Intevac (IVAC) 10-Q 2024 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM

10-Q

(MARK ONE)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2024

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

      

to

     

Commission file number

0-26946

INTEVAC, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-3125814
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

3560 Bassett Street

Santa Clara, California 95054

(Address of principal executive office, including Zip Code)

Registrant’s telephone number, including area code: (408)

986-9888

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.001 par value)	IVAC	The Nasdaq Stock Market LLC (Nasdaq) Global Select

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in

Rule 12b-2

of the Exchange Act:

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2

of the Act). ☐ Yes ☒ No

On July 31, 2024, 26,935,406 shares of the registrant’s Common Stock, $0.001 par value, were outstanding.

INTEVAC, INC.

INDEX

No.		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets		3
	Condensed Consolidated Statements of Operations		4
	Condensed Consolidated Statements of Comprehensive Loss		5
	Condensed Consolidated Statements of Cash Flows		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		29
Item 4.	Controls and Procedures		29
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings		30
Item 1A.	Risk Factors		30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3.	Defaults Upon Senior Securities		36
Item 4.	Mine Safety Disclosures		36
Item 5.	Other Information		37
Item 6.	Exhibits		38
SIGNATURES			39

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

INTEVAC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 29, 2024			December 30, 2023
	(Unaudited)
	(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	37,562		$	51,441
Short-term investments		27,221			17,405
Trade and other accounts receivable, net of allowances of $0 at both June 29, 2024 and December 30, 2023		17,592			18,613
Inventories		45,561			43,795
Prepaid expenses and other current assets		2,421			2,123
Total current assets		130,357			133,377
Long-term investments		4,919			2,687
Restricted cash		700			700
Property, plant and equipment, net		7,626			7,664
Operating lease right-of-use-assets		6,839			7,658
Intangible assets, net of amortization of $247 at June 29, 2024 and $178 at December 30, 2023		885			954
Deferred income taxes and other long-term assets		2,643			3,466
Total assets	$	153,969		$	156,506
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current operating lease liabilities	$	1,202		$	1,008
Accounts payable		4,417			5,800
Accrued payroll and related liabilities		3,959			3,475
Other accrued liabilities		2,487			1,820
Customer advances		21,629			20,407
Total current liabilities		33,694			32,510
Noncurrent liabilities:
Noncurrent operating lease liabilities		6,197			6,976
Customer advances		1,482			1,482
Other long-term liabilities		7			21
Total noncurrent liabilities		7,686			8,479
Stockholders’ equity:
Common stock, $0.001 par value		27			26
Additional paid-in capital		212,315			210,320
Treasury stock, 5,087 shares at both June 29, 2024 and December 30, 2023		(29,551	)		(29,551	)
Accumulated other comprehensive income		42			97
Accumulated deficit		(70,244	)		(65,375	)
Total stockholders’ equity		112,589			115,517
Total liabilities and stockholders’ equity	$	153,969		$	156,506

Note: Amounts as of December 30, 2023 are derived from the December 30, 2023 audited consolidated financial statements.

3

INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Six Months Ended
	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
	(Unaudited)
	(In thousands, except per share amounts)
Net revenues	$	14,526		$	10,301		$	24,156		$	21,843
Cost of net revenues		8,978			7,731			14,404			14,554
Gross profit		5,548			2,570			9,752			7,289
Operating expenses:
Research and development		3,511			3,647			7,880			7,620
Selling, general and administrative		5,308			4,375			9,588			9,575
Total operating expenses		8,819			8,022			17,468			17,195
Loss from operations		(3,271	)		(5,452	)		(7,716	)		(9,906	)
Interest income and other income (expense), net		759			650			2,979			1,322
Loss from continuing operations before provision for income taxes.		(2,512	)		(4,802	)		(4,737	)		(8,584	)
Provision for income taxes		751			116			1,227			502
Net loss from continuing operations, net of taxes		(3,263	)		(4,918	)		(5,964	)		(9,086	)
Net income from discontinued operations, net of taxes		—			40			1,095			317
Net loss	$	(3,263	)	$	(4,878	)	$	(4,869	)	$	(8,769	)
Net income (loss) per share:
Basic and diluted – continuing operations	$	(0.12	)	$	(0.19	)	$	(0.22	)	$	(0.35	)
Basic and diluted – discontinued operations	$	0.00		$	0.00		$	0.04		$	0.01
Basic and diluted – net loss	$	(0.12	)	$	(0.19	)	$	(0.18	)	$	(0.34	)
Weighted average common shares outstanding:
Basic and diluted		26,668			26,032			26,595			25,907

See accompanying notes to the condensed consolidated financial statements.

4

INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	Three Months Ended						Six Months Ended
	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
	(Unaudited)
	(In thousands)
Net loss	$	(3,263	)	$	(4,878	)	$	(4,869	)	$	(8,769	)
Other comprehensive income (loss), before tax:
Change in unrealized net gain (loss) on available-for-sale investments		27			53			56			222
Foreign currency translation losses		(15	)		(229	)		(111	)		(219	)
Other comprehensive income (loss), before tax		12			(176	)		(55	)		3
Income taxes related to items in other comprehensive income (loss)		—			—			—			—
Other comprehensive income (loss), net of tax		12			(176	)		(55	)		3
Comprehensive loss	$	(3,251	)	$	(5,054	)	$	(4,924	)	$	(8,766	)

See accompanying notes to the condensed consolidated financial statements.

5

INTEVAC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended
	June 29, 2024			July 1, 2023
	(Unaudited)
	(In thousands)
Operating activities
Net loss	$	(4,869	)	$	(8,769	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Depreciation and amortization		1,011			681
Amortization of intangible assets		68			68
Net accretion of investment premiums and discounts		(243	)		(108	)
Equity-based compensation		1,906			3,076
Straight-line rent adjustment and amortization of lease incentives		234			(554	)
Deferred income taxes		811			183
(Gain) loss on disposal of equipment		523			(41	)
Changes in operating assets and liabilities		(53	)		(27,931	)
Total adjustments		4,257			(24,626	)
Net cash and cash equivalents used in operating activities		(612	)		(33,395	)
Investing activities
Purchases of investments		(36,590	)		(9,099	)
Proceeds from sales and maturities of investments		24,841			23,029
Proceeds from sales of fixed assets		—			65
Purchases of leasehold improvements and equipment		(1,497	)		(4,335	)
Net cash and cash equivalents provided by (used in) investing activities		(13,246	)		9,660
Financing activities
Net proceeds from issuance of common stock		462			838
Payment of acquisition-related contingent consideration		—			(250	)
Taxes paid related to net share settlement		(372	)		(1,563	)
Net cash and cash equivalents provided by (used in) financing activities		90			(975	)
Effect of exchange rate changes on cash and cash equivalents		(111	)		(219	)
Net decrease in cash, cash equivalents and restricted cash		(13,879	)		(24,929	)
Cash, cash equivalents and restricted cash at beginning of period		52,141			69,690
Cash, cash equivalents and restricted cash at end of period	$	38,262		$	44,761

See accompanying notes to the condensed consolidated financial statements.

6

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business, Basis of Presentation and Significant Accounting Policy

Description of Business

Intevac, Inc. (together with its subsidiaries, “Intevac”, the “Company” or “we”) is a leader in the design and development of high-productivity, thin-film processing systems. Intevac’s production-proven platforms are designed for high-volume manufacturing of substrates with precise thin-film properties, such as for the hard disk drive (“HDD”) and advanced coatings (“ADVC”) (formerly known as display cover panel (“DCP”)) markets.

Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of Intevac, Inc. and its subsidiaries after elimination of inter-company balances and transactions.

In the opinion of management, the unaudited interim condensed consolidated financial statements of Intevac included herein have been prepared on a basis consistent with the December 30, 2023 audited consolidated financial statements and include all material adjustments, consisting of normal recurring adjustments, necessary to fairly present the information set forth therein.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

Reportable Segment

During fiscal 2021, we sold the business of one of our reporting segments, Photonics. Therefore, we have one reportable segment remaining. See Note 2 for additional disclosure related to discontinued operations.

The remaining segment, Thin Film Equipment (“TFE”), designs, develops and markets vacuum process equipment solutions for high-volume manufacturing of small substrates with precise thin-film properties, such as for the HDD and ADVC markets, as well as other adjacent thin-film markets. The TFE segment also previously designed, developed and marketed manufacturing equipment for the photovoltaic (“PV”) solar cell and advanced semiconductor packaging (“ASP”) industries.

In March 2022, the Company’s management realigned its operational focus and eliminated several research and development (“R&D”) programs and product offerings. As part of this realignment effort, the Company ceased its efforts to develop and market several of its manufacturing platforms for the ADVC, PV and ASP industries.

Government Grants and Credits

Government assistance is recognized when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received. Reimbursements of eligible expenditures pursuant to government assistance programs are recorded when the related costs have been incurred and there is reasonable assurance regarding collection of the claim. Grant claims not settled by the balance sheet date are recorded as receivables, provided their receipt is reasonably assured. The determination of the amount of the claim, and accordingly the receivable amount, requires management to make calculations based on its interpretation of eligible expenditures in accordance with the terms of the programs. The reimbursement claims submitted by the Company are subject to review by the relevant government agencies.

During the six months ended June 29, 2024, we amended certain fiscal year 2021 payroll tax filings and applied for a refund equal to $2.4 million of Employee Retention Credit (“ERC”) benefits from the U.S. government. The refund is recorded within trade and other accounts receivable in our condensed consolidated balance sheet as of June 29, 2024, and as $1.5 million in other income (expense), net and $933,000 in discontinued operations in our condensed consolidated statements of operations for the six months ended June 29, 2024. (See Note 12. Income Taxes.)

7

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

2. Divestiture and Discontinued Operations

Sale of Photonics

On December 30, 2021, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with EOTECH, LLC (“EOTECH”) governing the sale of the Company’s Photonics business to EOTECH in exchange for (i) $70.0 million in cash consideration, (ii) up to $30.0 million in earnout payments and (iii) the assumption by EOTECH of certain liabilities of the Photonics business as specified in the Purchase Agreement. The transaction closed on December 30, 2021. Under the Purchase Agreement, EOTECH has also agreed to pay to the Company, if earned, earnout payments of up to an aggregate of $30.0 million based on achievement of fiscal year 2023, 2024 and 2025 Photonics segment revenue targets for the Integrated Visual Augmentation System (“IVAS”) program as specified in the Purchase Agreement. As of June 29, 2024, there have been no earnout payments under the Purchase Agreement. At any time prior to December 31, 2024, EOTECH may elect to pay to the Company $14.0 million, which would terminate EOTECH’s obligations with respect to any remaining earnout payments. The cash proceeds do not include any estimated future payments from the revenue earnout as the Company has elected to record the proceeds when the consideration is deemed realizable. The Company believes the disposition of the Photonics business will allow it to benefit from a streamlined business model, simplified operating structure, and enhanced management focus.

In connection with the Photonics sale, the Company and EOTECH also entered into a Transition Service Agreement (the “TSA”) and a Lease Assignment Agreement. The TSA, which expired on June 30, 2022, outlined the information technology, people, and facility support the parties provided to each other for a period after the closing of the sale. The Lease Assignment Agreement assigns the lease obligation for two buildings in the Company’s California campus to EOTECH. As part of the assignment, the Company agreed to subsidize a portion of EOTECH’s lease payments through the remainder of the lease term which expired in March 2024. In August 2022, Intevac and EOTECH entered into a Shared Services Agreement (the “Shared Services Agreement”) to share certain building maintenance costs.

Fees earned under the Shared Services Agreement for the three and six months ended June 29, 2024 were $37,000 and $73,000, respectively. Fees earned under the Shared Services Agreement for the three and six months ended July 1, 2023 were $39,000 and $65,000, respectively. As of June 29, 2024 and December 30, 2023, accounts receivable from EOTECH of $14,000 and $62,000, respectively, were included in trade and other accounts receivable in the Company’s condensed consolidated balance sheets.

Based on its magnitude and because the Company exited certain markets, the sale of the Photonics segment represents a significant strategic shift that has a material effect on the Company’s operations and financial results, and the Company has separately reported the results of its Photonics segment as discontinued operations in the condensed consolidated statements of operations for the three and six months ended June 29, 2024 and July 1, 2023.

