 2026 and June 30, 2025, the Company did not capitalize any contract costs. \n Shipping and Handling Costs \n Amounts billed to customers related to shipping and handling are classified as revenue, and the Company's shipping and handling costs are included in cost of goods sold within the consolidated statements of operations. \n 14 Table of Contents \n Cost of Goods Sold \n Cost of goods sold includes the cost of materials, direct labor, and manufacturing overhead costs used in the manufacture of products sold to customers. Cost of goods sold also consists of personnel, facility costs associated with operating our laboratory testing on behalf of the customers, costs related to maintenance, servicing equipment, training customers at customer sites, freight, other direct costs, and overhead. \n Research and Development Costs \n Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including activities associated with performing services under research revenue arrangements, costs associated with the manufacture of developing products and include salaries and benefits, research related facility and overhead costs, laboratory supplies, and contract services. For the three months ended July 3, 2026 and June 30, 2025, the Company expensed approximately $4.3 million (of which $3.6 million was associated with stock compensation in connection with the IPO) and $1.0 million, respectively. For the six months ended July 3, 2026 and June 30, 2025, the Company expensed approximately $5.2 million (of which $3.6 million was associated with stock compensation in connection with the IPO) and $1.8 million, respectively. \n Advertising Expense \n The costs of advertising, marketing, and media are expensed as incurred. For both the three months ended July 3, 2026 and June 30, 2025, the Company expensed approximately $0.1 million, and for both the six months ended July 3, 2026 and June 30, 2025, the Company expensed approximately $0.2 million, which were included in sales and marketing expense in the consolidated statements of operations. \n Derivative Instruments \n Interest Rate Collars \n The Company uses derivative instruments to manage its interest rate risk related to variable rate debt facilities. The Company's derivative instruments are recorded at fair value. The accounting for changes in fair value of derivatives depends upon whether or not the Company has elected to designate the derivative in a hedging relationship, and the derivative qualifies for hedge accounting. Under hedge accounting, changes in fair value for derivatives are recorded through accumulated other comprehensive income (loss). When hedge accounting is not elected, changes in fair value for derivatives are recorded through the consolidated statements of operations. \n The Company has two interest rate collars that have not been designated for hedge accounting. The interest rate collars have an original notional value of principal of approximately $10.0 million as of July 3, 2026 and December 31, 2025. The interest rate collars mature on October 30, 2026 and August 1, 2028, respectively. The collective fair value of the Company's interest rate collars as of July 3, 2026 and December 31, 2025 was less than $0.1 million and approximately $0.1 million, respectively, which were included in other liabilities on the consolidated balance sheets. Changes in the fair value of derivatives totaled less than $0.1 million for the three and six months ended July 3, 2026 and June 30, 2025 and have been recorded in other (income) expense, net in the consolidated statements of operations. \n Derivative Assets \n In connection with a long-term supply agreement entered into during 2024, the Company was granted options to purchase 20,000,000 shares of common stock in a publicly traded company at an exercise price of $0.10 per share. The options expired on November 22, 2026. The Company accounted for the options as a derivative asset at fair value with changes recognized in earnings, within changes in fair value of the derivative asset in the consolidated statements of operations. \n During the three and six months ended July 3, 2026, the Company fully exercised the option to purchase the 20,000,000 shares, paying a cash exercise price of $1.4 million for the 20,000,000 shares. Immediately prior to the exercise date, the derivative asset was remeasured to its intrinsic value of $2.2 million, resulting in a loss of $0.9 million, included within change in fair value of derivative asset in the consolidated statement of operations for the three and six months ended July 3, 2026. The intrinsic value of $2.2 million as of the exercise date, plus the cash paid upon exercise, was reclassified to marketable securities. \n The shares are subsequently accounted for as an equity security under ASC 321 , Investments - Equity Securities , at fair value with changes recognized in earnings. From the exercise date through July 3, 2026, the Company recognized an \n 15 Table of Contents \n additional $0.5 million unrealized gain to adjust the shares to fair value, resulting in a net loss recognized in for the three months ended July 3, 2026. The total loss recognized within the three and six months ended July 3, 2026 was $0.4 million and $1.1 million, respectively, which has been recognized within (gain) loss on remeasurement of the fair value of marketable securities in the consolidated statements of operations. The change in fair value of marketable securities during the three and six months ended June 30, 2025 was immaterial. As of July 3, 2026, the 20,000,000 shares, together with the gain on the Company's pre-existing holding in the same company, were included within marketable securities in the consolidated balance sheet at a combined fair value of $4.9 million. As of December 31, 2025, the value of these options were immaterial. \n Fair Value