GENTEX CORP

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(1)SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

The Company

Gentex Corporation, including its wholly-owned subsidiaries (the "Company"), is a leading supplier of digital vision, connected car, dimmable glass, fire protection technologies, premium audio products, medical devices, and consumer electronics. The Company’s largest business segment involves designing, developing, manufacturing, marketing, and supplying automatic-dimming rearview and non-dimming mirrors and various electronic modules for the automotive industry. The Company ships its products to all of the major automotive producing regions worldwide, which it supports with numerous sales, engineering and distribution locations worldwide.

A substantial portion of the Company’s net sales and accounts receivable result from transactions with domestic and foreign automotive manufacturers and Tier 1 suppliers. The Company also designs, develops, manufactures, markets, and supplies: dimmable aircraft windows for the aviation industry; commercial smoke alarms and signaling devices for the fire protection products industry; premium audio, aftermarket electronics, consumer electronic and accessory products; medical devices; and biometric products and technologies for the commercial and retail consumer electronics industries. The Company does not require collateral or other security for trade accounts receivable.

Significant accounting policies of the Company not described elsewhere are as follows:

Consolidation

The Consolidated Financial Statements include the accounts of Gentex Corporation and all of its wholly-owned and majority-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). All intercompany accounts and transactions have been eliminated.

Non-controlling interests represent the equity interests in consolidated entities that the Company does not wholly own. The Consolidated Financial Statements reflect 100% of the revenues, expenses, assets, and liabilities (after elimination of intercompany transactions), even though the Company does not own 100% of the equity interests of these consolidated entities. The Company follows FASB ASC 810-10-45-21 to report a non-controlling interest (other than non-controlling interests subject to a put option) in the Consolidated Balance Sheets within the equity section, separately from the Company’s retained earnings. Non-controlling interest is adjusted for the non-controlling interest holders’ proportionate shares of the earnings or losses and other comprehensive (loss) income, if any, and the non-controlling interest continues to be attributed their share of losses even if that attribution results in a deficit non-controlling interest balance.

The Company classifies securities with redemption features that are not solely within its control outside of permanent equity, specifically the non-controlling shareholder interest in Onkyo Technology KK ("Onkyo"), acquired in conjunction with the acquisition of VOXX International Corporation ("VOXX") (see Note 11 "Acquisitions"). This redeemable non-controlling interest, subject to a put/call option, is recorded at the greater of the non-controlling interest balance determined pursuant to ASC 810-10, “Consolidation,” or the redemption value (which is based upon the greater of a specified formula) when a redemption value exists. In periods where the specific formula results in a negative amount, and thus no redemption value, no redemption adjustment is recorded. Changes in the non-controlling interest due to changes in the redemption amount are immediately recorded as equity transactions and the Company's earnings per share calculation would be adjusted accordingly to treat any redemption adjustment similar to a dividend.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents

Cash equivalents consist of funds invested in bank accounts and money market funds that have daily liquidity.

Investments

Available for sale securities

The Company follows the provisions of ASC 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities, and for its non-financial assets and liabilities subject to fair value measurements. ASC 820 provides a framework for measuring the fair value of assets and liabilities. This framework is intended to provide increased consistency in how fair value determinations are made under various existing accounting standards that permit, or in some cases, require estimates of fair-market value. This standard also expanded financial statement disclosure requirements about a company’s use of fair-value measurements, including the effect of such measurement on earnings. The cost of securities sold is based on the specific identification method.

The Company determines the fair value of its government securities, asset-backed securities, corporate bonds, and certain municipal bonds by utilizing monthly valuation statements that are provided by its broker. The broker determines the investment valuation by utilizing the bid price in the market and also refers to third party sources to validate valuations, and as such are classified as Level 2 assets.

The Company's certificates of deposit are classified as available for sale and are considered as Level 1 assets. These investments are carried at amortized cost, which approximates fair value.

As of December 31, 2024, the Company held a total of 6,463,308 shares of VOXX Class A Common Stock. The VOXX shares held by the Company were publicly traded, had a readily determinable fair market value, and were considered Level 1 assets. The Company accounted for the VOXX investment in accordance with ASC 323 – Investments – Equity Method and Joint Venture, with the election to use the Fair Value Option under ASC 825 -Fair Value. As a result of this election, changes in fair value of the shares were recorded in Investment (loss) income, net in the Consolidated Statements of Income. The Company recorded a gain of $0.8 million during the year ended December 31, 2025 and a loss of $2.4 million during the year ended December 31, 2024, relating to mark to market adjustments in Investment (loss) income, net, related to VOXX.

