inTEST CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

inTEST CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)

inTEST CORPORATION

CONSOLIDATED STATEMENTS OF ~~OPERATIONS~~COMPREHENSIVE EARNINGS (LOSS)

(In ~~thousands, except share and per share data)~~
thousands)
(Unaudited)

inTEST CORPORATION

CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE EARNINGS (LOSS)~~STOCKHOLDERS' EQUITY

(In ~~thousands)~~
thousands, except share data)
(Unaudited)

inTEST CORPORATION

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS' EQUITY~~CASH FLOWS

(In ~~thousands, except share data)~~
thousands)
(Unaudited)

~~inTEST CORPORATION~~
~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~(In thousands)~~
~~(Unaudited)~~

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except share and per share data)

~~(2)~~(2)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements include our accounts and those of our ~~wholly owned~~wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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 differ from those estimates. Certain of our accounts, including inventories, long-lived assets, goodwill, identifiable intangibles, ~~and~~ deferred tax assets and liabilities, including related valuation allowances, and performance-based stock compensation are particularly impacted by estimates.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position, results of operations, and changes in cash flows for the interim periods presented. Certain footnote information has been condensed or omitted from these consolidated financial statements. Therefore, these consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in our Form ~~10-K~~10-K for the year ended December 31, ~~2019 (“2019~~2020 (“2020 Form ~~10-K”~~10-K”) filed on March 23, ~~2020~~ 2021 with the Securities and Exchange Commission ~~("SEC"~~(the “SEC”).

Reclassification

Certain prior period amounts have been reclassified to be comparable with the current period's presentation.

Subsequent Events

We have made an assessment of our operations and determined that there were no material subsequent events requiring adjustment to, or disclosure in, our consolidated financial statements for the nine months ended September 30, ~~2020~~ 2021 other than those described in Note ~~1 under “COVID-19 Pandemic” and Note 3.~~15.

Business Combinations

Acquired businesses are accounted for using the purchase method of accounting, which requires that the purchase price be allocated to the net assets acquired at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Fair values of intangible assets are estimated by valuation models prepared by our management and ~~third-party~~third-party advisors. The assets purchased and liabilities assumed have been reflected in our consolidated balance sheets, and the results are included in the consolidated statements of operations and consolidated statements of cash flows from the date of acquisition. Any change in the fair value of acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, will be recognized in the consolidated statement of operations in the period of the estimated fair value change. Acquisition-related transaction costs, including legal and accounting fees and other external costs directly related to the acquisition, are recognized separately from the acquisition and expensed as incurred in general and administrative expense in the consolidated statements of operations.

Restructuring and Other Charges

In accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 420 (Exit or Disposal Cost Obligations), we recognize a liability for restructuring costs at fair value only when the liability is incurred. Workforce-related charges are accrued when it is determined that a liability has been incurred, which is generally after individuals have been notified of their termination dates and expected severance benefits. Depending on the timing of the termination dates, these charges may be recognized upon notification or ratably over the remaining required service period of the employees. Plans to consolidate excess facilities may result in lease termination fees and impairment charges related to our right-of-use (“ROU”) assets that are associated with the leases for these facilities. Other long-lived assets that may be impaired as a result of restructuring consist of property and equipment, goodwill and intangible assets. Asset impairment charges included in restructuring and other charges are based on an estimate of the amounts and timing of future cash flows related to the expected future remaining use and ultimate sale or disposal of the asset, and, in the case of our ROU assets, would include expected future sublease rental income, if applicable. These estimates are derived using the guidance in ASC Topic 842 (Leases), ASC Topic 360 (Property, Plant and Equipment) and ASC Topic 350 (Intangibles - Goodwill and Other).

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Goodwill, Intangible and Long-Lived Assets

We account for goodwill and intangible assets in accordance with ASC Topic ~~350.~~350 (Intangibles - Goodwill and Other). Finite-lived intangible assets are amortized over their estimated useful economic life and are carried at cost less accumulated amortization. Goodwill is assessed for impairment annually in the fourth quarter on a reporting unit basis, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. Goodwill is considered to be impaired if the fair value of a reporting unit is less than its carrying amount. As a part of the goodwill impairment assessment, we have the option to perform a qualitative assessment to determine whether it is ~~more-likely-than-not~~more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If, as a result of our qualitative assessment, we determine that it is ~~more-likely-than-not~~more-likely-than-not that the fair value of the reporting unit is greater than its carrying amount, a quantitative goodwill impairment test is not required. However, if, as a result of our qualitative assessment, we determine it is ~~more-likely-than-not~~more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, or, if we choose not to perform a qualitative assessment, we are required to perform a quantitative goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized.

The quantitative goodwill impairment test compares the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The goodwill impairment assessment is based upon the income approach, which estimates the fair value of our reporting units based upon a discounted cash flow approach. This fair value is then reconciled to our market capitalization at year end with an appropriate control premium. The determination of the fair value of our reporting units requires management to make significant estimates and assumptions, including the selection of control premiums, discount rates, terminal growth rates, forecasts of revenue and expense growth rates, income tax rates, changes in working capital, depreciation, amortization and capital expenditures. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit or the amount of the goodwill impairment charge.

Indefinite-lived intangible assets are assessed for impairment annually in the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset might be impaired. As a part of the impairment assessment, we have the option to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, as a result of our qualitative assessment, we determine that it is ~~more-likely-than-not~~more-likely-than-not that the fair value of the indefinite-lived intangible asset is less than its carrying amount, the quantitative impairment test is required; otherwise, no further testing is required. The quantitative impairment test consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Long-lived assets, which consist of finite-lived intangible assets, ~~and~~ property and equipment and ROU assets, are assessed for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the estimated undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value. The cash flow estimates used to determine the impairment, if any, contain management's best estimates using appropriate assumptions and projections at that time.

Revenue Recognition

We recognize revenue in accordance with the guidance in ASC Topic 606 (Revenue from Contracts with Customers). We recognize revenue for the sale of products or services when our performance obligations under the terms of a contract with a customer are satisfied and control of the product or service has been transferred to the customer. Generally, this occurs when we ship a product or perform a service. In certain cases, recognition of revenue is deferred until the product is received by the customer or at some other point in the future when we have determined that we have satisfied our performance obligations under the contract. Our contracts with customers may include a combination of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. In addition to the sale of products and services, we also lease certain of our equipment to customers under short-term lease agreements. We recognize revenue from equipment leases on a straight-line basis over the lease term.

Revenue is recorded in an amount that reflects the consideration we expect to receive in exchange for those products or services. We do not have any material variable consideration arrangements, or any material payment terms with our customers other than standard payment terms which generally range from net 30 to net 90 days. We generally do not provide a right of return to our customers. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to governmental authorities.

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Nature of Products and Services

We are a global supplier of ~~precision-engineered~~innovative test and process solutions for use in manufacturing and testing across a wide range of markets including automotive, defense/aerospace, ~~energy,~~ industrial, medical, semiconductor and ~~telecommunications.~~telecommunications. We sell thermal management products including ThermoStreams, ThermoChambers and process chillers, which we sell under our Temptronic, Sigma and Thermonics product lines, and ~~Ambrell’s~~Ambrell Corporation’s (“Ambrell”) precision induction heating systems, including EKOHEAT and EASYHEAT products. We sell semiconductor ATE interface solutions which include manipulators, docking hardware and electrical interface products. We provide post-warranty service ~~and support~~ for the equipment we sell. We sell semiconductor ATE interface solutions and certain thermal management products to the Semi Market. We also sell our thermal management products to various other markets including the automotive, defense/aerospace, ~~energy,~~ industrial, medical and telecommunications markets.

We lease certain of our equipment under short-term leasing agreements with original lease terms of six months or less. Our lease agreements do not contain purchase options.

Types of Contracts with Customers

Our contracts with customers are generally structured as individual purchase orders which specify the exact products or services being sold or equipment being leased along with the selling price, service fee or monthly lease amount for each individual item on the purchase order. Payment terms and any other customer-specific acceptance criteria are also specified on the purchase order. We generally do not have any customer-specific acceptance criteria, other than that the product performs within the agreed upon specifications. We test substantially all products manufactured as part of our quality assurance process to determine that they comply with specifications prior to shipment to a customer.

Contract Balances

We record accounts receivable at the time of invoicing. Accounts receivable, net of the allowance for doubtful accounts, is included in current assets on our balance sheet. To the extent that we do not recognize revenue at the same time as we invoice, we record a liability for deferred revenue. In certain instances, we also receive customer deposits in advance of invoicing and recording of accounts receivable. Deferred revenue and customer deposits are included in current liabilities on our consolidated balance sheets.

The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, if any, historical experience, and other currently available evidence.

Costs to Obtain a Contract with a Customer

The only costs we incur associated with obtaining contracts with customers are sales commissions that we pay to our internal sales personnel or ~~third-party~~third-party sales representatives. These costs are calculated based on set percentages of the selling price of each product or service sold. Commissions are considered earned by our internal sales personnel at the time we recognize revenue for a particular transaction. Commissions are considered earned by ~~third-party~~third-party sales representatives at the time that revenue is recognized for a particular transaction. We record commission expense in our consolidated statements of operations at the time the commission is earned. Commissions earned but not yet paid are included in current liabilities on our balance sheets.

Product Warranties

In connection with the sale of our products, we generally provide standard ~~one-~~one- or ~~two-year~~two-year product warranties which are detailed in our terms and conditions and communicated to our customers. Our standard warranties are not offered for sale separately from our products; therefore, there is not a separate performance obligation related to our standard warranties. We record estimated warranty expense for our standard warranties at the time of sale based upon historical claims experience. ~~In very limited cases, we~~We offer customers an option to separately purchase an extended warranty ~~for~~on certain ~~of our~~ products. In the case of extended warranties, we recognize revenue in the amount of the sale price for the extended warranty on a straight-line basis over the extended warranty period. We record costs incurred to provide service under an extended warranty at the time the service is provided. Warranty expense is included in selling expense in our consolidated statements of operations.

See Notes 5 and 1314 for further information about our revenue from contracts with customers.

Inventories

Inventories are valued at cost on a ~~first-in, first-out~~first-in, first-out basis, not in excess of market value. Cash flows from the sale of inventories are recorded in operating cash flows. On a quarterly basis, we review our inventories and record excess and obsolete inventory charges based upon our established objective excess and obsolete inventory criteria. ~~These~~Our criteria identify excess material ~~that has not been used in a work order during the prior twelve months and~~as the quantity of material on hand that is greater than the average annual usage of that material over the prior three years. Effective January 1, 2021, our criteria identify obsolete material as material that has not been used in a work order during the prior twenty-four months. Prior to January 1, 2021, these criteria identified obsolete material as material that had not been used in a work order during the prior twelve months. In certain cases, additional excess and obsolete inventory charges are recorded based upon current market conditions, anticipated product life cycles, new product introductions and expected future use of the inventory. The excess and obsolete inventory charges we record establish a new cost basis for the related inventories.

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Leases

We account for leases in accordance with ASC Topic 842 (Leases) which was effective for us as of January 1, 2019. Upon adoption of ASC Topic 842, we elected the package of practical expedients which included the grandfathering of the lease classification that had been made under prior guidance and, accordingly, we did not re-evaluate any of our leases for classification purposes in connection with the implementation of ASC Topic 842. All of our lease contracts are still being treated as operating leases. We do not currently have any lease contracts that meet the criteria to be categorized as finance leases. We did not elect the hindsight practical expedient and therefore did not reevaluate the lease terms that we used under prior guidance. The implementation of ASC Topic 842 had a significant impact on our consolidated balance sheet as a result of recording ROU assets and lease liabilities for all our multi-year leases. Under prior guidance, none of these leases had any related asset recorded on our balance sheets. The only related liability recorded on our balance sheets was the amount which represented the difference between the lease payments we had made and the straight-line rent expense we had recorded in our statements of operations. The implementation of ASC Topic 842 did not have a significant impact on our pattern of expense recognition for any of our multi-year leases.

We determine if an arrangement is a lease at inception. A lease contract is within scope if the contract has an identified asset (property, plant or equipment) and grants the lessee the right to control the use of the asset during the lease term. The identified asset may be either explicitly or implicitly specified in the contract. In addition, the supplier must not have any practical ability to substitute a different asset and would not economically benefit from doing so for the lease contract to be in scope. The lessee’s right to control the use of the asset during the term of the lease must include the ability to obtain substantially all the economic benefits from the use of the asset as well as decision-making authority over how the asset will be used. Leases are classified as either operating leases or finance leases based on the guidance in ASC Topic 842. Operating leases are included in operating lease ROU assets and operating lease liabilities in our consolidated balance sheets. Finance leases are included in property and equipment and finance lease liabilities. We do not currently have any finance leases. We do not have embedded leases nor do we have any initial direct costs related to our lease contracts.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. None of our leases provide an implicit rate; therefore, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease. We include these options in the determination of the amount of the ROU asset and lease liability when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Certain of our operating leases contain predetermined fixed escalations of minimum rentals and rent holidays during the original lease terms. Rent holidays are periods during which we have control of the leased facility but are not obligated to pay rent. For these leases, our ROU asset and lease liability are calculated including any rent holiday in the determination of the life of the lease.

We have lease agreements which contain both lease and non-lease components, which are generally accounted for separately. In addition to the monthly rental payments due, most of our leases for our offices and warehouse facilities include non-lease components representing our portion of the common area maintenance, property taxes and insurance charges incurred by the landlord for the facilities which we occupy. These amounts are not included in the calculation of the ROU assets and lease liabilities as they are based on actual charges incurred in the periods to which they apply.

Operating lease payments are included in cash outflows from operating activities on our consolidated statements of cash flows. Amortization of ROU assets is presented separately from the change in operating lease liabilities and is included in depreciation and amortization in our consolidated statements of cash flows.

We have made an accounting policy election not to apply the recognition requirements of ASC Topic 842 to short-term leases (leases with a term of one year or less at the commencement date of the lease). Lease expense for short-term lease payments is recognized on a straight-line basis over the lease term.

See Note 8 for further disclosures regarding our leases.

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Contingent Liability for Repayment of State and Local Grant Proceeds

In connection with leasing a new facility in Rochester, New York, which our subsidiary, Ambrell, occupied in May 2018, we entered into agreements with the city of Rochester and the state of New York under which we received grants totaling $463 to help offset a portion of the cost of the leasehold improvements we have made to this facility. In exchange for the funds we received under these agreements, we are required to create and maintain specified levels of employment in this location through various dates ending in 2023. If we fail to meet these employment targets, we may be required to repay a proportionate share of the proceeds. As of September 30, ~~2020, $423~~2021, $370 of the total proceeds received could still be required to be repaid if we do not meet the targets. We have recorded this amount as a contingent liability which is included in other liabilities on our balance sheet. Those portions of the proceeds which are no longer subject to repayment are reclassified to deferred grant proceeds and amortized to income on a straight-line basis over the remaining lease term for the Rochester facility. Deferred grant proceeds are included in other current liabilities and other liabilities on our balance sheet and totaled ~~$32~~$77 at September 30, ~~2020.~~2021.

As of December 31, ~~2019,~~ 2020, we were not in compliance with the employment targets as specified in the grant agreement with the city of Rochester. We applied for and received a waiver of this requirement for the year ended December 31, ~~2019. As of September 30, 2020, we are still not in compliance with these employment targets. We have~~2020. The waiver provided us until December 31, ~~2020~~ 2021 to come into compliance with the targets as outlined in the ~~waiver received for the year ended December 31, 2019. If~~ waiver. As of September 30, 2021, we ~~do not achieve~~were in compliance ~~we will need to apply for an additional waiver or we may be required to repay a proportionate share of the proceeds.~~

with those targets.

Stock-Based Compensation

We account for stock-based compensation in accordance with ASC Topic 718 (Compensation - Stock Compensation), which requires that employee share-based equity awards be accounted for under the fair value method and requires the use of an option pricing model for estimating fair value of stock options granted, which is then amortized to expense over the service periods. See further disclosures related to our stock-based compensation plan in Note 10.

Income Taxes

The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carryforwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.

Net Earnings (Loss) Per Common Share

Net earnings (loss) per common share - basic is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during each period. Net earnings (loss) per common share - diluted is computed by dividing net earnings (loss) by the weighted average number of common shares and common share equivalents outstanding during each period. Common share equivalents represent unvested shares of restricted stock and stock options and are calculated using the treasury stock method. Common share equivalents are excluded from the calculation if their effect is anti-dilutive.

