Risk Factors and Forward-Looking Statements



In addition to historical information, this Quarterly Report on Form 10-Q for
the period ended March 31, 2022 (this "Report"), including this management's
discussion and analysis ("MD&A"), contains statements that are considered
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, as amended. These statements do not convey
historical information but relate to predicted or potential future events and
financial results, such as statements of our plans, strategies and intentions,
or our future performance or goals that are based upon management's current
expectations. Our forward-looking statements can often be identified by the use
of forward-looking terminology such as "believes," "expects," "intends," "may,"
"could," "will," "should," "plans," "projects," "forecasts," "seeks,"
"anticipates," "goal," "objective," "target," "estimate," "future," "outlook,"
"vision," or variations of such words or similar terminology. Investors and
prospective investors are cautioned that such forward-looking statements are
only projections based on current estimations. These statements involve risks
and uncertainties and are based upon various assumptions. Such risks and
uncertainties include, but are not limited to:



? our ability to execute our 5-point strategy;

? our ability to increase our presence in life sciences, security, industrial

and international markets;

? the possibility of future acquisitions or divestitures and the success

the integration of any acquired operations;

? the success of our strategy of diversifying our activities by penetrating markets

outside of the semiconductor and automated test equipment (“ATE”) markets,

collectively the “semi-market”;

? indications of a change in market cycles in the semi-market, or other

the markets we serve;

? semi-finished products market developments and trends, including changes in demand

for semiconductors;

? our ability to convert backlog into sales and ship products in a timely manner

way;

? the loss of one or more of our largest customers, or a reduction in orders

by a major client;

? the availability of materials used to manufacture our products;

? the impact of current global supply chain constraints or other disruptions

in our supply chain caused by external factors, including the ongoing war in

Ukraine and COVID-19;

? the impact of inflation on our business and financial condition;

? the impact of COVID-19 on our business, liquidity, financial condition and

    results of operations;
  ? the sufficiency of cash balances, lines of credit and net cash from
    operations;
  ? stock price fluctuations;

? the ability to borrow funds or raise capital to finance potential acquisitions

or for working capital;

? changes in the pace and timing of capital expenditures by our customers;

? effects of exchange rate fluctuations;

? the progress of product development programs;

? the intended market for our products;

? the availability and retention of key personnel or our ability to hire

staff at planned costs;

? general economic conditions both domestically and internationally, and

? other risk factors included in part I, point 1A – “Risk factors” of our 2021

    Form 10-K.




                                      -24-
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These risks and uncertainties, among others, could cause our actual future
results to differ materially from those described in our forward-looking
statements or from our prior results. Any forward-looking statement made by us
in this Report is based only on information currently available to us and speaks
to circumstances only as of the date on which it is made. We are not obligated
to update these forward-looking statements, even though our situation may change
in the future.



Overview

This MD&A should be read in conjunction with the accompanying consolidated financial statements. In addition, please refer to the discussion of our business and markets contained in Part 1, Item 1 of our 2021 Form 10-K.



We are a global supplier of innovative test and process solutions for use in
manufacturing and testing across a wide range of markets including automotive,
defense/aerospace, industrial, life sciences, security and semiconductor. During
the year ended December 31, 2021, we managed our business as two operating
segments which were also our reportable segments and reporting units: Thermal
Products ("Thermal") and Electromechanical Solutions ("EMS"). Effective January
1, 2022, we reorganized our operating segments to better align with our plan to
manage and report our business going forward. This change in our operating and
reporting structure reflects the evolution of our business, particularly as a
result of the broadening of our product portfolio through the acquisitions we
completed in the fourth quarter of 2021, which are discussed more fully in Note
3. Accordingly, for 2022, we have three reportable segments which are also our
reporting units: Electronic Test (which includes our semiconductor test
equipment, flying probe and in-circuit testers), Environmental Technologies
(which includes our thermal test, process and storage products) and Process
Technologies (which includes our induction heating and video imaging products).
Prior period information has been reclassified to be comparable to the current
period's presentation.