Measurement \n Financial instruments measured and reported at fair value are classified and disclosed in one of the following levels within the fair value hierarchy: \n Level 1 - quoted prices are available in active markets for identical financial instruments as of the measurement date. The Company does not adjust the quoted price for these financial instruments. \n Level 2 - quoted prices are available in markets that are not active or model inputs are based on inputs that are either directly or indirectly observable as of the measurement date. \n Level 3 - pricing inputs are unobservable and include instances where there is minimal, if any, market activity for the financial instrument. These inputs require significant judgment or estimation by management or third parties when determining fair value and generally represent anything that does not meet the criteria of Levels 1 and 2. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these financial instruments existed. \n Under normal market conditions, the fair value of a financial instrument is the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). Additionally, there is a hierarchical framework that prioritizes and ranks the level of market price observability used in measuring financial instruments at fair value. Market price observability is impacted by a number of factors, including the type of financial instrument and the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. \n For certain financial instruments, including accounts receivable, unbilled receivables, accounts payable, accrued expenses, deferred consideration, deferred revenue, deferred government grants, current portion of long-term debt, and other current liabilities, the carrying amounts approximate their fair values as of July 3, 2026 and December 31, 2025. These assessments reflect the short-term nature of the instruments and market conditions as of the reporting date. \n The Company's equity marketable securities are classified as a Level 1 fair value measurement, as its valuation is based on quoted prices in active markets for identical instruments. \n The fair value of the Company's interest rate collars is determined by using widely accepted valuation techniques based on their maturity and observable market-based inputs, including interest rate curves. This measurement is considered a Level 2 measurement. \n The fair value of the Company's derivative asset was recorded at fair value and was remeasured at each reporting date, using the Black Scholes Option Pricing Model based on (i) the contractual terms of the options, including exercise price and expected term, and (ii) other observable inputs, including the fair value of the underlying publicly traded common stock, the risk-free interest rate, volatility based on the historical stock price of the publicly traded common stock, and expected dividends. The measurement was considered a Level 2 measurement. \n Contingent consideration related to acquisitions is recorded at fair value as a liability on the acquisition date and is remeasured at each reporting date, based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions management believes would be made by a market participant. Management assesses these estimates on an ongoing basis as additional data impacting the assumptions becomes available. Changes in the fair value of contingent consideration related to updated assumptions and estimates are recognized within other (income) expense, net in the consolidated statements of operations. \n 16 Table of Contents \n Fair value of the Company's long-term debt is based on quoted market prices or on rates available for debt with similar terms and maturities. Based upon interest rates currently available to the Company, the carrying value of the Company's long-term debt approximates fair value. \n Certain assets and liabilities are recognized or disclosed at fair value on a non-recurring basis, such as property, plant, and equipment, ROU assets, goodwill, and intangible assets. These assets are required to be assessed for impairment when events or circumstances indicated that the carrying value may not be recoverable, and at least annually for goodwill and identified-lived intangible assets. If an impairment charge is required, the asset is adjusted to fair value using Level 3 inputs. \n The following table summarizes the classification between the three levels of the fair value hierarchy of the Company's financial instruments measured/disclosed at fair value on a recurring basis as of July 3, 2026 (in thousands): Financial Statement Classification \n Level 1 \n Level 2 \n Level 3 \n Total Fair Value \n Assets: \n Equity securities \n Marketable securities \n $ \n 4,923 \n $ \n - \n $ \n - \n $ \n 4,923 \n Total Assets \n $ \n 4,923 \n $ \n - \n $ \n - \n $ \n 4,923 \n Liabilities: \n Interest rate collar derivatives \n Other liabilities \n $ \n - \n $ \n 11 \n $ \n - \n $ \n 11 \n Contingent consideration \n Other liabilities \n - \n - \n 239 \n 239 \n Total Liabilities \n $ \n - \n $ \n 11 \n $ \n 239 \n $ \n 250 The following table summarizes the classification between the three levels of the fair value hierarchy of the Company's financial instruments measured/disclosed at fair value on a recurring basis as of December 31, 2025 (in thousands): Financial Statement Classification \n Level 1 \n Level 2 \n Level 3 \n Total Fair Value \n Assets: \n Equity securities \n Marketable securities \n $ \n 202 \n $ \n - \n $ \n - \n $ \n 202 \n Total Assets \n $ \n 202 \n $ \n - \n $ \n - \n $ \n 202 \n Liabilities: \n Interest rate collar derivatives \n Other liabilities \n $ \n - \n $ \n 66 \n $ \n - \n $ \n 66 \n Contingent consideration \n Other liabilities \n - \n - \n 288 \n 288 \n Total Liabilities \n $ \n - \n $ \n 66 \n $ \n 288 \n $ \n 354 There were no changes in valuation