The table below sets forth, for the periods indicated, a reconciliation of weighted average common shares outstanding - basic to weighted average common shares and common share equivalents outstanding - diluted and the average number of potentially dilutive securities that were excluded from the calculation of diluted earnings per share because their effect was anti-dilutive:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Weighted average common shares outstanding - basic
10,269,995 10,421,383 10,247,779 10,405,892
Potentially dilutive securities:

Unvested shares of restricted stock and employee stock options
17,567 8,153 - 17,229
Weighted average common shares and common share equivalents outstanding - diluted
10,287,562 10,429,536 10,247,779 10,423,121
Average number of potentially dilutive securities excluded from calculation
631,392 657,969 722,538 501,964

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Weighted average common shares outstanding - basic
10,496,188 10,269,995 10,422,851 10,247,779
Potentially dilutive securities:

Unvested shares of restricted stock and employee stock options
296,102 17,567 271,500 0
Weighted average common shares and common share equivalents outstanding - diluted
10,792,290 10,287,562 10,694,351 10,247,779
Average number of potentially dilutive securities excluded from calculation
237,545 631,392 283,894 722,538

Effect of Recently Issued Amendments to Authoritative Accounting Guidance

In June 2016, the Financial Accounting Standards Board (“FASB”) issued amendments to the guidance for accounting for credit losses. In November 2019, the FASB deferred the effective date of these amendments for certain companies, including smaller reporting companies. As a result of the deferral, the amendments are effective for us for reporting periods beginning after December 15, 2022. The amendments replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. The amendments require a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. We plan to adopt the amendments when they become effective for us on January 1, 2023. We ~~are~~do not currently ~~evaluating the impact~~expect that the adoption of these amendments will ~~have on our consolidated financial statements.~~
In December 2019, the FASB issued amendments to the accounting for income taxes, which add new guidance to simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC Topic 740 (Income Taxes) and changing the accounting for certain income tax transactions. The amendments are effective for us as of January 1, 2021. Early adoption is permitted. We plan to adopt the amendments when they become effective for us on January 1, 2021. We do not expect these amendments to have a material impact on our consolidated financial statements.
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~~(3)~~(3)
RESTRUCTURING AND OTHER CHARGES

EMS Segment Restructuring and Facility Consolidation

On As discussed in Note 3 to our consolidated financial statements in our 2020 Form 10-K, on September 21, 2020, we notified employees in our Fremont, California facility of a plan to consolidate all manufacturing for our EMS segment into our manufacturing ~~operation~~operations located in Mt. Laurel, New Jersey. ~~Currently, our interface products are manufactured in the Fremont facility, and our manipulator and docking hardware products are manufactured in the Mt. Laurel facility.~~ The consolidation of manufacturing operations ~~will result~~resulted in the closure of the Fremont facility and the termination of certain employees at that location. The consolidation is being undertaken to better serve customers through streamlined operations and reduce the fixed annual operating costs for the EMS segment. The consolidation is expected to be substantially completed during the fourth quarter of 2020. A small engineering and sales office will be maintained in northern California after the consolidation of manufacturing operations has been completed.
As a result of ~~this action,~~the consolidation, we ~~expect to incur cash~~incurred charges for severance and other ~~one-time~~one-time termination benefits, ~~ranging from $50 to $100. In addition, we expect to incur cash charges for~~ other associated costs, ~~related to the facility consolidation,~~ including moving ~~costs~~ and production start-up costs, ~~ranging from $300 to $400. Most of these costs are expected to be incurred during the fourth quarter of 2020. Costs incurred through September 30, 2020~~and charges related to ~~these actions were $14. The costs are included in general and administrative expense on our statement of operations. The cash payments are expected to be made during~~exiting the ~~fourth quarter of 2020 and the first quarter of 2021. In addition, we intend to try to sublease our~~ facility, ~~located in Fremont, California. When manufacturing operations cease in the Fremont facility we expect to record~~including an impairment charge related to the ROU asset for the lease of the Fremont facility. These charges are more fully discussed in Note 3 to our consolidated financial statements in our 2020 Form 10-K.
At the time of the consolidation of manufacturing operations, we intended to try to sublease the facility asin Fremont, but we do did not ~~currently~~ expect to sublet the facility for the full remaining term of the lease. On July 19, 2021, we executed a sublease for our facility in Fremont. The sublease commenced in August 2021 and ends November 30, 2025, which is the termination date of our lease for this facility. We ~~currently estimate~~entered into this sublease approximately 14 months earlier than we had estimated in December 2020. As a result, we will record approximately $350 of incremental sublease income above the ~~amount of this charge will range from $700 to $800. This~~level that we had estimated at the time that we recorded the impairment charge ~~is expected to~~in December 2020. This income will be recorded inratably over the ~~fourth quarter~~term of ~~2020~~the sublease and will be included in other income in our consolidated statements of operations.
During the nine months ended September 30, 2021, we incurred $183 of additional charges associated with finalizing the integration of the manufacturing operations. All of these charges were cash charges and are included in restructuring and other charges in our consolidated statement of operations. The integration of our EMS manufacturing operations took longer than originally anticipated, primarily as a ~~non-cash charge As~~result of the significant increase in our business activity in the firstnine months of 2021 as we delayed some final integration activities and instead allocated our resources to meet customer demand for shipments of our products during this time. We completed the integration of the EMS manufacturing operations in the third quarter of 2021.
Executive Management Changes
On June 10, 2021, our Board of Directors (the “Board”) accepted the retirement of Hugh T. Regan, Jr. from the positions of Chief Financial Officer, Treasurer, and Secretary (the “Retirement”). In connection with the Retirement, we entered into a Separation and Consulting Agreement (the “Separation and Consulting Agreement”) with Mr. Regan effective June 11, 2021 pursuant to which Mr. Regan agreed to provide consulting services for three months, subject to an extension of up to an additional three months at our option. We did not extend the consulting services beyond the original three months. The Separation and Consulting Agreement also provides that Mr. Regan was entitled to a severance benefit of $120. In connection with the Retirement, we also agreed that certain options issued to Mr. Regan in March 2020 to purchase shares of our common stock that remained unvested on the date of the Retirement would continue to vest after the Retirement and expire one year from their respective vesting dates.
On June 10, 2021, the Board approved, effective as of June 14, 2021 (the “Start Date”), the appointment of Duncan Gilmour to the position of Chief Financial Officer, Treasurer, and Secretary. Mr. Gilmour entered into a letter agreement (the “Letter Agreement”), dated June 10, 2021, subject to his appointment as our Chief Financial Officer, Treasurer, and Secretary, which appointments were approved on June 10, 2021 and are effective as of the Start Date.
Total costs incurred during the nine months ended September 30, 2021 related to these executive management changes were $370, which consisted of $159 for consulting and legal fees related to the transition, $120 for severance paid to our former Chief Financial Officer (“CFO”) and $91 of stock-based compensation expense, primarily as a result of the modification of the March 2020 option awards issued to our former CFO, as discussed above. The $120 of severance is included in restructuring and other charges in our consolidated statement of operations. The balance of the costs is included in general and administrative expense in our consolidated statement of operations.
2020 Restructuring Actions
During the nine months ended September 30, 2020, ~~the ROU asset~~we recorded cash charges totaling $207 for severance and other one-time termination benefits and other costs associated with restructuring activities. This amount consisted of $133 related to ~~this~~the resignation of our former Chief Executive Officer, $46 related to headcount reductions in our corporate office and at Ambrell, $14 related to the EMS facility ~~totaled $1,174.~~consolidation and $14 of other associated costs.

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Accrued Restructuring
The liability for accrued restructuring charges is included in other current liabilities on our consolidated balance sheet. Changes in the amount of the liability for accrued restructuring for the nine months ended September 30, ~~2020 are~~2021 is as follows:

~~Balance - January 1, 2020~~
$ -
~~Accruals for other associated costs~~
14
~~Cash payments~~
~~(14~~
)
~~Balance September 30, 2020~~
$ -
~~Executive Management Changes~~
On August 6, 2020, our Board of Directors accepted the resignation of James Pelrin as President and Chief Executive Officer (“CEO”) and as a director. In connection with his resignation, we entered into a Separation and Consulting Agreement (the “Separation Agreement”) with Mr. Pelrin dated August 6, 2020 pursuant to which Mr. Pelrin has agreed to provide consulting services for three months, subject to an extension of up to an additional three months at our option. The Separation Agreement also provides that Mr. Pelrin is entitled to severance and other benefits. The full text of the Separation Agreement is included as Exhibit 10.1 to our Current Report on Form 8-K (“8-K”) filed on August 11, 2020 with the SEC.
13
On August 6, 2020, our Board of Directors approved, effective as of August 24, 2020 (the “Start Date”), the appointment of Richard N. Grant, Jr. to the position of President and CEO and to fill the vacancy on our Board of Directors left by Mr. Pelrin’s resignation. We entered into a letter agreement with Mr. Grant, subject to his appointment as our President, CEO and a director, which appointments occurred on August 6, 2020 and became effective as of the Start Date. The full text of the letter agreement is included as Exhibit 10.2 to our 8-K filed on August 11, 2020 with the SEC.
Total costs incurred during the nine months ended September 30, 2020 related to these executive management changes were $495, which consisted of $224 for the executive management search firm, $128 for legal fees related to the transition, and $143 for severance and consulting fees paid to our former CEO. These costs were partially offset by the reversal of $117 of expense related to stock-based compensation awards forfeited at his termination date by our former CEO. All of these costs were included in general and administrative expense in our consolidated statement of operations and were accrued and paid during the nine months ended September 30, 2020. We expect to incur an additional $20 in consulting fees during the fourth quarter of 2020 related to these actions. In addition, in connection with these actions, we are reducing the administrative footprint in our Mansfield, Massachusetts corporate office associated with the reestablishment of the Mt. Laurel, New Jersey office as our corporate headquarters. We expect to record a non-cash impairment charge in the range of $100 to $200 during the fourth quarter of 2020 related to the ROU asset associated with the lease of the corporate space in Mansfield. As of September 30, 2020, the ROU asset related to this space totaled $242. We do not expect to incur any additional costs related to these actions after December 31, 2020.

EMS Facility
Consolidation

Executive Management
Changes

Total

Balance – January 1, 2021
$ 233 $ 107 $ 340
Accruals for severance
0 120 120
Accruals for other costs associated with facility consolidation
183 0 183
Cash payments
(416
)
(140
)
(556
)
Balance – September 30, 2021
$ 0 $ 87 $ 87

~~(4)~~(4)
GOODWILL AND INTANGIBLE ASSETS

We have 2 operating segments which are also our reporting units: Thermal and EMS. Goodwill and intangible assets on our balance sheets are the result of our acquisitions of Sigma Systems Corp. ("Sigma") in October 2008, Thermonics, Inc. ("Thermonics") in January 2012 and Ambrell in May 2017. All our goodwill and intangible assets are allocated to our Thermal segment.

Goodwill

Goodwill totaled $13,738 at both September 30, ~~2020~~ 2021 and December 31, ~~2019~~ 2020 and was comprised of the following:

Sigma
$ 1,656
Thermonics
50
Ambrell
12,032
Total
$ 13,738

Intangible Assets

Changes in the amount of the carrying value of finite-lived intangible assets for the nine months ended September 30, ~~2020~~ 2021 are as follows:

Balance - January 1, 2020
$ 6,944
Amortization
(927
)
Balance September 30, 2020
$ 6,017
Balance - January 1, 2021
$ 5,711
Amortization
(918
)
Balance September 30, 2021
$ 4,793

The following tables provide further detail about our intangible assets as of September 30, ~~2020~~ 2021 and December 31, ~~2019:~~2020:

September 30, 2020

September 30, 2021

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Finite-lived intangible assets:

Customer relationships
$ 10,480 $ 4,633 $ 5,847 $ 10,480 $ 5,767 $ 4,713
Technology
600 457 143 600 528 72
Patents
590 563 27 590 582 8
Software
270 270 - 270 270 0
Trade name
140 140 - 140 140 0
Total finite-lived intangible assets
12,080 6,063 6,017 12,080 7,287 4,793
Indefinite-lived intangible assets:

Trademarks
6,710 - 6,710 6,710 - 6,710
Total intangible assets
$ 18,790 $ 6,063 $ 12,727 $ 18,790 $ 7,287 $ 11,503

14- 13 -

December 31, 2019

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Finite-lived intangible assets:

Customer relationships
$ 10,480 $ 3,805 $ 6,675
Technology
600 380 220
Patents
590 541 49
Software
270 270 -
Trade name
140 140 -
Total finite-lived intangible assets
12,080 5,136 6,944
Indefinite-lived intangible assets:

Trademarks
6,710 - 6,710
Total intangible assets
$ 18,790 $ 5,136 $ 13,654

December 31, 2020

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Finite-lived intangible assets:

Customer relationships
$ 10,480 $ 4,912 $ 5,568
Technology
600 477 123
Patents
590 570 20
Software
270 270 0
Trade name
140 140 0
Total finite-lived intangible assets
12,080 6,369 5,711
Indefinite-lived intangible assets:

Trademarks
6,710 - 6,710
Total intangible assets
$ 18,790 $ 6,369 $ 12,421

We generally amortize our finite-lived intangible assets over their estimated useful lives on a straight-line basis, unless an alternate amortization method can be reliably determined. Any such alternate amortization method would be based on the pattern in which the economic benefits of the intangible asset are expected to be consumed. None of our intangible assets have any residual value.

Total amortization expense for our finite-lived intangible assets was $309 and $918 for the three months and nine months ended September 30, 2021, respectively, and $307 and $927 for the three months and nine months ended September 30, 2020, ~~respectively, and $312 and $944 for the three months and nine months ended September 30, 2019,~~ respectively. The following table sets forth the estimated annual amortization expense for each of the next five years:

2020 (remainder)
$ 307
2021
$ 1,226
2022
$ 1,167
2023
$ 1,067
2024
$ 980
~~Assessment for Impairment of Goodwill and Long-Lived Assets~~
As discussed in Note 2, goodwill is assessed for impairment annually in the fourth quarter on a reporting unit basis, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. Long-lived assets are assessed for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. As a result of recent market conditions and trends, including the significant ongoing impact of COVID-19 on the global economy, we performed a qualitative review of facts and circumstances to determine whether it was more likely than not that our goodwill or long-lived assets were impaired and if, as a result, a quantitative impairment assessment was required to be performed as of September 30, 2020. Our review included identifying and weighting the significant factors that have impacted our business operations in recent months, both positively and negatively. We considered the nature of these factors, including whether they were ongoing and related to our core business and markets, or non-recurring and reflected macro-economic or global events that are not directly related to our core business and markets. As a result of our qualitative review, we determined that is was more likely than not that our goodwill and long-lived assets were not impaired and, therefore, no quantitative assessment for impairment was required and, thus not performed, as of September 30, 2020. During the fourth quarter of 2020, we will perform our annual impairment assessment related to our goodwill. As a result of the ongoing uncertainty surrounding the impact of COVID-19 on our operations, we may perform additional qualitative reviews of goodwill and long-lived assets for impairment at various points in 2021. There can be no assurance that we will be able to continue to conclude that it is more likely than not that our goodwill and long-lived assets are not impaired. We may determine that we need to perform a quantitative assessment for impairment at some point in the future. Such a quantitative assessment could result in a determination that an impairment exists which would result in recording an impairment charge. The amount of any such impairment charge could be material. Any future impairment charge recorded could materially adversely impact our balance sheet and results of operations and could result in our being unable to borrow funds that would otherwise be available under our revolving credit facility discussed in Note 9.
2021 (remainder)
$ 309
2022
$ 1,167
2023
$ 1,067
2024
$ 980
2025
$ 905

15
~~(5)~~(5)
REVENUE FROM CONTRACTS WITH CUSTOMERS

The following tables provide additional information about our revenue from contracts with customers, including revenue by customer and product type and revenue by market. See also Note 1314 for information about revenue by operating segment and geographic region.

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

2021

2020

2021

2020

Net revenues by customer type:

End user
$ 12,651 $ 13,167 $ 34,518 $ 42,310 $ 17,366 $ 12,651 $ 54,291 $ 34,518
OEM/Integrator
1,792 1,465 4,430 4,736 3,778 1,792 8,229 4,430
$ 14,443 $ 14,632 $ 38,948 $ 47,046 $ 21,144 $ 14,443 $ 62,520 $ 38,948

Net revenues by product type:

Thermal test
$ 3,632 $ 4,568 $ 11,482 $ 13,817 $ 5,284 $ 3,632 $ 14,126 $ 11,482
Thermal process
5,574 4,635 13,885 15,303 6,412 5,574 18,785 13,885
Semiconductor test
3,604 3,841 9,093 12,734 7,951 3,604 25,224 9,093
Service/other
1,633 1,588 4,488 5,192 1,497 1,633 4,385 4,488
$ 14,443 $ 14,632 $ 38,948 $ 47,046 $ 21,144 $ 14,443 $ 62,520 $ 38,948

Net revenues by market:

Semi Market
$ 7,387 $ 7,126 $ 19,256 $ 24,878 $ 13,656 $ 7,387 $ 42,653 $ 19,256
Multimarket:

Industrial
4,220 5,758 12,346 15,983 5,463 4,220 13,535 12,346
Defense/aerospace
2,015 153 4,919 1,437 778 2,015 3,175 4,919
Telecommunications
419 1,377 1,427 3,509 315 419 870 1,427
Other Multi Markets
402 218 1,000 1,239
Other Multimarkets
932 402 2,287 1,000
$ 14,443 $ 14,632 $ 38,948 $ 47,046 $ 21,144 $ 14,443 $ 62,520 $ 38,948

There was nonot a significant change in the amount of the allowance for doubtful accounts for the nine months ended September 30, ~~2020.~~2021.
- 14 -

~~(6)~~(6)
MAJOR CUSTOMERS

During the nine months ended September 30, ~~2020, no customer accounted for 10% or more of our consolidated net revenues. During the nine months ended September 30, 2019,~~ 2021, Texas Instruments Incorporated accounted for ~~11%~~14% of our consolidated net revenues. While both of our segments sold to this customer, these revenues were primarily generated by our EMS segment. NoNaN other customers accounted for 10% or more of our consolidated net revenues during the nine months ended September 30, ~~2019.~~2021. During the nine months ended September 30, 2020, 0 customer accounted for 10% or more of our consolidated net revenues.

~~(7)~~(7)
INVENTORIES

Inventories held at September 30, ~~2020~~ 2021 and December 31, ~~2019~~ 2020 were comprised of the following:

September 30,
2020

December 31,
2019

September 30,
2021

December 31,
2020

Raw materials
$ 4,800 $ 5,369 $ 6,768 $ 5,371
Work in process
1,042 949 1,148 1,085
Inventory consigned to others
49 54 44 45
Finished goods
1,033 810 1,399 975
Total inventories
$ 6,924 $ 7,182 $ 9,359 $ 7,476

Total charges incurred for excess and obsolete inventory for the three months and nine months ended September 30, ~~2020~~ 2021 and ~~2019,~~2020, respectively, were as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Excess and obsolete inventory charges
$ 105 $ 98 $ 410 $ 341

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Excess and obsolete inventory charges
$ 61 $ 105 $ 154 $ 410

~~(8)~~(8)
LEASES

We lease our offices, warehouse facilities and certain equipment under non-cancellable operating leases which expire at various dates through 2031. Total operating lease and short-term lease costs for the three months and nine months ended September 30, ~~2020~~ 2021 and ~~2019~~2020 were as follows:

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Operating lease cost
$ 393 $ 370 $ 1,174 $ 1,106
Short-term lease cost
$ 13 $ 12 $ 35 $ 39
16

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Operating lease cost
$ 247 $ 393 $ 865 $ 1,174
Short-term lease cost
$ 20 $ 13 $ 60 $ 35

The following is additional information about our leases as of September 30, ~~2020:~~2021:

Range of remaining lease terms (in years)

0.3
to
10.0

0.5 to 9.6
Weighted average remaining lease term (in years)

6.6

6.0
Weighted average discount rate

4.4%

4.2 %

Maturities of lease liabilities as of September 30, ~~2020~~ 2021 were as follows:

2021 (remainder)
$ 358
2022
1,469
2023
1,482
2024
1,474
2025
722
Thereafter
1,845
Total lease payments
$ 7,350
Less imputed interest
(811
)
Total
$ 6,539
2020 (remainder)
$ 378
2021
1,407
2022
1,321
2023
1,341
2024
1,377
Thereafter
2,566
Total lease payments
$ 8,390
Less imputed interest
(1,042
)
Total
$ 7,348
- 15 -

Supplemental Cash Flow Information
Total amortization of ROU assets was $231 and $760 for the three months and nine months ended September 30, 2021, respectively, and $324 and $977 for the three months and nine months ended September 30, 2020, ~~respectively,~~respectively.
Nine Months ended September 30, 2021
Non-cash increases in operating lease liabilities and ~~$351 and $952~~ROU assets as a result of a lease modification for the ~~three months and~~ nine months ended September 30, ~~2019, respectively.~~2021 were as follows:

Execution of lease for facility in Fremont, California $ 202
On August 16, 2021, we executed a lease for approximately 3,888 square feet of office space for the engineering and sales staff located in Fremont, California. This lease has a 38.5 month term. At the effective date of this lease, we recorded an increase in our ROU assets and operating lease liabilities of approximately $202.
Nine Months ended September 30, 2020
Non-cash increases in operating lease liabilities and ROU assets as a result of lease modifications for the nine months ended September 30, 2020 were as follows:

Modification to lease for facility in Fremont, California $ 1,176
Modification to lease for facility in Mt. Laurel, New Jersey $ 2,051

On January 23, 2020, we executed an amendment to the lease for our EMS facility in Fremont, California, which extended the term for a period of 61 months commencing on November 1, 2020 and expiring on November 30, 2025. At the effective date of this modification, we recorded an increase in our ROU assets and operating lease liabilities of approximately $1,176. As discussed in Note 3 to our consolidated financial statements in our 2020 Form 10-K, as of December 31, 2020, we recorded an impairment charge of $522 related to the ROU asset associated with this lease. On July 19, 2021, we executed a sublease for this facility which commenced on August 1, 2021 and ends November 30, 2025, which is the termination date of our lease for this facility. We entered into this sublease approximately 14 months earlier than we had estimated in December 2020. As a result, we will record approximately $350 of incremental sublease income above the level that we had estimated at the time that we recorded the impairment charge in December 2020. This income will be recorded ratably over the term of the sublease and will be included in other income in our consolidated statements of operations.

