What changed in this filing

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Item 1. Financial Statements

2022-12-06 compared with 2022-08-09 · 303 added, 255 removed, 473 unchanged (54% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

ASSETS (unaudited)

2 unchanged sentences

Marketable securities 55,171 13,147

Accounts receivable, net of allowance for doubtful accounts of $ 1,553 and $ 1,636 as of June 30, 2022 and December 31, 2021, respectively

Accounts receivable, net of allowance for doubtful accounts of $ 1,523 and $ 1,597 as of September 30, 2022 and December 31, 2021, respectively

27,775 27,766

2 unchanged sentences

Current contract assets 1,268 1,230

Current assets held for sale — 15,841

Total current assets 125,920 87,830

7 unchanged sentences

Deferred income tax asset 56 56

Non-current assets held for sale — 7,169

Total assets $ 194,272 $ 168,794

8 unchanged sentences

Liability for uncertain tax positions 624 592

Current liabilities held for sale — 3,939

Total current liabilities 34,693 33,882

3 unchanged sentences

Deferred income tax liability 184 215

Non-current liabilities held for sale — 8

Total liabilities $ 39,684 $ 39,817

5 unchanged sentences

Authorized 30,000,000 shares;

20,503,438 and 20,342,695 shares issued at June 30, 2022 and December 31, 2021, respectively;

and 19,070,744 and 18,910,001 shares outstanding at June 30, 2022 and December 31, 2021, respectively

20,606,201 and 20,342,695 shares issued at September 30, 2022 and December 31, 2021, respectively;

and 19,173,507 and 18,910,001 shares outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital 159,555 156,199

Accumulated deficit ( 18,301 ) ( 12,165 )

Retained earnings (accumulated deficit) 11,345 ( 12,165 )

Accumulated other comprehensive loss ( 4,667 ) ( 3,409 )

166,439 140,828

treasury stock at cost, common stock, 1,432,694 shares as of June 30, 2022 and December 31, 2021

treasury stock at cost, common stock, 1,432,694 shares as of September 30, 2022 and December 31, 2021

( 11,851 ) ( 11,851 )

6 unchanged sentences

(in thousands, except earnings per share amounts, unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

12 unchanged sentences

Interest expense 1 20 3 52

Other income (expense), net 923 ( 1 ) 1,061 ( 790 )

Loss before income tax expense (benefit) ( 1,209 ) ( 5,595 ) ( 5,572 ) ( 9,776 )

Income tax expense (benefit) 235 78 564 ( 75 )

Net loss $ ( 1,444 ) $ ( 5,673 ) $ ( 6,136 ) $ ( 9,701 )

Net loss per common share

Other income, net 569 7,031 1,561 6,174

(Loss) income from continuing operations before income tax expense (benefit) ( 14 ) 3,686 ( 3,906 ) ( 8,892 )

Income tax expense (benefit) from continuing operations 81 16 645 ( 59 )

Net (loss) income from continuing operations $ ( 95 ) $ 3,670 $ ( 4,551 ) $ ( 8,833 )

Net income from discontinued operations, net of tax 29,741 348 28,061 3,150

Net income (loss) $ 29,646 $ 4,018 $ 23,510 $ ( 5,683 )

Net (loss) income from continuing operations per common share

Basic $ ( 0.01 ) $ 0.20 $ ( 0.25 ) $ ( 0.49 )

Diluted $ ( 0.01 ) $ 0.20 $ ( 0.25 ) $ ( 0.49 )

Net income from discontinued operations per common share

Basic $ 1.59 $ 0.02 $ 1.51 $ 0.17

Diluted $ 1.59 $ 0.02 $ 1.51 $ 0.17

Net income (loss) per common share

Basic $ 1.58 $ 0.22 $ 1.27 $ ( 0.31 )

Diluted $ 1.58 $ 0.22 $ 1.27 $ ( 0.31 )

Weighted average number of common shares outstanding:

4 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Net loss $ ( 1,444 ) $ ( 5,673 ) $ ( 6,136 ) $ ( 9,701 )

Other comprehensive (loss) income, net of tax:

Net income (loss) $ 29,646 $ 4,018 $ 23,510 $ ( 5,683 )

Other comprehensive loss, net of tax:

Foreign currency translation adjustment ( 646 ) ( 370 ) ( 1,258 ) ( 106 )

Other comprehensive (loss) income, net of tax (1)

Other comprehensive loss, net of tax (1)

( 646 ) ( 370 ) ( 1,258 ) ( 106 )

Total comprehensive loss $ ( 1,863 ) $ ( 5,632 ) $ ( 6,748 ) $ ( 9,437 )

Total comprehensive income (loss) $ 29,000 $ 3,648 $ 22,252 $ ( 5,789 )

(1) Tax impact was nominal for all periods.

5 unchanged sentences

Common Stock Additional

Accumulated Deficit Accumulated

Capital (Accumulated deficit) Retained earnings Accumulated

Comprehensive

2 unchanged sentences

Shares Amount Shares Amount

Balance at March 31, 2022 20,328 $ 203 $ 157,142 $ ( 16,857 ) $ ( 3,602 ) ( 1,433 ) $ ( 11,851 ) $ 125,035

Net loss — — — ( 1,444 ) — — — ( 1,444 )

Balance at June 30, 2022 20,503 $ 205 $ 157,996 $ ( 18,301 ) $ ( 4,021 ) ( 1,433 ) $ ( 11,851 ) $ 124,028

Net income — — — 29,646 — — — 29,646

Other comprehensive loss — — — — ( 646 ) — — ( 646 )

1 unchanged sentence

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 103 1 450 — — — — 451

Balance at June 30, 2022 20,503 $ 205 $ 157,996 $ ( 18,301 ) $ ( 4,021 ) ( 1,433 ) $ ( 11,851 ) $ 124,028

Balance at September 30, 2022 20,606 $ 206 $ 159,555 $ 11,345 $ ( 4,667 ) ( 1,433 ) $ ( 11,851 ) $ 154,588

Common Stock Additional

Accumulated Deficit Accumulated

Capital (Accumulated deficit) Retained earnings Accumulated

Comprehensive

3 unchanged sentences

Balance at December 31, 2021 20,343 $ 203 $ 156,199 $ ( 12,165 ) $ ( 3,409 ) ( 1,433 ) $ ( 11,851 ) $ 128,977

Net loss — — — ( 6,136 ) — — — ( 6,136 )

Net income — — — 23,510 — — — 23,510

Other comprehensive loss — — — — ( 1,258 ) — — ( 1,258 )

3 unchanged sentences

Taxes accrued for net share settlement of options — — ( 131 ) — — — — ( 131 )

Balance at June 30, 2022 20,503 $ 205 $ 157,996 $ ( 18,301 ) $ ( 4,021 ) ( 1,433 ) $ ( 11,851 ) $ 124,028

Balance at September 30, 2022 20,606 $ 206 $ 159,555 $ 11,345 $ ( 4,667 ) ( 1,433 ) $ ( 11,851 ) $ 154,588

Common Stock Additional

4 unchanged sentences

Shares Amount Shares Amount

Balance at March 31, 2021 20,165 $ 202 $ 151,657 $ ( 6,430 ) $ ( 3,009 ) ( 1,433 ) $ ( 11,851 ) $ 130,569

Net loss — — — ( 5,673 ) — — — ( 5,673 )

Other comprehensive income — — — — 41 — — 41

Balance at June 30, 2021 20,245 $ 202 $ 153,596 $ ( 12,103 ) $ ( 2,968 ) ( 1,433 ) $ ( 11,851 ) $ 126,876

Net income — — — 4,018 — — — 4,018

Other comprehensive loss — — — — ( 370 ) — — ( 370 )

Stock-based compensation — — 1,042 — — — — 1,042

Issuance of common stock under employee stock purchase plan 26 — 231 — — — — 231

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 61 1 172 — — — — 173

Balance at June 30, 2021 20,245 $ 202 $ 153,596 $ ( 12,103 ) $ ( 2,968 ) ( 1,433 ) $ ( 11,851 ) $ 126,876

Balance at September 30, 2021 20,332 $ 203 $ 155,041 $ ( 8,085 ) $ ( 3,338 ) ( 1,433 ) $ ( 11,851 ) $ 131,970

Common Stock Additional

5 unchanged sentences

Net loss — — — ( 5,683 ) — — — ( 5,683 )

Other comprehensive income — — — — 264 — — 264

Other comprehensive loss — — — — ( 106 ) — — ( 106 )