The key components from discontinued operations related to the Photonics segment are as follows:

	Three Months Ended					Six Months Ended
	June 29, 2024		July 1, 2023			June 29, 2024			July 1, 2023
	(In thousands)
Selling, general and administrative	$	—	$	(40	)	$	(162	)	$	(317	)
Total operating expenses		—		(40	)		(162	)		(317	)
Operating income (loss) – discontinued operations		—		40			162			317
Other income (expense) – discontinued operations		—		—			933			—
Income from discontinued operations before provision for income taxes		—		40			1,095			317
Provision for income taxes		—		—			—			—
Net income from discontinued operations, net of taxes	$	—	$	40		$	1,095		$	317

The cash flows related to discontinued operations have not been segregated and are included in the condensed consolidated statements of cash flows. The following table presents cash flow and

non-cash

information related to discontinued operations for the three and six months ended June 29, 2024 and July 1, 2023.

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
	(In thousands)
Equity-based compensation	$	—	$	—	$	—	$	(260	)

8

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

3. Revenue

The following tables represent a disaggregation of revenue from contracts with customers for the three and six months ended June 29, 2024 and July 1, 2023.

Major Products and Service Lines

	Three Months Ended June 29, 2024		Three Months Ended July 1, 2023
	(In thousands)
	HDD		HDD		PV		ASP		Total
Systems, upgrades and spare parts	$	13,052	$	9,351	$	10	$	11	$	9,372
Field service		1,474		929		—		—		929
Total net revenues	$	14,526	$	10,280	$	10	$	11	$	10,301

	Six Months Ended  June 29, 2024		Six Months Ended July 1, 2023
	(In thousands)
	HDD		HDD		ADVC		ASP		Total
Systems, upgrades and spare parts	$	21,170	$	19,868	$	28	$	11	$	19,907
Field service		2,986		1,936		—		—		1,936
Total net revenues	$	24,156	$	21,804	$	28	$	11	$	21,843

Primary Geographical Markets

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
	(In thousands)
United States	$	178	$	662	$	660	$	2,276
Asia		14,348		9,628		23,496		19,556
Europe		—		11		—		11
Total net revenues	$	14,526	$	10,301	$	24,156	$	21,843

Timing of Revenue Recognition

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
	(In thousands)
Products transferred at a point in time	$	14,526	$	10,301	$	24,156	$	21,843
Products and services transferred over time		—		—		—		—
Total net revenues	$	14,526	$	10,301	$	24,156	$	21,843

The following table reflects the changes in our contract assets, which we classify as accounts receivable, unbilled, and our contract liabilities, which we classify as deferred revenue and customer advances, for the six months ended June 29, 2024:

	June 29, 2024		December 30, 2023		Six Months Change
	(In thousands)
Contract assets:
Accounts receivable, unbilled	$	2,705	$	393	$	2,312
Contract liabilities:
Deferred revenue	$	915	$	376	$	539
Customer advances		23,111		21,889		1,222
	$	24,026	$	22,265	$	1,761

9

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Accounts receivable, unbilled represents a contract asset for revenue that has been recognized in advance of billing the customer. For our system and certain upgrade sales, our customers generally pay in three installments, with a portion of the system price billed upon receipt of an order, a portion of the price billed upon shipment, and the balance of the price due upon completion of installation and acceptance of the system at the customer’s factory. Accounts receivable, unbilled generally represents the balance of the system price that is due upon completion of installation and acceptance, less the amount that has been deferred as revenue for the performance of the installation tasks. During the six months ended June 29, 2024, contract assets increased by $2.3 million primarily due to the accrual of revenue related to the sale of upgrades and spare parts sold to a customer as of June 29, 2024.

Customer advances generally represent a contract liability for amounts billed to the customer prior to transferring goods. The Company has elected to use the practical expedient to disregard the effect of the time value of money in a significant financing component when its payment terms are less than one year. These customer advances are liquidated when revenue is recognized. Deferred revenue generally represents a contract liability for amounts billed to a customer for completed systems at the customer site that are undergoing installation and acceptance testing where transfer of control has not yet occurred as Intevac does not yet have a demonstrated history of meeting the acceptance criteria upon the customer’s receipt of product. During the six months ended June 29, 2024, we recognized revenue of $1.8 million and $98,000 that was included in customer advances and deferred revenue, respectively, at the beginning of the period.

In May 2023, the Company received notice of the cancellation of a $54.6 million order for eight 200 Lean HDD systems due to the customer postponing previously planned media capacity additions, and, accordingly, the Company removed the order from backlog. The customer contract associated with the cancelled order requires the customer to pay the Company a prorated price based upon the percentage of work completed on the order. The Company has received customer advances in the amount of $19.1 million associated with the cancelled order, all of which will be utilized to settle this customer obligation. In September 2023, the Company applied $444,000 of billings against these advances in connection with inventory scrapped at the customer’s direction. In December 2023, the Company received notice of the cancellation of a $11.4 million order for two 200 Lean HDD systems due to the customer postponing previously planned media capacity additions, and, accordingly, the Company removed the order from backlog. The Company has not received any customer advances associated with the cancelled order.

On June 29, 2024, we had $42.5 million of remaining performance obligations, which

we also refer to as total backlog.

We expect to recognize approximately 48.4% of our remaining performance obligations as revenue in 2024 and 51.6% in 2025.

4. Inventories

Inventories are stated at the lower of average cost or net realizable value and consist of the following:

	June 29, 2024		December 30, 2023
	(In thousands)
Raw materials	$	34,929	$	37,346
Work-in-progress		7,148		6,449
Finished goods		3,484		—
	$	45,561	$	43,795

Finished goods inventory at June 29, 2024 is primarily comprised of a Trio system undergoing evaluation at a customer location.

In May 2023, the Company received notice of the cancellation of a $54.6 million order for eight 200 Lean HDD systems. In December 2023, the Company received notice of the cancellation of a $11.4 million order for two 200 Lean HDD systems. The customer contract associated with the cancelled orders requires the customer to pay the Company a prorated price based upon the percentage of work completed on the order. The Company has received customer advances in the amount of $19.1 million associated with the cancelled order for eight 200 Lean HDD systems, all of which will be utilized to settle this customer obligation. The Company has not received any customer advances associated with the cancelled order for two 200 Lean HDD systems. In fiscal 2024, as part of the cancellation of the orders for the ten 200 Lean HDD systems, the customer is expected to take delivery of $12.3 million of inventory on hand at June 29, 2024 and approximately $3.3 million of inventory on order, plus reimburse us for any supplier cancellation charges and the costs associated with managing the inventory. A portion of the inventory will be utilized to satisfy other outstanding purchase orders from this customer in backlog.

10

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

5. Equity-Based Compensation

At June 29, 2024, Intevac had equity-based awards outstanding under the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan, the 2022 Inducement Equity Incentive Plan (the “Inducement Plan”) (together, the “Plans”) and the 2003 Employee Stock Purchase Plan (the “ESPP”). Intevac’s stockholders approved the 2020 Equity Incentive Plan, the 2012 Equity Incentive Plan and the ESPP. The Plans permit the grant of incentive or

non-statutory

stock options, performance-based stock options (“PSOs”), restricted stock, stock appreciation rights, restricted stock units (“RSUs”), performance-based restricted stock units (“PRSUs”) and performance shares.

On January 19, 2022, Intevac’s Board of Directors (the “Board”) adopted the Inducement Plan and, subject to the adjustment provisions of the Inducement Plan, reserved 1,200,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. On July 1, 2024, the Board amended the Inducement Plan to increase the shares of common stock reserved for issuance thereunder by 600,000 shares. The Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the Company’s 2020 Equity Incentive Plan. The Inducement Plan was adopted without stockholder approval pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. In accordance with that rule, awards under the Inducement Plan may only be made to individuals not previously employees or

non-employee

directors of the Company (or following such individuals’ bona fide period of

non-employment

with the Company), as an inducement material to the individuals’ entry into employment with the Company.

The ESPP provides that eligible employees may purchase Intevac’s common stock through payroll deductions at a price equal to 85% of the lower of the fair market value at the entry date of the applicable offering period or at the end of each applicable purchase interval. Offering periods are generally two years in length and consist of a series of

six-month

purchase intervals. Eligible employees may join the ESPP at the beginning of any

six-month

purchase interval. Under the terms of the ESPP, employees can choose to have up to 50% of their base earnings withheld to purchase Intevac common stock (not to exceed $25,000 per year).

Compensation Expense

The effect of recording equity-based compensation for the three and six months ended June 29, 2024 and July 1, 2023 was as follows:

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
	(In thousands)
Equity-based compensation by type of award:
Stock options	$	8	$	2	$	8	$	(11	)
RSUs		589		756		1,122		1,355
PRSUs		419		534		510		1,332
ESPP purchase rights		129		203		266		400
Total equity-based compensation	$	1,145	$	1,495	$	1,906	$	3,076

Included in the table above are:

(a) Equity-based compensation reported in discontinued operations of ($260,000) for the six months ended July 1, 2023. (See Note 2. Divestiture and Discontinued Operations.)

Stock Options and ESPP

The fair value of stock options and ESPP awards is estimated at the grant date using the Black-Scholes option valuation model. The determination of the fair value of stock options and ESPP awards on the date of grant using an option-pricing model is affected by Intevac’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, and actual employee stock option exercise behavior. Intevac accounts for forfeitures as they occur, rather than estimating expected forfeitures.

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INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Intevac estimated the weighted-average fair value of stock options using the following weighted-average assumptions:

	Three and Six Months Ended
	June 29, 2024
Weighted-average fair value of grants per share	$	1.61
Expected volatility		49.13	%
Risk-free interest rate		4.58	%
Expected term (in years)		3.43
Dividend yield		None

Option activity as of June 29, 2024 and changes during the six months ended June 29, 2024 were as follows:

	Shares			Weighted-Average Exercise Price
Options outstanding at December 30, 2023		142,000		$	6.57
Options granted		41,200		$	4.00
Options cancelled and forfeited		(31,000	)	$	11.43
Options outstanding at June 29, 2024		152,200		$	4.89
Options exercisable at June 29, 2024		111,000		$	5.22

Intevac issued 153,595 shares of common stock under the ESPP during the six months ended June 29, 2024.

Intevac estimated the weighted-average fair value of ESPP purchase rights using the following weighted-average assumptions:

	Six Months Ended
	June 29, 2024			July 1, 2023
ESPP Purchase Rights:
Weighted-average fair value of grants per share	$	1.41		$	2.23
Expected volatility		47.81	%		34.20	%
Risk-free interest rate		4.52	%		4.47	%
Expected term of purchase rights (in years)		1.0			1.0
Dividend yield		None			None

The computation of the expected volatility assumptions used in the Black-Scholes calculations for ESPP purchase rights is based on the historical volatility of Intevac’s stock price, measured over a period equal to the expected term of the purchase right. The risk-free interest rate is based on the yield available on U.S. Treasury Strips with an equivalent remaining term. The expected term of purchase rights represents the period of time remaining in the current offering period. The dividend yield assumption is based on Intevac’s history of not paying dividends and the assumption of not paying dividends in the future.

RSUs

RSU activity as of June 29, 2024 and changes during the six months ended June 29, 2024 were as follows:

	Shares			Weighted-Average Grant Date Fair Value
Non-vested RSUs at December 30, 2023		915,087		$	4.89
Granted		420,496		$	3.92
Vested		(289,053	)	$	5.21
Cancelled and forfeited		(8,654	)	$	5.62
Non-vested RSUs at June 29, 2024		1,037,876		$	4.40

12

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Time-based RSUs are converted into shares of Intevac common stock upon vesting on a

one-for-one

basis. Time-based RSUs typically are scheduled to vest over three or four years. Time-based RSUs granted in May 2022 or later generally vest over a three-year period, with 33% vesting at the end of one year and the remaining vesting quarterly thereafter. Vesting of time-based RSUs is subject to the grantee’s continued service with Intevac. The compensation expense related to these awards is determined using the fair market value of Intevac common stock on the date of the grant, and the compensation expense is recognized over the vesting period.