On September 22, 2020, we executed an amendment to the lease for our EMS facility in Mt. Laurel, New Jersey, which extended the term of the existing lease for a period of 120 months commencing on May 1, 2021. ~~In addition, effective on May 1, 2021, the leased space shall be reduced to approximately 33,650 square feet.~~ At the effective date of this modification, we recorded an increase in our ROU assets and operating lease liabilities of approximately $2,051.

~~Non-cash increases (decreases) in operating lease liabilities and ROU assets as a result of lease modifications for the nine months ended September 30, 2019 was as follows:~~
Modification to Ambrell’s U.K. facility lease
$ (486
)
Modification to lease for facility in Mansfield, Massachusetts
$ 1,811
Modification to Ambrell’s Netherlands facility lease
$ (48
)
The lease for Ambrell’s U.K. facility had an original term of 15 years, which extended through August 2029. The lease included the option to terminate the lease at specified points in time without penalty. We exercised this option in March 2019, and the lease expired in September 2019. At the effective date of this modification, we recorded a reduction in our ROU assets and operating lease liabilities of approximately $486.
On April 8, 2019, we executed an amendment to the lease for our facility in Mansfield, Massachusetts that extended the term of the lease for an additional forty months to December 31, 2024 and expanded the amount of leased space by approximately 6,100 square feet. The current rate per square foot that is in place through August 31, 2021 (the original expiration date of the lease) did not change. After August 31, 2021, there are predetermined fixed escalations of the rate as outlined in the amendment. As a result of this modification, we recorded an increase in our ROU assets and operating lease liabilities of approximately $1,811.
17

During the third quarter of 2019, the lease for a portion of Ambrell’s facility in the Netherlands was modified to reduce the term of that lease to expire in September 2019 as that portion of the space was no longer needed. At the effective date of this modification, we recorded a reduction in our ROU assets and operating lease liabilities of approximately $48.
~~(9)~~(9)
DEBT

Letters of Credit

We have issued letters of credit as security deposits for certain of our domestic leases. These letters of credit are secured by pledged certificates of deposit which are classified as ~~restricted certificates~~Restricted Certificates of ~~deposit~~Deposit on our consolidated balance sheets. The terms of our leases require us to renew these letters of credit at least 30 days prior to their expiration dates for successive terms of not less than one year until lease expiration.

Our outstanding letters of credit at September 30, ~~2020~~ 2021 and December 31, ~~2019~~ 2020 consisted of the following:

Letters of Credit
Amount Outstanding

Letters of Credit
Amount Outstanding

Original L/C
Issue Date

L/C
Expiration
Date

Lease
Expiration
Date

September 30,
2020

December 31,
2019

Original L/C
Issue Date

L/C
Expiration
Date

Lease
Expiration
Date

September 30,
2021

December 31,
2020

Mt. Laurel, NJ
3/29/2010

4/30/2021

4/30/2031
$ 90 $ 90
3/29/2010

4/30/2022

4/30/2031
$ 50 $ 90
Mansfield, MA
10/27/2010

12/31/2024

12/31/2024
50 50
10/27/2010

12/31/2024

12/31/2024
50 50
$ 140 $ 140 $ 100 $ 140

~~Line of Credit~~
As previously indicated in Note 1, on April 10, 2020 (the “Closing Date”) we entered into the Agreement with M&T. Under the terms of the Agreement, M&T has provided us with a $7,500 revolving credit facility under which our domestic subsidiaries, Ambrell, inTEST EMS LLC (“EMS LLC”), Temptronic Corporation (“Temptronic”) and inTEST Silicon Valley Corporation (“Silicon Valley”), are guarantors (collectively, the “Guarantors”). The revolving credit facility has a 364-day contract period that began on the Closing Date and expires on April 9, 2021 (the “Contract Period”). The principal balance of the revolving credit facility accrues interest at the LIBOR rate plus 2.5%. In the event the current LIBOR rate is no longer available or representative, the Agreement includes a mechanism for providing an alternate benchmark. Interest payments are due on a monthly basis, and principal payments are due, along with any accrued and unpaid interest thereon, on the earlier of (a) the expiration of the Contract Period, or (b) on demand upon the occurrence of an event of default that is continuing. As of September 30, 2020, we had $7,500 available to borrow under this facility.
The Agreement contains customary events of default including, but not limited to, the failure by us to repay obligations when due, violation of provisions or representations provided in the Agreement, bankruptcy of inTEST Corporation, suspension of the business of inTEST Corporation or any of our subsidiaries and certain material judgments. After expiration of the Contract Period, or if during the continuance of an event of default, interest will accrue on the principal balance at a rate of 2% in excess of the then applicable non-default interest rate. Our obligations under the Agreement are secured by liens on substantially all our tangible and intangible assets. The Agreement includes customary affirmative, negative and financial covenants, including a maximum ratio of assets to liabilities and a fixed charge coverage ratio.
This facility was put in place to provide us with additional liquidity in response to the current business environment, as a result of COVID-19. During the three months ended June 30, 2020, we drew down $2,800 on our revolving credit facility. This amount was fully repaid during this same period.
~~Paycheck Protection Program Loans~~
As discussed more fully in Note 13 to our consolidated financial statements in our Quarterly Report on Form 10-Q for the three months ended March 31, 2020 (“Q1 2020 Form 10-Q”) filed on May 13, 2020 with the Securities and Exchange Commission, during April 2020 we applied for and received loans through the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (the “SBA”) totaling $2,829. We repaid the full amount of the PPP loans on May 5, 2020 with the applicable interest.
18- 16 -

Line of Credit
As of September 30, 2021, we had a revolving credit facility with M&T Bank (“M&T”) which is discussed more fully in Note 10 to our consolidated financial statements included in our 2020 Form 10-K and Note 9 to our consolidated financial statements included in our Form 10-Q for the quarterly period ended June 30, 2021, filed on August 12, 2021 with the SEC. On October 15, 2021 we entered into an Amended and Restated Loan and Security Agreement (the “October 2021 Agreement”) with M&T which replaced this facility. The October 2021 Agreement is discussed further under “Credit Facility” in Note 15.

~~(10)~~(10)
STOCK-BASED COMPENSATION

As of September 30, ~~2020,~~ 2021, we had unvested restricted stock awards and stock options granted under stock-based compensation plans that are described more fully in Note 1213 to the consolidated financial statements in our ~~2019~~2020 Form ~~10-K.~~

~~As of September 30, 2020, total unrecognized compensation expense related to~~10-K.

Our unvested restricted stock awards and stock options ~~was $1,544.~~are accounted for based on their grant date fair value. As of September 30, 2021, total compensation expense to be recognized in future periods is $2,928. The weighted average period over which this expense is expected to be recognized is ~~2.8~~2.6 years. The following table shows the allocation of the compensation expense we recorded during the three months and nine months ended September 30, ~~2020~~ 2021 and ~~2019,~~2020, respectively, related to stock-based compensation:

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

2021

2020

2021

2020

Cost of revenues
$ - $ - $ - $ - $ 10 $ 0 $ 17 $ 0
Selling expense
3 - 9 4 8 3 17 9
Engineering and product development expense
10 11 31 26 17 10 43 31
General and administrative expense
72 231 440 608 336 72 1,017 440
$ 85 $ 242 $ 480 $ 638 $ 371 $ 85 $ 1,094 $ 480

There was no0 stock-based compensation expense capitalized in the three months or nine months ended September 30, ~~2020~~ 2021 or ~~2019.~~2020.

Restricted Stock Awards

We record compensation expense for restricted stock awards based on the quoted market price of our stock at the grant date and amortize the expense over the vesting period. Restricted stock awards generally vest over four years for employees and over one year for our independent directors (25% at each of March 31, June 30, September 30, and December 31 of the year in which they were granted).

On August 24, 2020, our new President and CEO received two restricted stock awards totaling 141,610 shares valued at $650 as of the date of grant, which was also his hire date. Of the total shares awarded, 66,448 shares vest over 4 years (25% at each anniversary) and 75,162 shares vest on the third anniversary of the grant date at a vesting percentage that could range from 0% to 150% of the number of shares awarded on August 24, 2020. The final vesting percentage will be based on the achievement of certain performance metrics, including net revenue compound annual growth rate and diluted earnings per share excluding amortization of intangibles, for specified time periods as determined by the Compensation Committee of our Board of Directors. As of September 30, ~~2020,~~ 2021, we have estimated that these shares will vest at 100% of the original amount awarded and are recording expense based on this estimate on a straight-line basis over the three ~~year~~-year vesting period. Our estimate of the final expected vesting percentage ~~will be~~is reassessed and adjusted, as needed, at the end of each reporting period.
On March 10, 2021, we issued restricted stock awards totaling 18,000 shares to members of the senior management within our operating segments. These shares will vest on the third anniversary of the grant date at a vesting percentage that could range from 0% to 150% of the number of shares awarded on March 10, 2021. The final vesting percentage will be based on the achievement of certain performance metrics related to the operating results of the business units for which these members of management are responsible. As of September 30, 2021, we have estimated that these shares will vest at 100% of the original amount awarded and are recording expense based on this estimate on a straight-line basis over the three-year vesting period. Our estimate of the final expected vesting percentage is reassessed and adjusted, as needed, at the end of each reporting period.
On June 14, 2021, our new CFO received two restricted stock awards totaling 7,941 shares valued at $133 as of the date of grant, which was also his hire date. Of the total shares awarded, 1,988 shares vest over 4 years (25% at each anniversary) and 5,953 shares vest on August 24, 2023 at a vesting percentage that could range from 0% to 150% of the number of shares awarded on June 14, 2021. The final vesting percentage will be based on the achievement of certain performance metrics, including net revenue compound annual growth rate and diluted earnings per share excluding amortization of intangibles, for specified time periods as determined by the Compensation Committee of our Board of Directors. As of September 30, 2021, we have estimated that these shares will vest at 100% of the original amount awarded and are recording expense based on this estimate on a straight-line basis over the vesting period. Our estimate of the final expected vesting percentage is reassessed and adjusted, as needed, at the end of each reporting period.
- 17 -

The following table summarizes the activity related to unvested shares of restricted stock for the nine months ended September 30, ~~2020:~~2021:

Number
of Shares

Weighted
Average
Grant Date
Fair Value

Number
of Shares

Weighted
Average
Grant Date
Fair Value

Unvested shares outstanding, January 1, 2020
165,031 $ 6.55
Unvested shares outstanding, January 1, 2021
237,155 $ 4.93
Granted
229,110 4.24 126,209 11.74
Vested
(80,361
)
5.47 (78,206
)
7.24
Forfeited
(67,125
)
6.03 (18,125
)
9.02
Unvested shares outstanding, September 30, 2020
246,655 4.89
Unvested shares outstanding, September 30, 2021
267,033 7.19

The total fair value of the shares that vested during the nine months ended September 30, ~~2020~~ 2021 and ~~2019~~2020 was ~~$296~~$981 and ~~$370,~~$296, respectively, as of the vesting dates of these shares.

Stock Options

We record compensation expense for stock options based on the fair value of the options as of the grant date. No option may be granted with an exercise period in excess of ten years from the date of grant. Generally, stock options will be granted with an exercise price equal to the fair market value of our stock on the date of grant and will vest over four years.

The fair value for stock options granted during the nine months ended September 30, ~~2020~~ 2021 and ~~2019~~2020 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:

2020

2019

Risk-free interest rate
0.46
%
2.35
%
Dividend yield
0.00
%
0.00
%
Expected common stock market price volatility factor
.44 .42
Weighted average expected life of stock options (years)
6.25 6.25
19

2021

2020

Risk-free interest rate
1.03
%
0.46
%
Dividend yield
0.00
%
0.00
%
Expected common stock market price volatility factor
.50 .44
Weighted average expected life of stock options (years)
6.25 6.25

The per share weighted average fair value of stock options issued during the nine months ended September 30, ~~2020~~ 2021 and ~~2019~~2020 was $5.70 and $1.48, ~~and $2.75,~~ respectively.

The following table summarizes the activity related to stock options for the nine months ended September 30, ~~2020:~~2021:

Number
of Shares

Weighted
Average
Grant Date
Fair Value

Number
of Shares

Weighted
Average
Grant Date
Fair Value

Options outstanding, January 1, 2020 (87,900 exercisable)
506,810 $ 6.89
Options outstanding, January 1, 2021 (204,630 exercisable)
438,200 $ 6.25
Granted
113,980 3.49 282,404 11.77
Exercised
- - (149,010
)
6.84
Forfeited
(182,590
)
6.31 (80,550
)
9.55
Options outstanding, September 30, 2020 (204,630 exercisable)
438,200 6.25
Options outstanding, September 30, 2021 (141,370 exercisable)
491,044 8.70

~~(11)~~(11)
STOCK REPURCHASE PLAN

On July 31, 2019, our Board of Directors authorized the repurchase of up to $3,000 of our common stock from time to time on the open market, in compliance with Rule ~~10b-18~~10b-18 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or in privately negotiated transactions pursuant to a newly authorized stock repurchase plan (the ~~“2019~~“2019 Repurchase Plan”). Repurchases ~~may~~are to be made under a Rule ~~10b5-1~~10b5-1 plan entered into with RW Baird & Co., which ~~would permit~~permits shares to be repurchased when we might otherwise be precluded from doing so under insider trading laws and our internal trading windows. The 2019 Repurchase Plan does not obligate us to purchase any particular amount of common stock and ~~may~~can be suspended or discontinued at any time without prior notice. The 2019 Repurchase Plan is funded using our operating cash flow or available cash. Purchases began on September 18, 2019 under this plan. ~~During the quarter ended March 31, 2020, we repurchased 13,767 shares under the 2019 Repurchase Plan at a cost of $74, including fees paid to our broker.~~ On March 2, 2020, we suspended repurchases under the 2019 Repurchase Plan. ~~For~~From the ~~term~~adoption of the 2019 Repurchase Plan through ~~September 30, 2020,~~the suspension of the plan, we ~~have~~ repurchased a total of 243,075 shares at a cost of $1,216, which includes fees paid to our broker of $6. All of the repurchased shares were retired.
- 18 -

~~(12)~~(12)
EMPLOYEE STOCK PURCHASE PLAN
The inTEST Corporation Employee Stock Purchase Plan (the “ESPP”) was adopted by the Board in April 2021 subject to approval by our stockholders, which occurred on June 23, 2021 at our Annual Meeting of Stockholders. The ESPP provides our eligible employees with an opportunity to purchase common stock through accumulated payroll deductions at a discounted purchase price. The ESPP became effective on October 1, 2021.
The ESPP provides that an aggregate of up to 250,000 shares of our common stock will be available for issuance under the ESPP. The shares of our common stock purchasable under the ESPP will be shares of authorized but unissued or reacquired shares, including shares repurchased by us on the open market.
(13)
EMPLOYEE BENEFIT PLANS

We have defined contribution ~~401(k)~~401(k) plans for our employees who work in the U.S. All permanent employees of inTEST Corporation, inTEST EMS LLC (“inTEST EMS”), Temptronic Corporation (“Temptronic”) and inTEST Silicon Valley Corporation (“inTEST SV”) who are at least 18 years of age are eligible to participate in the inTEST Corporation Incentive Savings Plan. We match employee contributions dollar for dollar up to 10% of the employee's annual compensation, with a maximum limit of $5. Employer contributions vest ratably over four years. Matching contributions are discretionary. For the three months and nine months ended September 30, ~~2020~~ 2021, we recorded ~~$56~~$51 and ~~$313~~$322 of expense for matching contributions, respectively. For the three months and nine months ended September 30, ~~2019~~ 2020, we recorded ~~$53~~$56 and ~~$335~~$313 of expense for matching contributions, respectively.

All permanent employees of Ambrell are immediately eligible to participate in the Ambrell Corporation Savings & Profit Sharing Plan (the "Ambrell Plan") upon employment and are eligible for employer matching contributions after completing ~~one year~~six months of service, as defined in the Ambrell Plan. The Ambrell Plan allows eligible employees to make voluntary contributions up to 100% of compensation, up to the federal government contribution limits. We will make a matching contribution of ~~25%~~50% of each employee's contributions up to a maximum of 2%10% of ~~such~~the employee's ~~annual compensation.~~deferral with a maximum limit of $5. For the three months and nine months ended September 30, 2021, we recorded $44 and $131 of expense for matching contributions, respectively. For the three months and nine months ended September 30, 2020, we recorded $17 and $49 of expense for matching contributions, respectively. ~~For the three months and nine months ended September 30, 2019 we recorded $11 and $48 of expense for matching contributions, respectively.~~

~~(13)~~(14)
SEGMENT INFORMATION

We have ~~two~~2 reportable segments, Thermal and EMS, which are also our reporting units. Thermal includes the operations of Temptronic, Thermonics, Sigma, inTEST Thermal Solutions GmbH (Germany), inTEST Pte, Limited (Singapore) and Ambrell. Sales of this segment consist primarily of temperature management systems which we design, manufacture and market under our Temptronic, Thermonics and Sigma product lines, and precision induction heating systems which are designed, manufactured and marketed by Ambrell. In addition, this segment provides post-warranty service and support. EMS includes the operations of our manufacturing facilities in Mt. Laurel, New Jersey and, prior to the consolidation of manufacturing operations late in the fourth quarter of 2020,Fremont, California. Sales of this segment consist primarily of manipulator, docking hardware and tester interface products, which we design, manufacture and market. ~~See Note 3 for information related to the planned closure of our manufacturing facility in Fremont, California.~~
20

We operate our business worldwide and sell our products both domestically and internationally. Both of our segments sell to semiconductor manufacturers, ~~third-party~~third-party test and assembly houses and ATE manufacturers. Thermal also sells into a variety of markets outside of the Semi Market, including the automotive, defense/aerospace, ~~energy,~~medical, industrial, telecommunications and other markets.