Stock-based compensation — — 3,029 — — — — 3,029

Issuance of common stock under employee stock purchase plan 26 — 231 — — — — 231

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 443 4 2,611 — — — — 2,615

Balance at June 30, 2021 20,245 $ 202 $ 153,596 $ ( 12,103 ) $ ( 2,968 ) ( 1,433 ) $ ( 11,851 ) $ 126,876

Balance at September 30, 2021 20,332 $ 203 $ 155,041 $ ( 8,085 ) $ ( 3,338 ) ( 1,433 ) $ ( 11,851 ) $ 131,970

See accompanying Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

(in thousands, unaudited)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Net loss $ ( 6,136 ) $ ( 9,701 )

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

Net income (loss) $ 23,510 $ ( 5,683 )

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

Provision for doubtful accounts 459 524

3 unchanged sentences

Compensation expense related to stock-based awards and employee stock purchase plan

Unrealized currency translation (gain) loss ( 361 ) 236

Unrealized currency translation gain ( 808 ) ( 35 )

Gain on sale of KVH Media Group Entertainment Limited ( 631 ) —

Gain on sale of inertial navigation business

PPP loan forgiveness — ( 6,979 )

Changes in operating assets and liabilities:

13 unchanged sentences

Proceeds from the sale of KVH Media Group Entertainment Limited, net of cash sold 2,378 —

Proceeds from the sale of inertial navigation business 55,000 —

Purchases of marketable securities ( 55,203 ) ( 5 )

6 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 402 ) ( 39 )

Net decrease in cash and cash equivalents ( 981 ) ( 3,355 )

Net increase (decrease) in cash and cash equivalents 3,026 ( 2,698 )

Cash and cash equivalents at beginning of period 11,376 12,578

10 unchanged sentences

KVH Industries, Inc.

(together with its subsidiaries, the Company or KVH) designs, develops, manufactures and markets mobile connectivity products and services for the marine and land markets, and inertial navigation products for both the commercial and defense markets.

KVH's reporting segments are as follows:

• the mobile connectivity segment and

• the inertial navigation segment.

KVH’s mobile connectivity products enable customers to receive voice and Internet services, and live digital television via satellite services in marine vessels, recreational vehicles, buses and automobiles.

KVH sells its mobile connectivity products through an extensive international network of dealers and distributors.

KVH also sells and leases products to service providers and directly to end users.

KVH’s mobile connectivity service sales represent primarily sales earned from satellite voice and Internet airtime services.

KVH provides, for monthly fixed and usage fees, satellite connectivity services, including broadband Internet, data and Voice over Internet Protocol (VoIP) services, to its TracPhone V-series customers.

AgilePlans, a mini-VSAT Broadband service offering, is a monthly subscription model providing global connectivity to commercial maritime customers, including hardware, installation, broadband Internet, VoIP, entertainment and training content and global support for a monthly fee with no minimum commitment.

KVH offers AgilePlans customers a variety of airtime data plans with varying data speeds and fixed data usage levels with overage charges per megabyte, which is similar to the plans that the Company offers to its other customers.

The Company recognizes the monthly subscription fee as service revenue over the service delivery period.

The Company retains ownership of the hardware that it provides to AgilePlans customers, who must return the hardware to KVH if they decide to terminate the service.

(together with its subsidiaries, the Company or KVH) designs, develops, manufactures and markets mobile connectivity products and services for the marine and land markets.

KVH’s satellite-only and hybrid products enable marine customers to receive data, voice, and value-added services via satellite, cellular, and shore-based Wi-Fi networks onboard commercial, leisure, and military/government vessels.

In addition, the Company’s in-motion television terminals permit customers to receive live digital television via regional satellite services in marine vessels, recreational vehicles, buses and automobiles.

KVH sells its products through an extensive international network of dealers and distributors.

KVH also sells and leases products to service providers and end users.

KVH’s service sales represent primarily revenue earned from satellite Internet airtime services.

KVH provides, for monthly fixed and per-usage fees, satellite connectivity encompassing broadband Internet and Voice over Internet Protocol (VoIP) services, to its TracNet-H series and TracPhone V-series customers via KVH’s global high-throughput satellite (HTS) network.

Cellular airtime service increasingly supplements KVH’s satellite-only airtime revenue following the July 2022 launch of the KVH ONE hybrid network and TracNet H-series terminals.

This product and service combination integrates global satellite service with KVH-provided cellular service in more than 150 countries, along with shore-based Wi-Fi access.

AgilePlans, KVH’s connectivity as a service offering, is a monthly subscription model that provides global connectivity to commercial maritime customers.

The subscription includes the choice of satellite-only and hybrid terminals, airtime data service, VoIP, daily news, subsidized shipping and installation, and global support for a monthly fee with no minimum contract commitment.

KVH offers AgilePlans subscribers a variety of airtime data plans with varying data speeds and fixed data usage levels with per megabyte overage charges.

These airtime plans are similar to those the Company offers to customers who elect to purchase or lease a TracNet H-series or TracPhone V-series terminal.

The Company recognizes the monthly AgilePlans subscription fee as service revenue over the service delivery period.

The Company retains ownership of the hardware it provides to AgilePlans customers, who must return the hardware to KVH if they decide to terminate the service.

Because KVH does not sell the hardware under AgilePlans, the Company does not recognize any product revenue when the hardware is deployed to an AgilePlans customer.

1 unchanged sentence

Since the Company is retaining ownership of the hardware, it does not accrue any warranty costs for AgilePlans hardware;

however, any maintenance costs on the hardware are expensed in the period these costs are incurred.

Mobile connectivity service sales also include the distribution of commercially licensed entertainment, including news, sports, music, and movies to commercial and leisure customers in the maritime, hotel, and retail markets through the KVH Media Group.

KVH also earns monthly usage fees from third-party satellite connectivity services, including voice, data and Internet services, provided to its Inmarsat and Iridium customers who choose to activate their subscriptions with KVH.

Mobile connectivity service sales also include engineering services provided under development contracts, sales from product repairs, and extended warranty sales.

KVH's inertial navigation products offer precision fiber optic gyro (FOG)-based systems that enable platform and optical stabilization, navigation, pointing and guidance.

KVH’s inertial navigation products also include tactical navigation systems that provide uninterrupted access to navigation and pointing information in a variety of military vehicles, including tactical trucks and light armored vehicles.

KVH’s inertial navigation products are sold directly to U.S.

and foreign governments and government contractors, as well as through an international network of authorized independent sales representatives.

In addition, KVH's inertial navigation technology is used in numerous commercial products, such as navigation and positioning systems for various applications including autonomous platforms, precision mapping, dynamic surveying, train location control and track geometry measurement systems, industrial robotics and optical stabilization.

KVH’s inertial navigation service sales include product repairs, engineering services provided under development contracts and extended warranty sales.

however, the Company expenses any maintenance costs on the hardware in the period these costs are incurred.

Service sales also include the distribution of commercially licensed entertainment, including news, sports, music, and movies to commercial customers in the maritime, hotel, and retail markets through the KVH Media Group, along with supplemental value-added services.

In addition, KVH earns monthly usage fees from third-party satellite connectivity services, including voice, data and Internet services, provided to its Inmarsat and Iridium customers who choose to activate their subscriptions with KVH.

Service sales also include sales from product repairs and extended warranty sales.

On August 9, 2022, the Company sold its inertial navigation business to EMCORE Corporation for gross proceeds of $ 55,000 , less specified deductions and a holdback of $ 1,000 and subject to a working capital adjustment.

The holdback was released to the Company on August 17, 2022.

On August 9, 2022, the Company also entered into a Transition Services Agreement with EMCORE, pursuant to which the Company agreed to provide certain transition services to support the continued operation of the inertial navigation business for six months following the sale with two extension options of three months each.

The fee is comprised of both fixed monthly fees of approximately $ 100 as well as variable amounts for certain additional services with escalation increases on the fixed and variable rates for each extension option.

The working capital adjustment is expected to be finalized in the fourth quarter of 2022.

The Company does not have any continuing involvement in these operations other than short-term transition services, which are being recorded in other income in continuing operations.

The Company determined that the sale met the requirements for reporting as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20.

Please see Note 18 for the discontinued operations disclosures.

(2) Summary of Significant Accounting Policies

4 unchanged sentences

All significant intercompany accounts and transactions have been eliminated in consolidation.

The 2021 consolidated interim financial statements reflect the sale of the inertial navigation business as discontinued operations.

See Notes 1 and 18 for further information on the sale of the inertial navigation business.

The consolidated interim financial statements have not been audited by the Company’s independent registered public accounting firm and include all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations, and cash flows for the periods presented.

These consolidated interim financial statements do not include all disclosures associated with annual financial statements and accordingly should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2021 filed on March 11, 2022 with the Securities and Exchange Commission.