All of our operating segments have multiple products that we design, manufacture
and market to our customers. Due to a number of factors, our products have
varying levels of gross margin. These factors include, for example, the amount
of engineering time required to develop the product, the market or customer to
which we sell the product and the level of competing products available from
other suppliers. The needs of our customers ultimately determine the products
that we sell in a given time period. Therefore, the mix of products sold in a
given period can change significantly when compared against the prior period. As
a result, our consolidated gross margin may be significantly impacted by a
change in the mix of products sold in a particular period.



Markets



As discussed further in Part 1, Item 1 "Markets" of our 2021 Form 10-K, we are
focused on specific target markets which include automotive, defense/aerospace,
industrial, life sciences, security as well as both the front-end and back-end
of the semiconductor manufacturing industry ("semi" or "semi market"). The semi
market, which includes both the broader semiconductor market, as well as the
more specialized ATE and wafer processing sectors within the broader
semiconductor market, has historically been the largest single market in which
we operate. The semi market is characterized by rapid technological change,
competitive pricing pressures and cyclical market patterns and is subject to
periods of significant expansion or contraction in demand. Our intention is to
continue diversifying our markets, our product offerings within the markets we
serve and our customer base across all of our markets with the goal of reducing
our dependence on any one market, product or customer. In particular, we are
seeking to reduce the impact of volatility in the semi market on our results of
operations.



The portion of our business that is derived from the semi market is
substantially dependent upon the demand for ATE by semiconductor manufacturers
and companies that specialize in the testing of integrated circuits ("ICs") and,
for our induction heating products, the demand for wafer processing equipment.
Demand for ATE or wafer processing equipment is primarily driven by
semiconductor manufacturers that are opening new, or expanding existing,
semiconductor fabrication facilities or upgrading equipment, which in turn is
dependent upon the current and anticipated market demand for ICs and products
incorporating ICs. Such market demand can be the result of market expansion,
development of new technologies or redesigned products to incorporate new
features, or the replacement of aging equipment.



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



                                      -25-
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While a significant portion of our orders and revenue are derived from the semi
market, and our operating results generally follow the overall trend in the semi
market, in any given period we may experience anomalies that cause the trend in
our revenue from the semi market to deviate from the overall trend in the
market. We believe that these anomalies may be driven by a variety of factors
within the semi market, including, for example, changing product requirements,
longer periods between new product offerings by OEMs and changes in customer
buying patterns. In addition, in recent periods, we have seen instances when
demand within the semi market is not consistent for each of our operating
segments or for any given product within a particular operating segment. This
inconsistency in demand can be driven by a number of factors but, in most cases,
we have found that the primary reason is unique customer-specific changes in
demand for certain products driven by the needs of their customers or markets
served. Recently this has become more pronounced for our sales into the wafer
processing sector within the broader semiconductor market due to the limited
market penetration we have into this sector and the variability of orders we
have experienced from the few customers we support. These shifts in market
practices and customer-specific needs have had, and may continue to have,
varying levels of impact on our operating results and are difficult to quantify
or predict from period to period. Management has taken, and will continue to
take, such actions it deems appropriate to adjust our strategies, products and
operations to counter such shifts in market practices as they become evident.



Acquisitions



A key element to our strategy for growth is through acquisitions. As discussed
more fully in Note 3 to our consolidated financial statements in this Report,
during 2021, we completed three acquisitions that expanded our technology
offerings, diversified our markets and customers and expanded our reach into
Europe.



On October 6, 2021, we acquired substantially all of the assets of Z-Sciences
(now North Sciences), a developer of ultra-cold storage solutions for the life
sciences cold chain market. This small, tuck-in transaction enhances our
technology, adds new talent, and provides a low-cost entry into this fast
growing, fragmented market. This business is included in our Environmental
Technologies segment.



On October 28, 2021, we acquired substantially all of the assets of Videology, a
global designer, developer and manufacturer of OEM digital streaming and image
capturing solutions. The acquisition expanded our process technology offerings,
diversified our reach into key target markets and broadened our customer base.
This business is included in our Process Technologies segment.



On December 21, 2021, we acquired Acculogic, a global manufacturer of
robotics-based electronic production test equipment and application support
services. The acquisition expanded our global reach and enhanced our product
portfolio with leading technologies and automation services. This business is
included in our Electronic Test segment.