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

Net Revenues:

Thermal
$ 10,724 $ 10,622 $ 29,534 $ 33,775
EMS
3,719 4,010 9,414 13,271
$ 14,443 $ 14,632 $ 38,948 $ 47,046
Earnings (loss) before income tax expense (benefit):

Thermal
$ 478 $ 496 $ 39 $ 1,949
EMS
169 475 (574
)
1,624
Corporate
(214
)
(177
)
(242
)
(1,617
)
$ 433 $ 794 $ (777
)
$ 1,956
Net earnings (loss):

Thermal
$ 379 $ 403 $ 26 $ 1,592
EMS
218 387 (380
)
1,327
Corporate
(139
)
(143
)
(161
)
(1,321
)
$ 458 $ 647 $ (515
)
$ 1,598

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Net Revenues:

Thermal
$ 13,042 $ 10,724 $ 36,863 $ 29,534
EMS
8,102 3,719 25,657 9,414
$ 21,144 $ 14,443 $ 62,520 $ 38,948
Earnings (loss) before income tax expense (benefit):

Thermal
$ 865 $ 478 $ 1,991 $ 39
EMS
2,278 169 7,767 (574
)
Corporate
(611
)
(214
)
(1,592
)
(242
)
$ 2,532 $ 433 $ 8,166 $ (777
)
Net earnings (loss):

Thermal
$ 743 $ 379 $ 1,706 $ 26
EMS
1,957 218 6,654 (380
)
Corporate
(525
)
(139
)
(1,364
)
(161
)
$ 2,175 $ 458 $ 6,996 $ (515
)

September 30,
2020

December 31,
2019

Identifiable assets:

Thermal
$ 51,920 $ 51,621
EMS
9,940 7,319
Corporate
929 775
$ 62,789 $ 59,715
- 19 -

September 30,
2021

December 31,
2020

Identifiable assets:

Thermal
$ 51,368 $ 50,782
EMS
16,309 9,667
Corporate
7,052 1,581
$ 74,729 $ 62,030

The following tables provide information about our geographic areas of operation. Net revenues from unaffiliated customers are based on the location to which the goods are shipped.

Three Months Ended
September 30,

Nine Months Ended
September 30,

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

2021

2020

2021

2020

Net revenues:

U.S.
$ 5,562 $ 6,226 $ 16,235 $ 19,319 $ 6,271 $ 5,562 $ 18,650 $ 16,235
Foreign
8,881 8,406 22,713 27,727 14,873 8,881 43,870 22,713
$ 14,443 $ 14,632 $ 38,948 $ 47,046 $ 21,144 $ 14,443 $ 62,520 $ 38,948

September 30,
2021

December 31,
2020

Net property and equipment:

U.S.
$ 2,200 $ 2,053
Foreign
197 297
$ 2,397 $ 2,350

September 30,
2020

December 31,
2019

Property and equipment:

U.S.
$ 2,088 $ 2,163
Foreign
329 257
$ 2,417 $ 2,420
(15)
SUBSEQUENT EVENTS

Acquisition of Z-Sciences
On October 6, 2021, we acquired substantially all of the assets of Z-Sciences Corp. (“Z-Sciences”) pursuant to the Asset Purchase Agreement dated as of that same date. Z-Sciences is a developer of ultra-cold storage solutions for the life sciences cold chain market. The acquisition of the Z-Sciences business will broaden the product line of our Thermal segment. The purchase price for the assets, net of assumed liabilities, was approximately $500 in cash. We placed $200 of the purchase price in escrow to provide security for certain indemnification obligations set forth in the acquisition agreement. In connection with this acquisition, we also entered into a separate management services agreement with Z-Sciences and certain of its employees to provide management, transitional, and administrative services to us. We also expect that the founder of Z-Sciences, Jean Fallacara, will become an employee of inTEST in 2022. In connection with his prospective employment, Mr. Fallacara would receive a multi-year restricted stock award with vesting provisions which would be contingent upon achieving future performance milestones related to sales growth and profitability of products related to the Z-Sciences business.
The Z-Sciences acquisition will be accounted for as a purchase business combination and, accordingly, the results will be included in our consolidated results of operations from the date of acquisition. We have not completed our purchase accounting for this transaction and are still in the process of valuing the assets acquired. We expect to complete this process by December 31, 2021. The results of Z-Sciences will be included in our Thermal segment.
Acquisition of Videology
On October 28, 2021, we acquired substantially all of the assets of Videology Imaging Solutions, Inc. and Videology Imaging Solutions Europe B.V. (collectively, “Videology”), pursuant to two separate asset purchase agreements, both of which were dated as of that same date. Videology is a global designer, developer and manufacturer of OEM digital streaming and image capturing solutions. The acquisition of Videology will broaden the product line of our Thermal segment. The purchase price for the assets, net of assumed liabilities, was approximately $12,000 in cash. We placed $1,200 of the purchase price in escrow to provide security for certain indemnification obligations set forth in the asset purchase agreements.
21- 20 -

The Videology acquisition will be accounted for as a purchase business combination and, accordingly, the results will be included in our consolidated results of operations from the date of acquisition. We have not completed our purchase accounting for this transaction and are still in the process of valuing the assets acquired. We expect to complete this process by December 31, 2021. The results of Videology will be included in our Thermal segment.
Credit Facility
As discussed in Note 9, on October 15, 2021 (the “Closing Date”), we entered into the October 2021 Agreement with M&T Bank. The October 2021 Agreement includes a $25,000 non-revolving delayed draw term note (the “Term Note”) and a $10,000 revolving credit facility (the “Revolver Note”) and replaces the Loan and Security Agreement, dated April 10, 2020, as amended by the First Amendment to Loan and Security Agreement, dated December 16, 2020, and the Second Amendment to Loan and Security Agreement, dated April 10, 2021. Our domestic subsidiaries, Ambrell, inTEST EMS, inTEST SV and Temptronic, are guarantors under the October 2021 Agreement (collectively, the “Guarantors”). The October 2021 Agreement has a five year contract period that began on the Closing Date and expires on October 15, 2026 (the “Contract Period”), and draws under the delayed draw 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 for U.S. government securities (“SOFR”) or a bank-defined base rate plus an applicable margin, depending on leverage. Currently, this equates to a rate of approximately 2.2%. Each draw under the delayed draw term note will have an option for us of either (i) up to a five year amortizing term loan with a balloon due at maturity, or (ii) up to a five year term with up to seven years amortization with a balloon due at maturity. Any amortization greater than five years will be subject to an excess cash flow recapture. The October 2021 Agreement also allows us to enter into hedging contracts with M&T, including interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, or any other agreements or that are designed to protect us against fluctuations in interest rates or currency exchange rates.
The October 2021 Agreement contains customary default provisions, including but not limited to the failure by us to repay obligations when due, violation of provisions or representations provided in the October 2021 Agreement, bankruptcy by us, suspension of our business or any of our subsidiaries and certain material judgments. After expiration of the Contract Period or if a continued event of default occurs, interest will accrue on the principal balance at a rate of 2% in excess of the then applicable non-default interest rate. 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 that are owned as of the Closing Date or acquired thereafter.
On October 28, 2021, we drew $12,000 under the Term Note to finance the acquisition of Videology discussed above. 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 October 28, 2021, the October 2021 Agreement was amended to include our subsidiary, Videology Imaging Corporation, as a subsidiary guarantor thereunder.

Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
~~MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~
Risk Factors and Forward-Looking Statements

In addition to historical information, this ~~report,~~Quarterly Report on Form 10-Q for the period ended September 30, 2021 (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,~~"believes," "expects," "intends," "may," “could,” ~~“expects,” “intends,” “may,” “will,” “should,” “plans,”~~"will," "should," "plans," “projects,” “forecasts,” “seeks,” “anticipates,” “goal,” “objective,” “target,” “future,” “outlook,” “vision,” or ~~“anticipates”~~variations of such words or similar terminology. ~~See “Cautionary Statement Regarding Forward-Looking Statements" in our 2019 Form 10-K for examples of~~Investors and prospective investors are cautioned that such forward-looking statements ~~made in this report which may be "forward-looking statements."~~are only projections based on current estimations. These statements involve risks and uncertainties and are based onupon various assumptions. Although we believe that our expectations are based on reasonable assumptions, investors and prospective investors are cautioned that such statements are only projections, and there cannot be any assurance that these events or results will occur. We undertake no obligation to update the information in this report including this MD&A, to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated or unanticipated events.

~~Information about the primary~~Such risks and uncertainties that could cause our actual future results to differ materially from our historic results or the results described in the forward-looking statements made in this report or presented elsewhere by management from time to time include, but are not limited to:

●
the possibility of future acquisitions and our ability to realize the potential benefits of acquisitions or dispositions and the successful integration of any acquired operations, for example with respect to our acquisitions of Videology and Z-Sciences;
●
the success of our strategy to diversify our business by entering markets outside the Semi Market, including the automotive, defense/aerospace, industrial, life sciences, telecommunications and other markets and changes in demand in these markets;

●
the impact of COVID-19 and its variant strains on our business, liquidity, financial condition and results of ~~operations, including as a result of evolving public health requirements in response to COVID-19, such as:~~
o
~~government mandated facility closures;~~operations;
o
- 21 -

~~availability of employees;~~
o
~~supply chain and distribution interruptions;~~
o
price increases and/or lack of availability from our normal suppliers for the materials needed to produce our products in a timely manner and/or with the level of margins we typically expect to achieve;
o
~~customers’ inability or refusal to accept product deliveries or schedule after market service and support visits; and~~
o
~~the sufficiency of our revolving credit facility to address the impact of COVID-19;~~

●
indications of a change in the market cycles in the Semi Market or other markets we ~~serve including as a result of COVID-19;~~serve;

●
developments and trends in the Semi Market, including changes in ~~business conditions and general economic conditions both domestically and globally including as~~the demand for semiconductors;
●
the loss of any one or more of our largest customers, or a ~~result of COVID-19;~~reduction in orders by a major customer;

●
changes in the ~~demand for semiconductors, generally~~rate of, and ~~as a result~~timing of, ~~COVID-19;~~
● ~~the success of~~capital expenditures by our ~~consolidation of all EMS manufacturing into our operation located in Mt. Laurel, New Jersey;~~customers;

●
the ~~success~~availability of materials used to manufacture our ~~strategy to diversify~~products;
●
the impact of interruptions in our ~~business~~supply chain caused by ~~entering markets outside~~ external factors;
●
the ~~Semi Market;~~sufficiency of cash balances, lines of credit and net cash from operations;
●
stock price fluctuations;

●
the possibility of future acquisitions or dispositions and the successful integration of any acquired operations;

●
~~the~~our ability to borrow funds or raise capital to finance major potential acquisitions;

●
~~changes in~~ competitive pricing pressures;
●
the ~~rates~~development of new products and ~~timing~~technologies by us or our competitors;
●
effects of ~~capital expenditures by our customers including as a result of COVID-19;~~exchange rate fluctuations;

●
progress of product development programs;

●
~~increases in raw material~~the anticipated market for our products;
●
the availability of and ~~fabrication costs associated with~~retention of key personnel or our ~~products including as a result~~ability to hire personnel at anticipated costs;
●
general economic conditions both domestically and globally;
●
other projections of ~~COVID-19;~~net revenues, taxable earnings (loss), net earnings (loss), net earnings (loss) per share, capital expenditures and other financial items; and

●
other risk factors included in Part I, Item 1A - "Risk Factors" in our ~~2019~~2020 Form ~~10-K and Part II, Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q.~~10-K.

~~Material changes~~These risks and uncertainties, among others, could cause our actual future results to ~~such risk factors may be reported in subsequent Quarterly Reports on Form 10-Q in Part II, Item 1A.~~
~~COVID-19 Pandemic~~
Our business has been, and will continue to be, adversely affected by the ongoing COVID-19 pandemic. As of the date of this filing, COVID-19 continues to cause significant disruptions in the normal business environment, both domestically and globally, and we believe the situation will remain challenging until the spread of the virus can be contained. Since March 17, 2020, several states, including all of the states in which we have manufacturing facilities, have instituted “shelter-in place” orders as well as guidance in response to COVID-19 and the need to contain it. As of the date of this filing, all of the states in which we operate have re-opened to varying degrees. However, some of these states have paused their re-opening plans or reversed actions they had taken with respect to their re-opening plans because of increased spread. Despite these changes, all of our operations continue to be deemed “critical and essential business operations” under the various governmental COVID-19 mandates which has allowed us to continue to operate our business with certain modifications as discussed below.
22
~~Although our net revenues~~differ materially from all of the markets we serve have been significantly affected by COVID-19, the impact of COVID-19 on our net revenues from the Semi Market has been intensified because it began during a time when our business operations were also being negatively affected by a global downturn in the Semi Market. The Semi Market, from which approximately half of our net revenues are derived, entered a cyclical downturn in the beginning of 2019. This downturn resulted in significant declinesthose described in our net revenues from the Semi Market during 2020 as compared to 2019, particularly during the first half of the year, and was the primary factor causing the net loss we recorded in the first nine months of 2020 of $515,000. Our net revenues from the Semi Market for the first nine months of 2020 totaled $19.3 million compared to $24.9 million in the first nine months of 2019. During the first quarter of 2020, before the spread of COVID-19, we had started to see indications that the downturn was coming to an end and that the beginning of the next cyclical upturn in the Semi Market was about to commence. However, COVID-19 impacted this timing and, as a result, the recovery in the Semi Market was delayed. Although we saw increasing order ratesforward-looking statements or from our customers in the Semi Market during the second quarter of 2020, this trend did not continue for all of the products we sell into this market during the third quarter of 2020. While the broader Semi Market appears to have entered the next cyclical upturn, we serve only a portion of that broader market. Furthermore, because we sell to a limited number of customers in the ATE and wafer processing sectors within the broader Semi Market, the trend in our orders and net revenues does not always follow the overall trend in these sectors of the broader Semi Market. Accordingly, there can be no assurance that the trend in our orders from customers in the Semi Market will follow the trend in the broader Semi Market, in particular, if the spread of COVID-19 is not further contained and one or more of our significant customers is negatively impacted.

~~In addition, the aftermarket service and support that we provide to our customers has been, and we expect may continue to be, adversely impacted~~prior results. Any forward-looking statement made by COVID-19 due to travel restrictions which continue to exist in some locations and limitations on visitors allowed into customer facilities, which has resulted in some of these activities being reduced or suspended. The net revenues associated with these aftermarket service and support activities typically range from 8% to 10% of our consolidated net revenues. Although these net revenues returned to a more typical range during the third quarter of 2020, if the spread of COVID-19 worsens, these revenues may be reduced in future periods.
During 2019, we made adjustments to reduce our fixed cost structure, which included staff reductions and limits on all discretionary spending. As a result of the delay in the Semi Market recovery discussed above and the impact of COVID-19 on our operations, we have taken actions to further reduce our fixed cost structure with the goal of limiting future losses and maintaining an adequate level of liquidity to operate our business. To date, these additional actions have included further staff reductions, the temporary closure of our EMS manufacturing facility in Fremont, California for approximately three weeks beginning in late March and the temporary closure of our Thermal segment manufacturing facility in Mansfield, Massachusetts for a two-week period at the beginning of April. As discussed further in Note 9 to our consolidated financial statements, on April 10, 2020, we entered into a Loan and Security Agreement (the “Agreement”) with M&T Bank (“M&T”). Under the terms of the Agreement, M&T has provided us with a $7.5 million revolving credit facility. This revolving credit facility was put in place to provide us with additional liquidity in response to the current business environment as a result of COVID-19.
As of the date of the filing of this report, all of our facilities are open, although a significant number of our employees are working remotely as discussed below. As discussed further in Note 3 to our consolidated financial statements, we are in the process of closing our manufacturing operation in Fremont, California. We expect that action to be substantially completed during the fourth quarter of 2020. While we do not currently have any further plans for other facility closures, if the current pace of COVID-19 cannot be sufficiently slowed and the spread of the virus is not contained, our business operations could be further interrupted. If the spread of the virus cannot be contained, government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. These adjustments to our operations could include additional facility closures in the future if demand slows down, which could have a material negative impact on our business, results of operations, financial condition and cash flows. The funds we may be able to draw down under the Agreement may not be sufficient to prevent the need to take further actions, such as staff reductions, facility closures or other salary and benefits adjustments for remaining employees. As a result of our current level of working capital as well as the availability of the revolving credit facility under the Agreement, we currently expect to have sufficient liquidity to operate our business throughout the balance of 2020, as further described in this ~~report.~~
~~Generally, global supply chains~~Report is based only on information currently available to us and ~~the timely availability of products have been, and will continue~~speaks to be, materially disrupted by quarantines, factory slowdowns or shutdowns, border closings and travel restrictions resulting from COVID-19. We have experienced, and expect that we may continue to experience, extended delivery lead times, price increases and/or lack of availability from our normal suppliers for the materials needed to produce our products in a timely manner and/or with the level of margins we typically expect to achieve. We are working to mitigate and address these delays and price increases, but there can be no assurance that we will not experience delays or price increases in the future which could have a material negative impact on our business, results of operations and financial condition.
23
We have implemented workplace safeguards designed to protect the health and well-being of our employees. A significant number of employees have been authorized to work from home and have been provided with the tools and technology necessary to do so. However, the process of working remotely may result in those employees not being as effective or responsive to our customers’ needs as they would be under more normal conditions. This could result in lost business opportunities or have other negative impacts on our business. Remaining employees in our facilities are following World Health Organization (“WHO”) and Centers for Disease Control and Prevention (“CDC”) recommended safety practices, as well as state and local directives, but there can be no assurances that we can successfully avoid one or more of our employees contracting COVID-19 and entering our facilities while infected. Should this occur, or should we have employees who become ill or otherwise are unable to work, we may experience limitations in employee resources or may be required to close affected facilities for a time to clean and disinfect appropriately.
The duration of any business disruption and related financial impact cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs. The extent to which COVID-19 may impact our operating results, financial condition, and liquidity will depend on future developments, which are highly uncertain and cannot be predictedcircumstances only as of the date ofon which it is made. We are not obligated to update these forward-looking statements, even though our situation may change in the filing of this report, including new information that may emerge concerning the severity of COVID-19 and steps taken to contain COVID-19 or treat its impact, among others. The adverse effects of COVID-19 on our business could be material in future periods. future.

Overview

This MD&A should be read in conjunction with the accompanying consolidated financial statements.

We are a global supplier of ~~precision-engineered~~innovative test and process solutions for use in manufacturing and testing across a wide range of markets including automotive, defense/aerospace, ~~energy,~~ industrial, life sciences, semiconductor and telecommunications. We manage our business as two operating segments: Thermal ~~Products (“Thermal”)~~ and ~~Electromechanical Solutions (“EMS”).~~EMS. Our Thermal segment designs, manufactures and sells our thermal test and thermal process products while our EMS segment designs, manufactures and sells our semiconductor test products.

Our EMS segment sells its products to semiconductor manufacturers and third-party test and assembly houses (end user sales) and to ATE manufacturers ~~(OEM sales)~~(“OEM sales”), who ultimately resell our equipment with theirs to both semiconductor manufacturers and third-party test and assembly houses. These sales all fall within the ATE sector of the broader semiconductor market. Our Thermal segment sells its products to many of these same types of customers; however, it also sells ~~into~~to customers in the wafer processing sector within the broader semiconductor market and to customers in a variety of other markets outside the semiconductor market, including the automotive, defense/aerospace, ~~energy,~~ industrial ~~and telecommunications markets. As a result of the acquisition of Ambrell in May 2017, our Thermal segment also sells into the~~(including consumer products packaging, fiber optics and other sectors within the broader industrial ~~market,~~market), life sciences and ~~into the wafer processing sector within the broader semiconductor market.~~telecommunications markets.

Both 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 ~~mix~~needs of our customers ultimately determine the products that we sell in ~~any period is ultimately determined by our customers' needs.~~a given time period. Therefore, the mix of products sold in ~~any~~a given period can change significantly ~~from~~when compared against the prior period. As a result, our consolidated gross margin ~~can~~may be significantly impacted ~~in any given period~~ by a change in the mix of products sold in ~~that~~a particular period.