PRSUs

PRSU activity as of June 29, 2024 and changes during the six months ended June 29, 2024 were as follows:

	Shares		Weighted-Average Grant Date Fair Value
Non-vested PRSUs at December 30, 2023		1,160,293	$	4.04
Granted		678,000	$	3.88
Non-vested PRSUs at June 29, 2024		1,838,293	$	3.98

In June 2024, we granted to members of our senior management awards of performance-based restricted stock units (the “2024 PRSU Awards”) covering an aggregate of 339,000 shares of Intevac common stock at target performance and 678,000 shares at maximum performance. The 2024 PRSU Awards are eligible to be earned based on achievement of (i) a cumulative number of TRIO units shipped and the satisfaction of an operating profit requirement, both measured during a three-year performance period commencing on June 20, 2024 and ending on December 26, 2026 (the last day of our 2026 fiscal year) (the “TRIO Unit Award”), or (ii) an operating profit percentage, measured during a

one-year

performance period commencing on December 28, 2025 and ending on December 26, 2026, and satisfaction of a TRIO units shipped requirement as of December 26, 2026 (the “OPP Award”), with 50% of the target number of the 2024 PRSU Awards allocated to each of the TRIO Unit Award and the OPP Award. The number of shares that can be earned under the TRIO Unit Award will be 0%, 50%, 100% or 200% of the target number of shares, and the number of shares that can be earned under the OPP Award will range from 0% to 200% of the target number of shares. If a performance goal is not achieved within the applicable performance period, the corresponding PRSUs will not vest, and all unvested PRSUs at the end of the applicable performance period will immediately be forfeited. Stock compensation expense is recorded based on the probability of achievement of the performance conditions specified in the agreement governing the applicable 2024 PRSU Award.

In May 2023, we granted to members of our senior management awards of performance-based restricted stock units (the “2023 PRSU Awards”) covering an aggregate of 525,656 shares of Intevac common stock (at maximum performance). The 2023 PRSU Awards are eligible to be earned based on achievement of five strategic goals during a three-year performance period commencing on May 18, 2023 and ending on May 31, 2026 (the “2023 Performance Period”). The 2023 PRSU Awards will vest, if at all, in five possible tranches. Each of the five tranches will vest only if the applicable strategic goal is achieved within the 2023 Performance Period, and each tranche may only be achieved once during the 2023 Performance Period. If a strategic goal is not achieved within the 2023 Performance Period, the corresponding PRSUs will not vest, and all unvested PRSUs at the end of the 2023 Performance Period will immediately be forfeited. Stock compensation expense is recorded based on the probability of achievement of the performance conditions specified in the PRSU grant.

The Company evaluated the performance and strategic goals under the 2024 PRSU Awards and 2023 PRSU Awards in the context of the Company’s long-range financial plan and product development roadmap and determined the probability of achieving each goal for accounting purposes commencing in the quarter awards were granted. Management expectations related to the achievement of performance goals associated with PRSUs with performance conditions are assessed regularly to determine whether such grants are expected to vest. The fair value of each PRSU is the Company’s stock price on the date of grant. Over the applicable performance period, the number of shares expected to be issued may be adjusted upward or downward based upon the probability of achievement of the performance conditions.

6. Warranty

Intevac provides for the estimated cost of warranty when revenue is recognized. Intevac’s warranty is subject to contract terms and, for its systems, the warranty typically ranges between 12 and 24 months from customer acceptance. During this warranty period any defective

non-consumable

parts are replaced and installed at no charge to the customer. Intevac uses estimated repair or replacement costs along with its historical warranty experience to determine its warranty obligation. The provision for the estimated future costs of warranty is based upon historical cost and product performance experience. Intevac exercises judgment in determining the underlying estimates.

13

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

On the condensed consolidated balance sheets, the short-term portion of the warranty provision is included in other accrued liabilities, while the long-term portion, if any, is included in other long-term liabilities. The expense associated with product warranties issued or adjusted is included in cost of net revenues on the condensed consolidated statements of operations.

The following table displays the activity in the warranty provision account for the three and six months ended June 29, 2024 and July 1, 2023.

	Three Months Ended						Six Months Ended
	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
	(In thousands)
Opening balance	$	159		$	177		$	205		$	163
Expenditures incurred under warranties		2			(67	)		(34	)		(165	)
Accruals for product warranties issued during the reporting period		63			72			101			172
Adjustments to previously existing warranty accruals		(38	)		(1	)		(86	)		11
Closing balance	$	186		$	181		$	186		$	181

The following table displays the balance sheet classification of the warranty provision account at June 29, 2024 and at December 30, 2023.

	June 29		December 30
	2024		2023
	(In thousands)
Other accrued liabilities	$	179	$	184
Other long-term liabilities		7		21
Total warranty provision	$	186	$	205

7. Guarantees

Officer and Director Indemnifications

As permitted or required under Delaware law and to the maximum extent allowable under that law, Intevac has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at Intevac’s request in such capacity. These indemnification obligations are valid as long as the director or officer acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The maximum potential amount of future payments Intevac could be required to make under these indemnification obligations is unlimited; however, Intevac has a director and officer insurance policy that mitigates Intevac’s exposure and enables Intevac to recover a portion of any future amounts paid. As a result of Intevac’s insurance policy coverage, Intevac believes the estimated fair value of these indemnification obligations is not material.

Other Indemnifications

As is customary in Intevac’s industry, many of Intevac’s contracts provide remedies to certain third parties such as defense, settlement, or payment of judgments for intellectual property claims related to the use of its products. Such indemnification obligations may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

Letters of Credit

As of June 29, 2024, we had letters of credit and bank guarantees outstanding totaling $700,000, including the standby letter of credit outstanding under the Santa Clara, California facility lease and various other guarantees with our bank. These letters of credit and bank guarantees are collateralized by $700,000 of restricted cash.

14

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

8. Cash, Cash Equivalents and Investments

Cash and cash equivalents, short-term investments and long-term investments consist of:

	June 29, 2024
	Amortized Cost		Unrealized Holding Gains		Unrealized Holding Losses		Fair Value
	(In thousands)
Cash and cash equivalents:
Cash	$	10,256	$	—	$	—	$	10,256
Money market funds		8,957		—		—		8,957
Commercial paper		15,173		—		4		15,169
Municipal bonds		190		—		—		190
U.S. treasury securities		2,989		1		—		2,990
Total cash and cash equivalents	$	37,565	$	1	$	4	$	37,562
Short-term investments:
Certificates of deposit	$	2,210	$	1	$	—	$	2,211
Commercial paper		10,802		2		3		10,801
Corporate bonds and medium-term notes		3,022		3		5		3,020
U.S. treasury and agency securities		11,187		2		—		11,189
Total short-term investments	$	27,221	$	8	$	8	$	27,221
Long-term investments:
Asset backed securities	$	93	$	—	$	1	$	92
Certificates of deposit		250		—		—		250
Corporate bonds and medium-term notes		3,677		—		1		3,676
U.S. treasury and agency securities		902		—		1		901
Total long-term investments	$	4,922	$	—	$	3	$	4,919
Total cash, cash equivalents, and investments	$	69,708	$	9	$	15	$	69,702

15

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	December 30, 2023
	Amortized Cost		Unrealized Holding Gains		Unrealized Holding Losses		Fair Value
	(In thousands)
Cash and cash equivalents:
Cash	$	19,050	$	—	$	—	$	19,050
Money market funds		15,090		—		—		15,090
Commercial paper		14,659		—		4		14,655
U.S. treasury securities		2,646		—		—		2,646
Total cash and cash equivalents	$	51,445	$	—	$	4	$	51,441
Short-term investments:
Asset backed securities	$	12	$	—	$	—	$	12
Certificates of deposit		1,850		—		—		1,850
Commercial paper		3,506		—		1		3,505
Corporate bonds and medium-term notes		5,373		—		36		5,337
Municipal bonds		221		—		2		219
U.S. treasury and agency securities		6,498		1		17		6,482
Total short-term investments	$	17,460	$	1	$	56	$	17,405
Long-term investments:
Asset backed securities	$	460	$	—	$	4	$	456
Corporate bonds and medium-term notes		2,230		1		—		2,231
Total long-term investments	$	2,690	$	1	$	4	$	2,687
Total cash, cash equivalents, and investments	$	71,595	$	2	$	64	$	71,533

The contractual maturities of investment securities at June 29, 2024 are presented in the following table.

	Amortized Cost		Fair Value
	(In thousands)
Due in one year or less	$	54,530	$	54,527
Due after one through five years		4,922		4,919
	$	59,452	$	59,446

We periodically review investments for impairment. For investments in unrealized loss positions, we assess whether any portion of the decline in fair value below the amortized cost basis is due to credit-related factors if the Company neither intends to sell nor anticipates that it is more likely than not that we will be required to sell prior to recovery of the amortized cost basis. We consider factors such as the extent to which the market value has been less than the amortized cost basis, any noted failure of the issuer to make scheduled interest or principal payments, changes to the rating of the security by a rating agency and other relevant credit-related factors in determining whether or not a credit loss exists. We reassess our estimated credit losses on investments each reporting period. U.S. government securities and cash equivalents are under a

“zero-loss

exception” for credit losses, meaning no credit loss risk calculation is necessary on those instruments due to the exceptionally low rate of default, which continues to decrease as the securities approach maturity. We record changes in the allowance for credit losses for

available-for-sale

debt securities with a corresponding adjustment in credit loss expense on the consolidated statement of operations. No reversal of a previously recorded allowance for credit losses may be made to an amount below zero. The total allowance for credit losses was $0 at both June 29, 2024 and December 30, 2023.

Our investment portfolio includes both corporate and U.S. government securities that have a maximum maturity of two years. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities with a lower

yield-at-cost

show a

mark-to-market

unrealized loss. Most of our unrealized losses are due to changes in market interest rates and bond yields.

16

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

We believe that we have the ability to realize the full value of all these investments upon maturity. As of June 29, 2024, we had 99 investments in a gross unrealized loss position. The following table provides the fair market value of Intevac’s investments with unrealized losses that are not deemed to be other-than temporarily impaired as of June 29, 2024

	June 29, 2024
	In Loss Position for Less than 12 Months				In Loss Position for Greater than 12 Months
	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(In thousands)
Asset-backed securities	$	—	$	—	$	92	$	1
Commercial paper		23,827		7		—		—
Corporate bonds and medium-term notes		4,399		6		—		—
U.S. treasury securities		1,380		1		—		—
	$	29,606	$	14	$	92	$	1

All prices for the fixed maturity securities including U.S. treasury and agency securities, certificates of deposit, commercial paper, corporate bonds, asset-backed securities and municipal bonds are received from independent pricing services utilized by Intevac’s outside investment manager. This investment manager performs a review of the pricing methodologies and inputs utilized by the independent pricing services for each asset type priced by the vendor. In addition, on at least an annual basis, the investment manager conducts due diligence visits and interviews with each pricing vendor to verify the inputs utilized for each asset class. The due diligence visits include a review of the procedures performed by each vendor to ensure that pricing evaluations are representative of the price that would be received if a security were sold in an orderly transaction. Any pricing where the input is based solely on a broker price is deemed to be a Level 3 price. Intevac uses the pricing data obtained from its outside investment manager as the primary input to make its assessments and determinations as to the ultimate valuation of the above-mentioned securities and has not made, during the periods presented, any material adjustments to such inputs.

The following table represents the fair value hierarchy of Intevac’s investment securities measured at fair value on a recurring basis as of June 29, 2024.

	Fair Value Measurements at June 29, 2024
	Total		Level 1		Level 2
	(In thousands)
Recurring fair value measurements:
Investment securities
Money market funds	$	8,957	$	8,957	$	—
U.S. treasury and agency securities		15,080		15,080		—
Asset-backed securities		92		—		92
Certificates of deposit		2,461		—		2,461
Commercial paper		25,970		—		25,970
Corporate bonds and medium-term notes		6,696		—		6,696
Municipal bonds		190		—		190
Total recurring fair value measurements	$	59,446	$	24,037	$	35,409

9. Derivative Instruments

The Company uses foreign currency forward contracts to mitigate variability in gains and losses generated from the

re-measurement

of certain monetary assets and liabilities denominated in foreign currencies and to offset certain operational exposures from the impact of changes in foreign currency exchange rates. These derivatives are carried at fair value with changes recorded in interest income and other income (expense), net in the

17

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

condensed consolidated statements of operations. Changes in the fair value of these derivatives are largely offset by

re-measurement

of the underlying assets and liabilities. Cash flows from such derivatives are classified as operating activities. The derivatives have maturities of approximately 30 days. There were no outstanding derivatives at June 29, 2024 and December 30, 2023.

10. Equity

Stock Repurchase Program

On November 21, 2013, Intevac announced that its Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases. On August 20, 2018, Intevac announced that its Board of Directors approved a $10.0 million increase to the original stock repurchase program for an aggregate authorized amount of up to $40.0 million. At June 29, 2024, $10.4 million remains available for future stock repurchases under the repurchase program. Intevac did not make any common stock repurchases during the three and six months ended June 29, 2024 and July 1, 2023.