On April 1, 2025, the Company completed its previously announced merger of VOXX pursuant to that certain Agreement and Plan of Merger dated as of December 17, 2024 (the "Merger Agreement"), acquiring all of the issued and outstanding shares of VOXX common stock not already owned by the Company for a purchase price of $7.50 per share. The Company's investment in VOXX has been included in the purchase price of the entity pursuant to step-acquisition accounting under ASC 805, Business Combinations (see Note 11 "Acquisitions").

Equity Method Investment - ASA

The Company has a 50% non-controlling ownership interest in ASA Electronics, LLC and Subsidiary ("ASA"), that was obtained in conjunction with the acquisition of VOXX on April 1, 2025 (see Note 11 "Acquisitions") and is accounted for in accordance with ASC 323, Investments – Equity Method and Joint Venture. ASA acts as a distributor of mobile electronics, specifically designed for niche markets, including: RV's; buses; and commercial, heavy duty, agricultural, construction, powersport, and marine vehicles. ASC 810, Consolidation, requires the Company to evaluate non-consolidated entities periodically, and as circumstances change, to determine if an implied controlling interest exists. In conjunction with the acquisition of VOXX on April 1, 2025, the Company evaluated this equity method investment and concluded that ASA is not a variable interest entity. The balance of the Company's investment in ASA as of December 31, 2025, was $20.0 million and is included in Long-term investments on the accompanying Consolidated Balance Sheet.

Technology Investments

The Company also periodically makes strategic investments in the non-marketable debt or equity securities of non-consolidated third parties ("technology investments"). Such technology investments totaled approximately $146.6 million at December 31, 2025, of which $144.9 million and $1.7 million are recorded in Long-term investments and Short-term investments, respectively, on the accompanying Consolidated Balance Sheet, and $155.9 million as of December 31, 2024, of which $149.9 million and $6.0 million are recorded in Long-term investments and Short-term investments, respectively, on the accompanying Consolidated Balance Sheet.

Depending on the form of investment, and the degree of influence the Company has over the investee, the Company primarily accounts for the technology investments in accordance with ASC 321, Investments- Equity Securities or ASC 323 –Investments – Equity Method and Joint Venture. The Company accounts for equity securitiesin non-controlled affiliates through which the Company exercises significant influence but does not have control over the investee under the equity method, with the Company’s share of the earnings or losses of non-controlled affiliates recognized within Other, net in the Company's Consolidated Statement of Income. All other technology investments that the Company holds are primarily accounted for under the measurement alternative of ASC 321. Under the measurement alternative, the carrying value is measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer.

A summary of the Company’s most significant technology investments is below:

Adasky Ltd. - Adasky is an Israeli based leading developer and manufacturer of intelligent, high-resolution thermal sensing systems for vehicle safety and perception applications and smart city roadway solutions. The Company's investment includes preferred shares of Adasky accounted for using the measurement alternative and common shares of Adasky accounted for using the equity method of accounting. During the year ended December 31, 2025, the Company made an additional investment of $5.0 million in Adasky common shares and has an approximately 34% ownership stake in Adasky as of December 31, 2025. As of December 31, 2025 and 2024, the carrying value of the Company’s investments in Adasky was $47.2 million and $44.0 million, respectively.

Green Marbles - GreenMarbles is a provider of sustainable solutions for integration into properties. In 2022, the Company obtained an equity share in GreenMarbles for $25.0 million, consisting of $20.0 million of cash investment and the issuance of $5.0 million worth of the Company's common stock. The Company accounts for its investment in GreenMarbles using the equity method. During the year ended December 31, 2025, the Company recorded an impairment charge related to this investment, as further discussed below. As of December 31, 2025 and 2024, the carrying value of the investment in GreenMarbles was $11.5 million and $20.8 million, respectively, and as of December 31, 2025, the Company has an approximate 26% ownership interest in the investee.

Simplenight -Simplenight provides drivers and vehicle occupants with access to enhanced mobile capability for booking personalized entertainment and lifestyle experiences in addition to everyday purchases. During the year ended December 31, 2025, the Company made an additional investment of $10.0 million in Simplenight, and as of December 31, 2025, the Company has an approximately 33% ownership interest in Simplenight accounted for using the measurement alternative. As of December 31, 2025, and 2024, the carrying value of the Company’s investments in Simplenight was $39.3 million and $29.2 million, respectively.