- 22 -

Markets

~~Historically, we have referred~~We refer to ~~our markets as “Semiconductor” (which includes both~~ the ~~broader~~ semiconductor market, ~~as well as~~including the more specialized semiconductor ATE and wafer processing sectors within the broader semiconductor market), and “Non-Semiconductor” (which included all of the other markets we serve). In the second quarter of 2019, we began referring to the semiconductor market, including the ATE and wafer processing sectors within that market, as the “Semi Market.” All other markets are designated as “Multimarket.” Business within our Thermal segment can fall into either the Semi Market or Multimarket, depending upon how our customers utilize our products or upon their respective applications.
While the Semi Market represents the historical roots of inTEST and remains a very important component of our business, Multimarket is where we have focused our strategic growth efforts in the last several years. Our goal ~~has been~~was to grow our business, both organically and through acquisition, in these markets as we believe these markets have historically been less cyclical than the Semi Market. ItMoving forward, with the launch of our new strategic plan which is ~~important~~discussed in Part 1, Item 1 under “Our Strategies” in our 2020 Form 10-K, we intend to ~~note that business within~~broaden our ~~Thermal segment can fall into either~~strategic growth efforts to target both organic and inorganic growth in all of our currently served markets, which includes the Semi ~~Market or Multimarket, depending upon how~~Market. Our goal is to further expand our ~~customers utilize~~existing product lines, strengthen our ~~products or upon their respective applications.~~ positions in served markets and drive expansion into new markets.
Prior to ~~the~~our acquisition of Ambrell in May 2017, we offered only highly specialized engineering solutions used for testing applications in Multimarket, the demand for which is limited and which varies significantly from period to period. Our acquisition of Ambrell not only provided expansion into new markets but also broadened our product offerings to include products sold into process or manufacturing applications. Historically, Ambrell sold its precision induction heating systems almost exclusively to customers in the industrial market but since 2018, has also had significant sales into the Semi Market. Overall, however, the acquisition of Ambrell has ~~reduced~~helped to diversify our ~~dependence on customers in the Semi Market. We expect that our future orders and net revenues will be approximately equally split between the Semi Market and Multimarket.~~customer base.
24

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")~~ or, for Ambrell, the demand for wafer processing equipment. Demand for ATE or wafer processing equipment is 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 semiconductors and products incorporating semiconductors. 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 addition, we continue to focus on design improvements and new approaches for our own products that contribute to our net revenues as our customers adopt these new products.

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 net revenues 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 net revenues 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 net revenues 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.
In addition to being cyclical, the Semi Market has also developed a seasonal pattern, with the second and third quarters being the periods of strong demand and the first and fourth quarters being periods of weaker demand. These periods of heightened or reduced demand can shift depending on various factors impacting both our customers and the markets that they serve.

Third party market share statistics are not available for the products we manufacture and sell into the Semi Market; therefore, comparisons of period over period changes in our market share are not easily determined. As a result, it is difficult to ascertain if Semi Market volatility in any period is the result of macro-economic or customer-specific factors impacting Semi Market demand, or if we have gained or lost market share to a competitor during the period.

While approximately half of our orders and net revenues are generally 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 net revenues to deviate from the overall trend in the Semi 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~~lack of consistency 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.

- 23 -

As previously mentioned, as part of our ongoing strategy to ~~reduce the impact of Semi Market volatility on~~grow our business, ~~operations,~~ we continue to diversify our served markets to address the thermal test and thermal process requirements of several markets outside the Semi Market. These include the automotive, defense/aerospace, ~~energy,~~ industrial, life sciences, telecommunications and other markets, which we refer to as Multimarket. We believe that these markets are usually less cyclical than the Semi Market. While market share statistics exist for some of these markets, due to the nature of our highly specialized product offerings in these markets, we do not expect broad market penetration in many of these markets and therefore do not anticipate developing meaningful market shares in most of these markets.

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

25
Acquisitions

On October 6, 2021, we acquired substantially all of the assets of Z-Sciences, as discussed further in Note 15 to our consolidated financial statements in this Report. Z-Sciences is a developer of ultra-cold storage solutions for the life sciences cold chain market. The acquisition of the Z-Sciences business will broaden the product line of our Thermal segment. The purchase price for the assets, net of liabilities assumed, was approximately $500,000 in cash. The Z-Sciences acquisition will be accounted for as a purchase business combination and, accordingly, the results will be included in our consolidated results of operations from the date of acquisition. We have not completed our purchase accounting for this transaction and are still in the process of valuing the assets acquired. We expect to complete this process by December 31, 2021.
On October 28, 2021, we acquired substantially all of the assets of Videology, as discussed further in Note 15 to our consolidated financial statements in this Report. Videology is a global designer, developer and manufacturer of OEM digital streaming and image capturing solutions. The purchase price for the assets, net of liabilities assumed, was approximately $12 million in cash. The Videology acquisition will be accounted for as a purchase business combination and, accordingly, the results will be included in our consolidated results of operations from the date of acquisition. We have not completed our purchase accounting for this transaction and are still in the process of valuing the assets acquired. We expect to complete this process by December 31, 2021.
Both acquired businesses will be integrated into our Thermal segment.
~~EMS Segment~~ Credit Facility
As discussed further in Notes 9 and 15 to our consolidated financial statements in this Report, on October 15, 2021, we entered into the October 2021 Agreement with M&T Bank. The October 2021 Agreement includes a $25 million non-revolving delayed draw term note and a $10 million revolving credit facility and replaces our prior credit facility with M&T Bank. The October 2021 Agreement has a five-year contract period that expires on October 15, 2026, and draws under the delayed draw 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 non-revolving delayed draw term note will accrue interest based on SOFR 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 discussed above. 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 October 28, 2021, the October 2021 Agreement was amended to include our subsidiary, Videology Imaging Corporation, as a subsidiary guarantor thereunder.
Restructuring and ~~Facility Consolidation~~Other Charges

On September 21, 2020, we notified employees in our Fremont, California facility of a plan to consolidate all manufacturing for our EMS segment into ~~the~~our manufacturing ~~operation~~operations located in Mt. Laurel, New Jersey. ~~Currently,~~Prior to the consolidation, our interface products ~~are~~were manufactured in the Fremont facility, and our manipulator and docking hardware products ~~are~~were manufactured in the Mt. Laurel facility. ~~This action will result in the closure of the Fremont facility and the termination of certain employees at that location.~~ The consolidation ~~of manufacturing operations is being~~was undertaken to better serve customers through streamlined operations and reduce the fixed annual operating costs for the EMS segment. ~~The consolidation is expected to be substantially completed during the fourth quarter of 2020.~~ A small engineering and sales office ~~will be~~is being maintained in northern ~~California after the consolidation~~California. The integration of our EMS manufacturing operations ~~has been completed.~~took longer than originally anticipated primarily as a result of the significant increase in our business activity in the first nine months of 2021. We completed the integration during the third quarter of 2021. The costs related to these actions are included in ~~general~~restructuring and ~~administrative expense~~other charges on our consolidated statement of operations and are discussed in more detail in Note 3 to our consolidated financial ~~statements.~~statements in this Report and in our 2020 Form 10-K.

- 24 -

Orders and Backlog

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

Three
Months Ended
September 30,

Change

Three
Months
Ended
June 30,

Change

Three
Months Ended
September 30,

Change

Three
Months
Ended
June 30,

Change

2020

2019

$

%

2020

$

%

2021

2020
$
%
2021 $ %

Orders:

Thermal
$ 11,004 $ 9,543 $ 1,461 15
%
$ 10,446 $ 558 5
%
$ 13,713 $ 11,004 $ 2,709 25
%
$ 14,826 $ (1,113
)
(8
)%
EMS
3,423 4,314 (891
)
(21
)%
3,472 (49
)
(1
)%
7,435 3,423 4,012 117
%
10,279 (2,844
)
(28
)%
$ 14,427 $ 13,857 $ 570 4
%
$ 13,918 $ 509 4
%
$ 21,148 $ 14,427 $ 6,721 47
%
$ 25,105 $ (3,957
)
(16
)%

Semi Market
$ 7,263 $ 6,602 $ 661 10
%
$ 7,299 $ (36
)
-
%
$ 13,365 $ 7,263 $ 6,102 84
%
$ 16,532 $ (3,167
)
(19
)%
Multimarket
7,164 7,255 (91
)
(1
)%
6,619 545 8
%
7,783 7,164 619 9
%
8,573 (790
)
(9
)%
$ 14,427 $ 13,857 $ 570 4
%
$ 13,918 $ 509 4
%
$ 21,148 $ 14,427 $ 6,721 47
%
$ 25,105 $ (3,957
)
(16
)%

Nine
Months Ended
September 30,

Change

Nine
Months Ended
September 30,

Change

2020

2019

$

%

2021

2020

%

Orders:

Thermal
$ 31,949 $ 30,476 $ 1,473 5
%
$ 43,285 $ 31,949 $ 11,336 35
%
EMS
10,172 11,197 (1,025
)
(9
)%
28,198 10,172 18,026 177
%
$ 42,121 $ 41,673 $ 448 1
%
$ 71,483 $ 42,121 $ 29,362 70
%

Semi Market
$ 21,254 $ 20,804 $ 450 2
%
$ 47,071 $ 21,254 $ 25,817 121
%
Multimarket
20,867 20,869 (2
)
-
%
24,412 20,867 3,545 17
%
$ 42,121 $ 41,673 $ 448 1
%
$ 71,483 $ 42,121 $ 29,362 70
%

Total consolidated orders for the three months ended September 30, ~~2020~~2021 were ~~$14.4~~$21.1 million compared to ~~$13.9~~$14.4 million for the same period in ~~each of~~2020 and $25.1 million for the three months ended ~~September 30, 2019 and~~ June 30, ~~2020.~~2021. Orders from customers in Multimarket for the three months ended September 30, ~~2020~~2021 were ~~$7.2 million, or 50%~~37% of total consolidated orders compared to ~~$7.3 million, or 52%~~50% of total consolidated orders for the same period in ~~2019~~2020 and ~~$6.6 million or 48%~~34% of total consolidated orders for the three months ended June 30, ~~2020.~~

2021.

We believe that the significant level of increase in ~~our consolidated~~ orders from the Semi Market during the three months ended September 30, ~~2020~~2021 as compared to the same period in ~~2019 primarily~~2020 reflects the impact of increased demand ~~in our Thermal segment from certain of its Semi Market customers. This was partially offset by our EMS segment continuing~~for semiconductors (also referred to ~~experience reduced levels of demand from~~as “integrated circuits” or “ICs”), generally, which has led to the ~~Semi Market~~current shortage in the ~~third quarter~~global supply. We believe this increase in the demand for semiconductors is being driven both by changing technology as well as increased use of ~~2020~~technology across all aspects of daily life, such as in devices that facilitate remote work and education, smart technology used in homes and businesses, the increase in the number of ICs used in the automotive industry and changes occurring in the telecommunications and mobility markets. We also experienced an increase in orders from Multimarket for the three months ended September 30, 2021 as compared to the same period in ~~2019. As previously discussed under~~2020. This increase was primarily from the ~~Markets section above,~~automotive market, which includes the electric vehicle (“EV”) market. During the third quarter of 2021, we ~~periodically see instances when demand within the Semi Market is not consistent for each~~received a significant order from one of our ~~segments or for any given product within a particular segment. We believe~~EV customers which we expect to ship over the ~~increase in~~next several quarters. Our orders ~~for our Thermal segment as well as recent indications~~ from customers ~~of our EMS segment signal we are coming out of the cyclical downturn~~ in the Semi Market that has been ongoing since late 2019. However, there can be no assurance that this trend will continue, in particular, if the spread of COVID-19 cannot be further contained, or worsens, and additional government mandated restrictions or shutdowns are enacted.
26
~~We believe that the increase in our consolidated orders during the three months ended September 30, 2020~~Multimarket declined as compared to the three months ended June 30, ~~2020 primarily reflects portions of our business returning to the levels we experienced prior to the onset of COVID-19. We had seen negative impacts in~~2021. During the second quarter of ~~2020~~2021, we experienced higher demand from ~~COVID-19 on certain aspects of our business,~~customers in ~~particular for our Thermal segment related~~both the defense/aerospace and automotive (both traditional and EV) markets as compared to ~~aftermarket service and support. We also experienced reductions in demand during~~ the ~~second~~third quarter of ~~2020 for induction heating products from~~2021. It is important to note that we have seen an increasing tendency by certain of our customers, ~~who had been impacted by government mandated closures. During~~particularly those in Multimarket, to place large orders with us that will ship over several quarters. We expect this may, at times, result in period over period fluctuations in order levels that are not necessarily indicative of changing demand but rather reflect the ~~third quarter~~timing of 2020, we saw an improvement as customers re-opened facilities and began to allow limited service and support visits or found alternate methods to access service and support, either virtually or by shipping equipment to us for service.when these large orders were placed.

At September 30, ~~2020,~~2021, our backlog of unfilled orders for all products was approximately ~~$8.7~~$20.4 million compared with approximately ~~$8.0~~$8.7 million at September 30, ~~2019~~2020 and ~~$8.7~~$20.4 million at June 30, ~~2020.~~2021. Our backlog includes customer orders which we have accepted, ~~substantially all~~approximately 75% of which we expect to deliver in ~~2020.~~2021. 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.

- 25 -

Net Revenues

The following table sets forth, for the periods indicated, a breakdown of the net revenues by operating segment and market (in thousands).

Three
Months Ended
September 30,

Change

Three
Months
Ended
June 30,

Change

Three
Months Ended
September 30,

Change

Three
Months
Ended
June 30,

Change

2020

2019

$

%

2020

$

%

2021

2020

$

%

2021
$ %
Net revenues:

Thermal
$ 10,724 $ 10,622 $ 102 1
%
$ 9,476 $ 1,248 13
%
$ 13,041 $ 10,724 $ 2,317 22
%
$ 12,766 $ 275 2
%
EMS
3,719 4,010 (291
)
(7
)%
3,799 (80
)
(2
)%
8,103 3,719 4,384 118
%
9,054 (951
)
(11
)%
$ 14,443 $ 14,632 $ (189
)
(1
)%
$ 13,275 $ 1,168 9
%
$ 21,144 $ 14,443 $ 6,701 46
%
$ 21,820 $ (676
)
(3
)%

Semi Market
$ 7,387 $ 7,126 $ 261 4
%
$ 6,858 $ 529 8
%
$ 13,656 $ 7,387 $ 6,269 85
%
$ 15,677 $ (2,021
)
(13
)%
Multimarket
7,056 7,506 (450
)
(6
)%
6,417 639 10
%
7,488 7,056 432 6
%
6,143 1,345 22
%
$ 14,443 $ 14,632 $ (189
)
(1
)%
$ 13,275 $ 1,168 9
%
$ 21,144 $ 14,443 $ 6,701 46
%
$ 21,820 $ (676
)
(3
)%

Nine
Months Ended
September 30,

Change

Nine
Months Ended
September 30,

Change

2020

2019

$

%

2021

2020
$
%

Net revenues:

Thermal
$ 29,534 $ 33,775 $ (4,241
)
(13
)%
$ 36,862 $ 29,534 $ 7,328 25
%
EMS
9,414 13,271 (3,857
)
(29
)%
25,658 9,414 16,244 173
%
$ 38,948 $ 47,046 $ (8,098
)
(17
)%
$ 62,520 $ 38,948 $ 23,572 61
%

Semi Market
$ 19,256 $ 24,878 $ (5,622
)
(23
)%
$ 42,653 $ 19,256 $ 23,397 122
%
Multimarket
19,692 22,168 (2,476
)
(11
)%
19,867 19,692 175 1
%
$ 38,948 $ 47,046 $ (8,098
)
(17
)%
$ 62,520 $ 38,948 $ 23,572 61
%

Total consolidated net revenues for the three months ended September 30, ~~2020~~2021 were ~~$14.4~~$21.1 million compared to ~~$14.6~~$14.4 million for the same period in ~~2019~~2020 and ~~$13.3~~$21.8 million for the three months ended June 30, ~~2020.~~ 2021. We believe the increase in our consolidated net revenues as compared to the same period in 2020 reflects the aforementioned increase in demand from the Semi Market. We saw this demand decrease in the third quarter of 2021 which resulted in a 13% decline in our net revenues from the Semi Market for the third quarter of 2021 as compared to the second quarter of 2021. This decline was partially offset by an increase in shipments to Multimarket customers, primarily those in the industrial market which we believe reflects the ongoing, broad-based recovery within industrial sectors that we serve. We also attribute the increase to new product introductions and the reopening of trade shows, which have resulted in new customer opportunities and wins. We believe the EV market continues to gain traction with a variety of applications for induction heating technology.
Net revenues from customers in Multimarket for the three months ended September 30, ~~2020~~2021 were ~~$7.1 million, or 49%~~35% of total consolidated net revenues compared to ~~$7.5 million, or 51%~~49% of total consolidated net revenues for the same period in ~~2019~~2020 and ~~$6.4 million or 48%~~28% of total consolidated orders for the three months ended June 30, ~~2020.~~2021.

COVID-19 Pandemic
As of the date of this Report, our U.S. offices remain open. We ~~believe~~are following the ~~decrease~~guidance of the CDC and, accordingly, we are requiring all employees working in our ~~consolidated net revenues as compared~~offices to ~~the same period~~wear masks and maintain appropriate social distancing. We are also continuing to allow employees to work remotely either part-time or full-time in 2019 reflects a combination of factors including the impact of COVID-19 on our revenues from Multimarket customers, which are all in our Thermal segment, and the impact of both COVID-19 and the aforementioned downturn in the Semi Market on our EMS segment. We believe the increase in our consolidated net revenues for the three months ended September 30, 2020 as compared to the three months ended June 30, 2020 reflects that the impact of COVID-19 is lessening and we are beginning to experience increased demand from certain of our Semi Market customers.circumstances where possible. As previously discussed under the Orders and Backlog section above, we believe this signals that the downturn in the Semi Market is coming to an end, although there can be no assurance that this trend will continue or what the pace of the ~~recovery may be.~~date of this Report, our offices in Europe have also reopened to varying degrees, while our employees in Asia remain under more significant restrictions. Our employees outside of the U.S. continue to follow the guidance of their local regulatory authorities, which in most cases includes wearing masks, observing social distancing, limiting travel and quarantining after travel, as required.

27- 26 -

While the negative impact of COVID-19 on our business was reduced significantly in the second half of 2020 and the first nine months of 2021, the spread of the virus or variants of the virus could continue to worsen and one or more of our significant customers or suppliers could be impacted, or significant additional governmental regulations and restrictions could be imposed, thus negatively impacting our business in the future. We continue to monitor the situation closely in the regions in which we operate in the U.S. and abroad 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 our two operating segments are generally affected by the same factors described in the Overview ~~and COVID-19 Pandemic sections~~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.

Three Months Ended September 30, ~~2020~~2021 Compared to Three Months Ended September 30, ~~2019~~2020

Net Revenues. Net revenues were ~~$14.4~~$21.1 million for the three months ended September 30, ~~2020~~2021 compared to ~~$14.6~~$14.4 million for the same period in ~~2019, a decrease~~2020, an increase of ~~$189,000,~~$6.7 million, or 1%46%. We believe the ~~decrease~~increase in our net revenues during the third quarter of ~~2020~~2021 primarily reflects the factors previously discussed in the Overview ~~and COVID-19 Pandemic sections.~~

section.

