What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-03-06 compared with 2025-09-05 · 104 added, 170 removed, 386 unchanged (42% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

Sales and service fees

5 unchanged sentences

Investment income, net

Other (expense) income, net

Other income (expense), net

(Loss) income before income taxes

3 unchanged sentences

Weighted average common shares outstanding

Dividends paid per share

The accompanying notes are an integral part of the condensed consolidated financial statements.

3 unchanged sentences

Three Months Ended

Nine Months Ended

Net (loss) income

50 unchanged sentences

no par value, $ .10 stated value per share, 12,500,000 shares authorized;

6,569,682 and 6,548,838 shares issued and 6,402,396 and 6,435,624 shares outstanding, as of July 31, 2025 and October 31, 2024, respectively

6,637,605 and 6,569,224 shares issued and 6,446,454 and 6,402,396 shares outstanding, as of January 31, 2026 and October 31, 2025, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Nine Months Ended

Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Adjustments to reconcile net (loss) income to net cash provided by (used for) operating activities:

Provision for doubtful accounts

Deferred income taxes

Deferred income tax valuation allowances

Equity in loss (income) of affiliates

Deferred income tax valuation allowance

Equity in (income) loss of affiliates

Foreign currency (gain) loss

5 unchanged sentences

(Increase) decrease in inventories

(Increase) decrease in prepaid expenses

(Increase) decrease in prepaid and other assets

Increase (decrease) in accounts payable

11 unchanged sentences

Software development costs

Other investments

Cash received from sale of a business

Net cash provided by (used for) investing activities

Cash flows from financing activities:

Dividends paid

Stock repurchases

Taxes paid related to net settlement of restricted shares

4 unchanged sentences

Cash and cash equivalents at end of period

Supplemental disclosures:

Cash paid for:

Income taxes, net

The accompanying notes are an integral part of the condensed consolidated financial statements.

2 unchanged sentences

(In thousands, except shares outstanding)

Three Months Ended July 31, 2025 and 2024

Comprehensive

Income (Loss)

Balances, April 30, 2024

Net income (loss)

Other comprehensive income (loss)

Deferred income tax valuation allowances

Stock–based compensation expense, net of taxes withheld for vested restricted shares

Stock repurchases

Balances, July 31, 2024

Balances, April 30, 2025

Net income (loss)

Other comprehensive income (loss)

Deferred income tax valuation allowances

Stock–based compensation expense, net of taxes withheld for vested restricted shares

Stock repurchases

Balances, July 31, 2025

Nine Months Ended July 31, 2025 and 2024

Three Months Ended January 31, 2026 and 2025

Comprehensive

5 unchanged sentences

Stock–based compensation expense, net of taxes withheld for vested restricted shares

Stock repurchases

Dividends paid

Balances, July 31, 2024

Balances, January 31, 2025

Balances, October 31, 2025

3 unchanged sentences

Stock–based compensation expense, net of taxes withheld for vested restricted shares

Stock repurchases

Balances, July 31, 2025

Balances, January 31, 2026

The accompanying notes are an integral part of the condensed consolidated financial statements.

8 unchanged sentences

We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories and replacement parts for our products, as well as customer service, training, and applications support.

The condensed consolidated financial information as of July 31, 2025 and for the three and nine months ended July 31, 2025, and July 31, 2024 is unaudited.

The condensed consolidated financial information as of January 31, 2026, and for the three months ended January 31, 2026, and January 31, 2025, is unaudited.

However, in our opinion, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, results of operations, changes in shareholders’ equity and cash flows for and at the end of the interim periods.

41 unchanged sentences

We also assess on a quarterly basis whether there have been adverse developments regarding the risk of a counterparty default.

We had forward contracts outstanding as of July 31, 2025, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from August 2025 through July 2026 .

We had forward contracts outstanding as of January 31, 2026, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from February 2026 through January 2027 .

The contract amounts, expressed at forward rates in U.S.

dollars at July 31, 2025, were $ 5.8 million for Euros, $ 3.9 million for Pounds Sterling, and $ 16.6 million for New Taiwan Dollars.

At July 31, 2025, we had an immaterial amount of realized gain, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss.

Included in this amount was $ 0.1 million of unrealized gain, net of tax, related to cash flow hedge instruments that remain subject to currency fluctuation risk.