techniques, nor were there any transfers among the fair value hierarchy levels during the six months ended July 3, 2026 and June 30, 2025. \n Discontinued Operations \n The Company categorizes the assets and liabilities of a disposal group, or business component, as discontinued operations once management commits to a plan to sell, the business segment is available for immediate sale, management has initiated a plan to sell at a price that is reasonable in relation to its fair value, management anticipates the sale will occur within one year, and it is unlikely that significant changes will be made to the plan to sell. For disposals other than by sale, such as abandonment or distribution, the results of operations of a business would not be recorded as a discontinued operation until the period in which the business is actually abandoned or distributed. The Company classifies such disposal group or business component as discontinued operations, if the divested disposal group or business represents a strategic shift that has (or will have) a major effect on an entity's operations and financial results. In addition, the disposal group or business component must be comprised of operations and cash flows that are clearly distinguished from the rest of the entity. The results of discontinued operations are aggregated and presented separately in the consolidated balance sheets, consolidated statements of operations, and consolidated statements of cash flows. Unless otherwise noted, the disclosures in these \n 17 Table of Contents \n footnotes relate solely to continuing operations. Information regarding discontinued operations, including results of operations, assets, and liabilities held for sale, is presented separately in Note 5 - Discontinued Operations . \n Income Taxes \n Prior to the Reorganization, the Company was an S-corporation and the Company's income and losses were passed through to its stockholders and reported on their individual tax returns. Following the Reorganization, the Company is a C-corporation that is subject to corporate income taxes. The Company included certain pro forma information related to the Reorganization within Note 16 - Net (Loss) Income Per Share. \n The Company accounts for income taxes using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. \n The Company accounts for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors, including, but not limited to, changes in the law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company does not have any uncertain tax positions that are more likely than not of not being recognized for any periods presented. \n Interest and penalty charges, if any, related to income taxes would be classified as a component of the income tax provision within the consolidated statement of operations. \n Stock-based Compensation \n The Company issues certain stock-based awards to employees in the form of restricted stock, settled in Common Stock of the Company, to employees as compensation for services rendered. The Company recognizes the stock-based compensation expense related to these stock-based awards within the consolidated financial statements based on their respective grant date fair values. For stock-based awards that include a service-based vesting condition, the Company recognizes the expense ratably over the requisite service period, which ranges from one to three years, subject to acceleration upon the occurrence of a qualifying liquidity event for certain awards. For stock-based awards that include a performance-based vesting condition, the Company recognizes the expense when it is probable that the performance-based condition will be satisfied and the award has satisfied other vesting conditions, if any. \n Because there has been no public market for the Company's equity prior to the initial public offering and in accordance with the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately- Held-Company Equity Securities Issued as Compensation , the Company has determined the fair value of the stock-based awards at the time of grant by considering a number of objective and subjective factors, including valuations performed by an independent third-party valuation specialist, comparable companies, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook. \n Net (Loss) Income Per Share \n Prior to the Company's IPO and the related reclassification described in Note 1 - Business and Organization, the Company had two classes of common stock, Class A common stock and Class B common stock, the rights of which - including liquidation and dividend rights and sharing of income - were identical, other than voting rights. Net (loss) income per share for periods prior to the IPO was computed using the two-class method required for multiple classes of common stock and participating securities. Because the liquidation and dividend rights and sharing of income of Class A common stock and Class B common stock were identical, undistributed earnings were allocated between the two classes on a proportionate basis, and the resulting net (loss) income per share was the same for Class A common stock and Class B common stock, individually and combined. \n In connection with the IPO, the Company's outstanding Class A common stock and Class B common stock were reclassified into a single class of common stock (see Note 1 - Business and Organization and Note 13 - Common Stock). Following the IPO, the Company has a single class of common stock outstanding and does not have any other participating securities, as its outstanding restricted stock awards, restricted stock units, and stock appreciation rights do not carry non-forfeitable dividend rights. Accordingly, net (loss) income per share for periods following the IPO is computed under the \n 18 Table of Contents \n single-class method described below, without allocation