Condensed Consolidated Statement of Changes in Equity

The changes in stockholders’ equity by component for the three and six months ended June 29, 2024 and July 1, 2023, are as follows (in thousands):

	Three Months Ended June 29, 2024
	Common Stock and Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit			Total Stockholders’ Equity
Balance at March 30, 2024	$	211,425		$	(29,551	)	$	30	$	(66,981	)	$	114,923
Shares withheld for net share settlement of RSUs		(228	)		—			—		—			(228	)
Equity-based compensation expense		1,145			—			—		—			1,145
Net loss		—			—			—		(3,263	)		(3,263	)
Other comprehensive income		—			—			12		—			12
Balance at June 29, 2024	$	212,342		$	(29,551	)	$	42	$	(70,244	)	$	112,589

	Six Months Ended June 29, 2024
	Common Stock and Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 30, 2023	$	210,346		$	(29,551	)	$	97		$	(65,375	)	$	115,517
Common stock issued under employee plans		462			—			—			—			462
Shares withheld for net share settlement of RSUs		(372	)		—			—			—			(372	)
Equity-based compensation expense		1,906			—			—			—			1,906
Net loss		—			—			—			(4,869	)		(4,869	)
Other comprehensive loss		—			—			(55	)		—			(55	)
Balance at June 29, 2024	$	212,342		$	(29,551	)	$	42		$	(70,244	)	$	112,589

18

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	Three Months Ended July 1, 2023
	Common Stock and Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at April 1, 2023	$	207,489		$	(29,551	)	$	(14	)	$	(57,076	)	$	120,848
Common stock issued under employee plans		3			—			—			—			3
Shares withheld for net share settlement of RSUs		(289	)		—			—			—			(289	)
Equity-based compensation expense		1,495			—			—			—			1,495
Net loss		—			—			—			(4,878	)		(4,878	)
Other comprehensive loss		—			—			(176	)		—			(176	)
Balance at July 1, 2023	$	208,698		$	(29,551	)	$	(190	)	$	(61,954	)	$	117,003

	Six Months Ended July 1, 2023
	Common Stock and Additional Paid-in Capital			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2022	$	206,381		$	(29,551	)	$	(193	)	$	(53,185	)	$	123,452
Common stock issued under employee plans		804			—			—			—			804
Shares withheld for net share settlement of RSUs		(1,563	)		—			—			—			(1,563	)
Equity-based compensation expense		3,076			—			—			—			3,076
Net loss		—			—			—			(8,769	)		(8,769	)
Other comprehensive loss		—			—			3			—			3
Balance at July 1, 2023	$	208,698		$	(29,551	)	$	(190	)	$	(61,954	)	$	117,003

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component for the three and six months ended June 29, 2024, and July 1, 2023, are as follows:

	Three Months Ended								Six Months Ended
	June 29, 2024
	Foreign currency			Unrealized holding gains (losses) on available-for-sale investments			Total		Foreign currency			Unrealized holding gains (losses) on available-for-sale investments			Total
	(In thousands)
Beginning balance	$	63		$	(33	)	$	30	$	159		$	(62	)	$	97
Other comprehensive income (loss) before reclassification		(15	)		27			12		(111	)		56			(55	)
Amounts reclassified from other comprehensive income (loss)		—			—			—		—			—			—
Net current-period other comprehensive income (loss)		(15	)		27			12		(111	)		56			(55	)
Ending balance	$	48		$	(6	)	$	42	$	48		$	(6	)	$	42

19

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

	Three Months Ended									Six Months Ended
	July 1, 2023
	Foreign currency			Unrealized holding gains (losses) on available-for-sale investments			Total			Foreign currency			Unrealized holding gains (losses) on available-for-sale investments			Total
	(In thousands)
Beginning balance	$	301		$	(315	)	$	(14	)	$	291		$	(484	)	$	(193	)
Other comprehensive income (loss) before reclassification		(229	)		53			(176	)		(219	)		222			3
Amounts reclassified from other comprehensive income (loss)		—			—			—			—			—			—
Net current-period other comprehensive income (loss)		(229	)		53			(176	)		(219	)		222			3
Ending balance	$	72		$	(262	)	$	(190	)	$	72		$	(262	)	$	(190	)

11. Net Loss Per Share

The following table sets forth the computation of basic and diluted net loss per share:

	Three Months Ended						Six Months Ended
	June 29, 2024			July 1, 2023			June 29, 2024			July 1, 2023
	(In thousands, except per share amounts)
Net loss from continuing operations	$	(3,263	)	$	(4,918	)	$	(5,964	)	$	(9,086	)
Net income from discontinued operations	$	—		$	40		$	1,095		$	317
Net loss	$	(3,263	)	$	(4,878	)	$	(4,869	)	$	(8,769	)
Weighted-average shares – basic		26,668			26,032			26,595			25,907
Effect of dilutive potential common shares		—			—			—			—
Weighted-average shares – diluted		26,668			26,032			26,595			25,907
Basic and diluted net income (loss) per share:
Continuing operations	$	(0.12	)	$	(0.19	)	$	(0.22	)	$	(0.35	)
Discontinued operations	$	0.00		$	0.00		$	0.04		$	0.01
Net loss per share	$	(0.12	)	$	(0.19	)	$	(0.18	)	$	(0.34	)

As the Company is in a net loss position, all of the Company’s equity instruments are considered antidilutive.

12. Income Taxes

Intevac recorded income tax provisions of $751,000 and $1.2 million for the three and six months ended June 29, 2024, respectively, and income tax provisions of $116,000 and $502,000 for the three and six months ended July 1, 2023, respectively. The income tax provisions for the three and six month periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which Intevac operates. For the three and six months ended June 29, 2024, Intevac recorded income tax provisions on income of its international subsidiaries of $512,000 and $856,000, respectively, and recorded $236,000 and $371,000, respectively, for withholding taxes on royalties paid to the United States from Intevac’s Singapore subsidiary as discrete items. For the three months ended July 1, 2023, Intevac recorded a $44,000 income tax benefit on losses of its international subsidiaries and recorded $158,000 for withholding taxes on royalties paid to the United States from Intevac’s Singapore subsidiary as a discrete item. For the six months ended July 1, 2023, Intevac recorded a $180,000 income tax provision on income of its international subsidiaries and recorded $320,000 for withholding taxes on royalties paid to the United States from Intevac’s Singapore subsidiary as a discrete item. Intevac’s tax rate differs from the applicable statutory rates due primarily to establishment of a valuation allowance, the utilization of deferred and current credits and the effect of permanent differences and adjustments of prior permanent differences. Intevac’s future effective income tax rate depends on various factors, including the level of Intevac’s projected earnings, the geographic composition of worldwide earnings, tax regulations governing each region, net operating loss carry-forwards, availability of tax credits and the effectiveness of Intevac’s tax planning strategies. Management carefully monitors these factors and timely adjusts the effective income tax rate.

20

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Under the Coronavirus Aid, Relief, and Economic Security Act of 2021 (the “CARES Act”), as modified and clarified by the Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021, the Company was eligible for an Employee Retention Credit (“ERC”) subject to certain criteria. The ERC is a payroll tax refund per employee, which was designed by the U.S. Treasury Department to assist businesses that retained employees during the COVID pandemic. During the six months ended June 29, 2024, we amended certain fiscal year 2021 payroll tax filings and applied for a refund equal to $2.4 million of ERC benefits. The refund is recorded within trade and other accounts receivable in our condensed consolidated balance sheet as of June 29, 2024, and as $1.5 million in other income (expense), net and $933,000 in discontinued operations in our condensed consolidated statements of operations for the six months ended June 29, 2024.

13. Restructuring and Other Costs, Net

During the fourth quarter of fiscal 2021, the Company recorded asset impairment and restructuring charges associated with the sale of the Photonics division including $665,000 in accruals for common area charges associated with an unused space commitment to EOTECH. In consideration of EOTECH’s assumption of certain lease obligations related to the Company’s Santa Clara, California campus, which assumed lease obligations pertain in part to excess space beyond that required by EOTECH’s anticipated operation of the Photonics division, the Company agreed to pay EOTECH the amount of $2.1 million, which was payable in (i) one initial installment of $308,000 on January 10, 2022 and (ii) seven equal quarterly installments of $259,000. The final installment was paid on October 9, 2023.

The changes in restructuring reserves, which resulted from cash-based severance payments and other employee-related costs and other exit costs associated with the Photonics divestiture for the three and six months ended July 1, 2023 were as follows.

	Other Exit Costs
	(In thousands)
Balance at December 31, 2022	$	318
Provision for restructuring charges associated with Photonics divestiture		3
Cash payments made		(81	)
Balance at April 1, 2023	$	240
Provision for restructuring charges associated with Photonics divestiture		2
Cash payments made		(80	)
Balance at July 1, 2023	$	162

14. Acquisition of Hia, Inc.

On August 26, 2022 (the “Closing Date”), the Company comp

let

ed the acquisition of Hia, Inc., a supplier of magnetic bars, to bring the manufacturing of these magnetic bars

in-house

and to protect our technology and product quality while continuing to improve our products. Pursuant to the Stock Purchase Agreement, dated August 26, 2022, between the Company, Hia and the other parties thereto, the Company paid an aggregate purchase price of $700,000 to Hia’s stockholders on the Closing Date. Further contingent consideration will consist of amounts payable upon achievement of certain development and commercialization milestones, which consideration is estimated to be up to $500,000. The first milestone was achieved and contingent consideration in the amount of $250,000 was paid on January 17, 2023 and was accrued in the fourth quarter of 2022. The Company is also obligated to pay a royalty of $1,500 for each magnetic bar sold through December 31, 2030. If at any time prior to December 31, 2030, the Company effects a change of control or a sale, license, transfer or other disposition to a third party (other than an affiliate of Intevac) of all or substantially all of the assets or rights associated with the magnetic bars, then, upon the closing of such transaction, a payment of $1.7 million (minus any royalty payments previously paid) will immediately become due and payable, which payment shall fulfill the Company’s royalty obligations. Transaction costs incurred in connection with the Hia acquisition totaled $63,000, which are included as a component of the purchase price paid in connection with the Hia acquisition.

The Company determined this transaction represented an asset acquisition as substantially all of the value was in the technology intangible assets of Hia. Contingent consideration is not recorded in an asset acquisition until the contingency is resolved (when the contingent consideration is paid or

21

INTEVAC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

becomes payable) or when probable and reasonably estimable. The first milestone was achieved and contingent consideration in the amount of $250,000 was paid on January 17, 2023. The technology intangible assets are being amortized on a straight-line basis over a period of 8.3 years. Total amortization expense during the three and six months ended June 29, 2024 was $34,000 and $68,000, respectively. Total amortization expense during the three and six months ended July 1, 2023 was $34,000 and $68,000, respectively. Annual amortization expense related to the acquired technology intangible assets in each of the succeeding years is estimated to be approximately $68,000 for the remainder of fiscal 2024 and approximately $136,000 per year from fiscal 2025 through fiscal 2030.

The following table represents the carrying amount of the Hia technology intangible assets at June 29, 2024 and December 30, 2023 (in thousands):

	June 29, 2024			December 30, 2023
	(In thousands)
Gross carrying amount	$	1,132		$	1,132
Accumulated amortization		(247	)		(178	)
Net carrying amount	$	885		$	954

15. Commitments and Contingencies

From time to time, Intev

ac

may have certain contingent liabilities that arise in the ordinary course of its business activities. Intevac accounts for contingent liabilities when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.

Legal Matters

From time to time, Intevac receives notification from third parties, including customers and suppliers, seeking indemnification, litigation support, payment of money or other actions in connection with claims made against them. In addition, from time to time, Intevac receives notification from third parties claiming that Intevac may be or is infringing their intellectual property or other rights. Intevac also is subject to various other legal proceedings and claims, both asserted and unasserted, that arise in the ordinary course of business. Although the outcome of these claims and proceedings cannot be predicted with certainty, Intevac does not believe that any existing proceedings or claims will have a material adverse effect on its consolidated financial condition or results of operations.

22

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

This Quarterly Report on Form 10-Q contains forward-looking statements, which involve risks and uncertainties. Words such as “believes,” “expects,” “anticipates” and the like indicate forward-looking statements. These forward-looking statements include comments related to Intevac’s shipments, projected revenue recognition, product costs, gross margin, operating expenses, interest income, income taxes, cash balances and financial results in 2024 and beyond; projected customer requirements for Intevac’s new and existing products, and when, and if, Intevac’s customers will place orders for these products; the timing of delivery and/or acceptance of the systems and products that comprise Intevac’s backlog for revenue and the Company’s ability to achieve cost savings. Intevac’s actual results may differ materially from the results discussed in the forward-looking statements for a variety of reasons, including those set forth under “Risk Factors” and in other documents we file from time to time with the Securities and Exchange Commission, including our Annual Report on Form 10-K filed on February 15, 2024, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.