The majority of these deferred gains will be recorded as an adjustment to Cost of sales and service in periods through August 2026, when the corresponding inventory that is the subject of the related hedge contracts is sold, as described above.

dollars at January 31, 2026, were $ 7.5 million for Euros, $ 4.0 million for Pounds Sterling, and $ 19.1 million for New Taiwan Dollars.

At January 31, 2026, we had $ 0.7 million of realized loss, net of tax, related to cash flow hedges deferred in Accumulated other comprehensive loss.

Included in this amount was $ 0.9 million of unrealized loss, net of tax, related to cash flow hedge instruments that remain subject to currency fluctuation risk.

The majority of these deferred gains will be recorded as an adjustment to Cost of sales and service in periods through January 2027, when the corresponding inventory that is the subject of the related hedge contracts is sold, as described above.

We are also exposed to foreign currency exchange risk related to our investment in net assets in foreign countries.

4 unchanged sentences

This forward contract matures in November 2026 .

As of July 31, 2025, we had a realized gain of $ 1.2 million and an unrealized loss of $ 0.1 million, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss related to this forward contract.

As of January 31, 2026, we had a realized gain of $ 1.0 million and an unrealized loss of $ 0.1 million, net of tax, recorded as cumulative translation adjustments in Accumulated other comprehensive loss related to this forward contract.

Derivatives Not Designated as Hedging Instruments

We also enter into foreign currency forward exchange contracts to protect against the effects of foreign currency fluctuations on inter-company receivables, payables and loans denominated in foreign currencies.

These derivative instruments are not designated as hedges under FASB guidance and, as a result, changes in their fair value are reported currently in Other (expense) income, net in the Condensed Consolidated Statements of Operations consistent with the transaction gain or loss on the related receivables and payables denominated in foreign currencies.

We had forward contracts outstanding as of July 31, 2025, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from August 2025 through March 2026 .

These derivative instruments are not designated as hedges under FASB guidance and, as a result, changes in their fair value are reported currently in Other income (expense), net in the Condensed Consolidated Statements of Operations consistent with the transaction gain or loss on the related receivables and payables denominated in foreign currencies.

We had forward contracts outstanding as of January 31, 2026, denominated in Euros, Pounds Sterling, and New Taiwan Dollars with set maturity dates ranging from February 2026 through September 2026 .

The contract amounts, expressed at forward rates in U.S.

dollars at July 31, 2025, totaled $ 63.0 million.

dollars at January 31, 2026, totaled $ 56.3 million.

Fair Value of Derivative Instruments

We recognize the fair value of derivative instruments as assets and liabilities on a gross basis on our Condensed Consolidated Balance Sheets.

As of July 31, 2025 and October 31, 2024, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):

July 31, 2025

As of January 31, 2026, and October 31, 2025, all derivative instruments were recorded at fair value on our Condensed Consolidated Balance Sheets as follows (in thousands):

January 31, 2026

October 31, 2025

16 unchanged sentences

Effect of Derivative Instruments on the Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity and Condensed Consolidated Statements of Operations

Derivative instruments had the following effects on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Condensed Consolidated Statements of Operations, net of tax, during the three months ended July 31, 2025 and 2024 (in thousands):

Location of Gain

19 unchanged sentences

– Net investment

We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the three months ended July 31, 2025 or 2024.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended July 31, 2025 and 2024 on derivative instruments not designated as hedging instruments (in thousands):

We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the three months ended January 31, 2026 or 2025.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the three months ended January 31, 2026 and 2025, on derivative instruments not designated as hedging instruments (in thousands):

Location of Gain

6 unchanged sentences

Foreign exchange forward contracts

Other (expense) income, net

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended July 31, 2025 (in thousands):

Other income (expense), net

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the three months ended January 31, 2026 (in thousands):

Foreign Currency

Balance, April 30, 2025

Other comprehensive income (loss) before reclassifications

Reclassifications

Deferred income tax valuation allowances

Balance, July 31, 2025

Derivative instruments had the following effects on our Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Changes in Shareholders’ Equity, and Condensed Consolidated Statements of Operations, net of tax, during the nine months ended July 31, 2025 and 2024 (in thousands):

Location of Gain

Amount of Gain

Amount of Gain (Loss)

(Loss) Reclassified

Recognized in Other

Comprehensive

Income (Loss)

Nine Months Ended

Designated as Hedging Instruments:

(Effective Portion)

Foreign exchange forward contracts

– Intercompany sales/purchases

Cost of sales and service

Foreign exchange forward contract

– Net investment

We did no t recognize any gains or losses as a result of hedges deemed ineffective for either of the nine months ended July 31, 2025 or 2024.