Gross Margin. Our consolidated gross margin was ~~45%~~49% of net revenues for the three months ended September 30, ~~2020~~2021 as compared to ~~49%~~45% of net revenues for the same period in ~~2019.~~2020. The ~~decrease~~increase in our gross margin primarily reflects ~~changes in product and customer mix. To a lesser extent, we also had an increase in~~that our fixed operating costs ~~as a percentage of~~were more fully absorbed by the higher net ~~revenues.~~revenue levels in 2021. Although our fixed operating costs were relatively unchanged in absolute dollar terms, ~~they increased~~ as a percentage of net revenues ~~as a result~~these costs decreased from 17% of ~~not being as fully absorbed by the lower~~ net revenues ~~levels in~~for the three months ended September 30, 2020 to 12% of net revenues for the same period in 2021. During the three months ended September 30, 2021 as compared to the same period in ~~2019.~~

2020, decreases in facility-related costs in our EMS segment and reduced premiums for medical insurance in both our segments were offset by increased salaries and benefits expense due to additional headcount in our Thermal segment. The decrease in our fixed operating costs as a percentage of net revenues during the three months ended September 30, 2021 as compared to the same period in 2020 was partially offset by an increase in our component material costs, reflecting changes in product mix.

Selling Expense. Selling expense was ~~$1.7~~$2.8 million for the three months ended September 30, ~~2020~~2021 compared to ~~$2.0~~$1.7 million for the same period in ~~2019, a decrease~~2020 an increase of ~~$297,000,~~$1.1 million, or ~~15%~~63%. ~~The decrease~~Commissions increased by $560,000 which primarily reflects ~~a reduction~~the higher net revenue levels. We also had an increase in salaries and benefits expense due to additional headcount and higher levels of travel and trade show expense ~~reflecting~~as COVID-19 restrictions were reduced or eliminated. We expect this increase in travel costs to continue throughout the ~~impact~~balance of ~~COVID-19. In late March 2020,~~2021 as we ~~suspended all non-essential travel, including attendance at trade shows. To~~return to a ~~lesser extent, there was also a reduction in warranty expense~~more normal business model with regard to customer support and ~~lower levels of commission expense, as a result of the lower net revenue levels, and a decrease in salary and benefits expense in our Thermal segment due to headcount reductions.~~

on-site visits.

Engineering and Product Development Expense. Engineering and product development expense was ~~relatively~~essentially unchanged at $1.3 million for both the three months ended September 30, ~~2020~~2021 and ~~2019.~~2020. Increases in ~~salaries~~our EMS segment as a result of headcount additions and ~~benefits expense~~higher spending on third-party consultants used in product development were offset by reductions in our Thermal segment ~~were offset by a reduction~~for legal fees related to our intellectual property and supplies used in ~~spending on third-party consultants in our Thermal segment and reduced travel in both of our segments.~~
product development.

General and Administrative Expense. General and administrative expense was ~~$3.0~~$3.6 million for the three months ended September 30, ~~2020~~2021 compared to ~~$3.1~~$2.8 million for the same period in ~~2019, a decrease~~2020, an increase of ~~$134,000,~~$821,000, or 4%29%. The expense for the three months ended September 30, 2020 included $133,000 for severance and medical benefits for our former CEO who resigned on August 6, 2020. In connection with his resignation, we also recorded a reduction of $117,000 in stock-based compensation expense related to awards that he forfeited at his termination date. During the three months ended September 30, ~~2020~~2021, we spent $336,000 on costs related to potential acquisitions which is a part of our corporate growth strategy, as previously discussed. There were no similar expenses in the three months ended September 30, 2020. In addition, we recorded ~~lower~~higher levels of stock-based compensation expense, ~~for salaries~~reflecting an increase in the price of our common stock, and ~~benefits,~~an increase in profit-based bonuses, reflecting ~~a reduction~~our increased earnings in ~~administrative staff, lower travel costs and reduced spending on third-party professionals who assist us~~the three months ended September 30, 2021 as compared to the same period in ~~a variety of strategic and compliance related matters.~~2020. These ~~reductions~~increases were partially offset by ~~accruals~~a reduction in non-acquisition related legal fees during the three months ended September 30, 2021 as compared to the same period in 2020. The higher legal fees in the third quarter of 2020 were primarily related to the ~~guaranteed minimum cash bonus that will be paid to~~resignation of our former CEO and the hiring of our new CEO ~~for~~which occurred in August 2020.

Restructuring and Other Charges. For the three months ended September 30, 2021, we recorded $51,000 in restructuring and other charges related to the consolidation of our EMS manufacturing operations. During the same period in 2020, we recorded $161,000 in restructuring and other charges related primarily to severance and other one-time termination benefits for our former CEO.
- 27 -

Income Tax Expense (Benefit). For the three months ended September 30, ~~2020,~~2021, we recorded income tax expense of $357,000 compared to an income tax benefit of $25,000 ~~compared to income tax expense of $147,000~~ for the same period in ~~2019.~~2020. Our effective tax rate was ~~(6)%~~14% for the three months ended September 30, ~~2020~~2021 compared to ~~19%~~(6)% for the same period in ~~2019.~~2020. 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. The lower effective tax ~~rates~~rate in ~~each of~~ the three months ended September 30, 2020 ~~and 2019 reflect~~reflects adjustments that were made to bring the effective tax ~~rates~~rate for the nine-month ~~periods~~period ended September 30, 2020 ~~and 2019~~ to the expected annualized effective tax rate as of ~~September 30 in each year.~~that date.

Nine Months Ended September 30, ~~2020~~2021 Compared to Nine Months Ended September 30, ~~2019~~2020

Net Revenues. Net revenues were ~~$38.9~~$62.5 million for the nine months ended September 30, ~~2020~~2021 compared to ~~$47.0~~$38.9 million for the same period in ~~2019, a decrease~~2020, an increase of ~~$8.1~~$23.6 million, or ~~17%~~61%. We believe the ~~decrease~~increase in our net revenues during the first nine months of ~~2020~~2021 primarily reflects the ~~factors previously~~increase in demand from the Semi Market as discussed in the ~~Overview, including the impact of the ongoing downturn in the Semi Market and COVID-19.~~
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Overview.

Gross Margin. Our consolidated gross margin was ~~45%~~49% of net revenues for the nine months ended September 30, ~~2020~~2021 as compared to ~~48%~~45% of net revenues for the same period in ~~2019.~~2020. The ~~decrease~~increase in our gross margin primarily reflects that our fixed operating costs were more fully absorbed by the higher net revenue levels in 2021. Although our fixed operating costs were relatively unchanged in absolute dollar terms, as a percentage of net revenues ~~primarily reflects an increase in our fixed operating costs as a percentage of net revenues. Although our fixed operating~~these costs decreased ~~by $356,000 in absolute dollar terms, they represented~~from 19% of net revenues for the nine months ended September 30, 2020 ~~as compared~~ to ~~16%~~12% of net revenues for the same period in ~~2019. This is a result of not being as fully absorbed by~~2021. During the ~~lower net revenues levels in the first~~ nine months ~~of 2020.~~ended September 30, 2021 as compared to the same period in 2020, decreases in facility related costs, primarily in our EMS segment, and a reduction in premiums for medical insurance in both our segments were offset by increased salaries and benefits expense due to additional headcount in our Thermal segment and, to a lesser extent, increases in supplies used in our manufacturing facilities. The ~~$356,000~~ decrease in our fixed operating costs ~~primarily reflects~~as a ~~reduction~~percentage of net revenues during the nine months ended September 30, 2021 as compared to the same period in ~~materials used in operations and service, headcount reductions and lower levels of outsourced labor in our Thermal segment. These decreases were~~2020 was partially offset by an increase in ~~facilities~~our component material costs, reflecting changes in ~~our Thermal segment.~~

product mix.

Selling Expense. Selling expense was ~~$5.6~~$7.8 million for the nine months ended September 30, ~~2020~~2021 compared to ~~$6.5~~$5.6 million for the same period in ~~2019, a decrease~~2020 an increase of ~~$945,000,~~$2.3 million, or ~~15%~~41%. ~~The decrease~~Commissions increased $1.5 million and standard warranty accruals increased $168,000, both of which primarily ~~reflects a reduction~~reflect the higher net revenue levels. We also had an increase in salaries and benefits expense due to additional headcount in our EMS segment and higher levels of travel and trade show expense ~~reflecting~~in both of our segments as COVID-19 restrictions were reduced or eliminated. We expect this increase in travel costs to continue throughout the ~~aforementioned suspension~~balance of ~~all non-essential travel~~2021 as we return to a more normal business model with regard to customer support and ~~trade show attendance as a result of COVID-19. In addition, there was also a reduction in warranty expense and lower levels of commission expense, as a result of the lower net revenue levels.~~

on-site visits.

Engineering and Product Development Expense. Engineering and product development expense was ~~relatively unchanged at $3.8~~$4.0 million for ~~both~~ the nine months ended September 30, 2021 compared to $3.8 million for the same period in 2020 ~~and 2019. Increases in~~an increase of $187,000, or 5%. The increase primarily reflects higher salaries and benefits expense ~~were offset by~~as a ~~reduction~~result of headcount additions in ~~spending on travel, third-party consultants and materials used in product development.~~
both our segments.

General and Administrative Expense. General and administrative expense was ~~$8.7~~$10.6 million for the nine months ended September 30, ~~2020~~2021 compared to ~~$10.5~~$8.5 million for the same period in ~~2019, a decrease~~2020, an increase of ~~$1.8~~$2.0 million, or ~~17%~~24%. During the nine months ended September 30, ~~2019,~~2021, as compared to the same period in 2020, we recorded higher levels of stock-based compensation expense, reflecting an increase in the price of our common stock, and an increase in profit-based bonuses, reflecting our increased earnings in the first nine months of 2021. In addition, during the nine months ended September 30, 2021, we incurred ~~$683,000~~$359,000 of costs related to ~~an acquisition opportunity which we decided not~~potential acquisitions and $250,000 of legal and consulting fees and stock-based compensation costs related to ~~pursue.~~the retirement of our former CFO and the appointment of our new CFO. There were no similar costs in the nine months ended September 30, 2020. ~~During~~
Restructuring and Other Charges. For the nine months ended September 30, ~~2019,~~2021, we ~~also~~ recorded $303,000 in restructuring ~~costs of $242,000, primarily~~and other charges related to retirement of our former CFO and the consolidation of ~~Ambrell’s European~~our EMS manufacturing operations. ~~This compares to~~During the same period in 2020, we recorded $207,000 in restructuring ~~costs of $179,000 recorded during the nine months ended September 30, 2020, primarily~~and other charges related to the ~~aforementioned~~ resignation of our former CEO in August 2020 and ~~to a lesser extent, employee terminations~~headcount reductions in our Corporate staff and our Thermal segment which were a result of reduced levels of demand. During the nine months ended September 30, 2020 we also recorded reduced spending on third-party professionals who assist us in a variety of strategic and compliance related matters, lower travel costs, reduced levels of stock-based compensation expense, lower salaries and benefits expense and reduced levels of accruals for profit-based bonuses.segment.

Income Tax Expense (Benefit). For the nine months ended September 30, ~~2020,~~2021, we recorded income tax expense of $1.2 million compared to an income tax benefit of $262,000 ~~compared to income tax expense of $358,000~~ for the same period in ~~2019.~~2020. Our effective tax rate was ~~34%~~14% for the nine months ended September 30, ~~2020~~2021 compared to ~~18%~~34% for the same period in 2019. The increase in our effective tax rate primarily represents the impact of changes in the expected mix of foreign and domestic source income for 2020 and other adjustments related to recently enacted tax regulations where specific application of the regulations is still evolving.2020. 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. The lower effective tax rate in the nine months ended September 30, 2021 primarily reflects both an increase in the deduction for foreign-derived intangible income and an increase in the level of our tax deductions related to stock-based compensation. To a lesser extent, we also recorded increased levels of expected tax credits driven by both research and development activities and foreign operations.

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Liquidity and Capital Resources

As discussed more fully in the Overview, our business and results of operations are substantially dependent upon the demand for ATE by semiconductor manufacturers and companies that specialize in the testing of ICs. The cyclical and volatile nature of demand for ATE makes estimates of future revenues, results of operations and net cash flows ~~difficult, especially in light of COVID-19.~~difficult.

Our primary historical source of liquidity and capital resources has been cash flow generated by our operations, and we manage our businesses to maximize operating cash flows as our primary source of liquidity. We use cash to fund growth in our operating assets, for new product research and development ~~for acquisitions~~ and for ~~stock repurchases.~~acquisitions.

Liquidity

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

September 30,
2020

December 31,
2019

Cash and cash equivalents
$ 9,473 $ 7,612
Working capital
$ 17,358 $ 16,534
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September 30,
2021

December 31,
2020

Cash and cash equivalents
$ 18,743 $ 10,277
Working capital
$ 27,588 $ 18,108

As of September 30, ~~2020, $3.4~~2021, $2.5 million, or ~~36%~~13%, of our cash and cash equivalents was held by our foreign subsidiaries. ~~In addition, included in our cash and cash equivalents at September 30, 2020 was $1.4 million in advance deposits from customers on orders we expect to ship in the fourth quarter of 2020.~~ We currently expect our cash and cash equivalents, in combination with the borrowing availability under our revolving credit facility to be sufficient to support our short-term working capital requirements and other corporate requirements. Our revolving credit facility is discussed in Notes 19 and 915 to our consolidated financial ~~statements. Should~~statements in this Report.
Our material short-term cash requirements include payments due under our various lease agreements, recurring payroll and benefits obligations to our employees and purchase commitments for materials that we use in the ~~impact~~products we sell. We estimate that our minimum short-term working capital requirements currently range between $5.0 million and $7.0 million. We also anticipate making investments in our business in the next twelve months including hiring of ~~COVID-19 on~~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 ~~including~~to be sufficient to support these additional investments as well as our current short-term cash requirements.
Our current growth strategy includes pursuing acquisition opportunities for complementary businesses, technologies or products. As discussed further in the ~~disruption~~Overview, on October 28, 2021, we acquired substantially all of the assets of Videology. We utilized our new credit facility which is also discussed further in the Overview to finance the purchase price of $12 million. We currently anticipate that any additional long-term cash requirements related to our ~~business caused by potential future closures~~acquisition strategy would be funded through a combination of our ~~facilities~~cash and cash equivalents, our new credit facility or reduced demand from our customers, be more significant than we currently anticipate, we may need additional financial resources, including additional debt or equity financings. There can be no assurance that any such debt or equity financings would be available on favorable terms or rates or at all.by issuing equity.

Cash Flows

Operating ~~Activities.~~Activities. For the nine months ended September 30, ~~2020,~~2021, we recorded a net ~~loss~~earnings of ~~$515,000 and our net~~$7.0 million. Net cash provided by operations during this period was ~~$2.4~~$8.1 million. During ~~this same period,~~the nine months ended September 30, 2021, we had non-cash charges of ~~$2.4~~$2.2 million for depreciation and amortization which included ~~$977,000~~$760,000 of amortization related to our ROU assets. Our operating lease liabilities declined $918,000 during this same period. During the nine months ended September 30, ~~2020,~~2021, we also recorded ~~$480,000~~$1.1 million for amortization of deferred compensation expense related to stock-based ~~awards~~awards. Accounts receivable increased $3.9 million during the nine months ended September 30, 2021, reflecting the significant increase in net revenues in the first nine months of 2021, while inventories, accounts payable and accrued sales commissions increased $2.1 million, $1.4 million and $366,000, respectively, also reflecting the increase in business levels. Accrued wages and benefits increased $942,000 during the first nine months of 2021 reflecting higher levels of profit-based bonuses accruals as a ~~provision for excess and obsolete inventory~~result of ~~$410,000.~~our level of profit in the first nine months of 2021. Customer deposits increased $1.7 million during the nine months ended June 30, 2021, primarily in our Thermal segment.
Investing Activities. During the nine months ended September 30, 2020, customer deposits and deferred revenue increased $936,000, primarily reflecting an increase in customers placing deposits with their orders for future shipment, our operating lease liabilities decreased $977,000, primarily reflecting cash payments made under our facility lease agreements, and our domestic and foreign taxes payable decreased $240,000, primarily reflecting the accrual of an income tax benefit on our loss for the nine months.

~~Investing Activities.~~ ~~During the nine months ended September 30, 2020,~~2021, purchases of property and equipment were ~~$520,000. During the fourth quarter of 2020, we expect to spend approximately $202,000 to complete the tenant~~$577,000, primarily reflecting leasehold improvements to our facility in Mt. Laurel, New ~~Jersey. These improvements are being done in connection with reducing the size of that facility and consolidating manufacturing operations from~~Jersey which were funded using our ~~Fremont, California operation as discussed under the Overview section above and in Notes 3 and 8 to our consolidated financial statements.~~working capital. We have no ~~other~~ significant commitments for capital expenditures for the balance of ~~2020;~~2021; 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.

Financing Activities. As discussed more fully in Note 13 to our consolidated financial statements in our Q1 2020 Form 10-Q, during April 2020, we applied for and received loans through the PPP of the CARES Act administered by the SBA totaling $2.8 million. We repaid the full amount of the PPP loans on May 5, 2020 with the applicable interest. During the nine months ended September 30, ~~2020~~2021, we ~~borrowed and repaid $2.8~~received $1.0 million ~~on our revolving credit facility. During~~as a result of the ~~nine months ended September 30, 2020, we utilized $74,000~~exercise of options to ~~repurchase 13,767~~acquire 149,010 shares of our ~~common stock~~stock. These options were issued to certain current and former employees under ~~the 2019 Repurchase Plan. On March 2, 2020, we suspended repurchases under the 2019 Repurchase Plan.~~our stock-based compensation plans which are discussed in Note 10 to our consolidated financial statements in this Report.

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New or Recently Adopted Accounting Standards

See the Notes to our consolidated financial statements in this Report for information concerning the implementation and impact of new or recently adopted accounting standards.

Critical Accounting ~~Policies~~Estimates

The preparation of consolidated financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, 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 September 30, ~~2020,~~2021, there have been no significant changes to the accounting ~~policies~~estimates that we have deemed ~~critical. These policies~~critical other than the change in accounting estimate that is discussed in Note 15 to our consolidated financial statements in our Form 10-Q for the quarter ended June 30, 2021. Our critical accounting estimates are more fully described in our ~~2019~~2020 Form 10-K.

Off -Balance Sheet Arrangements

There were no off-balance sheet arrangements during the nine months ended September 30, ~~2020~~2021 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.

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Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This disclosure is not required for a smaller reporting company.

Item 4.
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Exchange Act. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Our management, including ~~our~~the Chief Executive Officer ~~("CEO"~~(“CEO”) and Chief Financial Officer ~~("CFO"~~(“CFO”), does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Accordingly, our management has designed the disclosure controls and procedures to provide reasonable assurance that the objectives of the control system were met.