Intevac’s trademarks include the following: “200 Lean^®,” and “INTEVAC TRIO^™.”

Overview

Intevac is a leading provider of thin-film process technology and manufacturing platforms for high-volume manufacturing environments. With over 30 years of leadership in designing, developing, and manufacturing high-productivity, thin-film processing systems, the Company leverages its technology and know-how to provide process manufacturing equipment solutions to the hard disk drive (“HDD”) and advanced coatings (“ADVC”) markets (formerly known as the display cover panel (“DCP”) market). Intevac’s customers include HDD and DCP manufacturers. Intevac operates in a single segment: Thin-film Equipment (“TFE”). Product development and manufacturing activities occur in North America and Asia. Intevac also has field offices in Asia to support its customers. Intevac’s products are highly technical and are sold primarily through Intevac’s direct sales force.

Intevac’s results of operations are driven by a number of factors including success in its equipment growth initiatives in the ADVC market and by worldwide demand for HDDs. Demand for HDDs depends on the growth in digital data creation and storage, the rate of areal density improvements, and the end-user demand for personal computers (“PCs”), enterprise data storage, nearline “cloud” applications, video players and video game consoles that include such drives. Intevac continues to execute its strategy of diversification beyond the HDD industry by focusing on the Company’s ability to provide proprietary tools to enhance scratch protection and durability for the ADVC market and by working to develop the next generation of high volume ADVC manufacturing equipment. Intevac believes that its renewed focus on the ADVC market will result in incremental equipment revenues for Intevac and decrease Intevac’s dependence on the HDD industry. Intevac’s equipment business is subject to cyclical industry conditions, as demand for manufacturing equipment and services can change depending on supply and demand for HDDs and cell phones, as well as other factors such as global economic conditions and technological advances in fabrication processes.

In December 2021, the Company sold its Photonics business. As a result of the disposition, the results of operations from the Photonics reporting segment are reported as “Net income from discontinued operations, net of taxes” in the condensed consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q.

In March 2022, the Company realigned its operational focus and eliminated several research and development (“R&D”) programs and product offerings for the ADVC, photovoltaic solar cell and advanced semiconductor packaging industries and instead started a focused effort to develop TRIO^™, a modular platform that can be configured to handle a variety of form factors, including two-dimensional and three-dimensional shapes and both small and large surface area substrates.

In December 2022, the Company entered a joint development agreement (the “JDA”) with Corning Incorporated (“Corning”), a major provider of glass and glass ceramic materials, for the development of TRIO for consumer device applications. In December 2023, the Company successfully completed the qualification of its first TRIO system with Corning. On December 31, 2023, the JDA expired by its terms. Intevac expects to continue to develop additional customer relationships for TRIO for other glass coating applications.

23

The following table presents certain significant measurements for the three and six months ended June 29, 2024 and July 1, 2023:

	Three Months Ended									Six Months Ended
	June 29, 2024			July 1, 2023			Change over prior period			June 29, 2024			July 1, 2023			Change over prior period
	(In thousands, except percentages and per share amounts)
Net revenues	$	14,526		$	10,301		$	4,225		$	24,156		$	21,843		$	2,313
Gross profit	$	5,548		$	2,570		$	2,978		$	9,752		$	7,289		$	2,463
Gross margin percent		38.2	%		24.9	%		13.3 points			40.4	%		33.4	%		7.0 points
Loss from operations	$	(3,271	)	$	(5,452	)	$	2,181		$	(7,716	)	$	(9,906	)	$	2,190
Loss from continuing operations	$	(3,263	)	$	(4,918	)	$	1,655		$	(5,964	)	$	(9,086	)	$	3,122
Income from discontinued operations	$	—		$	40		$	(40	)	$	1,095		$	317		$	778
Net loss	$	(3,263	)	$	(4,878	)	$	1,615		$	(4,869	)	$	(8,769	)	$	3,900
Net loss per diluted share	$	(0.12	)	$	(0.19	)	$	0.07		$	(0.18	)	$	(0.34	)	$	0.16

Net revenues increased during the three and six months ended June 29, 2024 compared to the same periods in the prior year primarily due to higher upgrade sales, offset in part by lower system sales. We did not recognize revenue on any system sales in the first half of fiscal 2024. We recognized revenue on one 200 Lean HDD system and one refurbished 200 Lean HDD system in the second quarter of 2023. Higher gross margin in the three and six months ended June 29, 2024, versus the same periods in the prior year, reflected increased margin contribution from higher margin HDD upgrade sales, offset in part by increased inventory charges. Excess and obsolete inventory charges for the three and six months ended June 29, 2024 included $1.1 million in charges to reduce a TRIO tool currently undergoing evaluation at a customer facility to its estimated net realizable value. Gross margin in the three and six months ended July 1, 2023 reflected the lower-margin contributions from the 200 Lean HDD system and the refurbished 200 Lean HDD system. During the six months ended June 29, 2024, we amended certain payroll tax filings and applied for a refund of $2.4 million in ERC benefits. The refund is recorded as $1.5 million in other income (expense), net and $933,000 in discontinued operations in our condensed consolidated statements of operations for the six months ended June 29, 2024. The Company reported a smaller net loss for the three months ended June 29, 2024 compared to same period in the prior year due to higher revenues and higher gross profit, offset in part by higher operating costs. The Company reported a smaller net loss for the six months ended June 29, 2024 compared to same period in the prior year due to higher revenues and higher gross profit and due to the ERC benefits, offset in part by higher operating costs.

We believe fiscal 2024 will continue to be a challenging year, and we do not expect to be profitable in fiscal 2024. In fiscal 2024, we expect to begin recognizing revenue from our TRIO platform as the product completes qualifications. However, we expect that HDD equipment sales and upgrades for magnetic disk production in fiscal 2024 will be lower than fiscal 2023 levels. In addition, our results of operations and growth prospects could be impacted by macroeconomic conditions such as a global economic slowdown, global economic instability and political conflicts, wars, and public health crises. In addition, continued inflation and high interest rates may impact demand for our products and services and our cost to provide products and services.

Results of Operations

Net revenues

	Three Months Ended						Six Months Ended
	June 29, 2024		July 1, 2023		Change over prior period		June 29, 2024		July 1, 2023		Change over prior period
	(In thousands)
Net revenues	$	14,526	$	10,301	$	4,225	$	24,156	$	21,843	$	2,313

Revenue for the three and six months ended June 29, 2024 increased compared to the same periods in the prior year as a result of higher HDD upgrade sales, higher spare parts sales and higher field service sales, offset in part by lower systems sales. Revenue for the three and six months ended June 29, 2024 did not include revenue recognized for any systems. We recognized revenue on one 200 Lean HDD system and one refurbished 200 Lean HDD system during the three and six months ended July 1, 2023.

Backlog

	June 29, 2024		December 30, 2023		July 1, 2023
	(In thousands)
Backlog	$	42,486	$	42,415	$	58,157

24

Backlog at both June 29, 2024 and December 30, 2023 did not include any 200 Lean HDD systems. Backlog at July 1, 2023 included two 200 Lean HDD systems. In May 2023, we recorded a backlog reduction of $54.6 million due to customer cancellation of an order for eight 200 Lean HDD systems. In December 2023, we recorded a backlog reduction of $11.4 million due to customer cancellation of an order for two 200 Lean HDD systems. On June 29, 2024, we had $42.5 million of backlog, of which we expect to recognize as revenue: 48.4% in 2024 and 51.6% in 2025. However, our customers may cancel their contracts with us prior to contract completion. In the case of a termination for convenience, we would not receive anticipated future revenues, but would generally be permitted to recover all or a portion of our incurred costs and fees for work performed.

Revenue by geographic region

	Three Months Ended				Six Months Ended
	June 29, 2024		July 1, 2023		June 29, 2024		July 1, 2023
	(In thousands)
United States	$	178	$	662	$	660	$	2,276
Asia		14,348		9,628		23,496		19,556
Europe		—		11		—		11
Total net revenues	$	14,526	$	10,301	$	24,156	$	21,843

International sales include products shipped to overseas operations of U.S. companies. The decrease in sales to the U.S. region in the three months ended June 29, 2024 versus the same period in the prior year reflected lower HDD upgrade sales and lower spare parts sales, offset in part by higher field service sales. The decrease in sales to the U.S. region in the six months ended June 29, 2024 versus the same period in the prior year reflected lower HDD upgrade sales, lower spare parts sales and lower field service sales. The increase in sales to the Asia region in the three and six months ended June 29, 2024 versus the same periods in the prior year reflected higher HDD upgrade sales, higher spare parts sales and higher field service sales, offset by lower HDD system sales. Sales to the Asia region in the three and six months ended June 29, 2024 did not include any systems. Sales to the Asia region in the three and six months ended July 1, 2023 included one 200 Lean HDD system and one refurbished 200 Lean HDD system.

Gross profit

	Three Months Ended								Six Months Ended
	June 29, 2024			July 1, 2023			Change over prior period		June 29, 2024			July 1, 2023			Change over prior period
	(In thousands, except percentages)
Gross profit	$	5,548		$	2,570		$	2,978	$	9,752		$	7,289		$	2,463
% of net revenues		38.2	%		24.9	%				40.4	%		33.4	%

Cost of net revenues consists primarily of purchased materials, and also includes fabrication, assembly, test and installation labor and overhead, customer-specific engineering costs, warranty costs, shipping and tariff costs, provisions for inventory reserves and scrap.

Gross margin was 38.2% in the three months ended June 29, 2024 compared to 24.9% in the three months ended July 1, 2023 and was 40.4% in the six months ended June 29, 2024 compared to 33.4% in the six months ended July 1, 2023. The increase in the gross margin percentage for the three and six months ended June 29, 2024 compared to the same periods in the prior year was due primarily to the higher-margin contributions from HDD upgrades, offset in part by increased excess and obsolete inventory charges. Excess and obsolete inventory charges for the three and six months ended June 29, 2024 included $1.1 million in charges to reduce a TRIO tool currently undergoing evaluation at a customer facility to its estimated net realizable value. Gross margin in the three and six months ended July 1, 2023 reflected the lower-margin contributions from the 200 Lean HDD system and the refurbished 200 Lean HDD system. Gross margins will vary depending on a number of factors, including revenue levels, product mix, product cost, system configuration and pricing, factory utilization, and provisions for excess and obsolete inventory.

25

Research and development expense

	Three Months Ended							Six Months Ended
	June 29 2024		July 1, 2023		Change over prior period			June 29 2024		July 1, 2023		Change over prior period
	(In thousands)
Research and development expense	$	3,511	$	3,647	$	(136	)	$	7,880	$	7,620	$	260

Research and development spending during the three months ended June 29, 2024 decreased compared to the same period in the prior year primarily due to lower spending on HDD R&D programs. Research and development spending during the six months ended June 29, 2024 increased compared to the same period in the prior year primarily due to higher spending on TRIO R&D programs, offset in part by lower spending on HDD R&D programs. R&D spending during the six months ended June 29, 2024 included a $523,000 charge related to the disposal of certain lab equipment.

Selling, general and administrative expense

	Three Months Ended						Six Months Ended
	June 29, 2024		July 1, 2023		Change over prior period		June 29, 2024		July 1, 2023		Change over prior period
	(In thousands)
Selling, general and administrative expense	$	5,308	$	4,375	$	933	$	9,588	$	9,575	$	13

Selling, general and administrative expense consists primarily of selling, marketing, customer support, financial and management costs. Selling, general and administrative expense for the three months ended June 29, 2024 increased compared to the same period in the prior year as higher variable compensation expenses, higher legal fees, higher rent, higher marketing expenses, higher training costs and higher travel expenses were offset in part by lower salaries and wages and lower stock-based compensation expenses. Selling, general and administrative expense for the six months ended June 29, 2024 increased compared to the same period in the prior year as higher variable compensation expenses, higher legal fees, higher rent, higher marketing expenses, higher training costs and higher travel expenses were offset in part by lower salaries and wages, lower stock-based compensation expenses and lower consulting fees. Selling, general and administrative expense for the three and six months ended June 29, 2024 also included $364,000 in charges to support a customer evaluation for a TRIO system at a leading display cover glass manufacturer.