Solace Power - Solace Power is a Canada-based company specializing in wireless power solutions. In 2023, the Company purchased an equity interest in Solace Power, which is accounted for using the measurement alternative. As of both December 31, 2025, and 2024, the carrying value of the Company's investment in Solace Power was $7.1 million, and as of December 31, 2025, the Company has an approximately 15% ownership interest in the investee.

Retispec - RetiSpec is an artificial intelligence medical imaging company developing a tool for the early detection of disease biomarkers in the eye. During the year ended December 31, 2025, the Company made an additional investment of $2.8 million. The Company also recognized a $3.7 million revaluation gain during the year ended December 31, 2024, as part of its additional round of investment in that year, which included new investors in the entity. The Company accounts for RetiSpec using the measurement alternative. As of December 31, 2025, and 2024, the carrying value of the Company's investment in RetiSpec was $12.8 million and $10.0 million, respectively, and has a total of 20% ownership interest at December 31, 2025.

During the year ended December 31, 2025, the Company recorded other-than-temporary impairment charges totaling $14.1 million related to certain of its technology investments within Investment (loss) income, net, on the accompanying Consolidated Statement of Income. During the second quarter of 2025, the Company identified indicators of impairment related to its investment in Green Marbles, LLC as a result of sustained deterioration in the operating results of the investee. The Company performed an impairment analysis of this equity method investment and recorded a charge of $6.2 million during the year ended December 31, 2025. The fair value of the investment was estimated using a discounted cash flow model. The Company's assumptions in estimating the fair value of Green Marbles, LLC utilized Level 3 inputs, including projected revenue growth, gross margins, EBITDA margins, and weighted average costs of capital. Based on the foregoing, the Company determined that the fair value of this investment was below its carrying value at the triggering event date and does not expect the fair value to recover under current conditions. During the third quarter of 2025, the Company identified indicators of impairment related to its investment in New Compliance B.V. following a funding round conducted by the investee at a per-share price below the Company's carrying value of this investment. As a result, the Company recorded an impairment charge of $2.2 million during the year ended December 31, 2025, to reduce the carrying value of this investment to a balance consistent with the fair value implied by New Compliance B.V.'s then most recent financing. During the fourth quarter of 2025, the Company identified indicators of impairment related to its investment in PayByCar, Inc., including sustained deterioration in the operating results of the investee and initiation of a plan of liquidation and dissolution, as approved by the investee's board of directors. Based on these indicators, the Company evaluated the investment in PayByCar for impairment and determined that the carrying amount of the investment was not recoverable and that its fair value was nominal. Accordingly, the Company recorded an impairment charge of $5.7 million for the year ended December 31, 2025 to write down the investment to its estimated fair value.

Assets or liabilities that have recurring fair value measurements are shown below as of December 31, 2025 and December 31, 2024:

The amortized cost, unrealized gains and losses, and market value of investment securities are shown as of December 31, 2025 and 2024:

Unrealized losses on investments as of December 31, 2025 are as follows:

Unrealized losses on investments as of December 31, 2024 are as follows:

The Company utilizes the guidance provided by ASC 326 to determine whether any of the available-for-sale debt securities held by the Company were impaired. No investments were considered to be impaired during the years presented. The Company has the intention and current ability to hold its debt investments until the amortized cost basis has been recovered. If market, industry, and/or investee conditions deteriorate, the Company may incur future impairments. No such investments were considered to be other-than-temporarily impaired in 2025 and 2024.

Fixed income securities as of December 31, 2025, have contractual maturities as follows:

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, investments, accounts receivable, accounts payable, and short-term debt. The Company’s estimate of the fair values of these financial instruments approximates their carrying amounts at December 31, 2025 and 2024.

Allowance For Credit Losses

Trade Accounts Receivable:

The Company's trade accounts receivable arise from revenue transactions in the ordinary course of business. The Company extends credit to customers based on pre-defined criteria and trade receivables are generally due within 30 to 90 days. The Company estimates its allowances related to customer receivables based on historical credit and collections experience, customers' current financial condition and the specific identification of other potential problems, including the economic climate and impact supply chain constraints have had on specific customers. Actual collections can differ, requiring adjustments to the allowances, but historically such adjustments have not been material.

The following table presents the activity in the Company’s allowance for credit losses related to trade accounts receivable:

The Company’s allowance for credit losses related to trade accounts receivable primarily relates to financially distressed customers. The Company continues to work with these customers in collecting past due balances.