CEO/CFO Conclusions about the Effectiveness of the Disclosure Controls and Procedures. As required by Rule 13a-15(b), of the Exchange Act, inTEST management, including our CEO and CFO, conducted an evaluation as of the end of the period covered by this ~~report,~~Report, of the effectiveness of our disclosure controls and procedures, including the impact of ~~COVID-19.~~ COVID-19. Based on that evaluation, our CEO and CFO concluded that, as of the end of the period covered by this ~~report,~~Report, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

~~There~~
During the period covered by this Report, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this ~~report~~Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. We will continue monitoring and assessing any impacts from COVID-19 on our internal ~~controls.~~controls.

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PART II.OTHER INFORMATION

Item 1.
Legal Proceedings

From time to time we may be a party to legal proceedings occurring in the ordinary course of business. We are not currently involved in any material legal proceedings.

Item 1A.
Risk Factors

Information regarding the primary risks and uncertainties that could materially and adversely affect our future performance or could cause actual results to differ materially from those expressed or implied in our forward-looking statements, appears in Part I, Item 1A - "Risk Factors" of our ~~2019~~2020 Form 10-K filed with the Securities and Exchange Commission on March 23, ~~2020.~~2021. There have been no material changes from the risk factors set forth in our ~~2019~~2020 Form ~~10-K, except for the addition of the following:~~10-K.

~~Our business, results of operations and financial condition and the market price of our common stock have been and will continue to be adversely affected by the COVID-19 pandemic.~~
Our business has been, and will continue to be, adversely affected by COVID-19. As of the date of this filing, the ongoing COVID-19 pandemic continues to cause significant disruptions in the normal business environment, both domestically and globally, and we believe the situation will remain challenging until the spread of the virus can be contained. Since March 17, 2020, several states, including all of the states in which we have manufacturing facilities, have instituted “shelter-in place” orders as well as guidance in response to COVID-19 and the need to contain it. As of the date of this filing, all of the states in which we operate had begun the process of re-opening to varying degrees. However, some of these states have paused their re-opening plans or reversed actions they had taken with respect to their re-opening plans because of increased spread. Despite these changes, all of our operations continue to be deemed “critical and essential business operations” under the various governmental COVID-19 mandates which has allowed us to continue to operate our business with certain modifications.
31

The impact of COVID-19 on our operations is intensified because it has occurred during a time when our business operations have been negatively affected by a global downturn in the Semi Market. In addition, the aftermarket service and support that we provide to our customers has been, and we expect may continue to be, adversely impacted by COVID-19 due to travel restrictions and limitations on visitors allowed into customer facilities, which has resulted in some of these activities being reduced or suspended.
If the impact of COVID-19 is more significant than we currently expect, on top of downturns in the Semi Market, our business operations could be further interrupted. We may determine that we need to take actions to reduce our fixed cost structure with the goal of limiting future losses and maintaining an adequate level of liquidity to operate our business. These actions may include staff reductions, facility closures or other adjustments as we deem necessary. These actions may not be successful in reducing our cost structure sufficiently and we may experience further losses or a reduced level of liquidity which could negatively impact our ability to operate our business. We expect that government and health authorities may announce new or extend existing restrictions, which could require us to make further adjustments to our operations in order to comply with any such restrictions. These adjustments could include additional facility closures which could negatively impact our ability to operate our business.

Generally, global supply chains and the timely availability of products have been, and will continue to be, materially disrupted by quarantines, factory slowdowns or shutdowns, border closings and travel restrictions resulting from COVID-19. We have experienced, and expect that we may continue to experience, price increases and/or lack of availability from our normal suppliers for the materials needed to produce our products in a timely manner and/or with the level of margins we typically expect to achieve. Delays in receipt of materials or price increases in the future could have a material negative impact on our business, results of operations and financial condition.
As a result of COVID-19, a significant number of employees have been authorized to work from home. However, the process of working remotely may result in these employees not being as effective or responsive to our customers’ needs as they would be under more normal conditions. This could result in lost business opportunities or have other negative impacts on our business. There can be no assurances that we can avoid one of our employees contracting COVID-19 and entering our facilities while infected. Should this occur, or should we have employees who become ill or otherwise are unable to work, we may experience limitations in employee resources or may be required to close affected facilities for a time to clean and disinfect appropriately.
The adverse effects of COVID-19 on our business could be material in future periods, particularly if there are significant and prolonged economic slowdowns in regions where we derive a significant amount of our revenue or profit, or where our suppliers are located, or if we are forced to close additional facilities and limit or cease manufacturing operations for extended periods of time. We could experience delays in receipt of customer orders, cancellation or postponement of existing orders and/or our ability to fulfill orders placed with us within the order’s specified timeline and for the cost we estimated when we accepted the order may be negatively affected. This could lead to a reduction in revenue and/or an increase in our cost of revenues in future periods and could have a material adverse effect on our business, results of operations and financial condition. COVID-19 has also led to extreme volatility in capital markets and has adversely affected, and may continue to adversely affect, the market price of our common stock.
The duration of any business disruption and related financial impact cannot be reasonably estimated at this time but may materially affect our ability to operate our business and result in additional costs. The extent to which COVID-19 may impact our results will depend on future developments, which are highly uncertain and cannot be predicted as of the time of the filing of this report, including new information that may emerge concerning the severity of COVID-19 and steps taken to contain COVID-19 or treat its impact, among others. As a result of any negative impact of COVID-19 on our business, results of operations, financial condition and cash flows, we may determine that our goodwill and long-lived assets are impaired which would result in recording an impairment charge. The amount of any such impairment charge could be material.
32
~~If the EMS facility consolidation takes longer than we currently expect, the costs incurred could exceed our current estimates and the efficiencies we project from the consolidation may not occur.~~
On September 21, 2020, we notified employees in our Fremont, California facility of a plan to consolidate all manufacturing for our EMS segment from our Fremont facility into our manufacturing operation located in Mt. Laurel, New Jersey. Currently, our interface products are manufactured in the Fremont facility, and our manipulator and docking hardware products are manufactured in the Mt. Laurel facility. The consolidation of manufacturing operations will result in the closure of the Fremont facility and the termination of certain employees at that location. The consolidation of manufacturing operations is being undertaken to streamline operations and reduce the fixed annual operating costs for the EMS segment. The consolidation is expected to be substantially completed during the fourth quarter of 2020. If we are unable to complete the consolidation in the timeframe that we currently expect, this could impact customer shipments and reduce our revenue or increase our costs in future periods. If we do not meet our customers’ expectations for on-time delivery, this could result in lost business opportunities. If we do not achieve the efficiencies we currently anticipate as a result of the consolidation, our costs could be higher than we currently expect in future periods. In addition, if the consolidation is delayed, we would incur costs associated with the facility consolidation in excess of those we currently estimate. The occurrence of any of these events could have a material adverse effect on our business, results of operations and financial condition in future periods.
Non-compliance with the terms and covenants relating to our revolving credit facility could adversely impact our financial performance and liquidity, and thus we may need additional financial resources to maintain our liquidity.
Our revolving credit facility contains covenants requiring us to, among other things, provide financial and other information and to provide notice upon the occurrence of certain events affecting us or our business. These covenants also place restrictions on our ability to incur additional indebtedness, and enter into certain transactions, including selling assets, engaging in mergers or acquisitions, or engaging in transactions with affiliates. If we fail to satisfy one or more of the covenants under our revolving credit facility, we would be in default thereunder, and may be required to repay such debt with capital from other sources or otherwise not be able to draw down against our line of credit. Under such circumstances, due to the industry in which we operate, we may have difficulty in locating another lender that would be willing to extend credit to us, and other sources of capital may not be available to us on reasonable terms or at all. In addition, should the impact of COVID-19 on our operations, including the disruption to our business caused by potential future closures of our facilities or reduced demand from our customers, be more significant than we currently anticipate, we may need additional financial resources, including additional debt or equity financings. There can be no assurance that any such debt or equity financings would be available on favorable terms or rates or at all.
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.
Defaults Upon Senior Securities

None.

Item 4.
Mine Safety Disclosures

Not applicable.

Item 5.
Other Information

None.

- 31 -
Item 6.
Exhibits

2.1*
Asset Purchase Agreement among inTEST Corporation, Videology Imaging Corporation, Videology Imaging Solutions, Inc. and Carol Ethier dated October 28, 2021. (1)
2.2*
Asset Purchase Agreement among Ambrell B.V., Videology Imaging Solutions Europe B.V. and Carol Ethier dated October 28, 2021. (1)
10.1
~~First~~Amended and Restated Loan and Security Agreement, dated October 15, 2021, among inTEST Corporation, Ambrell Corporation, inTEST Silicon Valley Corporation, inTEST EMS, LLC, Temptronic Corporation and M&T Bank. (2)
10.2
Delayed Draw Term Note dated October 15, 2021. (2)
10.3
Second Amended and Restated Revolver Note dated October 15, 2021. (2)
10.4
Joinder and Amendment to ~~Lease~~Amended and Restated Loan and Security Agreement, dated ~~September 22, 2020, by and between~~October 28, 2021, among inTEST Corporation, Ambrell Corporation, inTEST Silicon Valley Corporation, inTEST EMS, LLC, Temptronic Corporation, Videology Imaging Corporation and ~~Exeter 804 East Gate 2018, LLC.~~M&T Bank. (1)
10.2*10.5
~~Separation~~Amended and ~~Consulting~~Restated Surety Agreement, ~~between~~dated October 28, 2021, among Ambrell Corporation, inTEST Silicon Valley Corporation, inTEST EMS, LLC, Temptronic Corporation, Videology Imaging Corporation and ~~James Pelrin dated August 6, 2020. (2)~~M&T Bank. (1)
10.3*10.6
~~Letter~~Amended and Restated Patents, Trademarks, Copyrights and Licenses Security Agreement, ~~between~~dated October 28, 2021, among inTEST Corporation, Ambrell Corporation, inTEST Silicon Valley Corporation, inTEST EMS, LLC, Temptronic Corporation, Videology Imaging Corporation and ~~Richard N. Grant, Jr. dated July 24, 2020. (2)~~M&T Bank. (1)
10.4*10.7
~~inTEST Corporation Third~~ Amended and Restated ~~2014 Stock Plan.~~Delayed Draw Term Note 1, dated October 28, 2021. (1)
10.5*10.8
~~Form of Restricted Stock Award Agreement for Employees.~~
10.6*
~~Form of Restricted Stock Award Agreement for Directors.~~
10.7*
~~Form of Incentive Stock Option Agreement.~~
10.8*
~~Form of Non-Qualified Stock Option Agreement.~~
10.9*
~~Change of Control Agreement~~Amended and Restated Delayed Draw Term Note 1A, dated ~~August 11, 2020 between the Company and Richard N. Grant, Jr.~~October 28, 2021. (1)
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32.1
Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
Certification of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS
Inline XBRL Taxonomy Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

(1)
Previously filed by the Company as an exhibit to the Company’s Current Report on Form 8-K dated ~~September 22, 2020,~~October 28, 2021, File No. 001-36117, filed ~~September 24, 2020,~~November 2, 2021, and incorporated herein by reference.
(2)
Previously filed by the Company as an exhibit to the Company’s Current Report on Form 8-K dated ~~August 6, 2020,~~October 15, 2021, File No. 001-36117, filed ~~August 11, 2020,~~October 20, 2021, and incorporated herein by reference.
*
~~Indicates a management contract or compensatory plan, contract or arrangement in~~This filing omits exhibits and schedules pursuant to Item 601(a)(5) of Regulation S-K, which ~~directors or executive officers participate.~~the registrant agrees to furnish supplementary to the Securities and Exchange Commission upon request.

33
- 32 -

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

inTEST Corporation
Date:
November 12, ~~2020~~2021
/s/ Richard N. Grant, Jr.
Richard N. Grant, Jr.

President and Chief Executive Officer
Date:
November 12, ~~2020~~2021
/s/ ~~Hugh T. Regan, Jr.~~Duncan Gilmour
~~Hugh T. Regan, Jr.~~
Duncan Gilmour
~~Secretary,~~Chief Financial Officer, Treasurer and ~~Chief Financial Officer~~Secretary

34- 33 -

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☐

		Page
PART I.	FINANCIAL INFORMATION

*Item 1.*	*Financial Statements*
~~Item 1.~~	~~Financial Statements~~

	Consolidated Balance Sheets as of September 30, ~~2020~~2021 (Unaudited) and December 31, ~~2019~~2020	1
	Unaudited Consolidated Statements of Operations for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	2
	Unaudited Consolidated Statements of Comprehensive Earnings (Loss) for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	3
	Unaudited Consolidated Statements of Stockholders' Equity for the three months and nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	4
	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, ~~2020~~2021 and ~~2019~~2020	5
	Notes to Consolidated Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2221

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3130

Item 4.	Controls and Procedures	3130

PART II.	OTHER INFORMATION	31

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3331

Item 3.	Defaults Upon Senior Securities	3331

Item 4.	Mine Safety Disclosures	3331

Item 5.	Other Information	3331

Item 6.	Exhibits	3332

SIGNATURES		3433

	September 30,			December 31,			September 30,			December 31,
	2020			2019			2021			2020
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	9,473		$	7,612		$	18,743		$	10,277
Trade accounts receivable, net of allowance for doubtful accounts of $211 and $211, respectively		9,533			9,296
Trade accounts receivable, net of allowance for doubtful accounts of $211 and $212, respectively								12,232			8,435
Inventories		6,924			7,182			9,359			7,476
Prepaid expenses and other current assets		712			805			798			776
Total current assets		26,642			24,895			41,132			26,964
Property and equipment:
Machinery and equipment		5,531			5,269			5,414			5,356
Leasehold improvements		2,628			2,424			2,908			2,636
Gross property and equipment		8,159			7,693			8,322			7,992
Less: accumulated depreciation		(5,742	)		(5,273	)		(5,925	)		(5,642	)
Net property and equipment		2,417			2,420			2,397			2,350
Right-of-use assets, net		7,094			4,842			5,819			6,387
Goodwill		13,738			13,738			13,738			13,738
Intangible assets, net		12,727			13,654			11,503			12,421
Restricted certificates of deposit		140			140			100			140
Other assets		31			26			40			30
Total assets	$	62,789		$	59,715		$	74,729		$	62,030

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	2,203		$	1,984		$	3,849		$	2,424
Accrued wages and benefits		2,028			2,007			2,881			1,944
Accrued professional fees		852			805			827			776
Customer deposits and deferred revenue		1,392			456			2,082			396
Accrued sales commissions		441			442			836			472
Current portion of operating lease liabilities		1,299			1,302			1,207			1,215
Domestic and foreign income taxes payable		631			868			1,121			825
Other current liabilities		438			497			741			804
Total current liabilities		9,284			8,361			13,544			8,856
Operating lease liabilities, net of current portion		6,049			3,794			5,332			6,050
Deferred tax liabilities		2,182			2,263			1,701			1,922
Other liabilities		451			463			436			450
Total liabilities		17,966			14,881			21,013			17,278

Commitments and Contingencies
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued or outstanding		-			-			0			0
Common stock, $0.01 par value; 20,000,000 shares authorized; 10,562,200 and 10,413,982 shares issued, respectively		106			104
Common stock, $0.01 par value; 20,000,000 shares authorized; 10,819,294 and 10,562,200 shares issued, respectively								108			106
Additional paid-in capital		26,660			26,256			28,962			26,851
Retained earnings		17,490			18,005			24,106			17,110
Accumulated other comprehensive earnings		771			673			744			889
Treasury stock, at cost; 33,077 shares		(204	)		(204	)		(204	)		(204	)
Total stockholders' equity		44,823			44,834			53,716			44,752
Total liabilities and stockholders' equity	$	62,789		$	59,715		$	74,729		$	62,030

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019

Net revenues	$	14,443		$	14,632		$	38,948		$	47,046
Cost of revenues		7,993			7,427			21,564			24,286
Gross margin		6,450			7,205			17,384			22,760
Operating expenses:
Selling expense		1,747			2,044			5,560			6,505
Engineering and product development expense		1,316			1,261			3,825			3,753
General and administrative expense		2,960			3,094			8,732			10,549

Total operating expenses		6,023			6,399			18,117			20,807

Operating income (loss)		427			806			(733	)		1,953
Other income (loss)		6			(12	)		(44	)		3
Earnings (loss) before income tax expense (benefit)		433			794			(777	)		1,956
Income tax expense (benefit)		(25	)		147			(262	)		358

Net earnings (loss)	$	458		$	647		$	(515	)	$	1,598

Net earnings (loss) per common share - basic	$	0.04		$	0.06		$	(0.05	)	$	0.15


Weighted average common shares outstanding - basic		10,269,995			10,421,383			10,247,779			10,405,892

Net earnings (loss) per common share - diluted	$	0.04		$	0.06		$	(0.05	)	$	0.15

Weighted average common shares and common share equivalents outstanding - diluted		10,287,562			10,429,536			10,247,779			10,423,121

	Nine Months Ended September 30, 2021
											Accumulated
						*Additional*					*Other*						*Total*
	*Common Stock*					*Paid-in*			*Retained*		*Comprehensive*			*Treasury*			*Stockholders'*
	*Shares*			*Amount*		*Capital*			*Earnings*		*Earnings*			*Stock*			*Equity*
Balance, January 1, 2021		10,562,200		$	106	$	26,851		$	17,110	$	889		$	(204	)	$	44,752

Net earnings		-			0		0			2,212		0			0			2,212
Other comprehensive loss		-			0		0			0		(101	)		0			(101	)
Amortization of deferred compensation related to stock-based awards		-			0		269			0		0			0			269
Issuance of unvested shares of restricted stock		81,468			1		(1	)		0		0			0			0
Stock options exercised		99,740			1		716			0		0			0			717

Balance, March 31, 2021		10,743,408			108		27,835			19,322		788			(204	)		47,849

Net earnings		-			0		0			2,609		0			0			2,609
Other comprehensive earnings		-			0		0			0		24			0			24
Amortization of deferred compensation related to stock-based awards		-			0		454			0		0			0			454
Issuance of unvested shares of restricted stock		44,741			0		0			0		0			0			0
Forfeiture of unvested shares of restricted stock		(18,125	)		0		0			0		0			0			0
Stock options exercised		45,835			0		285			0		0			0			285

Balance, June 30, 2021		10,815,859			108		28,574			21,931		812			(204	)		51,221

Net earnings		-			0		0			2,175		0			0			2,175
Other comprehensive loss		-			0		0			0		(68	)		0			(68	)
Amortization of deferred compensation related to stock-based awards		-			0		371			0		0			0			371
Stock options exercised		3,435			0		17			0		0			0			17

Balance, September 30, 2021		10,819,294		$	108	$	28,962		$	24,106	$	744		$	(204	)	$	53,716

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021		2020

Net revenues	$	21,144		$	14,443		$	62,520	$	38,948
Cost of revenues		10,749			7,993			31,642		21,564
Gross margin		10,395			6,450			30,878		17,384
Operating expenses:
Selling expense		2,841			1,747			7,849		5,560
Engineering and product development expense		1,334			1,316			4,012		3,825
General and administrative expense		3,620			2,799			10,550		8,525
Restructuring and other charges		51			161			303		207

Total operating expenses		7,846			6,023			22,714		18,117

Operating income (loss)		2,549			427			8,164		(733	)
Other income (loss)		(17	)		6			2		(44	)
Earnings (loss) before income tax expense (benefit)		2,532			433			8,166		(777	)
Income tax expense (benefit)		357			(25	)		1,170		(262	)