Orders and backlog

The following table shows, for the periods indicated, the breakdown of orders received by operating segment and by market (in thousands).



                                                                              Three
                             Three                                            Months
                         Months Ended                                         Ended
                           March 31,                  Change               December 31,             Change
                       2022         2021          $            %               2021             $            %
Orders:
Electronic Test      $  9,297     $ 10,484     $ (1,187 )        (11 )%   $        5,324     $  3,973           75 %
Environmental
Technologies            6,914        5,644        1,270           23 %             6,468          446            7 %
Process
Technologies            8,852        9,102         (250 )         (3 )%           18,667       (9,815 )        (53 )%
                     $ 25,063     $ 25,230     $   (167 )         (1 )%   $       30,459     $ (5,396 )        (18 )%


Semi                 $ 12,382     $ 17,185     $ (4,803 )        (28 )%   $       21,386     $ (9,004 )        (42 )%
Industrial              3,222        2,526          696           28 %             2,504          718           29 %
Auto/EV                 2,619        1,168        1,451          124 %             1,413        1,206           85 %
Life Sciences           1,216          952          264           28 %               654          562           86 %
Defense/Aerospace       1,851        1,110          741           67 %               862          989          115 %
Security                  153            -          153          n/a               1,620       (1,467 )        (91 )%
Other                   3,620        2,289        1,331           58 %             2,020        1,600           79 %
                     $ 25,063     $ 25,230     $   (167 )         (1 )%   $       30,459     $ (5,396 )        (18 )%




                                      -26-
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Total consolidated orders for the three months ended March 31, 2022 were $25.1
million compared to $25.2 million for the same period in 2021 and $30.5 million
for the three months ended December 31, 2021. Orders from customers in semi for
the three months ended March 31, 2022 declined 28% compared to the same period
in 2021 and 42% compared to the three months ended December 31, 2021. During the
first quarter of 2021, we experienced exceptionally strong demand from our
back-end semi customers as the market was in a period of significant expansion.
Demand from these customers in the first quarter of 2021 has moderated, which we
believe reflects the typical purchasing cycle in this market as customers
complete the installation and set-up of equipment purchased throughout 2021. In
addition, orders in the fourth quarter of 2021 included a $10.0 million order
for our front-end semi solutions which we did not expect to repeat in the first
quarter of 2022. This order will ship over the next several quarters.

Orders for the three months ended March 31, 2022 as compared to both the same
period in 2021 and the three months ended December 31, 2021 reflected strong
demand from the automotive market, in particular for electric vehicle ("EV")
applications utilizing our induction heating technology and our newly acquired
battery test solutions. Orders increased in life sciences as well, driven by
demand for a variety of our technology solutions including digital imaging and
induction heating. Demand from the defense/aerospace market for environmental
technology solutions was also strong in the three months ended March 31, 2022.



At March 31, 2022, our backlog of unfilled orders for all products was
approximately $35.0 million compared with approximately $17.1 million at March
31, 2021 and $34.1 million at December 31, 2021. The amounts at March 31, 2022
and December 31, 2021 included approximately $7.6 million and $6.5 million,
respectively, from acquired businesses. The significant increase in our backlog
as compared to March 31, 2021 primarily reflects the aforementioned $10.0
million order received from one of our front-end semi market customers during
the fourth quarter of 2021 and the impact of the acquired businesses. Our
backlog includes customer orders which we have accepted, essentially all of
which we expect to deliver in 2022, subject to supply chain constraints. While
backlog is calculated on the basis of firm purchase orders, a customer may
cancel an order or accelerate or postpone currently scheduled delivery dates.
Our backlog may be affected by the tendency of customers to rely on short lead
times available from suppliers, including us, in periods of depressed demand. In
periods of increased demand, there is a tendency towards longer lead times that
has the effect of increasing backlog. As a result, our backlog at a particular
date is not necessarily indicative of sales for any future period.



Revenue

The following table presents, for the periods indicated, the breakdown of sales by operating segment and by market (in thousands).