The results for the three and six months ended June 30, 2022 are not necessarily indicative of operating results for the remainder of the year.

The results for the three and nine months ended September 30, 2022 are not necessarily indicative of operating results for the remainder of the year.

Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions

4 unchanged sentences

The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances.

Management Transition and Restructuring

On March 7, 2022, the Company announced that its President and Chief Executive Officer, Martin Kits van Heyningen, was retiring from his executive and Board roles after more than 40 years of service and assuming a consulting position with the Company.

1 unchanged sentence

Subsequently, on June 15, 2022, he was appointed as its President and Chief Executive Officer and as a Class II member of the Board of Directors.

As of March 31, 2022, the Company accrued approximately $ 539 in consulting fees associated with a maximum of 50 hours of transition services through March 2023, which will be paid to Mr.

Kits van Heyningen over the next 12 months.

Approximately $ 405 is accrued as of June 30, 2022.

As of March 31, 2022, the Company accrued approximately $ 539 in consulting fees associated with a maximum of 50 hours of transition services through March 2023, which is being paid to Mr.

Kits van Heyningen over the 12 months following his retirement.

Approximately $ 269 is accrued as of September 30, 2022.

In addition, the Company agreed to a separation payment of $ 201 , which was inclusive of any amount which he may have otherwise earned under the executive bonus plan for 2021, which was paid in April 2022.

5 unchanged sentences

The Company reduced its workforce by approximately 10 % and began incurring reduced expenses from these actions beginning in the second quarter of 2022.

For the three months ended June 30, 2022, the Company incurred $ 426 in severance payments and other employee benefit costs for employees which had a severance date of June 30, 2022 and December 31, 2022 (as amended), of which $ 64 was paid as of June 30, 2022.

For the six months ended June 30, 2022, the Company incurred $ 1,818 in severance and health insurance costs and $ 327 in legal and advisory fees.

The combined expense of $ 2,145 was included in the financial statement line items of the accompanying consolidated statements of operations as follows:

For the three months ended September 30, 2022, the Company incurred $ 83 in severance payments and other employee benefit costs for employees who had a severance date of December 31, 2022, none of which was paid as of September 30, 2022.

For the nine months ended September 30, 2022, the Company incurred $ 1,901 in severance and health insurance costs and $ 327 in legal and advisory fees.

The combined expense of $ 2,228 was included in the

financial statement line items of the accompanying consolidated statements of operations as follows:

costs of product sales of $ 17 , costs of service sales of $ 55 , research and development of $ 392 , sales, marketing and support of $ 977 , and general and administrative expenses of $ 787 .

2 unchanged sentences

Please see Note 5 for further discussion.

On April 29, 2022, KVH Media Group Limited, the Company's wholly owned subsidiary, sold its subsidiary KVH Media Group Entertainment Limited, which was in the KVH Media Group reporting unit of the Company's mobile connectivity segment, for net cash proceeds of $ 2,378 .

This transaction did not meet the criteria as a discontinued operation under ASC 205-20.

For the three months ended September 30, 2022, we restructured our foreign operations by closing our India and Cyprus offices and our Denmark warehouse to reduce costs.

Approximately $ 370 of severance payments, other employee benefits, and legal and advisory fees were incurred for the three and nine months ended September 30, 2022.

We expect to incur an additional $ 100 in severance payments and other employee benefit costs through December 31, 2022 arising from this restructuring.

Dispositions;

Termination of Credit Facility

On April 29, 2022, KVH Media Group Limited, the Company's wholly owned subsidiary, sold its subsidiary KVH Media Group Entertainment Limited for net cash proceeds of $ 2,378 .

This transaction did not meet the criteria for reporting as discontinued operations under ASC 205-20.

The Company recorded a gain on the sale of approximately $ 630 , which is recorded in other income, net in the accompanying consolidated statements of operations.

See Note 14 for the reduction of goodwill and intangibles associated with the KVH Media Group reporting unit as it relates to the sale of this subsidiary.

On August 9, 2022, the Company sold its inertial navigation business to EMCORE Corporation.

Please see Notes 1 and 18 for further discussion.

On August 9, 2022, the Company also terminated its senior secured credit facility agreement (the 2018 Credit Agreement) and the related security and pledge agreements with Bank of America, N.A., as Administrative Agent.

At the time of termination, no borrowings were outstanding under the 2018 Credit Agreement.

With the termination of this agreement, all associated liens were released.

Executive Employment Agreements

In May 2022, the Company entered into executive employment agreements with each of Brent C.

6 unchanged sentences

If in connection with such a termination the executive becomes entitled to receive the change in control severance payments and benefits, the executive will also become entitled to receive the full retention bonus, and the Retention Date will be the later of the date of such change in control or such termination of employment.

For the three months ended June 30, 2022, the Company accrued approximately $ 263 for the executive employment agreements.

On October 11, 2022, the Company entered into an amendment to the employment agreement with Mr.

Bruun that, among other things, increased his annual base salary to $ 448 per year, retroactive to July 1, 2022, increased his target annual incentive compensation for the second half of 2022 to 80 % of his base salary (without changing his target annual incentive compensation for the first half of 2022), extended his Retention Date from December 31, 2022 to December 31, 2023, which effectively extended the period during which Mr.

Bruun must remain employed by the Company in order to earn his retention bonus, and modified the amount of the retention bonus from 75 % of his base salary in effect on May 2, 2022 to 75 % of the highest base salary in effect for Mr.

Bruun on or before the date he becomes entitled to receive the retention bonus or the “Partial Retention Bonus” (as defined in the employment agreement).

The amendment did not modify the terms of the employment agreement relating to acceleration of vesting of certain equity awards if Mr.

Bruun remains employed by the Company through December 31, 2022.

As of September 30, 2022, the Company accrued approximately $ 649 for the executive employment agreements.

In addition to the amendment to Mr.

Bruun’s employment agreement, the Compensation Committee also granted Mr.

Bruun a restricted stock award and a non-statutory stock option, which together had an aggregate grant date fair value of

approximately $ 100,000 .

The restricted stock award and the non-statutory stock option have terms that are materially consistent with the previously disclosed terms of similar grants to the Company’s executive officers.

(3) Accounting Standards Issued and Not Yet Adopted

47 unchanged sentences

(4) Marketable Securities

Marketable securities as of June 30, 2022 and December 31, 2021 consisted of the following:

June 30, 2022 Amortized

Marketable securities as of September 30, 2022 and December 31, 2021 consisted of the following:

September 30, 2022 Amortized

Money market mutual funds $ 50,265 $ — $ — $ 50,265

United States treasuries 4,906 — 4,906

Total marketable securities designated as available-for-sale $ 55,171 $ — $ — $ 55,171

2 unchanged sentences

Total marketable securities designated as available-for-sale $ 13,147 $ — $ — $ 13,147

Interest income from marketable securities was $ 9 and $ 2 during the three months ended June 30, 2022 and 2021, respectively, and $ 10 and $ 4 during the six months ended June 30, 2022 and 2021, respectively.

Interest income from marketable securities was $ 193 and $ 1 during the three months ended September 30, 2022 and 2021, respectively, and $ 203 and $ 5 during the nine months ended September 30, 2022 and 2021, respectively.

(5) Stockholder's Equity

1 unchanged sentence

The Company recognizes stock-based compensation in accordance with the provisions of ASC Topic 718, Compensation-Stock Compensation .

Stock-based compensation expense was $ 701 and $ 1,033 , excluding $ 4 and $ 22 of compensation charges related to our Amended and Restated 1996 Employee Stock Purchase Plan, or the ESPP, for the three months ended June 30, 2022 and 2021, respectively, and $ 1,560 and $ 1,957 , excluding $ 26 and $ 30 of compensation charges related to ESPP, for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, there was $ 3,286 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.79 years.

As of June 30, 2022, there was $ 3,499 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.85 years.

On June 8, 2022, at the Company's 2022 Annual Meeting of Stockholders, the stockholders of the Company approved an amendment and restatement of the Company’s current equity compensation plan to increase the number of shares of common stock reserved for issuance under the plan by 1,280 shares, from 4,800 shares to 6,080 shares (excluding rollover shares).

Stock-based compensation expense was $ 1,103 and $ 1,031 , excluding $ 6 and $ 11 of compensation charges related to our Amended and Restated 1996 Employee Stock Purchase Plan, or the ESPP, for the three months ended September 30, 2022 and 2021, respectively, and $ 2,663 and $ 2,988 , excluding $ 32 and $ 41 of compensation charges related to ESPP, for the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, there was $ 2,887 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.61 years.