We recognized the following gains and losses in our Condensed Consolidated Statements of Operations during the nine months ended July 31, 2025 and 2024 on derivative instruments not designated as hedging instruments (in thousands):

Location of Gain

(Loss) Recognized

Amount of Gain (Loss)

in Operations

Recognized in Operations

Nine Months Ended

Not Designated as Hedging Instruments:

Foreign exchange forward contracts

Other (expense) income, net

The following table presents the changes in the components of Accumulated other comprehensive loss, net of tax, for the nine months ended July 31, 2025 (in thousands):

Balance, October 31, 2025

2 unchanged sentences

Deferred income tax valuation allowances

Balance, July 31, 2025

Balance, January 31, 2026

EQUITY INCENTIVE PLAN

7 unchanged sentences

2016 Equity Incentive Plan, which, among other items, increased the aggregate number of shares that may be issued under the 2016 Equity Plan by 850,000 shares.

On March 13, 2025, our shareholders approved an amendment to the 2016 Equity Plan, which, once again, increased by 850,000 the aggregate number of shares that may be issued thereunder.

On March 13, 2025, our shareholders approved an amendment to the 2016 Equity Plan, which increased the aggregate number of shares that may be issued thereunder by an additional 850,000 shares.

The Compensation Committee of our Board of Directors has the authority to determine the officers, directors, and key employees who will be granted awards under the 2016 Equity Plan;

4 unchanged sentences

The market value of a share of our common stock, for purposes of the 2016 Equity Plan, is the closing sale price as reported by the Nasdaq Global Select Market on the date in question or, if not a trading day, on the last preceding trading date.

On March 13, 2025, the Compensation Committee granted a total of 29,868 shares of time-based restricted stock to our non-employee directors.

The restricted shares vest in full one year from the date of grant provided the recipient remains on the board of directors through that date.

The grant date fair value of the restricted shares was based on the closing sales price of our common stock on the grant date, which was $ 16.07 per share.

On January 6, 2026, the Compensation Committee approved a long-term incentive compensation arrangement for our executive officers in the form of time-based restricted shares and performance stock units (“PSUs”), which will be payable in shares of our common stock if earned and vested.

2 unchanged sentences

On that date, the Compensation Committee granted a total of 66,491 shares of time-based restricted stock to our executive officers.

The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date.

The restricted shares vest in thirds over three years from the date of grant provided the recipient continues service with the company through that date.

The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $ 16.29 per share.

8 unchanged sentences

On November 12, 2025, the Compensation Committee granted a total of 20,260 shares of time-based restricted stock to our non-executive employees.

The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date.

The restricted shares vest in thirds over three years from the date of grant provided the recipient continues service with the company through that date.

The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $ 16.65 per share.

A reconciliation of our restricted stock and PSU activity and related information for the nine-month period ended July 31, 2025 is as follows:

A reconciliation of our restricted stock and PSU activity and related information for the three-month period ended January 31, 2026 is as follows:

Weighted Average Grant

6 unchanged sentences

Shares withheld

Unvested at July 31, 2025

During the nine months of fiscal 2025 and 2024, we recorded approximately $ 1.6 million and $ 1.1 million, respectively, of stock-based compensation expense related to grants under the 2016 Equity Plan.

As of July 31, 2025, there was an estimated $ 3.5 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal year 2028.

Unvested at January 31, 2026

During the first quarter of each of fiscal years 2026 and 2025, we recorded approximately $ 0.6 million of stock-based compensation expense related to grants under the 2016 Equity Plan.

As of January 31, 2026, there was an estimated $ 4.6 million of total unrecognized stock-based compensation cost that we expect to recognize by the end of the first quarter of fiscal year 2029.

EARNINGS (LOSS) PER SHARE

2 unchanged sentences

Three Months Ended

Nine Months Ended

Net (loss) income

4 unchanged sentences

(Loss) income per share

For the three and nine months ended July 31, 2025 and July 31, 2024, there were an immaterial number of stock options and contingently issuable securities that were excluded from the diluted loss per share calculation because they were anti-dilutive due to the net loss in the periods.

For the three months ended January 31, 2026 and January 31, 2025, there were an immaterial number of stock options and contingently issuable securities that were excluded from the diluted loss per share calculation because they were anti-dilutive due to the net loss in the periods.