Net earnings (loss)	$	2,175		$	458		$	6,996	$	(515	)

Net earnings (loss) per common share - basic	$	0.21		$	0.04		$	0.67	$	(0.05	)


Weighted average common shares outstanding - basic		10,496,188			10,269,995			10,422,851		10,247,779

Net earnings (loss) per common share - diluted	$	0.20		$	0.04		$	0.65	$	(0.05	)

Weighted average common shares and common share equivalents outstanding - diluted		10,792,290			10,287,562			10,694,351		10,247,779

	Nine Months Ended September 30, 2020
													Accumulated
							*Additional*						*Other*						*Total*
	*Common Stock*						*Paid-in*			*Retained*			*Comprehensive*			*Treasury*			*Stockholders'*
	*Shares*		��	*Amount*			*Capital*			*Earnings*			*Earnings*			*Stock*			*Equity*
Balance, January 1, 2020		10,413,982		$	104		$	26,256		$	18,005		$	673		$	(204	)	$	44,834

Net loss		-			0			0			(1,143	)		0			0			(1,143	)
Other comprehensive loss		-			0			0			0			(38	)		0			(38	)
Amortization of deferred compensation related to stock-based awards		-			0			187			0			0			0			187
Issuance of unvested shares of restricted stock		58,160			1			(1	)		0			0			0			0
Forfeiture of unvested shares of restricted stock		(8,315	)		0			0			0			0			0			0
Repurchase and retirement of common stock		(13,767	)		0			(74	)		0			0			0			(74	)

Balance, March 31, 2020		10,450,060			105			26,368			16,862			635			(204	)		43,766

Net earnings		-			0			0			170			0			0			170
Other comprehensive earnings		-			0			0			0			35			0			35
Amortization of deferred compensation related to stock-based awards		-			0			208			0			0			0			208
Issuance of unvested shares of restricted stock		15,840			0			0			0			0			0			0
Forfeiture of unvested shares of restricted stock		(6,750	)		0			0			0			0			0			0

Balance, June 30, 2020		10,459,150			105			26,576			17,032			670			(204	)		44,179

Net earnings		-			0			0			458			0			0			458
Other comprehensive earnings		-			0			0			0			101			0			101
Amortization of deferred compensation related to stock-based awards		-			0			85			0			0			0			85
Issuance of unvested shares of restricted stock		155,110			2			(2	)		0			0			0			0
Forfeiture of unvested shares of restricted stock		(52,060	)		(1	)		1			0			0			0			0

Balance, September 30, 2020		10,562,200		$	106		$	26,660		$	17,490		$	771		$	(204	)	$	44,823

	Nine Months Ended September 30, 2020
													Accumulated
							Additional						Other						Total
	Common Stock						Paid-in			Retained			Comprehensive			Treasury			Stockholders'
	Shares			Amount			Capital			Earnings			Earnings			Stock			Equity
Balance, January 1, 2020		10,413,982		$	104		$	26,256		$	18,005		$	673		$	(204	)	$	44,834

Net loss		-			-			-			(1,143	)		-			-			(1,143	)
Other comprehensive loss		-			-			-			-			(38	)		-			(38	)
Amortization of deferred compensation related to stock-based awards		-			-			187			-			-			-			187
Issuance of unvested shares of restricted stock		58,160			1			(1	)		-			-			-			-
Forfeiture of unvested shares of restricted stock		(8,315	)		-			-			-			-			-			-
Repurchase and retirement of common stock		(13,767	)		-			(74	)		-			-			-			(74	)
Balance, March 31, 2020		10,450,060			105			26,368			16,862			635			(204	)		43,766

Net earnings		-			-			-			170			-			-			170
Other comprehensive earnings		-			-			-			-			35			-			35
Amortization of deferred compensation related to stock-based awards		-			-			208			-			-			-			208
Issuance of unvested shares of restricted stock		15,840			-			-			-			-			-			-
Forfeiture of unvested shares of restricted stock		(6,750	)		-			-			-			-			-			-
Balance, June 30, 2020		10,459,150			105			26,576			17,032			670			(204	)		44,179

Net earnings		-			-			-			458			-			-			458
Other comprehensive earnings		-			-			-			-			101			-			101
Amortization of deferred compensation related to stock-based awards		-			-			85			-			-			-			85
Issuance of unvested shares of restricted stock		155,110			2			(2	)		-			-			-			-
Forfeiture of unvested shares of restricted stock		(52,060	)		(1	)		1			-			-			-			-

Balance, September 30, 2020		10,562,200		$	106		$	26,660		$	17,490		$	771		$	(204	)	$	44,823

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Weighted average common shares outstanding - basic		10,269,995		10,421,383		10,247,779		10,405,892
Potentially dilutive securities:
Unvested shares of restricted stock and employee stock options		17,567		8,153		-		17,229
Weighted average common shares and common share equivalents outstanding - diluted		10,287,562		10,429,536		10,247,779		10,423,121
Average number of potentially dilutive securities excluded from calculation		631,392		657,969		722,538		501,964

~~Balance - January 1, 2020~~	$	-
~~Accruals for other associated costs~~		14
~~Cash payments~~		~~(14~~	)
~~Balance September 30, 2020~~	$	-

	EMS Facility Consolidation			Executive Management Changes			Total
Balance – January 1, 2021	$	233		$	107		$	340
Accruals for severance		0			120			120
Accruals for other costs associated with facility consolidation		183			0			183
Cash payments		(416	)		(140	)		(556	)
Balance – September 30, 2021	$	0		$	87		$	87

Balance - January 1, 2020	$	6,944
Amortization		(927	)
Balance September 30, 2020	$	6,017

Balance - January 1, 2021	$	5,711
Amortization		(918	)
Balance September 30, 2021	$	4,793

	September 30, 2020						September 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	10,480	$	4,633	$	5,847	$	10,480	$	5,767	$	4,713
Technology		600		457		143		600		528		72
Patents		590		563		27		590		582		8
Software		270		270		-		270		270		0
Trade name		140		140		-		140		140		0
Total finite-lived intangible assets		12,080		6,063		6,017		12,080		7,287		4,793
Indefinite-lived intangible assets:
Trademarks		6,710		-		6,710		6,710		-		6,710
Total intangible assets	$	18,790	$	6,063	$	12,727	$	18,790	$	7,287	$	11,503

	December 31, 2019
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	10,480	$	3,805	$	6,675
Technology		600		380		220
Patents		590		541		49
Software		270		270		-
Trade name		140		140		-
Total finite-lived intangible assets		12,080		5,136		6,944
Indefinite-lived intangible assets:
Trademarks		6,710		-		6,710
Total intangible assets	$	18,790	$	5,136	$	13,654

	December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-lived intangible assets:
Customer relationships	$	10,480	$	4,912	$	5,568
Technology		600		477		123
Patents		590		570		20
Software		270		270		0
Trade name		140		140		0
Total finite-lived intangible assets		12,080		6,369		5,711
Indefinite-lived intangible assets:
Trademarks		6,710		-		6,710
Total intangible assets	$	18,790	$	6,369	$	12,421

	September 30, 2020		December 31, 2019		September 30, 2021		December 31, 2020
Raw materials	$	4,800	$	5,369	$	6,768	$	5,371
Work in process		1,042		949		1,148		1,085
Inventory consigned to others		49		54		44		45
Finished goods		1,033		810		1,399		975
Total inventories	$	6,924	$	7,182	$	9,359	$	7,476

Range of remaining lease terms (in years)	0.3	to	10.0	0.5	to	9.6
Weighted average remaining lease term (in years)			6.6			6.0
Weighted average discount rate			4.4%			4.2	%

2021 (remainder)	$	358
2022		1,469
2023		1,482
2024		1,474
2025		722
Thereafter		1,845
Total lease payments	$	7,350
Less imputed interest		(811	)
Total	$	6,539

2020 (remainder)	$	378
2021		1,407
2022		1,321
2023		1,341
2024		1,377
Thereafter		2,566
Total lease payments	$	8,390
Less imputed interest		(1,042	)
Total	$	7,348

Modification to lease for facility in Fremont, California		$	1,176
Modification to lease for facility in Mt. Laurel, New Jersey		$	2,051

Modification to Ambrell’s U.K. facility lease	$	(486	)
Modification to lease for facility in Mansfield, Massachusetts	$	1,811
Modification to Ambrell’s Netherlands facility lease	$	(48	)

				Letters of Credit Amount Outstanding							Letters of Credit Amount Outstanding
	Original L/C Issue Date	L/C Expiration Date	Lease Expiration Date	September 30, 2020		December 31, 2019		Original L/C Issue Date	L/C Expiration Date	Lease Expiration Date	September 30, 2021		December 31, 2020
Mt. Laurel, NJ	3/29/2010	4/30/2021	4/30/2031	$	90	$	90	3/29/2010	4/30/2022	4/30/2031	$	50	$	90
Mansfield, MA	10/27/2010	12/31/2024	12/31/2024		50		50	10/27/2010	12/31/2024	12/31/2024		50		50
				$	140	$	140				$	100	$	140

	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Unvested shares outstanding, January 1, 2020		165,031		$	6.55
Unvested shares outstanding, January 1, 2021							237,155		$	4.93
Granted		229,110			4.24		126,209			11.74
Vested		(80,361	)		5.47		(78,206	)		7.24
Forfeited		(67,125	)		6.03		(18,125	)		9.02
Unvested shares outstanding, September 30, 2020		246,655			4.89
Unvested shares outstanding, September 30, 2021							267,033			7.19

	2020			2019
Risk-free interest rate		0.46	%		2.35	%
Dividend yield		0.00	%		0.00	%
Expected common stock market price volatility factor		.44			.42
Weighted average expected life of stock options (years)		6.25			6.25

	September 30, 2020		December 31, 2019
Identifiable assets:
Thermal	$	51,920	$	51,621
EMS		9,940		7,319
Corporate		929		775
	$	62,789	$	59,715

	September 30, 2021		December 31, 2020
*Identifiable assets:*
Thermal	$	51,368	$	50,782
EMS		16,309		9,667
Corporate		7,052		1,581
	$	74,729	$	62,030

	September 30, 2021		December 31, 2020
*Net property and equipment:*
U.S.	$	2,200	$	2,053
Foreign		197		297
	$	2,397	$	2,350

	September 30, 2020		December 31, 2019
Property and equipment:
U.S.	$	2,088	$	2,163
Foreign		329		257
	$	2,417	$	2,420

	●	the possibility of future acquisitions and our ability to realize the potential benefits of acquisitions or dispositions and the successful integration of any acquired operations, for example with respect to our acquisitions of Videology and Z-Sciences;
	●	the success of our strategy to diversify our business by entering markets outside the Semi Market, including the automotive, defense/aerospace, industrial, life sciences, telecommunications and other markets and changes in demand in these markets;
	●	the impact of COVID-19 and its variant strains on our business, liquidity, financial condition and results of ~~operations, including as a result of evolving public health requirements in response to COVID-19, such as:~~

	●	indications of a change in the market cycles in the Semi Market or other markets we ~~serve including as a result of COVID-19;~~serve;
	●	developments and trends in the Semi Market, including changes in ~~business conditions and general economic conditions both domestically and globally including as~~the demand for semiconductors;
	●	the loss of any one or more of our largest customers, or a ~~result of COVID-19;~~reduction in orders by a major customer;
	●	changes in the ~~demand for semiconductors, generally~~rate of, and ~~as a result~~timing of, ~~COVID-19;~~
	●	~~the success of~~capital expenditures by our ~~consolidation of all EMS manufacturing into our operation located in Mt. Laurel, New Jersey;~~customers;
	●	the ~~success~~availability of materials used to manufacture our ~~strategy to diversify~~products;
	●	the impact of interruptions in our ~~business~~supply chain caused by ~~entering markets outside~~ external factors;
	●	the ~~Semi Market;~~sufficiency of cash balances, lines of credit and net cash from operations;
	●	stock price fluctuations;
	●	the possibility of future acquisitions or dispositions and the successful integration of any acquired operations;
	●	~~the~~our ability to borrow funds or raise capital to finance major potential acquisitions;
	●	~~changes in~~ competitive pricing pressures;
	●	the ~~rates~~development of new products and ~~timing~~technologies by us or our competitors;
	●	effects of ~~capital expenditures by our customers including as a result of COVID-19;~~exchange rate fluctuations;
	●	progress of product development programs;
	●	~~increases in raw material~~the anticipated market for our products;
	●	the availability of and ~~fabrication costs associated with~~retention of key personnel or our ~~products including as a result~~ability to hire personnel at anticipated costs;
	●	general economic conditions both domestically and globally;
	●	other projections of ~~COVID-19;~~net revenues, taxable earnings (loss), net earnings (loss), net earnings (loss) per share, capital expenditures and other financial items; and
	●	other risk factors included in Part I, Item 1A - "Risk Factors" in our ~~2019~~2020 Form ~~10-K and Part II, Item 1A - "Risk Factors" in this Quarterly Report on Form 10-Q.~~10-K.

	Three Months Ended September 30,				Change						Three Months Ended June 30,		Change						Three Months Ended September 30,				Change					Three Months Ended June 30,		Change
	2020		2019		$			%			2020		$			%			2021		2020			$	%				2021		$		%
Orders:
Thermal	$	11,004	$	9,543	$	1,461			15	%	$	10,446	$	558			5	%	$	13,713	$	11,004	$	2,709		25	%	$	14,826	$	(1,113	)	(8	)%
EMS		3,423		4,314		(891	)		(21	)%		3,472		(49	)		(1	)%		7,435		3,423		4,012		117	%		10,279		(2,844	)	(28	)%
	$	14,427	$	13,857	$	570			4	%	$	13,918	$	509			4	%	$	21,148	$	14,427	$	6,721		47	%	$	25,105	$	(3,957	)	(16	)%

Semi Market	$	7,263	$	6,602	$	661			10	%	$	7,299	$	(36	)		-	%	$	13,365	$	7,263	$	6,102		84	%	$	16,532	$	(3,167	)	(19	)%
Multimarket		7,164		7,255		(91	)		(1	)%		6,619		545			8	%		7,783		7,164		619		9	%		8,573		(790	)	(9	)%
	$	14,427	$	13,857	$	570			4	%	$	13,918	$	509			4	%	$	21,148	$	14,427	$	6,721		47	%	$	25,105	$	(3,957	)	(16	)%

	Nine Months Ended September 30,				Change						Nine Months Ended September 30,				Change
	2020		2019		$			%			2021		2020				%
Orders:
Thermal	$	31,949	$	30,476	$	1,473			5	%	$	43,285	$	31,949	$	11,336		35	%
EMS		10,172		11,197		(1,025	)		(9	)%		28,198		10,172		18,026		177	%
	$	42,121	$	41,673	$	448			1	%	$	71,483	$	42,121	$	29,362		70	%

Semi Market	$	21,254	$	20,804	$	450			2	%	$	47,071	$	21,254	$	25,817		121	%
Multimarket		20,867		20,869		(2	)		-	%		24,412		20,867		3,545		17	%
	$	42,121	$	41,673	$	448			1	%	$	71,483	$	42,121	$	29,362		70	%

	Three Months Ended September 30,				Change						Three Months Ended June 30,		Change						Three Months Ended September 30,				Change					Three Months Ended June 30,		Change
	2020		2019		$			%			2020		$			%			2021		2020		$		%			2021		$			%
Net revenues:
Thermal	$	10,724	$	10,622	$	102			1	%	$	9,476	$	1,248			13	%	$	13,041	$	10,724	$	2,317		22	%	$	12,766	$	275			2	%
EMS		3,719		4,010		(291	)		(7	)%		3,799		(80	)		(2	)%		8,103		3,719		4,384		118	%		9,054		(951	)		(11	)%
	$	14,443	$	14,632	$	(189	)		(1	)%	$	13,275	$	1,168			9	%	$	21,144	$	14,443	$	6,701		46	%	$	21,820	$	(676	)		(3	)%

Semi Market	$	7,387	$	7,126	$	261			4	%	$	6,858	$	529			8	%	$	13,656	$	7,387	$	6,269		85	%	$	15,677	$	(2,021	)		(13	)%
Multimarket		7,056		7,506		(450	)		(6	)%		6,417		639			10	%		7,488		7,056		432		6	%		6,143		1,345			22	%
	$	14,443	$	14,632	$	(189	)		(1	)%	$	13,275	$	1,168			9	%	$	21,144	$	14,443	$	6,701		46	%	$	21,820	$	(676	)		(3	)%

2.1*	Asset Purchase Agreement among inTEST Corporation, Videology Imaging Corporation, Videology Imaging Solutions, Inc. and Carol Ethier dated October 28, 2021. (1)
2.2*	Asset Purchase Agreement among Ambrell B.V., Videology Imaging Solutions Europe B.V. and Carol Ethier dated October 28, 2021. (1)
10.1	~~First~~Amended and Restated Loan and Security Agreement, dated October 15, 2021, among inTEST Corporation, Ambrell Corporation, inTEST Silicon Valley Corporation, inTEST EMS, LLC, Temptronic Corporation and M&T Bank. (2)
10.2	Delayed Draw Term Note dated October 15, 2021. (2)
10.3	Second Amended and Restated Revolver Note dated October 15, 2021. (2)
10.4	Joinder and Amendment to ~~Lease~~Amended and Restated Loan and Security Agreement, dated ~~September 22, 2020, by and between~~October 28, 2021, among inTEST Corporation, Ambrell Corporation, inTEST Silicon Valley Corporation, inTEST EMS, LLC, Temptronic Corporation, Videology Imaging Corporation and ~~Exeter 804 East Gate 2018, LLC.~~M&T Bank. (1)
10.2*10.5	~~Separation~~Amended and ~~Consulting~~Restated Surety Agreement, ~~between~~dated October 28, 2021, among Ambrell Corporation, inTEST Silicon Valley Corporation, inTEST EMS, LLC, Temptronic Corporation, Videology Imaging Corporation and ~~James Pelrin dated August 6, 2020. (2)~~M&T Bank. (1)
10.3*10.6	~~Letter~~Amended and Restated Patents, Trademarks, Copyrights and Licenses Security Agreement, ~~between~~dated October 28, 2021, among inTEST Corporation, Ambrell Corporation, inTEST Silicon Valley Corporation, inTEST EMS, LLC, Temptronic Corporation, Videology Imaging Corporation and ~~Richard N. Grant, Jr. dated July 24, 2020. (2)~~M&T Bank. (1)
10.4*10.7	~~inTEST Corporation Third~~ Amended and Restated ~~2014 Stock Plan.~~Delayed Draw Term Note 1, dated October 28, 2021. (1)
10.5*10.8	~~Form of Restricted Stock Award Agreement for Employees.~~
10.6*	~~Form of Restricted Stock Award Agreement for Directors.~~
10.7*	~~Form of Incentive Stock Option Agreement.~~
10.8*	~~Form of Non-Qualified Stock Option Agreement.~~
10.9*	~~Change of Control Agreement~~Amended and Restated Delayed Draw Term Note 1A, dated ~~August 11, 2020 between the Company and Richard N. Grant, Jr.~~October 28, 2021. (1)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32.1	Certification of Chief Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Taxonomy Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).