Loans Receivable:

From time to time, the Company makes loans, in the ordinary course of business, to certain of its technology investees. Such loans vary in length and are interest bearing. As such, the loans are not deemed to be additional investments in the technology investees as the parties intend for the loans to be repaid. These loans are classified within Prepaid expenses and other and Patents and other assets, net, on the accompanying Consolidated Balance Sheet based on the maturity dates of the loans. The Company estimates an allowance for credit losses for these loans receivable in accordance with ASC 326, Financial Instruments - Credit Losses. This allowance reflects the Company's estimate of expected credit losses over the contractual term of the loans, considering historical loss experience, current conditions, and reasonable and supportable forecasts. The estimate is developed using a combination of quantitative data and qualitative factors, including borrower creditworthiness, loan-specific risk characteristics, macroeconomic trends, and other relevant information, all of which is updated quarterly. The allowance is adjusted through a provision for credit losses, presented within Other, net on the Company's Consolidated Statements of Income. For the year ended December 31, 2025, the Company recorded an increase to the credit loss allowance of $7.4 million. The balance of the loans included in Prepaid expenses and other on the accompanying Consolidated Balance Sheet at December 31, 2025, was $13.5 million, net of credit loss allowance. The balance of the loans included in Patents and other assets, net, on the accompanying Consolidated Balance Sheet at December 31, 2025, was $7.9 million, net of credit loss allowance.

Inventories

The Company values its inventory at the lower of cost or net realizable value ("NRV"). NRV is defined as estimated selling prices less costs of completion, disposal, and transportation. Inventories include material, direct labor, and manufacturing overhead. Cost is determined primarily on a standard cost basis that approximates the first-in, first-out (FIFO) method, with a portion valued on a weighted moving-average basis, both of which approximate actual cost. Inventories consisted of the following as of December 31, 2025 and 2024:

Estimated inventory allowances for slow-moving and obsolete inventories are based on current assessments of future demand, market conditions, purchase orders, selling prices, evaluation of longer lead times for certain electronic components, and related management initiatives. If market conditions or customer requirements change and are less favorable than those projected by management, inventory allowances are adjusted accordingly. Allowances for slow-moving and obsolete inventories (which are included, net, in the above inventory values) were $12.2 million and $9.9 million at December 31, 2025 and 2024, respectively. The increase in the inventory balance, as well as the increase in the balance of the allowance for slow moving and obsolete inventories at December 31, 2025, was due to the acquisition of VOXX (see Note 11, Acquisitions).

Plant and Equipment

Plant and equipment is stated at cost less accumulated depreciation. Depreciation is computed for financial reporting purposes using the straight-line method, with estimated useful lives of 7 to 30 years for buildings and improvements, and 3 to 10 years for machinery and equipment. Depreciation expense was approximately $88.8 million, $76.8 million and $73.6 million for the years ended December 31, 2025, 2024 and 2023, respectively. The increase in depreciation expense during the year ended December 31, 2025, was a result of the acquisition of VOXX on April 1, 2025 (see Note 11, Acquisitions).

Repairs and Maintenance

Major renewals and improvements of property and equipment are capitalized, and repairs and maintenance are expensed as incurred. The Company incurred expenses relating to the repair and maintenance of plant and equipment of approximately $34.9 million, $35.3 million and $31.0 million, in 2025, 2024 and 2023, respectively.

Impairment or Disposal of Long-Lived Assets

The Company reviews long-lived assets, including property, plant and equipment and other intangible assets with definite lives, for impairment whenever events or changes in circumstances indicate that the asset’s carrying amount may not be recoverable. The Company conducts its long-lived asset impairment analysis in accordance with ASC 360-10-15, Impairment or Disposal of Long-Lived Assets. ASC 360-10-15 requires the Company to group assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities and evaluate the asset group against the sum of the undiscounted future cash flows. If the undiscounted cash flows do not indicate the carrying amount of the asset is recoverable, an impairment charge is measured as the amount by which the carrying amount of the asset group exceeds its fair value based on discounted cash flow analysis or appraisals. There wereno impairments of long-lived assets incurred during the year ended December 31, 2025, 2024, or 2023.

Patents

The Company’s policy is to capitalize costs incurred to obtain patents. The cost of patents is amortized over their useful lives. The cost of patents in process is not amortized until issuance. The Company periodically obtains intellectual property rights, in the ordinary course of business, and the cost of the rights are amortized over their useful lives. At December 31, 2025 and 2024, total patents, net of accumulated amortization, were $11.0 million and $11.1 million, respectively, and are included in Patents and other assets, net, on the accompanying Consolidated Balances Sheets. At December 31, 2025, patents had a weighted average amortized life of 9 years.