ACCOUNTS RECEIVABLE

Accounts receivable is net of provision for credit losses of $ 1.3 million and $ 1.5 million as of July 31, 2025 and October 31, 2024, respectively.

Accounts receivable is net of provision for credit losses of $ 1.2 million as of each of January 31, 2026, and October 31, 2025.

Inventories, priced at the lower of cost (first-in, first-out method) or net realizable value, are summarized below (in thousands):

9 unchanged sentences

We record a right-of-use asset and lease liability on our Condensed Consolidated Balance Sheets for all leases that, at the commencement date, have a lease term of more than 12 months and are classified as leases under ASC 842.

We recorded total operating lease expense of $ 1.3 million for each of the three months ended July 31, 2025 and 2024, respectively, and $ 4.0 million and $ 4.1 million for the nine months ended July 31, 2025 and 2024, respectively, which is classified within Cost of sales and service and Selling, general and administrative expenses within the Condensed Consolidated Statements of Operations.

We recorded total operating lease expense of $ 1.3 million for each of the three months ended January 31, 2026 and 2025, which is classified within Cost of sales and service and Selling, general and administrative expenses within the Condensed Consolidated Statements of Operations.

Operating lease expense includes short-term leases and variable lease payments, which are immaterial.

There were no lease costs capitalized on the Condensed Consolidated Balance Sheets as of July 31, 2025.

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the three and nine months ended July 31, 2025 and 2024 (in thousands):

Three Months Ended July 31,

Nine Months Ended July 31,

There were no lease costs capitalized on the Condensed Consolidated Balance Sheets as of January 31, 2026.

The following table summarizes supplemental cash flow information and non-cash activity related to operating leases for the three months ended January 31, 2026 and 2025 (in thousands):

Three Months Ended January 31,

Operating cash flow information:

Cash paid for amounts included in the

measurement of lease liabilities

Cash paid for amounts included in the measurement of lease liabilities

Non-cash information:

Right-of-use assets obtained in exchange for

new operating lease liabilities

The following table summarizes the maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability as of July 31, 2025 (in thousands):

Right-of-use assets obtained in exchange for new operating lease liabilities

The following table summarizes the maturities of undiscounted cash flows of lease commitments reconciled to the total lease liability as of January 31, 2026 (in thousands):

Remainder of 2026

2 unchanged sentences

Present value of operating lease liabilities

As of July 31, 2025, the weighted-average remaining term of our lease portfolio was approximately 3.5 years and the weighted-average discount rate was approximately 3.4 %.

As of January 31, 2026, the weighted-average remaining term of our lease portfolio was approximately 3.2 years and the weighted-average discount rate was approximately 3.4 %.

SEGMENT INFORMATION

We operate in a single operating and reportable segment:

We are organized and managed as a single operating and reportable segment:

industrial automation equipment.

3 unchanged sentences

We also provide machine tool components, automation integration equipment and solutions for job shops, software options, control upgrades, accessories, and replacement parts for our products, as well as customer service, training, and applications support.

The following table sets forth sales and service fees by product group and services for the three and nine months ended July 31, 2025 and 2024 (in thousands):

Three Months Ended July 31,

Nine Months Ended July 31,

Our chief operating decision maker ("CODM") is the President and Chief Executive Officer, who reviews financial information presented on a consolidated basis.

The CODM uses consolidated sales and service fees, gross profit, operating (loss) income and net (loss) income, as shown on the Consolidated Statements of Operations, to assess financial performance and allocate resources.

The consolidated financial metrics are used by the CODM to make key operating decisions, such as the allocation of capital between reinvestment in the business, the payment of dividends, and acquisitions.

While the CODM receives some additional detailed financial information related to operating expenses, consolidated selling, general and administrative expenses is the significant expense he uses to manage operations.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

The following table sets forth sales and service fees by product group and services for the three months ended January 31, 2026 and 2025 (in thousands):

Three Months Ended January 31,

Computerized Machine Tools

1 unchanged sentence

Service Parts

† Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine tools.

† Amounts shown do not include computer control systems and software sold as an integrated component of computerized machine systems.

GUARANTEES AND PRODUCT WARRANTIES

From time to time, our subsidiaries guarantee third party payment obligations in connection with the sale of machines to customers that use financing.

We follow FASB guidance for accounting for guarantees (codified in ASC 460 Guarantees).

As of July 31, 2025, we had four outstanding third party payment guarantees totaling approximately $ 0.4 million.