As of September 30, 2022, there was $ 3,129 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.44 years.

Stock Options

During the three months ended June 30, 2022, the Company issued 18 shares of common stock upon the exercise of stock options and received $ 149 as payment for the exercise price.

During the three months ended September 30, 2022, the Company issued 53 shares of common stock upon the exercise of stock options and received $ 464 as payment for the exercise price.

No shares were surrendered to the Company to satisfy minimum tax withholding obligations.

Additionally, during the three months ended June 30, 2022, 398 stock options were granted and 159 stock options expired, were canceled or were forfeited.

During the six months ended June 30, 2022, upon the net exercise of 248 stock options, the Company issued 41 shares of common stock and received $ 149 as payment for the exercise price, 14 shares were surrendered to the Company to satisfy minimum tax withholding obligations, and 193 shares were cancelled.

Additionally, during the six months ended June 30, 2022, 398 stock options were granted and 329 stock options expired, were canceled or were forfeited.

During the six months ended June 30, 2021, 496 stock options were granted.

Additionally, during the three months ended September 30, 2022, no stock options were granted and 87 stock options expired, were canceled or were forfeited.

During the nine months ended September 30, 2022, upon the net exercise of 301 stock options, the Company issued 94 shares of common stock and received $ 613 as payment for the exercise price, 14 shares were surrendered to the Company to satisfy minimum tax withholding obligations, and 193 shares were cancelled.

Additionally, during the nine months ended September 30, 2022, 398 stock options were granted and 416 stock options expired, were canceled or were forfeited.

During the nine months ended September 30, 2021, 496 stock options were granted.

The Company has estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model.

The weighted average assumptions utilized to determine the fair value of options granted during the six months ended June 30, 2022 are as follows:

Six Months Ended June 30,

The weighted average assumptions utilized to determine the fair value of options granted during the nine months ended September 30, 2022 are as follows:

Nine Months Ended September 30,

Risk-free interest rate 2.97 % 0.92 %

2 unchanged sentences

Dividend yield 0 % 0 %

During the six months ended June 30, 2022, there were accelerated vesting and extended exercise term modifications of stock options as it related to the retirement of Mr.

During the nine months ended September 30, 2022, there were accelerated vesting and extended exercise term modifications of stock options as it related to the retirement of Mr.

Kits van Heyningen, which resulted in a reduction of approximately $ 85 in compensation cost.

During the three and six months ended June 30, 2022, there were accelerated vesting term modifications of stock options for employees terminated as part of the Company's restructuring, which resulted in a reduction of approximately $ 81 in compensation cost.

During the three months ended June 30, 2022, there were accelerated vesting term modifications of stock options for executive employment agreements, which resulted in an acceleration of compensation expense of approximately $ 48 .

As of June 30, 2022, there were 1,948 options outstanding with a weighted average exercise price of $ 9.83 per share and 858 options exercisable with a weighted average exercise price of $ 10.39 per share.

During the three and nine months ended September 30, 2022, there were accelerated vesting term modifications of stock options for employees terminated as part of the Company's restructuring, which resulted in a reduction of approximately $ 28 for the three months ended September 30, 2022 and approximately $ 109 for the nine months ended September 30, 2022 in compensation cost.

During the three and nine months ended September 30, 2022, there were accelerated vesting term modifications of stock options for executive employment agreements, which resulted in an acceleration of compensation expense of approximately $ 72 for the three months ended September 30, 2022 and approximately $ 120 for the nine months ended September 30, 2022.

During the three and nine months ended September 30, 2022, there were accelerated vesting term modifications of stock options for employees transitioned as part of the sale of the Company's inertial navigation business, which resulted in an acceleration of compensation expense of approximately $ 81 , included in discontinued operations.

As of September 30, 2022, there were 1,808 options outstanding with a weighted average exercise price of $ 9.82 per share and 844 options exercisable with a weighted average exercise price of $ 10.13 per share.

Restricted Stock

During the three months ended June 30, 2022, 183 shares of restricted stock were granted with a weighted average grant date fair value of $ 8.29 per share and 26 shares of restricted stock were forfeited.

Additionally, during the three months ended June 30, 2022, 79 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

During the six months ended June 30, 2022, 183 shares of restricted stock were granted with a weighted average grant date fair value of $ 8.29 per share and 86 shares of restricted stock were forfeited.

Additionally, during the six months ended June 30, 2022, 147 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

As of June 30, 2022, there were 440 shares of restricted stock outstanding that were still subject to service-based vesting conditions.

During the six months ended June 30, 2022, there were accelerated vesting term modifications of restricted stock as it related to the retirement of Mr.

During the three months ended September 30, 2022, 60 shares of restricted stock were granted with a weighted average grant date fair value of $ 9.14 per share and 10 shares of restricted stock were forfeited.

Additionally, during the three months ended September 30, 2022, 102 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

During the nine months ended September 30, 2022, 243 shares of restricted stock were granted with a weighted average grant date fair value of $ 8.50 per share and 96 shares of restricted stock were forfeited.

Additionally, during the nine months ended September 30, 2022, 249 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

As of September 30, 2022, there were 388 shares of restricted stock outstanding that were still subject to service-based vesting conditions.

During the nine months ended September 30, 2022, there were accelerated vesting term modifications of restricted stock as it related to the retirement of Mr.

Kits van Heyningen, which resulted in an acceleration in compensation expense of approximately $ 186 .

During the three and six months ended June 30, 2022, there were accelerated vesting term modifications of restricted stock for employees terminated as part of the Company's restructuring, which resulted in an acceleration in compensation expense of approximately $ 57 for the three months ended June 30, 2022 and approximately $ 125 for the six months ended June 30, 2022.

During the three months ended June 30, 2022, there were accelerated vesting term modifications of restricted stock for executive employment agreements, which resulted in an acceleration in compensation expense of approximately $ 66 .

As of June 30, 2022, the Company had no unvested outstanding options and no outstanding shares of restricted stock that were subject to performance-based or market-based vesting conditions.

During the three and nine months ended September 30, 2022, there were accelerated vesting term modifications of restricted stock for employees terminated as part of the Company's restructuring, which resulted in an acceleration in compensation expense of approximately $ 31 for the three months ended September 30, 2022 and approximately $ 156 for the nine months ended September 30, 2022.

During the three and nine months ended September 30, 2022, there were accelerated vesting term modifications of restricted stock for executive employment agreements, which resulted in an acceleration in compensation expense of approximately $ 99 for the three months ended September 30, 2022 and approximately $ 167 for the nine months ended September 30, 2022.

During the three and nine months ended September 30, 2022, there were accelerated vesting term modifications of restricted stock for employees transitioned as part of the sale of the Company's inertial navigation business, which resulted in an acceleration in compensation expense of approximately $ 374 , included in discontinued operations.

As of September 30, 2022, the Company had no unvested outstanding options and no outstanding shares of restricted stock that were subject to performance-based or market-based vesting conditions.

(b) Employee Stock Purchase Plan

The Company's ESPP affords eligible employees the right to purchase common stock, via payroll deductions, through various offering periods at a purchase price equal to 85 % of the fair market value of the common stock on the first or last day of the offering period, whichever is lower.

During the three and six months ended June 30, 2022, 0 and 22 shares were issued under the ESPP plan, respectively.

During the three and six months ended June 30, 2021, no shares were issued under the ESPP plan.

The Company recorded compensation charges related to the ESPP of $ 4 and $ 22 for the three months ended June 30, 2022 and 2021, respectively, and $ 26 and $ 30 for the six months ended June 30, 2022 and 2021, respectively.

During the three and nine months ended September 30, 2022, 0 and 22 shares were issued under the ESPP plan, respectively.

During the three and nine months ended September 30, 2021, 26 shares were issued under the ESPP plan.

The Company recorded compensation charges related to the ESPP of $ 6 and $ 11 for the three months ended September 30, 2022 and 2021, respectively, and $ 32 and $ 41 for the nine months ended September 30, 2022 and 2021, respectively.

The following table presents stock-based compensation expense, including under the ESPP, in the Company's consolidated statements of operations for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30, Six Months Ended June 30,

The following table presents stock-based compensation expense, including under the ESPP, in the Company's consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

8 unchanged sentences

The components of the Company’s comprehensive loss and the effect on earnings for the periods presented are detailed in the accompanying consolidated statements of comprehensive loss.