Goodwill and Intangible Assets

Goodwill and other intangible assets consist of the excess of consideration over the fair values of net assets acquired (goodwill) and other intangible assets (patents, contracts, trademarks/tradenames, developed technology and customer relationships). Values assigned to the respective assets are determined in accordance with ASC 805 "Business Combinations" ("ASC 805") and ASC 350 "Intangibles – Goodwill and Other" ("ASC 350").

Goodwill is calculated as the excess of the cost of an acquisition over the fair values assigned to identifiable net assets acquired. In accordance with ASC 350, the Company reviews goodwill for impairment during the fourth quarter on an annual basis or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The Company performs an impairment review for each of its reporting units with goodwill, which are Automotive, Premium Audio, Dimmable Aircraft Windows, Nanofiber, Medical, and Biometrics, using either a qualitative approach and/or quantitative approach employing a fair value method that incorporates certain assumptions and judgments. The fair value of a reporting unit refers to the price that would be received to sell the unit as a whole in an orderly transaction between market participants at the measurement date. The Company performs a qualitative assessment (step 0) to determine whether it is more likely than not that a reporting unit's fair value is less than its carrying amount. If not, no further goodwill impairment testing is performed. If so, the Company performs a step 1 test to determine the fair value of the reporting unit using an income approach to estimate the fair value of each of its reporting units and a market valuation approach to further support this analysis. If such fair value of the reporting unit is greater than its carrying amount, goodwill is not considered to be impaired. However, if such fair value of the reporting unit is less than its carrying amount, an impairment charge is recorded as the excess of the reporting unit's carrying value over its fair value.

The assumptions included in the impairment tests require judgment and changes to these inputs could impact the results of the calculations which could result in an impairment charge in future periods if the carrying amount of the reporting unit exceeds its calculated fair value. For the qualitative assessment performed, management considers factors such as macro-economic conditions, industry and market considerations, overall financial performance, and other Company-specific events, amongst other factors, in making the determination as to whether it is more likely than not that a reporting unit's fair value is less than its carrying amount. Other than management's internal projections of future cash flows, the primary assumptions used in the step 1 impairment test is the weighted-average cost of capital and long-term growth rates. Although the Company's cash flow forecasts are based on assumptions that are considered reasonable by management and consistent with the plans and estimates management is using to operate the underlying business, there are significant judgments involved in determining the expected future cash flows attributable to a reporting unit. During the year ended December 31, 2024, the Company recorded $3.7 million ofimpairment charges related to the Nanofiber reporting unit as a result of the annual impairment review. No impairment charges were recorded during the years ended December 31, 2025 and 2023.

In accordance with ASC 350, indefinite lived intangible assets are also subject to annual impairment testing or more frequently if indicators of impairment are identified. Management's judgment and assumptions are required in determining the underlying fair value of the indefinite lived intangible assets. While the Company believes the judgments and assumptions used in determining fair value are reasonable, different assumptions could change the estimated fair values and, therefore, impairment charges could be required, which could be material to the Consolidated Financial Statements. The Company performs a qualitative assessment (step 0) to determine whether it is more likely than not that an intangible asset's fair value is less than its carrying amount. If not, no further impairment testing over the indefinite lived intangible asset is performed.

As part of recent acquisitions, the Company acquired indefinite lived in-process research and development ("IPR&D") intangible assets. These IPR&D intangible assets are not amortized, but are tested for impairment annually, or more frequently when indicators of potential impairment exist, until the completion or abandonment of the associated research and development efforts. Upon completion of the projects, the assets will be amortized over the expected economic life of the asset, which will be determined on that date. Should the project be determined to be abandoned, and if the asset developed has no alternative use, the full value of the asset will be charged to expense at that time.

During the year ended December 31, 2024, the Company recorded $5.2 million inimpairment charges within its Nanofiber reporting unit related to the Vaporsens Inc. ("Vaporsens") IPR&D asset as a result of the annual impairment review. No impairment charges were recorded during the years ended December 31, 2025 and 2023.

Refer to Note 9, "Goodwill and Intangible Assets" for information regarding the impairment testing performed in calendar year 2025 and 2024.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. The Company applies the FASB’s guidance on revenue recognition, which requires recognition of the amount of revenue and consideration that is expected to be received in exchange for goods and services transferred to customers. To do this, the Company applies the five-step model prescribed by the FASB, which requires it to: (a) identify the contract with the customer; (b) identify the performance obligations in the contract; (c) determine the transaction price; (d) allocate the transaction price to the performance obligations in the contract; and (e) recognize revenue when, or as, the performance obligation is satisfied.