of undistributed earnings to a second class of common stock or to other participating securities. \n Basic net (loss) income per share is computed by dividing net income by the weighted average number of shares outstanding during the period without consideration of potentially dilutive common shares. Diluted net (loss) income per share reflects the potential dilution that could occur if securities or other contracts to issue shares of the Company's common stock were exercised or converted into common stock, or resulted in the issuance of common stock that then shared in the earnings of the Company, in each case using the treasury stock method, unless inclusion of such shares would be anti-dilutive \n Commitments and Contingencies \n The Company is subject to various commitments and contingencies arising in the normal course of business, including but not limited to legal and contractual matters. Liabilities are recorded when it is probable that a loss has been incurred, and the amount can be reasonably estimated. Matters that do not meet these criteria are disclosed if the likelihood of loss is reasonably possible and the potential impact could be material. The Company also discloses significant contractual obligations, including leases and purchase commitments, with information regarding their nature and timing of future cash flows. Management continuously evaluates these matters and updates the financial statements as appropriate. \n Risks and Uncertainties \n The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates and would impact future results of operations and cash flows. \n The Company's business, industry and the economy are influenced by a number of general macroeconomic factors, including, but not limited to, inflationary pressures impacting the Company's supply chain, reduced demand for the Company's products related to unfavorable macroeconomic conditions triggered by developments beyond the Company's control, including geopolitical dynamics and other events that trigger economic volatility. The Company actively monitors the impacts of the evolving macroeconomic and geopolitical landscape, including rapidly evolving tariff and global trade policies, on all aspects of its business. Sustained macroeconomic challenges could adversely impact the Company's operations. \n Several of the Company's government contracts are being funded incrementally, and as such, are subject to future authorization, appropriation, and availability of government funding. The Company has a history of successfully obtaining financing under incrementally funded contracts with the United States government and it expects to continue to obtain additional funding in the year ending January 1, 2027 and beyond as incremental funding is authorized and appropriated by the government. \n 3. RECENTLY ADOPTED AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS \n From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. The Company is considered to be an \"emerging growth company\" as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the \"Jobs Act\"). The Jobs Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to avail itself of this extended transition period and, as a result, the Company will not be required to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. \n Recently Adopted Accounting Pronouncements \n In July 2025, the FASB issued Accounting Standards Update (\"ASU\") 2025-05, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses for Accounts Receivable and Contract Assets (\"ASU 2025-05\") to address challenges encountered when applying the guidance in Topic 326, Financial Instruments-Credit Losses, to current accounts receivable and current contract assets arising from transactions accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2025-05 is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. The Company adopted this new accounting standard effective January 1, 2026 and the adoption did not have a material impact on its consolidated financial statements. \n 19 Table of Contents \n Recently Issued Accounting Pronouncements \n In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (\"ASU 2024-03\"), which requires disaggregated disclosure of income statement expenses. ASU 2024-03 does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for public business entities for annual periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements. \n In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities (\"ASU 2025-10\"), which provides guidance on the recognition, measurement, presentation, and disclosure of government grants received by for-profit entities. The ASU defines government grants as transfers of monetary or nonmonetary assets from a government, excluding exchange transactions, and clarifies scope exclusions such as tax credits, below-market loans, and nonfinancial asset transactions. Under the guidance, grants related to asset acquisition are generally recognized as a reduction of the asset's cost, while grants related to income are recognized in earnings once conditions are met, with appropriate classification in the statement of cash flows. Entities are required to disclose the nature of grants, significant terms and conditions, accounting policies adopted, and amounts recognized in the financial statements. ASU 2025-10 is effective for annual periods beginning after December 15, 2028, including interim periods, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements. \n In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (\"ASU 2025-11\"), which clarifies the applicability of interim reporting guidance, provides a comprehensive listing of interim disclosure requirements, and establishes a disclosure principle requiring entities to disclose events and changes occurring since the end of the most recent annual reporting period that