The balances for the three months ended June 30, 2022 and 2021 are as follows:

The balances for the three months ended September 30, 2022 and 2021 are as follows:

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

Balance, March 31, 2022 $ ( 3,602 ) $ ( 3,602 )

Balance, June 30, 2022 $ ( 4,021 ) $ ( 4,021 )

Other comprehensive loss ( 646 ) ( 646 )

Net other comprehensive loss ( 646 ) ( 646 )

Balance, June 30, 2022 $ ( 4,021 ) $ ( 4,021 )

Balance, September 30, 2022 $ ( 4,667 ) $ ( 4,667 )

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

Balance, March 31, 2021 $ ( 3,009 ) $ ( 3,009 )

Other comprehensive income 41 41

Net other comprehensive income 41 41

Balance, June 30, 2021 $ ( 2,968 ) $ ( 2,968 )

The balances for the six months ended June 30, 2022 and 2021 are as follows:

Other comprehensive loss ( 370 ) ( 370 )

Net other comprehensive loss ( 370 ) ( 370 )

Balance, September 30, 2021 $ ( 3,338 ) $ ( 3,338 )

The balances for the nine months ended September 30, 2022 and 2021 are as follows:

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

2 unchanged sentences

Net other comprehensive loss ( 1,258 ) ( 1,258 )

Balance, June 30, 2022 $ ( 4,021 ) $ ( 4,021 )

Balance, September 30, 2022 $ ( 4,667 ) $ ( 4,667 )

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

Balance, December 31, 2020 $ ( 3,232 ) $ ( 3,232 )

Other comprehensive income 264 264

Net other comprehensive income 264 264

Balance, June 30, 2021 $ ( 2,968 ) $ ( 2,968 )

(6) Net Loss per Common Share

Basic net loss per share is calculated based on the weighted average number of common shares outstanding during the period.

Other comprehensive loss ( 106 ) ( 106 )

Net other comprehensive loss ( 106 ) ( 106 )

Balance, September 30, 2021 $ ( 3,338 ) $ ( 3,338 )

(6) Net (Loss) Income from Continuing Operations per Common Share

Basic net (loss) income per share is calculated based on the weighted average number of common shares outstanding during the period.

Diluted net income per share incorporates the dilutive effect of common stock equivalent options, warrants and other convertible securities, if any, as determined with the treasury stock accounting method.

For the three and six months ended June 30, 2022, since there was a net loss, the Company excluded all 2,035 and 1,802 , respectively, in outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these securities would have reduced the net loss per share.

For the three and six months ended June 30, 2021, since there was a net loss, the Company excluded all 986 and 763 , respectively, in outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these securities would have reduced the net loss per share.

For the three and nine months ended September 30, 2022, since there was a net loss from continuing operations, the Company excluded all 1,572 and 1,763 , respectively, in outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these securities would have reduced the net loss per share.

For the nine months ended September 30, 2021, since there was a net loss from continuing operations, the Company excluded all 756 in outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these securities would have reduced the net loss per share.

A reconciliation of the basic and diluted weighted average common shares outstanding is as follows:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

4 unchanged sentences

Inventories, net are stated at the lower of cost and net realizable value using the first-in first-out costing method.

Inventories as of June 30, 2022 and December 31, 2021 include the costs of material, labor, and factory overhead.

Inventories as of September 30, 2022 and December 31, 2021 include the costs of material, labor, and factory overhead.

Components of inventories consist of the following:

September 30,

2022 December 31,

3 unchanged sentences

$ 23,878 $ 15,833

During the second quarter of 2022, the Company recorded an inventory reserve of $ 1,572 relating to a specialized component in its TACNAV product line.

This component was originally purchased in anticipation of an order from a long-standing customer;

however, that order never materialized.

The Company has had a number of potential opportunities for the

sale of this component, but at this time the remaining opportunities appear limited and given the age of the component the Company determined to book a reserve for the component’s full value.

(8) Property and Equipment

Property and equipment, net, as of June 30, 2022 and December 31, 2021 consist of the following:

Property and equipment, net, as of September 30, 2022 and December 31, 2021 consist of the following:

September 30,

2022 December 31,

9 unchanged sentences

$ 52,930 $ 52,945

Depreciation expense was $ 3,466 and $ 3,333 for the three months ended June 30, 2022 and 2021, respectively, and $ 6,839 and $ 6,407 for the six months ended June 30, 2022 and 2021, respectively.

Depreciation expense was $ 3,239 and $ 3,179 for the three months ended September 30, 2022 and 2021, respectively, and $ 9,542 and $ 8,918 for the nine months ended September 30, 2022 and 2021, respectively.

Certain revenue-generating hardware assets are utilized by the Company in the delivery of the Company's airtime services, media and other content.

5 unchanged sentences

Warranty and related costs are reflected within sales, marketing and support in the accompanying consolidated statements of operations.

As of June 30, 2022 and December 31, 2021, the Company had accrued product warranty costs of $ 1,398 and $ 1,179 , respectively.

As of September 30, 2022 and December 31, 2021, the Company had accrued product warranty costs of $ 1,284 and $ 1,084 , respectively.

The following table summarizes product warranty activity during 2022 and 2021:

Six Months Ended

Nine Months Ended

September 30,

Beginning balance $ 1,084 $ 1,725

9 unchanged sentences

On September 24, 2021, the Company received notification from the Lender that, on September 19, 2021, the SBA had determined that the PPP Loan forgiveness application was approved, and the PPP Loan, including all accrued interest thereon, was paid in full by the SBA.

The forgiveness of the PPP Loan is recognized in other income, net in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2021.

Line of Credit

Effective October 30, 2018, the Company entered into an amended and restated three-year senior secured credit facility agreement (the 2018 Credit Agreement) with Bank of America, N.A., as Administrative Agent, and the lenders named from time to time as parties thereto (the 2018 Lenders), which included a reducing revolving credit facility (the 2018 Revolver) of up to $ 20,000 initially and reducing to $ 15,000 on December 31, 2019, to be used for general corporate purposes.

The Company's obligations under the 2018 Credit Agreement are secured by substantially all of its assets and the pledge of equity interests in certain of its subsidiaries.

As of June 30, 2022, no amounts were outstanding under the 2018 Revolver.

Borrowings under the 2018 Revolver are subject to the satisfaction of various conditions precedent at the time of each borrowing, including the continued accuracy of the Company’s representations and warranties and the absence of any default under the 2018 Credit Agreement.

As of June 30, 2022, the full balance of the $ 15,000 facility was available for borrowing.

The 2018 Credit Agreement contained two financial covenants, a maximum Consolidated Leverage Ratio and a minimum Consolidated Fixed Charge Coverage Ratio, each as defined in the 2018 Credit Agreement.

The Consolidated Leverage Ratio could not exceed 2.50 :1.00 through December 31, 2020 and may not exceed 2.00 :1.00 after December 31, 2020.

The Consolidated Fixed Charge Coverage Ratio may not be less than 1.25 :1.00.

On July 30, 2020, the Company amended the 2018 Credit Agreement to reflect the incurrence of the PPP Loan.

Under the amended facility, the principal and interest on the PPP Loan were not included in the maximum Consolidated Leverage Ratio or the minimum Consolidated Fixed Charge Coverage Ratio calculations except as to any portion of the PPP Loan that is not ultimately forgiven.

In September 2021, the PPP Loan was forgiven in full.

On October 29, 2021, the Company amended the 2018 Credit Agreement to maintain the $ 15,000 2018 Revolver, extend the maturity date of the 2018 Revolver to October 28, 2022, eliminate the Consolidated Fixed Charge Coverage Ratio financial covenant, add a minimum trailing four-quarter Consolidated Adjusted EBITDA financial covenant of $ 3,000 , modify the definition of Consolidated Adjusted EBITDA, modify the interest rate margins and certain lender fees, and transition the interest rate provisions based on LIBOR to the Bloomberg Short Term Bank Yield Index.

In addition, Bank of America became the sole lender under the 2018 Credit Agreement.

The Company was in compliance with these financial covenants as of June 30, 2022.

The 2018 Credit Agreement imposes certain other affirmative and negative covenants, including without limitation covenants with respect to the payment of taxes and other obligations, compliance with laws, performance of material contracts, creation of liens, incurrence of indebtedness, investments, dispositions, fundamental changes, restricted payments, changes in the nature of the Company’s business, transactions with affiliates, corporate and accounting changes, and sale and leaseback arrangements.

On August 9, 2022, the Company terminated the 2018 Credit Agreement and the related security and pledge agreements with Bank of America, N.A., as Administrative Agent.

At the time of termination, no borrowings were outstanding under the 2018 Credit Agreement.

With the termination of this agreement, all associated liens were released.

(11) Segment Reporting

The Company's reportable segments are mobile connectivity and inertial navigation.

The financial results of each segment are based on revenues from external customers, costs of revenue and operating expenses that are directly attributable to the segment and an allocation of costs from shared functions.