The Company accounts for a contract or purchase order when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance, and collectability of consideration is probable. Revenue is recognized when control of the product passes to the customer, which is upon shipment, unless otherwise specified within the customer contract or on the purchase order as delivery and is recognized at the amount that reflects the consideration the Company expects to receive for the products sold, including any forms of discounts. Sales are shown net of returns, which have not historically been significant. The Company does not generate sales from arrangements with multiple deliverables.

Purchase orders submitted to the Company by its customers are typically of a duration of one year or less. As such, the Company applies the practical expedient in ASC 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less, for which work has not yet been performed. Within its Automotive Products segment, the Company generally receives purchase orders from customers on an annual basis in the ordinary course of business. Typically, such purchase orders provide the annual terms, including pricing, related to a particular vehicle model. Purchase orders generally do not specify quantities. The Company recognizes revenue based on the pricing terms included in such annual purchase orders.

The Company's typical payment terms vary based on the customer and the type of goods and services in the contract or purchase order. The period of time between invoicing and when the payment is due is not significant. Amounts billed and due from customers are classified as receivables on the accompanying Consolidated Balance Sheets. As the Company's standard payment terms are less than one year, the practical expedient under ASC 606-10-32-18 has been elected to not assess whether a contract has a significant financing component.

As part of certain agreements, entered into in the ordinary course of business, the Company is asked to provide customers with annual price reductions. Such amounts are subject to estimate and are accrued as a reduction of revenue as control of the products is transferred to the customer under standard commercial terms. For any shipments of product that may be subject to retroactive price adjustments that are then being negotiated, the Company records revenue based on the Company’s best estimate of the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods to the customer. The Company's best estimate requires significant judgment based on historical results and expected outcomes of ongoing negotiations with customers. The Company's approach is to consider these adjustments to the contract price as variable consideration which is estimated based on the then most likely price amount. In addition, the Company has ongoing adjustments to pricing arrangements with customers based on the related content, the cost of Company products and other commercial factors. Such pricing accruals are adjusted as they are settled with customers.

The Company offers sales incentives to certain customers in the form of: (a) co-operative advertising allowances; (b) market development funds; (c) volume incentive rebates; and (d) other trade allowances. The Company accrues the cost of co-operative advertising allowances, volume incentive rebates, and market development funds at the later of when the customer purchases its products or when the sales incentive is offered to the customer. The Company records the provision for other trade allowances at the later of when the sales incentive is offered or when the related revenue is recognized. Except for other trade allowances, all sales incentives require the customer to purchase the Company's products during a specified period of time and to claim the sales incentive within a certain time period (referred to as the "claim period"). All costs associated with sales incentives are classified as a reduction of net sales. Depending on the specific facts and circumstances, the Company utilizes either the most likely amount or the expected value methods to estimate the effect of uncertainty on the amount of variable consideration to which it would be entitled related to sales incentive adjustments. Both methods are based upon the contractual terms of the incentives and historical experience with each customer. Although the Company makes its best estimate of sales incentive liabilities, many factors, including significant unanticipated changes in the purchasing volume and the lack of claims from customers could have a significant impact on the liability for sales incentives and reported operating results. The Company records estimates for cash discounts, promotional rebates, and other promotional allowances in the period the related revenue is recognized (“Customer Credits”). The provision for Customer Credits is recorded as a reduction from gross sales and reserves for Customer Credits are presented within Other accrued liabilities on the accompanying Consolidated Balance Sheets.

Refer to Note 10, "Revenue", for further information. The Company has concluded that its estimates of variable consideration are not constrained according to the definition within the standard. Additionally, the Company applies the practical expedient in ASC paragraph 606-10-25-18B and accounts for shipping and handling activities that occur after the customer has obtained control of a good as a fulfillment activity, rather than a separate performance obligation.

Advertising and Promotional Materials

All advertising and promotional costs are expensed as incurred and amounted to approximately $8.0 million, $4.5 million, and $3.4 million, in the years ended December 31, 2025, 2024 and 2023, respectively. The increase in advertising expense during the year ended December 31, 2025 was due to the acquisition of VOXX and inclusion of VOXX in the Company's consolidated result beginning on April 1, 2025 (see Note 11, Acquisitions).

Self-Insurance

The Company is self-insured for a portion of its risk on workers’ compensation and employee medical costs. The arrangements provide for stop loss insurance to manage the Company’s risk. Such costs are accrued based on known claims and an estimate of incurred, but not reported ("IBNR") claims. IBNR claims are estimated using historical lag information and other data provided by claims administrators. This estimation process is subjective, and to the extent that future results differ from original estimates, adjustments to recorded accruals may be necessary.