Interest income and other income (expense), net

	Three months ended						Six months ended
	June 29, 2024		July 1, 2023		Change over prior period		June 29, 2024		July 1, 2023		Change over prior period
	(In thousands)
Interest income and other, income (expense), net	$	759	$	650	$	109	$	2,979	$	1,322	$	1,657

Interest income and other income (expense), net in the three months ended June 29, 2024 included $726,000 of interest income on investments and $34,000 of foreign currency gains, offset in part by $1,000 of various other expense. Interest income and other income (expense), net in the six months ended June 29, 2024 included $1.4 million of interest income on investments, $1.5 million of other income and $104,000 of foreign currency gains. Interest income and other income (expense), net in the three months ended July 1, 2023 included $567,000 of interest income on investments, $24,000 of various other income and $59,000 of foreign currency gains. Interest income and other income (expense), net in the six months ended July 1, 2023 included $1.3 million of interest income on investments and $64,000 of various other income, offset in part by $19,000 of foreign currency losses. The increase in interest income in the three and six months ended June 29, 2024 compared to the same periods in the prior year resulted from higher invested balances. During the six months ended June 29, 2024, we amended certain fiscal year 2021 payroll tax filings and applied for a refund of $2.4 million in ERC benefits. The refund is recorded as $1.5 million in other income (expense), net and $933,000 in discontinued operations in our condensed consolidated statements of operations for the six months ended June 29, 2024.

26

Provision for income taxes

	Three Months Ended						Six Months Ended
	June 29, 2024		July 1, 2023		Change over prior period		June 29, 2024		July 1, 2023		Change over prior period
	(In thousands)
Provision for income taxes	$	751	$	116	$	635	$	1,227	$	502	$	725

Intevac recorded income tax provisions of $751,000 and $1.2 million for the three and six months ended June 29, 2024, respectively, and income tax provisions of $116,000 and $502,000 for the three and six months ended July 1, 2023, respectively. The income tax provisions for these three and six month periods are based upon estimates of annual income (loss), annual permanent differences and statutory tax rates in the various jurisdictions in which Intevac operates. For the three and six months ended June 29, 2024, Intevac recorded income tax provisions on profits of its international subsidiaries of $512,000 and $856,000, respectively, and recorded $236,000 and $371,000, respectively, for withholding taxes on royalties paid to the United States from Intevac’s Singapore subsidiary as discrete items. For the three months ended July 1, 2023, Intevac recorded a $44,000 income tax benefit on losses of its international subsidiaries and recorded $158,000 for withholding taxes on royalties paid to the United States from Intevac’s Singapore subsidiary as a discrete item. For the six months ended July 1, 2023, Intevac recorded a $180,000 income tax provision on income of its international subsidiaries and recorded $320,000 for withholding taxes on royalties paid to the United States from Intevac’s Singapore subsidiary as a discrete item. For all periods presented, Intevac utilized net operating loss carry-forwards to offset the impact of global intangible low-taxed income. Intevac’s tax rate differs from the applicable statutory rates due primarily to the establishment of a valuation allowance, the utilization of deferred and current credits and the effect of permanent differences and adjustments of prior permanent differences. Intevac’s future effective income tax rate depends on various factors, including the level of Intevac’s projected earnings, the geographic composition of worldwide earnings, tax regulations governing each region, net operating loss carry-forwards, availability of tax credits and the effectiveness of Intevac’s tax planning strategies. Management carefully monitors these factors and timely adjusts the effective income tax rate.

The income tax expense consists primarily of income taxes in foreign jurisdictions in which we conduct business and foreign withholding taxes. We maintain a full valuation allowance for domestic deferred tax assets, including net operating loss carry-forwards and certain domestic tax credits. Intevac’s effective tax rate differs from the U.S. statutory rate in both fiscal 2024 and fiscal 2023 primarily due to the Company not recognizing an income tax benefit on the domestic loss.

Income from discontinued operations, net of taxes

	Three Months Ended							Six Months Ended
	June 29, 2024		July 1, 2023		Change over prior period			June 29, 2024		July 1, 2023		Change over prior period
	(In thousands)
Income from discontinued operations, net of taxes	$	—	$	40	$	(40	)	$	1,095	$	317	$	778

The income from discontinued operations consists primarily of the results of operations of the Photonics business which was sold to EOTECH on December 30, 2021. Income from discontinued operations for the six months ended June 29, 2024 is comprised of $933,000 in ERC benefits and the $162,000 reversal of certain charges associated with the completion of the lease subsidy in March 2024. Income from discontinued operations for the three months ended July 1, 2023 is comprised primarily of accretion on the lease liability that was assigned to EOTECH. Income from discontinued operations for the six months ended July 1, 2023 is comprised primarily of a stock-based compensation forfeiture benefit recognized upon the termination of employment of certain mutual employees of both the Company and EOTECH upon the completion of the assignment and novation of all government contracts to EOTECH in the first quarter of fiscal 2023.

Liquidity and Capital Resources

At June 29, 2024, Intevac had $70.4 million in cash, cash equivalents, restricted cash and investments, compared to $72.2 million at December 30, 2023. During the first six months of fiscal 2024, cash, cash equivalents, restricted cash and investments decreased by $1.8 million due primarily to cash used by operating activities, purchases of leasehold improvements and equipment, and tax payments on net share settlements, offset in part by cash received from the sale of Intevac common stock to Intevac’s employees through Intevac’s employee benefit plans.

27

Cash, cash equivalents, restricted cash and investments consist of the following:

	June 29, 2024		December 30, 2023
	(In thousands)
Cash and cash equivalents	$	37,562	$	51,441
Restricted cash		700		700
Short-term investments		27,221		17,405
Long-term investments		4,919		2,687
Total cash, cash equivalents, restricted cash and investments	$	70,402	$	72,233

Operating activities used cash of $612,000 during the first six months of fiscal 2024 compared to cash used of $33.4 million during the first six months of fiscal 2023.

Accounts receivable decreased to $17.6 million at June 29, 2024 compared to $18.6 million at December 30, 2023 as a result of collections, offset in part by second quarter sales. Accounts receivable at June 29, 2024 includes the $2.4 million claim for ERC benefits. Inventories increased to $45.6 million at June 29, 2024 compared to $43.8 million at December 30, 2023 primarily due to increased purchases of TRIO inventory. Accounts payable decreased to $4.4 million at June 29, 2024 from $5.8 million at December 30, 2023. Accrued payroll and related liabilities increased to $4.0 million at June 29, 2024 compared to $3.5 million at December 30, 2023 primarily due to the accrual of 2024 bonuses, offset in part by the settlement of 2023 bonuses. Other accrued liabilities increased to $2.5 million at June 29, 2024 compared to $1.8 million at December 30, 2023 primarily due to increased deferred revenue. Customer advances increased from $21.9 million at December 30, 2023 to $23.1 million at June 29, 2024 primarily as a result of new orders.

Investing activities used cash of $13.2 million during the first six months of fiscal 2024. Purchases of investments, net of proceeds from sales and maturities of investments totaled $11.7 million. Capital expenditures for the six months ended June 29, 2024 were $1.5 million.

Financing activities generated cash of $90,000 in the first six months of fiscal 2024. Cash generated from the sale of Intevac common stock to Intevac’s employees through Intevac’s employee benefit plans was $462,000. Tax payments related to the net share settlement of restricted stock units was $372,000.

Intevac’s investment portfolio consists principally of investment grade money market mutual funds, U.S. Treasury and agency securities, certificates of deposit, asset-backed securities, commercial paper, municipal bonds and corporate bonds. Intevac regularly monitors the credit risk in its investment portfolio and takes measures, which may include the sale of certain securities, to manage such risks in accordance with its investment policies.

As of June 29, 2024, approximately $21.4 million of cash and cash equivalents and $18.6 million of investments were domiciled in foreign tax jurisdictions. Intevac expects a significant portion of these funds to remain offshore in the short term. If the Company chose to repatriate these funds to the United States, it would be required to accrue and pay additional taxes on any portion of the repatriation subject to foreign withholding taxes.

We believe that our existing cash, cash equivalents and investments and cash flows from operating activities will be adequate to meet our liquidity needs for the next twelve months and for the foreseeable future beyond the next twelve months. Our significant funding requirements include procurement of manufacturing inventories, operating expenses, non-cancelable operating lease obligations, capital expenditures, contingent consideration payments, and variable compensation. We have flexibility over some of these uses of cash, including capital expenditures and discretionary operating expenses, to preserve our liquidity position. Capital expenditures for the remainder of fiscal 2024 are projected to be approximately $2.1 million related to network infrastructure and security, and laboratory and test equipment to support our R&D programs.

Off-Balance Sheet Arrangements

Off-balance sheet firm commitments relating to outstanding letters of credit amounted to approximately $700,000 as of June 29, 2024. These letters of credit and bank guarantees are collateralized by $700,000 of restricted cash. We do not maintain any other off-balance sheet arrangements, transactions, obligations, or other relationships that would be expected to have a material current or future effect on the consolidated financial statements.

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Climate Change

We believe that neither climate change, nor governmental regulations related to climate change, have had any material effect on our business, financial condition or results of operations.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make judgments, assumptions and estimates that affect the amounts reported. Intevac’s significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 8 of Intevac’s Annual Report on Form 10-K for the year ended December 30, 2023, filed with the SEC on February 15, 2024. Certain of these significant accounting policies are considered to be critical accounting policies, as defined below. There have been no material changes to our critical accounting policies during the six months ended June 29, 2024.

A critical accounting policy is defined as one that is both material to the presentation of Intevac’s financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on Intevac’s financial conditions and results of operations. Specifically, critical accounting estimates have the following attributes: 1) Intevac is required to make assumptions about matters that are highly uncertain at the time of the estimate; and 2) different estimates Intevac could reasonably have used, or changes in the estimate that are reasonably likely to occur, would have a material effect on Intevac’s financial condition or results of operations.

Estimates and assumptions about future events and their effects cannot be determined with certainty. Intevac bases its estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as Intevac’s operating environment changes. These changes have historically been minor and have been included in the consolidated financial statements as soon as they become known. In addition, management is periodically faced with uncertainties, the outcomes of which are not within its control and will not be known for prolonged periods of time. Many of these uncertainties are discussed in the section below entitled “Risk Factors.” Based on a critical assessment of Intevac’s accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that Intevac’s consolidated financial statements are fairly stated in accordance with US GAAP, and provide a meaningful presentation of Intevac’s financial condition and results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Intevac maintains a set of disclosure controls and procedures that are designed to ensure that information relating to Intevac required to be disclosed in periodic filings under the Securities Exchange Act of 1934, or Exchange Act, is recorded, processed, summarized and reported in a timely manner under the Exchange Act. In connection with the filing of this Quarterly Report on Form 10-Q for the quarter ended June 29, 2024, as required under Rule 13a-15(e) of the Exchange Act, an evaluation was carried out under the supervision and with the participation of management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), of the effectiveness of Intevac’s disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on this evaluation, Intevac’s CEO and CFO concluded that our disclosure controls and procedures were effective as of June 29, 2024.

Attached as exhibits to this Quarterly Report on Form 10-Q are certifications of the CEO and the CFO, which are required in accordance with Rule 13a-14 of the Exchange Act. This Controls and Procedures section includes the information concerning the controls evaluation referred to in the certifications, and it should be read in conjunction with the certifications for a more complete understanding of the topics presented.

Definition of Disclosure Controls

Disclosure controls are controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Our disclosure

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controls include components of our internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the U.S. To the extent that components of our internal control over financial reporting are included within our disclosure controls, they are included in the scope of our quarterly controls evaluation.

Limitations on the Effectiveness of Controls

Intevac’s management, including the CEO and CFO, does not expect that Intevac’s disclosure controls or Intevac’s internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within Intevac have been detected. 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. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, Intevac’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, Intevac is involved in claims and legal proceedings that arise in the ordinary course of business. Intevac expects that the number and significance of these matters will increase as Intevac’s business expands. Any claims or proceedings against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, or require us to enter into royalty or licensing agreements which, if required, may not be available on terms favorable to us or at all. Intevac is not presently a party to any lawsuit or proceeding that, in Intevac’s opinion, is likely to seriously harm Intevac’s business. See “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

The following factors could materially affect Intevac’s business, financial condition or results of operations and should be carefully considered in evaluating the Company and its business, in addition to other information presented elsewhere in this report.

Risks Related to Our Business

The industries we serve are cyclical, volatile and unpredictable.