These shared functions include, but are not limited to, facilities, human resources, information technology, and engineering.

Allocations are made based on management’s judgment of the most relevant factors, such as head count, number of customer sites, or other operational data that contribute to the shared costs.

Certain corporate-level costs have not been allocated as they are not directly attributable to either segment.

These costs primarily consist of broad corporate functions, including executive, legal, finance, and costs associated with corporate actions.

Segment-level asset information has not been provided as such information is not reviewed by the chief operating decision-maker for purposes of assessing segment performance and allocating resources.

There are no significant inter-segment sales or transactions.

The Company's performance is impacted by the levels of activity in the marine and land mobile markets and defense sectors, among others.

The Company operates as one reportable segment as a result of the sale of its inertial navigation business on August 9, 2022.

The Company's performance is impacted by the levels of activity in the marine and land mobile markets, among others.

Performance in any particular period could be impacted by the timing of sales to certain large customers.

The mobile connectivity segment primarily manufactures and distributes a comprehensive family of mobile satellite antenna products and services that provide access to television, the Internet and voice services while on the move.

Product sales within the mobile connectivity segment accounted for 16 % and 19 % of the Company's consolidated net sales for the three months ended June 30, 2022 and 2021, respectively, and 16 % and 17 % of the Company's consolidated net sales for the six months ended June 30, 2022 and 2021, respectively.

Service sales of mini-VSAT Broadband airtime service accounted for 62 % and 53 % of the Company's consolidated net sales for the three months ended June 30, 2022 and 2021, respectively, and 60 % and 52 % of the Company's consolidated net sales for the six months ended June 30, 2022 and 2021, respectively.

The inertial navigation segment manufactures and distributes a portfolio of digital compass and fiber optic gyro (FOG)-based systems that address the rigorous requirements of military and commercial customers and provide reliable, easy-to-use and continuously available navigation and pointing data.

The principal product categories in this segment include the FOG-based inertial measurement units (IMUs) for precision guidance, FOGs for tactical navigation as well as pointing and stabilization systems, and digital compasses that provide accurate heading information for demanding applications, security, automation and access control equipment and systems.

Sales of FOG-based guidance and navigation systems within the inertial navigation segment accounted for 15 % and 17 % of the Company's consolidated net sales for the three months ended June 30, 2022 and 2021, respectively, and 16 % of the Company's consolidated net sales for both the six months ended June 30, 2022 and 2021.

The Company primarily manufactures and distributes a comprehensive family of mobile satellite antenna products and services that provide access to television, the Internet and voice services while on the move.

Product sales accounted for 19 % and 20 % of the Company's consolidated net sales for the three months ended September 30, 2022 and 2021, respectively, and 19 % and 22 % of the Company's consolidated net sales for the nine months ended September 30, 2022 and 2021, respectively.

Service sales of mini-VSAT Broadband airtime service accounted for 76 % and 72 % of the Company's consolidated net sales for the three months ended September 30, 2022 and 2021, respectively, and 74 % and 70 % of the Company's consolidated net sales for the nine months ended September 30, 2022 and 2021, respectively.

The balance of service sales are comprised of distribution of commercially licensed entertainment, product repairs, and extended warranty sales.

No other single product class accounts for 10% or more of the Company's consolidated net sales.

The Company operates in a number of major geographic areas, including internationally.

Revenues from international locations primarily include Canada, European Union countries, and other European countries, as well as countries in Africa, Asia/Pacific, the Middle East, and India.

Revenues are based upon customer location and internationally represented 63 % and 60 % of consolidated net sales for the three months ended June 30, 2022 and 2021, respectively, and 63 % and 61 % of consolidated net sales for the six months ended June 30, 2022 and 2021, respectively.

Sales to Singapore customers represented 13 % and 10 % of the Company's consolidated net sales for the three months ended June 30, 2022 and 2021, respectively.

No other individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended June 30, 2022 and 2021.

Sales to Singapore customers represented 13 % and 10 % of the Company's consolidated net sales for the six months ended June 30, 2022 and 2021, respectively.

No other individual foreign country represented 10% or more of the Company's consolidated net sales for the six months ended June 30, 2022 and 2021.

As of June 30, 2022 and December 31, 2021, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets.

Net sales and operating income (loss) for the Company's reporting segments and the Company's loss before income tax expense (benefit) for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Mobile connectivity $ 34,553 $ 33,755 $ 67,704 $ 64,262

Inertial navigation 7,284 9,608 15,227 21,393

Consolidated net sales $ 41,837 $ 43,363 $ 82,931 $ 85,655

Operating income (loss):

Mobile connectivity $ 4,525 $ 580 $ 5,830 $ 183

Inertial navigation ( 1,289 ) 645 ( 1,749 ) 2,735

Subtotal 3,236 1,225 4,081 2,918

Unallocated, net ( 5,568 ) ( 7,027 ) ( 11,121 ) ( 12,327 )

Loss from operations ( 2,332 ) ( 5,802 ) ( 7,040 ) ( 9,409 )

Net interest and other income (expense), net 1,123 207 1,468 ( 367 )

Loss before income tax expense (benefit) $ ( 1,209 ) $ ( 5,595 ) $ ( 5,572 ) $ ( 9,776 )

Depreciation expense and amortization expense for the Company's reporting segments for the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended Six Months Ended

June 30, June 30,

2022 2021 2022 2021

Depreciation expense:

Mobile connectivity $ 3,003 $ 2,779 $ 5,895 $ 5,300

Inertial navigation 296 384 604 768

Unallocated 167 170 340 339

Total consolidated depreciation expense $ 3,466 $ 3,333 $ 6,839 $ 6,407

Amortization expense:

Mobile connectivity $ 125 $ 280 $ 319 $ 556

Inertial navigation — — — —

Unallocated — — — —

Total consolidated amortization expense $ 125 $ 280 $ 319 $ 556

Revenues from international locations primarily include Singapore, Canada, European Union countries, and other European countries, as well as countries in Africa, Asia/Pacific, the Middle East, and India.

Revenues are based upon customer location and internationally represented 62 % and 58 % of consolidated net sales for the three months ended September 30, 2022 and 2021, respectively, and 61 % and 58 % of consolidated net sales for the nine months ended September 30, 2022 and 2021, respectively.

Sales to Singapore customers represented 17 % and 14 % of the Company's consolidated net sales for the three months ended September 30, 2022 and 2021, respectively.

No other individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended September 30, 2022 and 2021.

Sales to Singapore customers represented 16 % and 13 % of the Company's consolidated net sales for the nine months ended September 30, 2022 and 2021, respectively.

No other individual foreign country represented 10% or more of the Company's consolidated net sales for the nine months ended September 30, 2022 and 2021.

As of September 30, 2022 and December 31, 2021, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets.

(12) Legal Matters

7 unchanged sentences

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

The Company’s Level 1 assets are investments in money market mutual funds.

The Company’s Level 1 assets are investments in money market mutual funds and United States treasuries.

Quoted prices for similar assets or liabilities in active markets;

4 unchanged sentences

Assets and liabilities measured at fair value are based on the valuation techniques identified in the table below.

The following tables present financial assets and liabilities at June 30, 2022 and December 31, 2021 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:

June 30, 2022 Total Level 1 Level 2 Level 3 Valuation

The following tables present financial assets and liabilities at September 30, 2022 and December 31, 2021 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:

September 30, 2022 Total Level 1 Level 2 Level 3 Valuation

Money market mutual funds $ 50,265 $ 50,265 $ — $ — (a)

United States treasuries 4,906 4,906 — — (a)

December 31, 2021 Total Level 1 Level 2 Level 3 Valuation

6 unchanged sentences

The Company's non-financial assets, such as goodwill, intangible assets, and other long-lived assets resulting from business combinations, are measured at fair value using income approach valuation methodologies at the date of acquisition and subsequently re-measured if indications of impairment exist.

There was no impairment of the Company's non-financial assets noted as of June 30, 2022.

There was no impairment of the Company's non-financial assets noted as of September 30, 2022.

The Company does not have any liabilities that are recorded at fair value on a non-recurring basis.

(14) Goodwill and Intangible Assets

The following table sets forth the changes in the carrying amount of goodwill for the six months ended June 30, 2022:

The following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2022:

Balance at December 31, 2021

1 unchanged sentence

Foreign currency translation adjustment ( 295 )

Balance at June 30, 2022

Balance at September 30, 2022

Intangible Assets

The changes in the carrying amount of intangible assets during the six months ended June 30, 2022 are as follows:

The changes in the carrying amount of intangible assets during the nine months ended September 30, 2022 are as follows:

Balance at December 31, 2021

3 unchanged sentences

Foreign currency translation adjustment ( 101 )

Balance at June 30, 2022

Balance at September 30, 2022

Intangible assets arose from the acquisition of KVH Media Group (acquired as Headland Media Limited) in May 2013.