Product Warranty

The Company warrants its products against certain defects in material and workmanship, when used as designed. These warranties do not provide a service beyond assuring that the products comply with agreed-upon specifications and are not sold separately. Warranty expenses are accrued at the time the related revenue is recognized, based on the Company's estimated cost to repair, or replace expected product returns for warranty matters. The liabilities associated with product warranty are estimated based on historical experiences of actual warranty claims, as well as known facts and circumstances. At December 31, 2025 and 2024, the warranty liability of $8.3 million and $2.8 million, respectively, was recorded in Other, under Accrued liabilities on the accompanying Consolidated Balance Sheets. For the years ended December 31, 2025, 2024 and 2023 warranty claims and product repair cost expense was $2.0 million, $1.4 million, and $2.1 million, respectively. The increase in the warranty liability balance at December 31, 2025, and the warranty claims and product repair expense for the year ended December 31, 2025, is due to the acquisition of VOXX.

Income Taxes

The provision for income taxes is based on the earnings reported in the Consolidated Financial Statements. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax basis of assets and liabilities that will result in deductible or taxable amounts in the future. Such deferred income tax asset and liability computations are based on enacted tax laws and rates. A valuation allowance is established whenever management determines that it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company applies the provisions of ASC 740, Income Taxes, as it relates to uncertainty in income taxes recognized in the Company’s Consolidated Financial Statements. A threshold of more likely than not to be sustained upon examination is applied to uncertain tax positions. The Company deems the estimates related to this provision to be reasonable, however, no assurance can be given that the final outcome of these matters will not vary from what is reflected in the historical income tax provisions and accruals.

Leases

The Company accounts for operating leases in accordance with ASC Topic 842, Leases. The Company determines whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly, or implicitly, for a period of time in exchange for consideration. Control of an underlying asset is conveyed if the Company obtains the rights to direct the use of, and to obtain substantially all of the economic benefit from, the use of the underlying asset. Some of the Company's leases include both lease and non-lease components, which are accounted for as a single lease component, as the Company has elected the practical expedient in ASC 842-10-15-37. Some of the Company's operating lease agreements include variable lease costs, including taxes, common area maintenance, or increases in rental costs related to inflation. Such variable payments, other than those dependent upon a market index or rate, are expensed when the obligation for those payments is incurred. Lease expense is recorded in operating expenses in the Consolidated Statements of Income. The Company's lease agreements do not currently contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of 12 months or less, which do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise, are considered short term leases and are not recorded on the balance sheet. The Company had no short-term leases during the year ended December 31, 2025.

Right-of-use assets and lease liabilities are recognized at each lease’s commencement date based on the present value of its lease payments over its respective lease term. When a borrowing rate is not explicitly available for a lease, the Company's incremental borrowing rate is used based on information available at the lease’s commencement date to determine the present value of its lease payments. Operating lease payments are recognized on a straight-line basis over the lease term.

The Company has operating leases for certain offices, warehouses, vehicles, and other equipment, which are included within Patents and other assets, net, on the accompanying Consolidated Balance Sheets. The leases have remaining lease terms of less than 1 year to 5 years, some of which include renewal options. The Company considers these renewal options in determining the lease term to establish the right-of-use assets and lease liabilities when it is determined that it is reasonably certain that the renewal options will be exercised. The weighted average remaining lease term for operating leases as of December 31, 2025 was 3 years, with a weighted average discount rate of 4.7%. Future minimum lease payments for operating leases are as follows:

Earnings Per Share

The Company has unvested share-based payment awards with a right to receive non-forfeitable dividends, which are considered participating securities under ASC 260, Earnings Per Share. The Company allocates earnings to participating securities and computes earnings per share using the two-class method. Under the two-class method, net income per share is computed by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, net income is allocated to both common shares and participating securities based on their respective weighted average shares outstanding for the period. For a period of net loss, net loss is not allocated to participating securities.

The following table sets forth the computation of basic and diluted net income per common share under the two-class method for each of the last three years:

For the years ended December 31, 2025, 2024 and 2023,2,913,014 shares,1,579,559 shares, and 1,441,812 shares, respectively, related to stock option plans were not included in diluted average common shares outstanding because they were anti-dilutive.

Comprehensive Income (Loss)

Comprehensive income (loss) reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the Company, comprehensive income represents net income adjusted for unrealized gains and losses on available for sale investments, derivatives, and foreign currency translation adjustments that are further detailed in Note 8, "Comprehensive Income".