                                                                           Three
                                                                          Months
                             Three                                         Ended
                         Months Ended                                    December
                           March 31,                  Change                31,               Change
                       2022         2021          $            %           2021           $            %
Revenue:
Electronic Test      $  8,778     $  8,501     $    277            3 %   $   6,851     $  1,927           28 %

Environment

Technologies            6,993        6,198          795           13 %       7,176         (183 )         (3 )%
Process
Technologies            8,310        4,857        3,453           71 %       8,331          (21 )          - %
                     $ 24,081     $ 19,556     $  4,525           23 %   $  22,358     $  1,723            8 %


Semi                 $ 13,390     $ 13,320     $     70            1 %   $  12,284     $  1,106            9 %
Industrial              2,799        1,427        1,372           96 %       2,172          627           29 %
Auto/EV                 2,756        1,327        1,429          108 %       2,697           59            2 %
Life Sciences             699          643           56            9 %         409          290           71 %
Defense/Aerospace       1,493        1,252          241           19 %       1,322          171           13 %
Security                  574            -          574          n/a           693         (119 )        (17 )%
Other                   2,370        1,587          783           49 %       2,781         (411 )        (15 )%
                     $ 24,081     $ 19,556     $  4,525           23 %   $  22,358     $  1,723            8 %




Total consolidated revenue for the three months ended March 31, 2022 was $24.1
million compared to $19.6 million for the same period in 2021 and $22.4 million
for the three months ended December 31, 2021. Revenue for the three months ended
March 31, 2022 included $4.0 million from the businesses we acquired during the
fourth quarter of 2021, as previously discussed. Acquired businesses accounted
for $1.5 million of revenue during the fourth quarter of 2021.



                                      -27-
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Organic growth in revenue for the three months ended March 31, 2022 was 3%
compared to the same period in 2021 and reflected demand from the automotive
market, in particular EVs, as well as industrial markets. The acquired
businesses contributed to growth in life sciences, security and other markets.
Revenue from the semi market was relatively unchanged compared to the same
period in 2021 as demand from front-end semi customers offset the decline in
sales to the back-end semi customers which were exceptionally strong in the same
period in 2021, as previously mentioned. Compared with the three months ended
December 31, 2021, revenue excluding acquired businesses declined approximately
4% largely reflecting logistics and supply chain constraints that did not allow
us to ship all of the orders we had planned to ship during the first quarter of
2022. The incremental increase from acquired businesses primarily reflects that
we owned these businesses for the full quarter while we only had revenue in the
fourth quarter of 2021 from the respective dates of acquisition through December
31, 2021.


War in Ukraine and constraints of the global supply chain



The ongoing war between Russia and Ukraine continues to contribute to global
inflationary pressures and the availability of certain raw materials produced in
that region, further exacerbating global supply chain challenges that emerged
after the onset of the COVID-19 pandemic as described below. As discussed in
Part 1, Item IA "Risk Factors" in our 2021 Form 10-K, Acculogic, which we
acquired in December 2021, purchases certain material from a key sole-source
supplier in Belarus, which is bordered by Russia to the east and northeast and
Ukraine to the south. We estimate that we currently have a six to nine month
supply of this material. Since February 2022, we have been working through the
process of qualifying an alternate supplier for this material. Although we
expect to have completed that qualification by the end of the second quarter of
2022, if we do not successfully identify and qualify an alternate vendor for
this material, our revenue and earnings could be adversely affected in future
periods.



In addition, while we were able to mitigate a significant portion of the supply
chain and logistics challenges that we encountered in the first quarter of 2022,
we have approximately $1.0 million of products that we were not able to ship
during the quarter because of such constraints. We expect to ship all of
such products during the second quarter of 2022. However, we expect to continue
to experience increased prices, lack of availability and logistics delays for
the foreseeable future. The actions we are taking to mitigate these risks
include qualifying new vendors as alternate sources in our supply chain,
increasing our inventory of raw materials and ordering further in advance of
when we expect to need materials than has been our practice in the past. We are
also increasing the prices that we charge our customers as a result of increased
raw material expenses, and we are working with our customers to find alternate
options for the shipment of products where they control aspects of the logistics
process. However, the situation is evolving and shifting rapidly at times, and
the success of our efforts to mitigate and address the impacts on our business
may not be successful. As a result, we could see increases in our costs or
reduced revenues which would impact the level of our earnings in future periods.