We follow FASB guidance for accounting for guarantees (codified in ASC 460).

As of January 31, 2026, we had four outstanding third party payment guarantees totaling approximately $ 0.4 million.

The terms of these guarantees are consistent with the underlying customer financing terms.

8 unchanged sentences

A reconciliation of the changes in our warranty estimated liability is as follows (in thousands):

Nine Months Ended

Three Months Ended

Balance, beginning of period

3 unchanged sentences

Balance, end of period

The year-over-year decrease in our warranty estimated liability was primarily due to a lower sales volume of more complex, higher-performance machines.

The year-over-year decrease in our warranty estimated liability was primarily due to a lower sales volume of machines.

DEBT AGREEMENTS

1 unchanged sentence

entered into a credit agreement with Bank of America, N.A., as the lender, which was subsequently amended on each of March 13, 2020, December 23, 2020, December 17, 2021, January 4, 2023, and December 19, 2023 (as amended, the “2018 Credit Agreement”).

The 2018 Credit Agreement provides for an unsecured revolving credit and letter of credit facility in a maximum aggregate amount of $ 40.0 million.

The 2018 Credit Agreement provides that the maximum amount of outstanding letters of credit at any one time may not exceed $ 10.0 million, the maximum amount of outstanding loans made to our subsidiary Hurco B.V.

at any one time may not exceed $ 20.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time may not exceed $ 20.0 million.

Under the 2018 Credit Agreement, we and Hurco B.V.

are borrowers, and certain of our other subsidiaries are guarantors.

The 2018 Credit Agreement provided for an unsecured revolving credit and letter of credit facility in a maximum aggregate amount of $ 40.0 million.

The 2018 Credit Agreement provided that the maximum amount of outstanding letters of credit at any one time could not exceed $ 10.0 million, the maximum amount of outstanding loans made to our subsidiary Hurco B.V.

at any one time could not exceed $ 20.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time could not exceed $ 20.0 million.

The scheduled maturity date of the 2018 Credit Agreement was December 31, 2025 , and on that date, the 2018 Credit Agreement terminated in accordance with its terms.

In March 2019, our wholly-owned subsidiaries in Taiwan (Hurco Manufacturing Limited (“HML”)) and China (Ningbo Hurco Machine Tool, Ltd.

(“NHML”)) closed on uncommitted revolving credit facilities with maximum aggregate amounts of 150 million New Taiwan Dollars and 32.5 million Chinese Yuan, respectively.

As uncommitted facilities, both the Taiwan and China credit facilities were subject to review and termination by the respective underlying lending institution from time to time.

On December 31, 2025, the 150 million New Taiwan Dollars Taiwan credit facility and the 32.5 million Chinese Yuan China credit facility terminated in accordance with their terms.

On January 5, 2026, we entered into a new credit agreement with Bank of America, N.A., as the lender (the “2026 Credit Agreement”).

The 2026 Credit Agreement provides for a secured revolving credit and letter of credit facility in a maximum aggregate amount of $ 20.0 million.

The 2026 Credit Agreement provides that the maximum amount of outstanding letters of credit at any one time may not exceed $ 10.0 million, and the maximum amount of all outstanding loans denominated in alternative currencies at any one time may not exceed $ 20.0 million.

Under the 2026 Credit Agreement, we are the borrower, and certain of our subsidiaries are guarantors.

Our obligations under the 2026 Credit Agreement are secured by a security interest in substantially all of our personal property and substantially all of the personal property of each subsidiary guarantor.

The scheduled maturity date of the 2026 Credit Agreement is December 31, 2026.

2 unchanged sentences

The 2026 Credit Agreement contains customary affirmative and negative covenants and events of default, including covenants (1) restricting us from making certain investments, loans, advances and acquisitions (but permitting us to make investments in subsidiaries of up to $ 10.0 million);

(2) restricting us from making certain payments, including (a) cash dividends, except that we may pay cash dividends as long as immediately before and after giving effect to such payment, the sum of the unused amount of the commitments under the 2018 Credit Agreement plus our cash on hand is not less than $ 10.0 million, and as long as we are not in default before and after giving effect to such dividend payments and (b) payments made to repurchase shares of our common stock, except that we may repurchase shares of our common stock as long as we are not in default before and after giving effect to such repurchases and the aggregate amount of payments made by us for all such repurchases during any fiscal year does not exceed $ 25.0 million;

(3) requiring that we maintain a minimum working capital of $ 125.0 million;

and (4) requiring that we maintain a minimum tangible net worth of $ 176.5 million.

and (b) payments made to repurchase shares of our common stock, except that we may repurchase shares of our common stock as long as we are not in default before and after giving effect to such repurchases and the aggregate amount of payments made by us for all such repurchases during any fiscal year does not exceed $ 10.0 million;

and (3) requiring that we maintain a maximum consolidated leverage ratio of total debt to EBITDA no greater than 2.00 to 1.00, with EBITDA defined as the greater of (i) consolidated EBITDA for the most recently completed measurement period and (ii) $ 1.00 .