Foreign Currency Translation

Assets and liabilities of the Company's foreign subsidiaries whose cash flows are primarily in local currencies have been translated at rates of exchange at year-end or historical exchange rates, as appropriate in accordance with ASC 830, "Foreign Currency Matters" ("ASC 830"). Revenues and expenses have been translated at the weighted-average rates of exchange in effect during the year. The resulting translation adjustment is recorded as a separate component of shareholders’ investment. Gains and losses arising from re-measuring foreign currency transactions into the appropriate currency are included in the determination of Net Income and were not significant during the years ended December 31, 2025, 2024 and 2023.

Stock-Based Compensation Plans

The Company accounts for stock-based compensation using the fair value recognition provisions of ASC 718, Compensation - Stock Compensation. As described more fully in Note 5, "Stock-Based Compensation Plans", the Company provides, or has provided, compensation benefits under an omnibus incentive plan, two other stock option plans, another restricted stock plan, andtwo employee stock purchase plans. The Company utilizes the Black-Scholes model to estimate the value of the stock options, which requires the input of assumptions. These assumptions include estimating (a) the length of time employees will retain their vested stock options before exercising them (“expected term”), (b) the volatility of the Company’s common stock price over the expected term, (c) the number of options that will ultimately not complete their vesting requirements (“forfeitures”), and (d) expected dividends. Changes in the assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amounts recognized on the Consolidated Statements of Operations.

Recent Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures. Under this ASU, public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income (or loss) by the applicable statutory income tax rate).” This ASU is effective on a prospective basis. The Company adopted ASU No. 2023-09 for the year ended December 31, 2025, on a prospective basis, and required changes are reflected in Note 3, "Income Taxes" in the accompanying notes to the Consolidated Financial Statements. The adoption of ASU 2023-09 did not have a material impact on the Company's consolidated financial statements.

In March 2024, the Securities and Exchange Commission ("SEC") issued final climate disclosure rules. The rules require disclosure of climate-related information outside of the audited financial statements and disclosure in the footnotes addressing specified financial statement effects of severe weather events and other natural conditions above certain financial thresholds, certain carbon offsets and renewable energy credits or certificates, if material. Such disclosure requirements were scheduled to begin phasing in for fiscal years beginning on or after January 1, 2025. On April 4, 2024, the SEC exercised its discretion to voluntarily stay the effective date of the final rules pending completion of certain judicial review. In 2025, the SEC withdrew its defense of the climate disclosure rules and litigation has been held in abeyance until the SEC decides how to proceed. Though compliance with such rules is not currently required, the Company continues to evaluate the potential impact of compliance, as well as compliance with similar rules of other jurisdictions.

In November 2024, the FASB issued ASU No. 2024-03, "Disaggregation of Income Statement Expenses (Subtopic 220-40)." The ASU requires public entities to disaggregate, in a tabular presentation, certain income statement expenses into different categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and may be applied retrospectively. The Company is currently evaluating the impact of adopting the new ASU on its consolidated financial statements and related disclosures. In January 2025, the FASB issued ASU No. 2025-01, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date." This ASU amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027.

In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity ("VIE"), which provides clarifying guidance on determining the accounting acquirer in certain transactions involving VIE's. The update aims to improve consistency and comparability in financial reporting. The guidance will be effective for annual periods beginning after December 15, 2026, including interim periods within those annual periods. Early adoption is permitted. Upon adoption, the guidance will be applied prospectively. The Company is currently evaluating the provisions of the guidance and the impact on its Consolidated Financial Statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which introduces a practical expedient for the application of the current expected credit loss model to current accounts receivable and contract assets in which all entities can assume that current conditions as of the balance sheet date do not change for the remaining life of the assets. This ASU is effective for annual periods beginning after December 15, 2025, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its Consolidated Financial Statements and disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU updates the cost capitalization threshold for internal-use software development costs by removing all references to software project development stages and providing new guidance on how to evaluate whether the probable-to-complete recognition threshold has been met. ASU 2025-06, which can be applied prospectively, retrospectively, or with a modified transition approach, is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its Consolidated Financial Statements and disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements("ASU 2025-11"). This ASU enhances consistency in interim reporting for all entities by clarifying interim disclosure requirements and the form and content of interim financial statements in accordance with GAAP. ASU 2025-11, which can be applied prospectively or retrospectively to any and all prior periods presented in the financial statements, is effective for the interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its Consolidated Financial Statements and related disclosures.