A significant portion of our revenue is derived from the sale of equipment used to manufacture commodity technology products such as disk drives and cell phones. This subjects us to business cycles, the timing, length and volatility of which can be difficult to predict. When demand for commodity technology products exceeds production capacity, then demand for new capital equipment such as ours tends to be amplified. Conversely, when supply of commodity technology products exceeds demand, then demand for new capital equipment such as ours tends to be depressed. We cannot predict with any certainty when these cycles will begin or end. For example, our sales of systems for magnetic disk production increased in 2016 as a customer began upgrading the technology level of its manufacturing capacity. Sales of systems and upgrades for magnetic disk production in 2017 and 2018 were higher than in 2016 as this customer’s technology upgrade continued. However, sales of systems and upgrades for magnetic disk production in each of 2019, 2020, 2021, 2022 and 2023 were down from the levels in 2018 as this customer took delivery of fewer or no (in the case of 2021 and 2022) systems. In 2023, this customer cancelled orders for ten 200 Lean HDD systems due to the customer postponing previously planned media capacity additions, and we recorded a backlog reduction of $66.0 million. We expect sales of systems and upgrades for magnetic disk production in 2024 will be lower than the levels in 2023.

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Our equipment represents only a portion of the capital expenditure that our customers incur when they upgrade or add production capacity. Accordingly, our customers generally commit to making large capital expenditures far in excess of the cost of our systems alone when they decide to purchase our systems. The magnitude of these capital expenditures requires our customers to have access to large amounts of capital. Our customers generally reduce their level of capital investment during downturns in the overall economy or during a downturn in their industries. Reductions in capital investment could be particularly pronounced during periods of higher interest rates due to the increased cost of obtaining capital.

We must effectively manage our resources and production capacity to meet rapidly changing demand. Our business experiences rapid growth and contraction, which stresses our infrastructure, internal systems and managerial resources. During periods of increasing demand for our products, we must have sufficient manufacturing capacity and inventory to meet customer demand; attract, retain and motivate a sufficient number of qualified individuals; and effectively manage our supply chain. During periods of decreasing demand for our products, we must be able to align our cost structure with prevailing market conditions; motivate and retain key employees; and effectively manage our supply chain.

We are exposed to risks associated with a highly concentrated customer base.

Historically, a significant portion of our revenue in any particular period has been attributable to sales of our disk sputtering systems to a limited number of customers. Our reliance on sales to relatively few customers has increased with the disposition of our Photonics business in December 2021, and we expect that sales of our products to relatively few customers will continue to account for a high percentage of our revenues in the foreseeable future. This concentration of customers, when combined with changes in the customers’ specific capacity plans and market share shifts, can lead to extreme variability in our revenue and financial results from period to period. The concentration of our customer base may also enable our customers to demand pricing and other terms unfavorable to Intevac and makes us more vulnerable to changes in demand by or issues with a given customer. The loss of one or more of these large customers, or delays in purchasing by any of them, would have a material and adverse effect on our revenues.

Sales of our equipment are primarily dependent on our customers’ upgrade and capacity expansion plans and whether our customers select our equipment.

We have no control over our customers’ upgrade and capacity expansion plans, and we cannot be sure they will select, or continue to select, our equipment when they upgrade or expand their capacity. The sales cycle for our equipment systems can be a year or longer, involving individuals from many different areas of Intevac and numerous product presentations and demonstrations for our prospective customers. Our sales process also commonly includes production of samples and customization of our products. We do not typically enter into long-term contracts with our customers, and until an order is actually submitted by a customer there is no binding commitment to purchase our systems. In some cases, orders are also subject to customer acceptance or other criteria even in the case of a binding agreement.

As of June 29, 2024, our total backlog was $42.5 million, which was primarily attributable to two customers. Our backlog includes orders under contracts that can extend for several years. Our backlog can be significantly affected by the timing of large orders. We may not realize all of the revenue included in our total backlog in the future. For example, in fiscal 2023, we removed $66.0 million from backlog upon receiving notices from a customer of the cancellation of orders for ten 200 Lean HDD systems due to the customer postponing previously planned media capacity additions. There can also be no assurance that our backlog will result in revenue in any particular period because the actual receipt, timing and amount of revenue under contracts included in backlog are subject to various contingencies, many of which are beyond our control. If our customers terminate, reduce or defer orders, we may be protected from certain costs and losses, but our sales will nevertheless be adversely affected, and we may not generate the revenue we expect.

Sales of new manufacturing systems are also dependent on obsolescence and replacement of the installed base of our customers’ existing equipment with newer, more capable equipment. If upgrades are developed that extend the useful life of the installed base of systems, then we tend to sell more upgrade products and fewer new systems, which can significantly reduce total revenue.

Our 200 Lean HDD customers also experience competition from companies that produce alternative storage technologies like flash memory, which offer smaller size, lower power consumption and more rugged designs. These storage technologies are being used increasingly in enterprise applications and smaller form factors such as tablets, smart-phones, ultra-books, and notebook PCs instead of hard disk drives. Tablet computing devices and smart-phones have never contained, nor are they likely in the future to contain, a disk drive. Products using alternative technologies, such as flash memory, optical storage and other storage technologies are becoming increasingly common and could become a significant source of competition to particular applications of the products of our 200 Lean HDD customers, which could adversely affect our results of operations. If alternative technologies, such as flash memory, replace hard disk drives as a significant method of digital storage, then demand for our hard disk manufacturing products would decrease.

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Our results of operations could be materially harmed if we are unable to accurately forecast demand for our products and manage product inventory in an effective and efficient manner.

To ensure adequate inventory supply, we must forecast inventory needs and place orders with our suppliers before orders are placed by our customers. Factors that could affect our ability to accurately forecast demand for our products include: (1) an increase or decrease in customer demand for our products; (2) a failure to accurately forecast consumer acceptance for our new products such as the TRIO platform; (3) product introductions by competitors; (4) unanticipated changes in general market conditions or other factors (for example, because of effects on inventory supply and consumer demand caused by high inflation rates or other adverse macroeconomic conditions); (5) the uncertainties and logistical challenges that accompany operations on a global scale; and (6) terrorism or acts of war, or the threat thereof, political or labor instability or unrest, or public health crises.

If we fail to accurately forecast customer demand, we may experience excess inventory levels or a shortage of product to deliver to our customers. Inventory levels in excess of customer demand may result in inventory write-downs or write-offs, and the sale of excess inventory at discounted prices, which could harm our gross margin. Conversely, if we underestimate the demand for our products, we may not be able to produce products to meet our customer requirements, which could result in delays in the shipment of our products, negatively impact our ability to recognize revenue, generate lost sales, and cause damage to our reputation and relationships with our customers. Challenges in forecasting demand can also make it difficult to estimate future results of operations and financial condition from period to period and meet investor expectations. A failure to accurately predict the level of demand for our products or manage product inventory in an effective and efficient manner could adversely impact our results of operations and cause us not to achieve our expected financial results.

We are dependent on certain suppliers for parts used in our products.

We are a manufacturing business. Purchased parts constitute the largest component of our product cost. Our ability to manufacture depends on the timely delivery of parts, components and subassemblies from suppliers. We obtain some of the key components and subassemblies used in our products from a single supplier or a limited group of suppliers. If any of our suppliers fail to deliver quality parts on a timely basis, we may experience delays in manufacturing, which could result in delayed product deliveries, increased costs to expedite deliveries or develop alternative suppliers, or require redesign of our products to accommodate alternative suppliers. Some of our suppliers are thinly capitalized and may be vulnerable to failure, particularly during economic downturns and periods of higher interest rates and inflation.

Supply chain and shipping disruptions could result in shipping delays, and increased product costs which may have a material adverse effect on our business, financial condition and results of operations.

Supply chain disruptions have impacted, and may continue to impact, us and our suppliers. These disruptions have resulted in longer lead times and increased product costs and shipping expenses. While we have taken steps to minimize the impact of these increased costs by working closely with our suppliers and customers, prolonged supply chain disruptions could interrupt product manufacturing, increase lead times, increase product costs and continue to increase shipping costs, all of which could have a material adverse effect on our business, financial condition and results of operations.

We operate in an intensely competitive marketplace, and our competitors have greater resources than we do.

In the market for our disk sputtering systems, we experience competition primarily from Canon Anelva, which has sold a substantial number of systems worldwide. Some of our competitors have substantially greater financial, technical, marketing, manufacturing and other resources than we do, especially in the ADVC market. Our competitors may develop enhancements to, or future generations of, competitive products that offer superior price or performance features, and new competitors may enter our markets and develop such enhanced products. Moreover, competition for our customers is intense, and our competitors have historically offered substantial pricing concessions and incentives to attract our customers or retain their existing customers.

Our operating results fluctuate significantly from quarter to quarter, which can lead to volatility in the price of our common stock.

Our quarterly revenues and common stock price have fluctuated significantly. We anticipate that our revenues, operating margins and common stock price will continue to fluctuate for a variety of reasons, including: (1) changes in the demand, due to seasonality, cyclicality and other factors, in the markets for computer systems, storage subsystems and consumer electronics containing disks, as well as cell phones; (2) delays or problems in the introduction and acceptance of our new products, or delivery of existing products; (3) timing of orders, acceptance of new systems by our customers or cancellation or delay of those orders; (4) new products, services or technological innovations by our competitors or us; (5) changes in our manufacturing costs and operating expense; (6) changes in general economic, political, stock market and industry conditions; and (7) any failure of our operating results to meet the expectations of investment research analysts or investors.

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Any of these, or other factors, could lead to volatility and/or a rapid change in the trading price of our common stock. In the past, securities class action litigation has been instituted against companies following periods of volatility in the market price of their securities. Any such litigation, if instituted against Intevac, could result in substantial costs and diversion of management time and attention.

Our success depends on international sales and the management of global operations.

A significant portion of our revenue comes from regions outside the United States, and we expect that international sales will continue to account for a significant portion of our total revenue in future years. Most of our international sales are to customers in Asia, which includes products shipped to overseas operations of U.S. companies. We currently have manufacturing facilities in California and Singapore and international customer support offices in Singapore, China, and Malaysia. Certain of our suppliers are also located outside the United States.

Managing our global operations presents challenges including, but not limited to, those arising from: (1) global trade issues; (2) variations in protection of intellectual property and other legal rights in different countries; (3) concerns of U.S. governmental agencies regarding possible national commercial and/or security issues posed by manufacturing businesses in Asia; (4) fluctuation of interest rates, raw material costs, labor and operating costs, and exchange rates; (5) variations in the ability to develop relationships with suppliers and other local businesses; (6) changes in the laws and regulations of the United States, including export restrictions, and other countries, as well as their interpretation and application; (7) the need to provide technical and spare parts support in different locations; (8) political and economic instability; (9) cultural differences; (10) varying government incentives to promote development; (11) shipping costs and delays; (12) adverse conditions in capital and credit markets; (13) variations in tariffs, quotas, tax codes and other market barriers; and (14) barriers to movement of cash.

We must regularly assess the size, capability and location of our global infrastructure and make appropriate changes to address these issues. Our failure to manage the risks and challenges associated with global operations could have a material adverse effect on our business.

Our success is dependent on recruiting and retaining a highly talented work force.

Our employees are vital to our success, and our key management, engineering and other employees are difficult to replace. We do not maintain key person life insurance on any of our employees. The expansion of high technology companies worldwide has increased demand and competition for qualified personnel and has made companies increasingly protective of prior employees. It may be difficult for us to locate employees who are not subject to non-competition agreements and other restrictions.

The majority of our U.S. operations are located in California where the cost of living and of recruiting employees is high. Our operating results depend, in large part, upon our ability to retain and attract qualified management, engineering, marketing, manufacturing, customer support, sales and administrative personnel. Furthermore, we compete with industries such as the hard disk drive, semiconductor, and solar industries for skilled employees. Failure to retain existing key personnel, or to attract, assimilate or retain additional highly qualified employees to meet our needs in the future, could have a material and adverse effect on our business, financial condition and results of operations.

Risks Related to Our Intellectual Property

Our growth depends on development of technically advanced new products and processes.