6 unchanged sentences

Under the asset purchase agreement, the purchase price includes a component of contingent consideration under which the Company is required to pay a percentage of recurring revenues received from the acquired subscriber relationships through 2026 up to a maximum annual payment of $ 114 .

As of June 30, 2022, the carrying value of the intangible assets acquired in the asset acquisition was $ 436 .

As of September 30, 2022, the carrying value of the intangible assets acquired in the asset acquisition was $ 450 .

As the acquisition did not represent a business combination, the contingent consideration arrangement is recognized only when the contingency is resolved and the consideration is paid or becomes payable.

The amounts payable under the contingent consideration arrangement, if any, will be included in the measurement of the cost of the acquired subscriber relationships.

An additional $ 28 and $ 32 of consideration was earned under the contingent consideration arrangement during the six months ended June 30, 2022 and 2021, respectively.

An additional $ 42 and $ 47 of consideration was earned under the contingent consideration arrangement during the nine months ended September 30, 2022 and 2021, respectively.

Acquired intangible assets are subject to amortization.

The following table summarizes acquired intangible assets at June 30, 2022 and December 31, 2021, respectively:

The following table summarizes acquired intangible assets at September 30, 2022 and December 31, 2021, respectively:

Gross Carrying Amount Accumulated Amortization Net Carrying Value

June 30, 2022

September 30, 2022

Subscriber relationships $ 7,624 $ 7,157 $ 467

11 unchanged sentences

$ 11,231 $ 9,944 $ 1,287

Amortization expense related to intangible assets was $ 125 and $ 280 for the three months ended June 30, 2022, respectively, and $ 319 and $ 556 for the six months ended June 30, 2022 and 2021, respectively.

Amortization expense related to intangible assets was $ 90 and $ 277 for the three months ended September 30, 2022, respectively, and $ 409 and $ 833 for the nine months ended September 30, 2022 and 2021, respectively.

Amortization expense was categorized as general and administrative expense.

As of June 30, 2022, the total weighted average remaining useful lives of the definite-lived intangible assets was 3.3 years.

Estimated future amortization expense remaining at June 30, 2022 for intangible assets acquired was as follows:

As of September 30, 2022, the total weighted average remaining useful lives of the definite-lived intangible assets was 3.2 years.

Estimated future amortization expense remaining at September 30, 2022 for intangible assets acquired was as follows:

Years ending December 31,

Remainder of 2022 $ 87

Thereafter 12

Total future amortization expense $ 467

1 unchanged sentence

Recoverability of assets to be held and used is measured by comparing the carrying amount of an asset, or asset group, to the future undiscounted cash flows expected to be generated by the asset, or asset group.

There were no events or changes in circumstances during the six months ended June 30, 2022 which indicated that an assessment of the impairment of goodwill and intangible assets was required.

There were no events or changes in circumstances during the nine months ended September 30, 2022 which indicated that an assessment of the impairment of goodwill and intangible assets was required.

(15) Revenue from Contracts with Customers (ASC 606)

1 unchanged sentence

The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these products and services.

Disaggregation of Revenue

The following table summarizes net sales from contracts with customers for the three and six months ended June 30, 2022 and 2021:

Three Months Ended Six Months Ended

June 30, June 30,

Disaggregation of Revenue for Continuing Operations

The following table summarizes net sales from contracts with customers for the three and nine months ended September 30, 2022 and 2021:

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Mobile connectivity product, transferred at point in time $ 5,976 $ 7,292 $ 12,083 $ 13,380

Mobile connectivity product, transferred over time 644 754 1,100 1,557

Mobile connectivity service 27,933 25,709 54,521 49,325

Inertial navigation product 6,959 9,223 14,766 20,764

Inertial navigation service 325 385 461 629

Product, transferred at point in time $ 5,974 $ 6,361 $ 18,057 $ 19,741

Product, transferred over time 651 490 1,751 2,047

Service 28,544 27,537 83,065 76,862

Total net sales $ 35,169 $ 34,388 $ 102,873 $ 98,650

Revenue recognized during the three months ended June 30, 2022 and 2021 from amounts included in contract liabilities at the beginning of the period was $ 621 and $ 696 , respectively.

Revenue recognized during the six months ended June 30, 2022 and 2021 from amounts included in contract liabilities at the beginning of the period was $ 1,073 and $ 1,469 , respectively.

For mobile connectivity product sales, the delivery of the Company’s performance obligations are generally transferred to the customer, and associated revenue is recognized, at a point in time, with the exception of certain mini-VSAT contracts which are transferred to customers over time.

For mobile connectivity service sales, the delivery of the Company’s performance obligations are transferred to the customer, and associated revenue is recognized, over time.

For inertial navigation product sales, the delivery of the Company’s performance obligations are generally transferred to the customer, and associated revenue is recognized, at a point in time.

For inertial navigation service sales, the Company's performance obligations are generally transferred to customers, and associated revenue is recognized, over time.

Revenue recognized during the three months ended September 30, 2022 and 2021 from amounts included in contract liabilities at the beginning of the period was $ 572 and $ 430 , respectively.

Revenue recognized during the nine months ended September 30, 2022 and 2021 from amounts included in contract liabilities at the beginning of the period was $ 1,645 and $ 1,899 , respectively.

For product sales, the delivery of the Company’s performance obligations are generally transferred to the customer, and associated revenue is recognized, at a point in time, with the exception of certain mini-VSAT contracts which are transferred to customers over time.

For service sales, the delivery of the Company’s performance obligations are transferred to the customer, and associated revenue is recognized, over time.

Business and Credit Concentrations

3 unchanged sentences

The Company performs ongoing credit evaluations of the financial condition of its customers and generally does not require collateral.

No single customer accounted for 10% or more of consolidated net sales for the six months ended June 30, 2022 or 2021 or accounts receivable at June 30, 2022 or December 31, 2021.

No single customer accounted for 10% or more of consolidated net sales for the nine months ended September 30, 2022 or 2021.

One customer accounted for 17 % of accounts receivable at September 30, 2022.

Two customers accounted for approximately 16 % and 14 % of accounts receivable at December 31, 2021.

One customer accounted for 63 % and 54 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at September 30, 2022 and December 31, 2021, respectively.

Certain components from third parties used in the Company’s products are procured from single sources of supply.

1 unchanged sentence

(16) Income Taxes

The Company’s effective tax rate for the three and six months ended June 30, 2022 was ( 19.4 )% and ( 10.1 )%, respectively, compared with ( 1.4 )% and 0.8 % for the corresponding period in the prior year.

The Company’s effective tax rate from continuing operations for the three and nine months ended September 30, 2022 was ( 578.6 )% and ( 16.5 )%, respectively, compared with 0.4 % and 0.7 % for the corresponding period in the prior year.

The effective income tax rate is based on estimated income for the year, the estimated composition of the income in different jurisdictions and discrete adjustments, if any, in the applicable periods, including retroactive changes in tax legislation, settlements of tax audits or assessments, and the resolution or identification of tax position uncertainties.

For the three and six months ended June 30, 2022 and 2021, the effective tax rates were lower than the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its US deferred tax assets, the composition of income from foreign jurisdictions taxed at lower rates and foreign withholding taxes on payments to the U.S.

As of June 30, 2022 and December 31, 2021, the Company had reserves for uncertain tax positions of $ 624 and $ 592 , respectively.

There were no material changes during the six months ended June 30, 2022 to the Company’s reserve for uncertain tax positions.

The Company estimates that it is reasonably possible that the balance of unrecognized tax benefits as of June 30, 2022 may decrease $ 19 in the next twelve months as a result of a lapse of statutes of limitations and settlements with taxing authorities.

For the three and nine months ended September 30, 2022 and 2021, the effective tax rates from continuing operations were lower than the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its U.S.

deferred tax assets, the composition of income from foreign jurisdictions taxed at lower rates and foreign withholding taxes on payments to the U.S.

As of September 30, 2022 and December 31, 2021, the Company had reserves for uncertain tax positions of $ 624 and $ 592 , respectively.

There were no material changes during the nine months ended September 30, 2022 to the Company’s reserve for uncertain tax positions.

The Company estimates that it is reasonably possible that the balance of unrecognized tax benefits as of September 30, 2022 may decrease $ 20 in the next twelve months as a result of a lapse of statutes of limitations and settlements with taxing authorities.