Please refer to Part 1, Item 1A of our 2021 Form 10-K for further discussion of
the risks associated with our business operations, including risks associated
with foreign operations.



COVID-19 Pandemic



With respect to the COVID-19 pandemic, we are following the guidance of the
Centers for Disease Control and Prevention and the local regulatory authorities
in regions outside the U.S. While in most cases we are no longer requiring
employees to wear masks indoors in our domestic locations, in certain of our
facilities, where we have experienced a recent increase in the number of
employees contracting the virus, we have re-instituted a mask requirement. We
are encouraging all employees to receive COVID-19 vaccinations and boosters, if
possible. We are continuing to conduct temperature screenings and encouraging
all employees to maintain social distancing when appropriate. We are also
continuing to allow employees to work remotely either part-time or full-time in
circumstances when possible. We are still assessing the impact of the recent
increase in cases in certain of our facilities and exploring alternatives to
address the lost production time. With regard to the recent shutdowns in China,
we are working with our customers to identify alternate plans for delivery of
our products to this region. If the spread of COVID-19 or its variants continues
to worsen, we may experience additional lost production time or further
interruption in our ability to ship our products to our customers. In addition,
if one or more of our significant customers or suppliers is impacted, or
significant additional governmental regulations and restrictions are imposed,
our business in the future could be negatively impacted. We continue to monitor
the situation closely and will adjust our operations as necessary to protect the
health and well-being of our employees. To the extent that further governmental
mandates or restrictions are implemented in the future, we currently expect to
be able to continue to operate our business in a manner similar to how we have
operated over the past year.



Results of Operations



The results of operations for all of our operating segments are generally
affected by the same factors described in the Overview section above. Separate
discussions and analyses for each segment would be repetitive. The discussion
and analysis that follows, therefore, is presented on a consolidated basis and
includes discussion of factors unique to each segment where significant to an
understanding of that segment.



                                      -28-
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Three months completed March 31, 2022 Compared to the three months ended March 31, 2021

Revenue. Revenue was $24.1 million for the three months ended March 31, 2022
compared to $19.6 million for the same period in 2021, an increase of $4.5
million, or 23%. We believe the increase in our revenue during the first quarter
of 2022 primarily reflects the factors previously discussed in the Overview
section.

Gross Margin. Our consolidated gross margin was 46% of revenue for the three
months ended March 31, 2022 as compared to 49% of revenue for the same period in
2021. The decrease in our gross margin primarily reflects a combination of an
increase in our component material costs as a percentage of revenue, reflecting
changes in product and customer mix, and an increase in our direct labor as a
percentage of revenue, reflecting an increase in the relative labor component of
our cost structure. This increase reflects both the impact of the acquired
businesses as well as increases in the average rates paid for labor as compared
to the same period in 2021. The increase in labor rates reflects both inflation
and merit increases given on April 1, 2021. To a lesser extent, there was also
an increase in our fixed operating costs as a percent of revenue, reflecting
both the impact of the acquired businesses as well as headcount investments in
our legacy business.

Selling Expense. Selling expense was $3.5 million for the three months ended
March 31, 2022 compared to $2.4 million for the same period in 2021 an increase
of $1.1 million, or 44%. The acquired businesses account for approximately
$721,000 of this increase. The remaining increase primarily reflects headcount
investments and increased travel across all our segments. These increases were
partially offset by a decrease in commission expense, reflecting changes in
customer mix.

Engineering and Product Development Expense. Engineering and product development
expense was $1.9 million for the three months ended March 31, 2022 compared to
$1.3 million for the same period in 2021 an increase of $602,000, or 46%. The
acquired businesses account for approximately $478,000 of this increase. The
remaining increase primarily reflects headcount investments and an increase in
supplies used in product development. These increases were partially offset by a
reduction in legal fees related to our intellectual property.