We have invested heavily, and continue to invest, in the development of new products, such as our 200 Lean HDD and our TRIO platform. Our development efforts have included, and may in the future include, entry into joint development and evaluation arrangements with our customers. These arrangements may include lengthy product qualification or evaluation processes and may not be successful or result in future product sales. Our success in developing and selling new products depends upon a variety of factors, including our ability to: (1) predict future customer requirements; (2) make technological advances; (3) achieve a low total cost of ownership for our products; (4) introduce new products on schedule; (5) manufacture products cost-effectively including transitioning production to volume manufacturing; (6) commercialize and attain customer acceptance of our products; and (7) achieve acceptable and reliable performance of our new products in the field. Our new product decisions and development commitments must anticipate continuously evolving industry requirements significantly in advance of sales. In addition, we are attempting to expand into new or related markets, including the ADVC market. Our expansion into the ADVC market is dependent upon the success of our customers’ development plans. To date we have not recognized material revenue from such products. Failure to correctly assess the size of the market, successfully develop products on a timely basis, successfully develop cost effective products to address the market, or establish effective sales and support of new products would have a material adverse effect on future revenues and profits. In addition, if we invest in products for which the market does not develop as anticipated, we may incur significant charges related to such investments.

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Rapid technological change in our served markets requires us to rapidly develop new technically advanced products. Our future success depends in part on our ability to develop and offer new products with improved capabilities and to continue to enhance our existing products. If new products have reliability or quality problems, our performance may be impacted by reduced orders, higher manufacturing costs, delays in acceptance and payment for new products and additional service and warranty expenses.

Our business depends on the integrity of our intellectual property rights.

The success of our business depends upon the integrity of our intellectual property rights, and we cannot ensure that: (1) any of our pending or future patent applications will be allowed or that any of the allowed applications will be issued as patents or will issue with claims of the scope we sought; (2) any of our patents will not be invalidated, deemed unenforceable, circumvented or challenged; (3) the rights granted under our patents will provide competitive advantages to us; (4) other parties will not develop similar products, duplicate our products or design around our patents; or (5) our patent rights, intellectual property laws or our agreements will adequately protect our intellectual property or competitive position.

From time to time, we have received claims that we are infringing third parties’ intellectual property rights or seeking to invalidate our rights. We cannot ensure that third parties will not in the future claim that we have infringed current or future patents, trademarks or other proprietary rights relating to our products. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements, if required, may not be available on terms acceptable to us.

Risks Related to Government Regulation

We are subject to risks of non-compliance with environmental and other governmental regulations.

We are subject to a variety of governmental regulations relating to the use, storage, discharge, handling, emission, generation, manufacture, treatment and disposal of toxic or otherwise hazardous substances, chemicals, materials or waste. If we fail to comply with current or future regulations, such failure could result in suspension of our operations, alteration of our manufacturing process, remediation costs or substantial civil penalties or criminal fines against us or our officers, directors or employees. Additionally, these regulations could require us to acquire expensive remediation or abatement equipment and incur substantial expenses to comply with them.

In addition, climate change legislation is a significant topic of recent discussion and has generated and may continue to generate federal, international or other regulatory responses in the near future. If we or our suppliers, customers or partners fail to timely comply with applicable legislation, certain customers may refuse to purchase our products or we may face increased operating costs as a result of taxes, fines or penalties, or incur legal liability and reputational damage, which could harm our business, financial condition and results of operations.

General Risk Factors

Global economic conditions may harm our industry, business and results of operations.

We operate globally and as a result our business, revenue and profitability are impacted by global macroeconomic conditions. The success of our activities is affected by general economic and market conditions, including, among others, inflation, interest rates, tax rates, economic uncertainty, political instability, changes in laws, and trade barriers and sanctions. Inflation and government efforts to combat inflation, such as raising the benchmark interest rate, have increased and could continue to increase market volatility and have an adverse effect on the financial market and global economy. Volatility and adverse conditions in the capital and credit markets have negatively affected levels of business and consumer spending, heightening concerns about the likelihood of a global recession and potential default of various national bonds and debt backed by individual countries. Such developments, as well as the politics impacting these, could adversely affect our financial results. Uncertainty about worldwide economic conditions poses a risk as businesses may further reduce or postpone spending in response to reduced budgets, tight credit, negative financial news and declines in income or asset values, which could adversely affect our business, financial condition and results of operations. Geopolitical destabilization could continue to impact global currency exchange rates, commodity prices, trade and movement of resources, which may adversely affect the ability of our customers and potential customers to incur the capital expenditures necessary to purchase our products and services.

Our business could be negatively impacted by cyber and other security threats or disruptions.

We face various cyber and other security threats, including attempts to gain unauthorized access to sensitive information and networks. Although we utilize various procedures and controls to monitor and mitigate the risk of these threats, there can be no assurance that these procedures and controls will be sufficient. These threats could lead to losses of sensitive information or capabilities; financial liabilities and damage to our reputation. If we are unable to maintain compliance with security standards applicable to defense contractors, we could lose business or suffer reputational harm. Cyber

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threats to businesses are evolving and include, but are not limited to, malicious software, destructive malware, attempts to gain unauthorized access to data, disruption or denial of service attacks, and other electronic security breaches that could lead to disruptions in our systems, unauthorized release of confidential, personal or otherwise protected information (ours or that of our employees, customers or partners), and corruption of data, networks or systems. We have experienced cybersecurity threats and incidents involving our systems and expect these incidents to continue. While none of the cybersecurity events have been material to date, a successful breach or attack could have a material adverse effect on our results of operations, financial condition or business, harm our reputation and relationships with our customers, business partners, employees or other third parties, and subject us to consequences such as litigation and direct costs associated with incident response. In addition, we could be impacted by cyber threats or other disruptions or vulnerabilities found in products we use or in our partners’ or customers’ systems that are used in connection with our business. These events, if not prevented or effectively mitigated, could damage our reputation, require remedial actions and lead to loss of business, regulatory actions, potential liability and other financial losses.

Changes to our effective tax rate affect our results of operations.

As a global company, we are subject to taxation in the United States, Singapore and various other countries. Significant judgment is required to determine and estimate worldwide tax liabilities. Our future effective tax rate could be affected by: (1) changes in tax laws; (2) the allocation of earnings to countries with differing tax rates; (3) changes in worldwide projected annual earnings in current and future years: (4) accounting pronouncements; or (5) changes in the valuation of our deferred tax assets and liabilities. Although we believe our tax estimates are reasonable, there can be no assurance that any final determination will not be different from the treatment reflected in our historical income tax provisions and accruals, which could result in additional payments by Intevac.

Difficulties in integrating past or future acquisitions or implementing strategic divestitures could adversely affect our business.

We have completed a number of acquisitions and dispositions during our operating history. We have spent and may continue to spend significant resources identifying and pursuing future acquisition opportunities. Acquisitions involve numerous risks including: (1) difficulties in integrating the operations, technologies and products of the acquired companies; (2) the diversion of our management’s attention from other business concerns; and (3) the potential loss of key employees of the acquired companies. Failure to achieve the anticipated benefits of the prior and any future acquisitions or to successfully integrate the operations of the companies we acquire could have a material and adverse effect on our business, financial condition and results of operations. Any future acquisitions could also result in potentially dilutive issuance of equity securities, acquisition or divestiture-related write-offs or the assumption of debt and contingent liabilities. In addition, we have made and will continue to consider making strategic divestitures, such as the disposition of our Photonics business. With any divestiture, there are risks that future operating results could be unfavorably impacted if targeted objectives, such as cost savings or earnout payments associated with the financial performance of the divested business, are not achieved or if other business disruptions occur as a result of the divestiture or activities related to the divestiture.

We could be involved in litigation.

From time to time, we may be involved in litigation of various types, including litigation alleging infringement of intellectual property rights and other claims and customer disputes. For example, in 2022 we settled an action against us under the Private Attorneys General Act for $1.0 million. Litigation is expensive, subjects us to the risk of significant damages, requires significant management time and attention, and could have a material and adverse effect on our business, financial condition and results of operations.

Business interruptions could adversely affect our operations.

Our operations are vulnerable to interruption by fire, earthquake, floods or other natural disaster, quarantines or other disruptions associated with infectious diseases, national catastrophe, terrorist activities, war, disruptions in our computing and communications infrastructure due to power loss, telecommunications failure, human error, physical or electronic security breaches and computer viruses, and other events beyond our control. We do not have a detailed disaster recovery plan. Despite our implementation of network security measures, our tools and servers may be vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems and tools located at customer sites. Political instability could cause us to incur increased costs in transportation, make such transportation unreliable, increase our insurance costs or cause international currency markets to fluctuate. All these unforeseen disruptions and instabilities could have the same effects on our suppliers and their ability to timely deliver their products. In addition, we do not carry sufficient business interruption insurance to compensate us for all losses that may occur, and any losses or damages incurred by us could have a material adverse effect on our business and results of operations. For example, we self-insure earthquake risks because we believe this is the prudent financial decision based on the high cost of the limited coverage available in the earthquake insurance market. An earthquake could significantly disrupt our operations, most of which are conducted in California. It could also significantly delay our research and engineering effort on new products, most of which is also conducted in California. We take steps to minimize the damage that would be caused by business interruptions, but there is no certainty that our efforts will prove successful.

We could be negatively affected as a result of a proxy contest and the actions of activist stockholders.

A proxy contest with respect to election of our directors, or other activist stockholder activities, could adversely affect our business because: (1) responding to a proxy contest and other actions by activist stockholders can be costly and time-consuming, disruptive to our operations and divert the attention of management and our employees; (2) perceived uncertainties as to our future direction caused by activist activities may result in the loss of

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potential business opportunities, and may make it more difficult to attract and retain qualified personnel and business partners; and (3) if individuals are elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively and timely implement our strategic plans.

We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002, and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on our stock price.

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, our management must perform evaluations of our internal control over financial reporting. Although our assessment, testing, and evaluation resulted in our conclusion that as of December 30, 2023, our internal control over financial reporting was effective, we cannot predict the outcome of our testing in future periods. Ongoing compliance with this requirement is complex, costly and time-consuming. If we fail to maintain effective internal control over financial reporting, then we could be subject to restatement of previously reported financial results, regulatory sanctions and a decline in the public’s perception of Intevac, which could have a material and adverse effect on our business, financial condition and results of operations.

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

Repurchases of Intevac Common Stock

On November 21, 2013, Intevac announced that its Board of Directors approved a stock repurchase program authorizing up to $30.0 million in repurchases. On August 20, 2018, Intevac announced that its Board of Directors approved a $10.0 million increase to the original stock repurchase program for an aggregate authorized amount of $40.0 million. At June 29, 2024, $10.4 million remains available for future stock repurchases under the repurchase program. Intevac did not make any common stock repurchases during the three months ended June 29, 2024.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

Securities Trading Plans of Directors and Executive Officers

During our last fiscal quarter, no director or officer, as defined in Rule

16a-1(f),

adopted or terminated a “Rule

10b5-1

trading arrangement” or a

“non-Rule

10b5-1

trading arrangement,” each as defined in Regulation

S-K

Item 408.

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Item 6. Exhibits

Exhibit Number	Description
10.1	Form of the 2024 PRSU Award Agreement under the 2020 Equity Incentive Plan (Grant 1)
10.2	Form of the 2024 PRSU Award Agreement under the 2020 Equity Incentive Plan (Grant 2)
10.3	Form of Outside Director Stock Option Agreement for 2020 Equity Incentive Plan
10.4	2020 Equity Incentive Plan, as amended February 15, 2024 (incorporated by reference to Appendix B to the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 10, 2024).
10.5	2003 Employee Stock Purchase Plan, as amended February 15, 2024 (incorporated by reference to Appendix A to the Registrant’s Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 10, 2024).
10.6	2022 Inducement Equity Incentive Plan, as amended July 1, 2024.
10.7	Offer Letter, effective as of July 9, 2024, between Intevac and Cameron McAulay
10.8	Change in Control Agreement, effective as of July 9, 2024, between Intevac and Cameron McAulay
31.1	Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Executive Vice President, Finance and Administration, Chief Financial Officer, Treasurer and Secretary Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certifications Pursuant to U.S.C. 1350 Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS	XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Schema Document
101.CAL	Inline XBRL Calculation Linkbase Document
101.DEF	Inline XBRL Definition Linkbase Document
101.LAB	Inline XBRL Label Linkbase Document
101.PRE	Inline XBRL Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

* The certification attached as Exhibit 32.1 is deemed “furnished” and not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference into any filing of Intevac, Inc. under the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof, irrespective of any general incorporation by reference language contained in any such filing, except to the extent that the registrant specifically incorporates it by reference.

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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.

	INTEVAC, INC.
Date: August 6, 2024	By:	/s/ NIGEL HUNTON
		Nigel Hunton
		President and Chief Executive Officer
		(Principal Executive Officer)
Date: August 6, 2024	By:	/s/ CAMERON MCAULAY
		Cameron McAulay
		Chief Financial Officer, Secretary and Treasurer
		(Principal Financial and Accounting Officer)

39