The Company’s tax jurisdictions include the United States, the United Kingdom, Denmark, Cyprus, Norway, Brazil, Singapore, Japan and India.

2 unchanged sentences

The Company has operating leases for office facilities, equipment, and satellite service capacity and related equipment.

Lease expense was $ 537 and $ 927 for the three months ended June 30, 2022 and 2021, respectively, and was $ 1,081 and $ 1,904 for the six months ended June 30, 2022 and 2021, respectively.

Short-term operating lease costs were $ 43 and $ 58 for the three months ended June 30, 2022 and 2021, respectively, and were $ 98 and $ 115 for the six months ended June 30, 2022 and 2021, respectively.

Sublease income was $ 34 and $ 33 for the three months ended June 30, 2022 and 2021, respectively, and was $ 69 and $ 67 for the six months ended June 30, 2022 and 2021, respectively.

Maturities of lease liabilities as of June 30, 2022 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Lease expense from continuing operations was $ 507 and $ 920 for the three months ended September 30, 2022 and 2021, respectively, and was $ 1,588 and $ 2,824 for the nine months ended September 30, 2022 and 2021, respectively.

Short-term operating lease costs were $ 41 and $ 66 for the three months ended September 30, 2022 and 2021, respectively, and were $ 139 and $ 181 for the nine months ended September 30, 2022 and 2021, respectively.

Maturities of lease liabilities as of September 30, 2022 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Remainder of 2022 $ 436

8 unchanged sentences

During the first quarter of 2021, the terms of this lease were adjusted and the Company discontinued use of two satellite hubs and was released from the related payment obligation in exchange for additional satellite service capacity.

As of June 30, 2022, the gross cost and accumulated amortization associated with this lease for the remaining satellite hub is included in revenue generating assets and amounted to $ 1,268 and $ 800 , respectively.

As of September 30, 2022, the gross cost and accumulated amortization associated with this lease for the remaining satellite hub is included in revenue generating assets and amounted to $ 1,268 and $ 846 , respectively.

The obligation under capital leases are stated at the present value of minimum lease payments.

1 unchanged sentence

Amortization of assets held under financing leases is included within depreciation expense.

Depreciation expense for the remaining capital assets was $ 46 for both the three months ended June 30, 2022 and 2021 and was $ 91 for both the six months ended June 30, 2022 and 2021.

The future minimum lease payments under this financing lease as of June 30, 2022 are:

Depreciation expense for the remaining capital assets was $ 45 for both the three months ended September 30, 2022 and 2021 and was $ 136 for both the nine months ended September 30, 2022 and 2021.

The future minimum lease payments under this financing lease as of September 30, 2022 are:

Remainder of 2022 $ 66

12 unchanged sentences

The sales-type leases do not have unguaranteed residual assets.

The current portion of the net investment in these leases was $ 3,678 as of June 30, 2022 and the non-current portion of the net investment in these leases was $ 5,565 as of June 30, 2022.

The current portion of the net investment in these leases was $ 3,911 as of September 30, 2022 and the non-current portion of the net investment in these leases was $ 5,059 as of September 30, 2022.

The current portion of the net investment in the leases is included in accounts receivable, net of allowance for doubtful accounts on the accompanying consolidated balance sheets and the non-current portion of the net investment in these leases is included in other non-current assets on the accompanying consolidated balance sheets.

Interest income from sales-type leases was $ 193 and $ 221 during the three months ended June 30, 2022 and 2021, respectively, and was $ 400 and $ 452 during the six months ended June 30, 2022 and 2021, respectively.

The future undiscounted cash flows from these leases as of June 30, 2022 are:

Interest income from sales-type leases was $ 191 and $ 218 during the three months ended September 30, 2022 and 2021, respectively, and was $ 591 and $ 670 during the nine months ended September 30, 2022 and 2021, respectively.

The future undiscounted cash flows from these leases as of September 30, 2022 are:

Remainder of 2022 $ 1,640

4 unchanged sentences

As a result, and in light of other factors indicated in ASC 842, these leases are classified as operating leases.

As of June 30, 2022, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $ 1,803 and $ 325 , respectively.

As of September 30, 2022, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $ 1,856 and $ 423 , respectively.

They are depreciated on a straight-line basis over a five-year estimated useful life.

Depreciation expense for these assets was $ 89 and $ 171 for the three and six months ended June 30, 2022, respectively.

Lease revenue recognized was $ 133 and $ 259 for the three and six months ended June 30, 2022, respectively.

As of June 30, 2022, minimum future lease payments to be recognized on the operating leases are as follows:

Depreciation expense for these assets was $ 96 and $ 267 for the three and nine months ended September 30, 2022, respectively.

Lease revenue recognized was $ 141 and $ 400 for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2022, minimum future lease payments to be recognized on the operating leases are as follows:

Remainder of 2022 $ 274

Total $ 1,180

(18) Subsequent Events

On August 9, 2022, the Company entered into an Asset Purchase Agreement with EMCORE Corporation to sell to EMCORE the Company’s inertial navigation business for gross proceeds of $ 55,000 , less specified deductions and a holdback of $ 1,000 and subject to a working capital adjustment.

The sale was completed simultaneously with the execution and delivery of the Asset Purchase Agreement.

Simultaneously with the execution of the Asset Purchase Agreement, the Company entered into a Transition Services Agreement with EMCORE, pursuant to which the Company agreed to provide certain transition services to support the continued operation of the inertial navigation business for a specified period of time following the sale.

The inertial navigation business did not meet the ASC 205-20 criteria to be classified as held for sale as of June 30, 2022.

On August 9, 2022, the Company also terminated the 2018 Credit Agreement and the related security and pledge agreements with Bank of America, N.A., as Administrative Agent.

At the time of termination, no borrowings were outstanding under the 2018 Credit Agreement.

With the termination of this agreement, all associated liens were released.

(18) Discontinued Operations

During the third quarter of 2022, the Company sold its inertial navigation business.

The Company determined that the sale met the requirements for reporting as discontinued operations in accordance with Accounting Standards Codification (ASC) 205-20.

Please see Note 1 for further discussion.

The following table presents a reconciliation of the carrying amounts of major classes of assets and liabilities of the discontinued operations to the amounts presented separately in the Company's consolidated balance sheet:

December 31, 2021

Accounts receivable, net $ 5,882

Inventories, net 8,807

Prepaid expenses and other current assets 1,152

Current assets held for sale $ 15,841

Property and equipment, net 7,169

Non-current assets held for sale $ 7,169

Accounts payable 1,764

Accrued compensation and employee-related expenses 914

Accrued other 955

Accrued product warranty costs 95

Contract liabilities 211

Current liabilities held for sale $ 3,939

Other long-term liabilities 8

Non-current liabilities held for sale $ 8

Net assets held for sale 19,063

The following table presents a reconciliation of the major financial line items constituting the results for discontinued operations to the net income from discontinued operations, net of tax, presented separately in the Company's consolidated statements of operations (through August 9, 2022, the date the inertial navigation business was sold):

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Product $ 1,276 $ 8,388 $ 16,042 $ 29,152

Service 218 208 679 837

Net sales 1,494 8,596 16,721 29,989

Costs and expenses:

Costs of product sales 1,504 5,341 12,732 17,168

Costs of service sales 169 173 457 750

Research and development 374 1,507 3,147 5,137

Sales, marketing and support 348 1,261 3,035 3,885

Other income, net 12 34 81 101

(Loss) income from discontinued operations before income tax expense ( 889 ) 348 ( 2,569 ) 3,150

Gain on sale of discontinued operations before tax expense 30,858 — 30,858 —

Total income from discontinued operations before tax expense $ 29,969 $ 348 $ 28,289 $ 3,150

Income tax expense on discontinued operations 228 — 228 —

Net income from discontinued operations, net of tax $ 29,741 $ 348 $ 28,061 $ 3,150

Net income from discontinued operations per common share

Basic $ 1.59 $ 0.02 $ 1.51 $ 0.17

Diluted $ 1.59 $ 0.02 $ 1.51 $ 0.17

Weighted average number of common shares outstanding:

Basic 18,706 18,341 18,574 18,152

Diluted 18,706 18,566 18,574 18,152

The following table presents supplemental cash flow information of the discontinued operations:

Nine Months Ended

September 30,

Cash (used in) provided by operating activities-discontinued operations $ ( 3,853 ) $ 3,364

Cash used in investing activities-discontinued operations $ ( 307 ) $ ( 846 )

The following table presents non-cash expenses from discontinued operations:

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Depreciation $ 269 $ 353 $ 805 $ 1,021

Compensation expense related to stock-based awards and employee stock purchase plan $ 380 $ 207 $ 580 $ 407

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