General and Administrative Expense. General and administrative expense was $4.8
million for the three months ended March 31, 2022 compared to $3.2 million for
the same period in 2021 an increase of $1.7 million, or 53%. The acquired
businesses account for approximately $1.3 million of this increase. The
remaining increase primarily reflects headcount investments as well as an
increase in professional fees paid to various third parties who assist us with
our strategic initiatives and regulatory compliance.



Restructuring and Other Charges. For the three months ended March 31, 2021, we
recorded $55,000 in restructuring and other charges related to the consolidation
of our EMS manufacturing operations. There were no similar charges in the three
months ended March 31, 2022.



Income Tax Expense. For the three months ended March 31, 2022, we recorded
income tax expense of $78,000 compared to income tax expense of $366,000 for the
same period in 2021. Our effective tax rate was 12% for the three months ended
March 31, 2022 compared to 14% for the same period in 2021. On a quarterly
basis, we record income tax expense or benefit based on the expected annualized
effective tax rate for the various taxing jurisdictions in which we operate our
businesses.


Cash and capital resources

As discussed more fully in the Overview, our business and results of operations
are substantially dependent upon the demand for ATE by semiconductor
manufacturers and companies that specialize in the testing of ICs. The cyclical
and volatile nature of demand for ATE makes estimates of future revenue, results
of operations and net cash flows difficult.



Our primary historical source of liquidity and capital resources has been cash
flow generated by our operations. In 2021, we also utilized our new credit
facility, which is discussed further in the Overview and below, to fund our
acquisitions. We manage our businesses to maximize operating cash flows as our
primary source of liquidity for our short-term cash requirements, as discussed
below. We use cash to fund growth in our operating assets, for new product
research and development, for acquisitions and for stock repurchases. We
currently anticipate that any additional long-term cash requirements related to
our strategy would be funded through a combination of our cash and cash
equivalents, our new credit facility or by issuing equity.



                                      -29-
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Credit Facility



As discussed in Note 11 to our consolidated financial statements in this Report,
on October 15, 2021, we entered into the October 2021 Agreement with M&T. The
October 2021 Agreement includes a $25 million Term Note and a $10 million
revolving credit facility and replaces our prior credit facility with M&T. The
October 2021 Agreement has a five-year contract period that expires on October
15, 2026 and draws under the Term Note will be permissible for two years. The
principal balance of the revolving credit facility and the principal balance of
any amount drawn under the Term Note will accrue interest based on the Secured
Overnight Financing Rate or a bank-defined base rate plus an applicable margin,
depending on leverage. The October 2021 Agreement includes customary
affirmative, negative and financial covenants, including a maximum ratio of
consolidated funded debt to consolidated EBITDA and a fixed charge coverage
ratio. Our obligations under the October 2021 Agreement are secured by liens on
substantially all of our tangible and intangible assets.

On October 28, 2021, we drew $12 million under the Term Note to finance the
acquisition of Videology. We also entered into an interest rate swap agreement
with M&T as of this date which is designed to protect us against fluctuations in
interest rates during the five-year repayment and amortization period. As a
result, the annual interest rate we expect to pay for this draw under the Term
Note is fixed at approximately 3.2% based on current leverage.



On December 29, 2021, we drew $8.5 million under the Term Note to finance the
acquisition of Acculogic. We did not enter into an interest rate swap agreement
with M&T related to this draw. The annual interest rate we expect to pay for
this draw under the Term Note is variable. At December 31, 2021, it was
approximately 2.1% based on current leverage.



At March 31, 2022, there were no amounts borrowed under our revolving credit
facility. This facility has a total borrowing availability of $10.0 million. At
March 31, 2022 we had utilized $20.5 million of the availability under our Term
Note and we had $4.5 million remaining available under our Term Note.

Liquidity

Our cash and cash equivalents and working capital were as follows (in
thousands):



                             March 31,       December 31,
                               2022              2021
Cash and cash equivalents   $    17,211     $       21,195
Working capital             $    27,122     $       27,005




As of March 31, 2022, $3.5 million, or 20%, of our cash and cash equivalents was
held by our foreign subsidiaries. We currently expect our cash and cash
equivalents, in combination with the borrowing capacity available under our
revolving credit facility and the anticipated net cash to be provided by our
operations in the next twelve months to be sufficient to support our short-term
working capital requirements and other corporate requirements. Our revolving
credit facility is discussed in Note 11 to our consolidated financial
statements.



Our material short-term cash requirements include payments due under our various
lease agreements, recurring payroll and benefits obligations to our employees,
purchase commitments for materials that we use in the products we sell and
principal and interest payments on our debt. We estimate that our minimum
short-term working capital requirements currently range between $8.0 million and
$10.0 million. We also anticipate making investments in our business in the next
twelve months including hiring of additional staff, updates to our website and
other systems and investments related to our geographic and market expansion
efforts. We expect our current cash and cash equivalents, in combination with
the borrowing capacity available under our revolving credit facility and the
anticipated net cash to be provided by our operations to be sufficient to
support these additional investments as well as our current short-term cash
requirements.



Our current strategy for growth includes pursuing acquisition opportunities for
complementary businesses, technologies or products. As discussed further in the
Overview, on October 28, 2021, we acquired substantially all of the assets of
Videology and on December 21, 2021, we completed the acquisition of Acculogic.
We utilized $20.5 million under our new credit facility to finance these
acquisitions. As previously discussed, we currently anticipate that any
additional long-term cash requirements related to our strategy would be funded
through a combination of our cash and cash equivalents, the remaining
availability under our new credit facility or by issuing equity.



Cash Flows



Operating Activities. For the three months ended March 31, 2022, we recorded net
earnings of $577,000. Net cash used in operations during this period was $2.8
million. During the three months ended March 31, 2022, we had non-cash charges
of $1.3 million for depreciation and amortization which included $309,000 of
amortization related to our ROU assets. Our operating lease liabilities declined
$346,000 during this same period. During the three months ended March 31, 2022,
we also recorded $372,000 for amortization of deferred compensation expense
related to stock-based awards. Accounts receivable increased $832,000 during the
three months ended March 31, 2022, reflecting the increase in revenue in the
first quarter of 2022, while inventories and accounts payable increased $2.2
million and $1.6 million, respectively, also reflecting the increase in business
levels. Accrued wages and benefits decreased $1.2 million during the three
months ended March 31, 2022 reflecting the payment in March 2022 of profit-based
bonuses accrued in 2021 on our results for the 2021 year.



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Investing Activities. During the three months ended March 31, 2022, purchases of
property and equipment were $335,000, primarily reflecting leasehold
improvements to our facility in Mansfield, Massachusetts for the space that our
Videology subsidiary will be occupying in the second quarter of 2022. These
improvements were funded using our working capital. We have no significant
commitments for capital expenditures for the balance of 2022; however, depending
upon changes in market demand or manufacturing and sales strategies, we may make
such purchases or investments as we deem necessary and appropriate. These
additional cash requirements would be funded by our cash and cash equivalents,
anticipated net cash to be provided by operations and our revolving credit
facility.



Fundraising activities. In the three months ended March 31, 2022we made principal repayments on our term note totaling $883,000 and received $56,000 as a result of purchases of our shares made by our employees under the ESPP.

New or recently adopted accounting standards

See the notes to our consolidated financial statements in this report for information regarding the implementation and impact of new or recently adopted accounting standards.



Critical Accounting Estimates

The preparation of consolidated financial statements in conformity with GAAP
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue, expenses and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our estimates,
including those related to inventories, long-lived assets, goodwill,
identifiable intangibles, contingent consideration liabilities and deferred
income tax valuation allowances. We base our estimates on historical experience
and on appropriate and customary assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Some of these accounting estimates and
assumptions are particularly sensitive because of their significance to our
consolidated financial statements and because of the possibility that future
events affecting them may differ markedly from what had been assumed when the
financial statements were prepared. As of March 31, 2022, there have been no
significant changes to the accounting estimates that we have deemed critical.
Our critical accounting estimates are more fully described in our 2021 Form
10-K.



Off-balance sheet arrangements



There were no off-balance sheet arrangements during the three months ended March
31, 2022 that have or are reasonably likely to have, a current or future effect
on our financial condition, changes in financial condition, revenue or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to our interests.

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