We may use the proceeds from advances under the 2026 Credit Agreement for general corporate purposes.

In March 2019, our wholly-owned subsidiaries in Taiwan (Hurco Manufacturing Limited (“HML”)) and China (Ningbo Hurco Machine Tool, Ltd.

(“NHML”)) closed on uncommitted revolving credit facilities with maximum aggregate amounts of 150 million New Taiwan Dollars and 32.5 million Chinese Yuan, respectively.

As uncommitted facilities, both the Taiwan and China credit facilities are subject to review and termination by the respective underlying lending institution from time to time.

In February and December 2023, NHML and HML, respectively, renewed the above-referenced credit facilities on substantially similar terms and identical maximum aggregate limits.

As of July 31, 2025, our existing credit facilities consisted of a € 1.5 million revolving credit facility in Germany, the 150 million New Taiwan Dollars Taiwan credit facility, the 32.5 million Chinese Yuan China credit facility, and the $ 40.0 million revolving credit facility under the 2018 Credit Agreement.

As of July 31, 2025, there were no borrowings under any of our credit facilities and there was approximately $ 51.2 million of available borrowing capacity thereunder.

There were also no borrowings under any of our credit facilities as of October 31, 2024.

The maximum consolidated leverage ratio covenant effectively prohibits us from borrowing any amounts under the 2026 Credit Agreement when our consolidated EBITDA for the most recently completed measurement period is negative.

As of the date of this report, the most recently completed measurement period was our first fiscal quarter ended January 31, 2026, during which our consolidated EBITDA was negative.

In order to borrow in compliance with the maximum consolidated leverage ratio covenant set forth above, we are effectively prohibited from borrowing under the 2026 Credit Agreement until we have positive consolidated EBITDA for our most recently completed four fiscal quarters.

As of January 31, 2026, our credit facilities consisted of a € 1.5 million revolving credit facility in Germany and the $ 20.0 million secured revolving credit and letter of credit facility.

We had no debt or borrowings outstanding under any of our credit facilities as of January 31, 2026.

Our provision for income taxes and effective tax rate is affected by the geographic composition of pre-tax income which includes jurisdictions with differing tax rates, conditional reduced tax rates, and other events that are not consistent from period to period, such as changes in income tax laws.

We recorded income tax expense during the nine months of fiscal 2025 of $ 3.1 million compared to $ 6.4 million for the same period in fiscal 2024.

Our effective tax rate for the nine months of fiscal 2025 was ( 35 %), compared to ( 74 %) in the corresponding prior year period.

The year-over-year change in income tax expense was due mainly to a lower valuation allowance recorded against our U.S.

deferred tax assets, as well as changes in geographic mix of income and loss that include jurisdictions with differing tax rates, partially offset by an increase in valuation allowance recorded against our Italian deferred tax assets.

We recorded a valuation allowance of $ 5.3 million for the nine months of fiscal year 2025, compared to $ 8.2 million recorded for the corresponding prior year period.

Because we have a $ 4.0 million valuation allowance recorded against our U.S., Chinese and Italian deferred tax assets, we did not record a tax benefit of $ 4.0 million for our U.S., Chinese and Italian net losses for the nine months of fiscal 2025.

The valuation allowance recorded in the nine months of fiscal year 2025 reflected a full valuation allowance of our U.S., Chinese and Italian deferred tax assets and was recorded based on our conclusion that the deferred tax assets were not more likely than not going to be realized.

Our unrecognized tax benefits were $ 29,000 as of July 31, 2025, and $ 28,000 as of October 31, 2024, and in each case included accrued interest.

We recognize accrued interest and penalties related to unrecognized tax benefits as components of income tax expense.

As of July 31, 2025, the gross amount of interest accrued, reported in Accrued expenses, was approximately $ 8,000 , which did not include the federal tax benefit of interest deductions.