have a material impact on the entity. The guidance is effective for interim reporting periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this standards on its consolidated financial statements. \n 4. ACQUISITIONS \n On November 14, 2025, the Company acquired 100% of the voting interests in Symphony Microwave Technologies, LLC (\"Symphony\"), a United States based company focused on the design and production of high-power microwave and RF components and subsystems, in exchange for total consideration of approximately $0.8 million. Total consideration consisted of (i) cash of approximately $0.2 million, (ii) the fair value of common stock issued of approximately $0.1 million, and (iii) the fair value of contingent consideration of approximately $0.3 million and (iv) the fair value of deferred consideration of approximately $0.2 million. \n The acquisition has been accounted for as a business combination. The Company allocated the purchase price to the assets acquired and liabilities assumed at their estimated fair values as of the acquisition date. The excess of the purchase price paid by the Company over the estimated fair value of net assets acquired has been recorded as goodwill. \n 20 Table of Contents \n The following table summarizes the allocation of the purchase price based on the estimated fair values of the assets acquired and liabilities assumed in connection with the acquisition of Symphony (in thousands): Amount \n Cash \n $ \n 1 \n Accounts receivable \n 358 \n Inventories \n 221 \n Customer relationships \n 335 \n Accounts payable and accrued expenses \n (481) \n Current portion of long-term debt \n (65) \n Long-term debt, net of current portion \n (26) \n Total identifiable net assets acquired \n 343 \n Goodwill \n 504 \n Total net assets acquired \n $ \n 847 Transaction-related costs incurred related to the acquisition were immaterial and were expensed as incurred in general and administrative within the consolidated statement of operations. \n The fair value of contingent consideration included in consideration transferred was $0.3 million, which is related to an earnout arrangement with the sellers of Symphony, as estimated by a third-party valuation specialist. The contingent consideration is payable in quarterly installments through the third anniversary of the acquisition date based on the post-acquisition sales to a customer of Symphony and does not include any continuing employment conditions. There is no cap on the amount payable under the earnout. The fair value of the instrument was based on the discounted cash flows of expected future payments to this customer based on forecasted revenue during the earnout period. The Company repaid less than $0.1 million of the contingent consideration for the three and six months ended July 3, 2026, which was included within payments of contingent consideration in the consolidated statements of cash flows. During the three and six months ended July 3, 2026, the change in fair value of contingent consideration was not material. \n The deferred consideration of $0.2 million accrues interest monthly at an annual rate of 3.75% and is payable to the sellers within eighteen months from the acquisition date, which was included with other liabilities within the consolidated balance sheets as of July 3, 2026 and December 31, 2025. Due to the short maturity of the deferred consideration, carrying value approximates fair value. During the three and six months ended July 3, 2026, interest expense related to deferred consideration was not material. The Company repaid approximately $0.0 million and $0.1 million of the deferred consideration during the three and six months ended July 3, 2026, respectively, which was included within payments of deferred consideration in the consolidated statements of cash flows. \n The Company recognized customer-related intangible assets of approximately $0.3 million, which primarily consisted of contractual and non-contractual relationships with customers. The valuation method used to determine the estimated fair value of the intangible asset was based on the multi-period excess earnings approach. The customer relationship was assigned a useful life of ten years based on historical and forecasted customer attrition. \n Goodwill resulting from the acquisition is attributable to the value of the acquired workforce and expected synergies. Goodwill resulting from the acquisition was assigned to the Company's EMP segment. The goodwill recognized is not deductible for tax purposes. \n 5. DISCONTINUED OPERATIONS \n On October 1, 2025, the Company's ownership interest in Poly Labs was distributed pro rata to the individual stockholders of the Company to focus financial and managerial efforts on the CMC and EMP divisions. The Company concluded that Poly Labs met the criteria to be classified as discontinued operations as of December 31, 2025, as the divestiture represented a strategic shift, had a major impact on the Company's consolidated results and the Company disposed of Poly Labs during the period. The results of Poly Labs have been classified as discontinued operations in the consolidated financial statements, and the results for all periods presented have been recast to exclude Poly Labs from continuing operations. \n 21 Table of Contents \n Activity related to Poly Labs for the three and six months ended June 30, 2025 was as follows (in thousands): Three Months \n Ended June 30, \n 2025 \n Six Months \n Ended June 30, \n 2025 \n Revenue \n $ \n 1,444 \n $ \n 2,985 \n Cost of goods sold \n 1,785 \n 3,535 \n Gross loss \n (341) \n (550) \n Operating expenses: \n General and administrative \n 393 \n 794 \n Research and development \n 12 \n 26 \n Sales and marketing \n 23 \n 47 \n Total operating expenses \n 428 \n 867 \n O...

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