On July 4, 2025, the United States Congress passed budget reconciliation bill H.R.

1 referred to as the One Big Beautiful Bill ("OBBB").

The OBBB contains several changes to corporate taxation including modifications to capitalization of research and development expenses, limitations on deductions for interest expense, and accelerated fixed asset depreciation.

We are still evaluating the impact of the OBBB, but we expect that the legislation will likely not have a material impact on our consolidated financial statements and related disclosures.

We recorded income tax expense during the first three months of fiscal year 2026 of $ 0.5 million, compared to $ 2.0 million for the corresponding prior year period.

Our effective tax rate for the first three months of fiscal year 2026 was ( 15 %), compared to ( 90 %) in the corresponding prior year period.

The year-over-year change was primarily due to a $ 1.2 million valuation allowance recorded during the first quarter of 2025 on our Italian deferred tax assets and changes in geographic mix of income and loss that includes jurisdictions with differing tax rates.

A full valuation allowance has been recorded against our Italian, U.S., and Chinese deferred tax assets as of January 31, 2026, based on our conclusion that the deferred tax assets were not more likely than not to be realized.

The Budget Reconciliation Act (H.R.

1) (“OBBB”) was signed into law on July 4, 2025.

The OBBB did not have a material impact on our condensed consolidated financial statements and related disclosures as of and for the three months ended January 31, 2026.

While further evaluation is ongoing, the OBBB is not expected to have a material impact on our consolidated financial statements and related disclosures in future years.

federal and state income tax returns, as well as tax returns in several foreign jurisdictions.

The statutes of limitations with respect to unrecognized tax benefits will expire this fiscal year.

Currently our manufacturing subsidiary in Italy is under tax inspection for fiscal year October 31, 2021.

7 unchanged sentences

The carrying amount of short-term debt approximates fair value due to the variable rate of the interest and the short-term nature of the instrument.

In accordance with this guidance, the following table represents the fair value hierarchy for our financial assets and liabilities measured at fair value as of July 31, 2025 and October 31, 2024 (in thousands):

July 31, 2025

In accordance with this guidance, the following table represents the fair value hierarchy for our financial assets and liabilities measured at fair value as of January 31, 2026, and October 31, 2025 (in thousands):

January 31, 2026

October 31, 2025

July 31, 2025

January 31, 2026

October 31, 2025

5 unchanged sentences

We have derivative financial instruments in the form of foreign currency forward exchange contracts as described in Note 3 of Notes to Condensed Consolidated Financial Statements.

dollar equivalent notional amounts of these contracts were $ 89.1 million and $ 85.1 million at July 31, 2025 and October 31, 2024, respectively.

dollar equivalent notional amounts of these contracts were $ 92.6 million and $ 91.0 million at January 31, 2026, and October 31, 2025, respectively.

The fair value of our foreign currency forward exchange contracts and the related currency positions are subject to offsetting market risk resulting from foreign currency exchange rate volatility.

8 unchanged sentences

NEW ACCOUNTING PRONOUNCEMENTS

New Accounting Pronouncements:

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, to update reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

This update will be effective for our fiscal year 2025 annual reporting and subsequent interim periods.

We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to income tax disclosures, which aims to improve disclosures and presentation requirements to the transparency of the income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction.

The amendments will be effective for our fiscal year 2026, with the option to early adopt at any time prior to the effective date.

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which is intended to enhance the transparency and usefulness of income tax disclosures by providing incremental and disaggregated income tax disclosures pertaining to the effective tax rate reconciliation and income taxes paid by jurisdiction.

This standard is effective for fiscal years beginning after December 31, 2024, with early adoption permitted.

The standard allows for prospective or retrospective application upon adoption.

We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures.

5 unchanged sentences

We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures.

In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815):

Hedge Accounting Improvements, which enables entities to apply hedge accounting to a greater number of highly effective economic hedges in the following five areas:

(1) similar risk assessment for cash flow hedges, (2) hedging forecasted interest payments on choose-your-rate debt instruments, (3) cash flow hedges of nonfinancial forecasted transactions, (4) net written options as hedging instruments, and (5) foreign-currency-denominated debt instrument as hedging instrument and hedged item (dual hedge).

This ASU is effective for fiscal year 2028.

Early adoption is permitted.

We are currently assessing the impact this new accounting guidance will have on our consolidated financial statements and disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements