What changed in this filing

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Item 1. Financial Statements

2023-05-05 compared with 2022-12-06 · 215 added, 326 removed, 450 unchanged (55% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

ASSETS (unaudited)

2 unchanged sentences

Marketable securities 56,280 55,680

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

Accounts receivable, net of allowance for credit losses of $ 1,526 and $ 1,268 as of March 31, 2023 and December 31, 2022, respectively

26,383 27,427

2 unchanged sentences

Current contract assets 1,273 1,243

Current assets held for sale — 15,841

Total current assets 123,389 131,203

7 unchanged sentences

Deferred income tax asset 259 259

Non-current assets held for sale — 7,169

Total assets $ 190,666 $ 200,530

8 unchanged sentences

Liability for uncertain tax positions 654 637

Current liabilities held for sale — 3,939

Total current liabilities 27,775 38,868

Other long-term liabilities — 22

Long-term operating lease liability 376 636

1 unchanged sentence

Deferred income tax liability 56 55

Non-current liabilities held for sale — 8

Total liabilities $ 32,874 $ 43,874

5 unchanged sentences

Authorized 30,000,000 shares;

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

20,825,805 and 20,631,152 shares issued at March 31, 2023 and December 31, 2022, respectively;

and 19,369,696 and 19,198,458 shares outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital 161,779 160,475

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

Retained earnings 11,924 11,936

Accumulated other comprehensive loss ( 4,029 ) ( 4,110 )

169,882 168,507

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

treasury stock at cost, common stock, 1,456,109 and 1,432,694 shares as of March 31, 2023 and December 31, 2022, respectively.

( 12,090 ) ( 11,851 )

6 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Product $ 4,949 $ 6,563

11 unchanged sentences

Interest expense — 1

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

Other (expense) income, net ( 224 ) 103

Income (loss) from continuing operations before income tax expense 6 ( 3,938 )

Income tax expense from continuing operations 18 329

Net loss from continuing operations $ ( 12 ) $ ( 4,267 )

Net loss from discontinued operations, net of tax — ( 425 )

Net loss $ ( 12 ) $ ( 4,692 )

Net loss from continuing operations per common share

Basic $ 0.00 $ ( 0.23 )

Diluted $ 0.00 $ ( 0.23 )

Net income from discontinued operations per common share

Net loss from discontinued operations per common share

Basic $ 0.00 $ ( 0.02 )

Diluted $ 0.00 $ ( 0.02 )

Net income (loss) per common share

Net loss per common share

Basic $ 0.00 $ ( 0.25 )

8 unchanged sentences

(in thousands, unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

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

Other comprehensive loss, net of tax:

Three Months Ended

Net loss $ ( 12 ) $ ( 4,692 )

Other comprehensive income (loss), net of tax:

Unrealized gain on available-for-sale securities 13 —

Foreign currency translation adjustment 68 ( 193 )

Other comprehensive loss, net of tax (1)

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

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

Total comprehensive income (loss) $ 69 $ ( 4,885 )

6 unchanged sentences

Common Stock Additional

Capital (Accumulated deficit) Retained earnings Accumulated

Comprehensive

Loss Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

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 )

Stock-based compensation — — 1,109 — — — — 1,109

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

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

Common Stock Additional

Capital (Accumulated deficit) Retained earnings Accumulated

Capital Retained earnings Accumulated

Comprehensive

3 unchanged sentences

Balance at December 31, 2022 20,631 $ 206 $ 160,475 $ 11,936 $ ( 4,110 ) ( 1,433 ) $ ( 11,851 ) $ 156,656

Net income — — — 23,510 — — — 23,510

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

Stock-based compensation — — 2,695 — — — — 2,695

Issuance of common stock under employee stock purchase plan 22 — 193 — — — — 193

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 241 3 599 — — — — 602

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

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

Common Stock Additional

Capital Accumulated Deficit Accumulated

Comprehensive

Loss Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

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 )

Net loss — — — ( 12 ) — — — ( 12 )

Other comprehensive income — — — — 81 — — 81

Stock-based compensation — — 296 — — — — 296

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

Acquisition of treasury stock — — — — — ( 23 ) ( 239 ) ( 239 )

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 195 2 1,008 — — — — 1,010

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

Balance at March 31, 2023 20,826 $ 208 $ 161,779 $ 11,924 $ ( 4,029 ) ( 1,456 ) $ ( 12,090 ) $ 157,792

Common Stock Additional

9 unchanged sentences

Exercise of stock options and issuance of restricted stock awards, net of forfeitures ( 37 ) — — — — — — —

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

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

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

See accompanying Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

(in thousands, unaudited)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

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

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

Net loss $ ( 12 ) $ ( 4,692 )

Adjustments to reconcile net loss to net cash used in operating activities:

Provision for doubtful accounts 280 120

4 unchanged sentences

Unrealized currency translation gain ( 1 ) ( 50 )

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:

6 unchanged sentences

Accrued compensation, product warranty and other 3,466 ( 2,370 )

Other long-term liabilities — 2

Net cash (used in) provided by operating activities $ ( 1,467 ) $ 1,914

Net cash used in operating activities $ ( 6,779 ) $ ( 3,513 )

Cash flows from investing activities:

1 unchanged sentence

Cash paid for acquisition of intangible asset ( 12 ) ( 14 )

Proceeds from sale of fixed assets — 100

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 ( 16,010 ) ( 1 )

Maturities and sales of marketable securities 15,422 4,500

Net cash provided by (used in) investing activities $ 4,297 $ ( 7,191 )

Net cash (used in) provided by investing activities $ ( 2,703 ) $ 113

Cash flows from financing activities:

Proceeds from stock options exercised and employee stock purchase plan 1,022 183

Purchase of treasury stock ( 239 ) —

Payment of finance lease ( 22 ) ( 66 )

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents 40 ( 57 )

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

Net decrease in cash and cash equivalents ( 8,681 ) ( 3,340 )

Cash and cash equivalents at beginning of period 21,056 11,376

11 unchanged sentences

(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.

KVH’s satellite-only and hybrid products enable marine customers to receive data, Voice over Internet Protocol (VoIP), 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.

2 unchanged sentences

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.

KVH provides, for monthly fixed and per-usage fees, satellite connectivity encompassing broadband Internet and 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.

9 unchanged sentences

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

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.

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

Service sales also include the distribution of commercially licensed entertainment, including news, sports, and movies to commercial customers in the maritime and hotel 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 VoIP, 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 sold its inertial navigation business to EMCORE Corporation for net proceeds of $ 54,904 , less specified deductions.

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 does not have any continuing involvement in these operations other than short-term transition services, which are being recorded as an offset to general and administrative expenses in continuing operations.

For the three months ended March 31, 2023, the Company recognized a $ 527 offset to general and administrative expenses associated with the Transition Services Agreement.

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 16 for the discontinued operations disclosures.

As a result of the sale of its inertial navigation business, the Company operates as one reportable segment.

(2) Summary of Significant Accounting Policies

8 unchanged sentences

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, 2022 filed on March 16, 2023 with the Securities and Exchange Commission.

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.

The results for the three months ended March 31, 2023 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.

Foreign Currency Translation

The financial statements of the Company’s foreign subsidiaries located in Denmark and Singapore are maintained using the United States dollar as the functional currency.

Exchange rates in effect on the date of the transaction are used to record monetary assets and liabilities.

Revenue and other expense elements are recorded at rates that approximate the rates in effect on the transaction dates.

Foreign currency exchange gains and losses are recognized within “other (expense) income, net” in the accompanying consolidated statements of operations.

For the three months ended March 31, 2023 and 2022, the Company recorded a total of net foreign currency exchange (losses) gains in its accompanying consolidated statements of operations of $( 54 ) and $ 275 , respectively, which is comprised of both realized and unrealized foreign currency exchange gains and losses.

The financial statements of the Company’s foreign subsidiaries located in the United Kingdom, Brazil, Norway, Cyprus, India and Japan use the foreign subsidiaries’ respective local currencies as the functional currency.

The Company translates the assets and liabilities of these foreign subsidiaries at the exchange rates in effect at the end of each reporting period.

Net sales, costs and expenses are translated using average exchange rates in effect during the period.

Gains and losses from foreign currency translation are credited or charged to accumulated other comprehensive loss included in stockholders' equity in the accompanying consolidated balance sheets.

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.

Bruun, its then Chief Operating Officer, was appointed as its interim President and Chief Executive Officer.

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 is being paid to Mr.

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.

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 31, 2023, which was 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.

As of March 31, 2023 all payments related to the consulting fees had been completed.

The associated expenses were included in general and administrative expenses in the accompanying consolidated statements of operations.

2 unchanged sentences

Please see Note 5 for further discussion.

In March 2022, the Company also restructured its operations to reduce costs and better pursue a more focused strategy.

In March 2022, the Company also restructured its operations to reduce costs and pursue a more focused strategy.

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 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:

For the three months ended March 31, 2022, the Company incurred $ 1,392 in severance and health insurance costs and $ 327 in legal and advisory fees.

The combined expense of $ 1,719 was included in the financial statement line items of the accompanying consolidated statements of operations as follows:

costs of product sales of $ 16 , costs of service sales of $ 55 , research and development of $ 387 , sales, marketing and support of $ 797 , and general and administrative expenses of $ 464 .

The Company expects to incur an additional $ 83 in severance payments and other employee benefit costs through December 31, 2022 arising from this restructuring.

For the three months ended March 31, 2023, the Company did not incur any additional expenses associated with this restructuring.

The Company also modified impacted employee's stock option and restricted stock awards.

Please see Note 5 for further discussion.

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.

During the third quarter of 2022, the Company restructured its foreign operations by closing its India and Cyprus offices and its Denmark warehouse to reduce costs.

All costs associated with the severance payments, other employee benefits, and legal and advisory fees were incurred in 2022.

Executive Employment Agreements

3 unchanged sentences

The terms of the agreements are substantially identical except as to title, salary, target bonus and reporting responsibilities.

The agreements provide that, if the executive continues to serve as an employee through December 31, 2022 (the “Retention Date”), the Company will pay the executive a retention bonus equal to 75 % of the executive’s base salary on the agreement date, and the Company will accelerate the vesting of the executive’s equity awards that would otherwise have vested in the twelve months after the Retention Date.

Please see Note 5 for further discussion regarding the equity compensation modifications.

If a Qualifying Termination occurs before December 31, 2022, the executive will receive a pro rata portion of the retention bonus.

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.

The agreements provided that, if the executive continued to serve as an employee through December 31, 2022 (the “Retention Date”), the Company would pay the executive a retention bonus equal to 75 % of the executive’s base salary on the agreement date, and the Company would accelerate the vesting of the executive’s equity awards that would otherwise have vested in the twelve months after the Retention Date.

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

2 unchanged sentences

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).

If a Qualifying Termination occurs before December 31, 2023, Mr.

Bruun will receive a pro rata portion of the retention bonus.

If in connection with such a termination he becomes entitled to receive the change in control severance payments and benefits, he 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.

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 January 2023, the Company paid out all contracted benefits to Roger A.

Kuebel, Felise Feingold and Robert Balog as the conditions of their agreements were satisfied on December 31, 2022.

As of March 31, 2023, the Company has accrued approximately $ 185 for the retention bonus payable to Brent Bruun.

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 .

Bruun a restricted stock award and a non-statutory stock option, which together had an aggregate grant date fair value of approximately $ 100 .

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

(3) Recently Issued Accounting Standards

Standards Implemented

ASC Update No.

11 unchanged sentences

2016-13 is to replace the incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates.

2016-13 did not have a material impact on the Company's financial position or results of operations.

In November 2018, the FASB issued ASC Update No.

3 unchanged sentences

Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases.

2018-19 did not have a material impact on the Company's financial position or results of operations.

In May 2019, the FASB issued ASC Update No.

1 unchanged sentence

This update introduced clarifications of the Board’s intent with respect to accrued interest, the transfer between classifications or categories for loans and debt securities, recoveries, reinsurance recoverables, projects of interest rate environments for variable-rate financial instruments, costs to sell when foreclosure is probable, consideration of expected prepayments when determining the effective interest rate, vintage disclosures, and extension and renewal options.

2019-04 did not have a material impact on the Company's financial position or results of operations.

In May 2019, the FASB issued ASC Update No.

3 unchanged sentences

With the exception of held-to-maturity debt securities, the amendments allow entities to irrevocably elect to apply the fair value option to financial instruments that were previously recorded at amortized cost basis within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost .

2019-05 did not have a material impact on the Company's financial position or results of operations.

In November 2019, the FASB issued ASC Update No.

2 unchanged sentences

The amendments in this update change some effective dates for certain new accounting standards including those pertaining to Topic 326 discussed above, for certain types of entities.

2019-10 did not have a material impact on the Company's financial position or results of operations.

In November 2019, the FASB issued ASC Update No.

3 unchanged sentences

2019-11 is to clarify the scope of the recovery guidance to purchased financial assets with credit deterioration.

2019-11 did not have a material impact on the Company's financial position or results of operations.

In February 2020, the FASB issued ASC Update No.

3 unchanged sentences

2020-02 is to clarify the scope and interpretation of the standard.

2020-02 did not have a material impact on the Company's financial position or results of operations.

In March 2022, the FASB issued ASC update 2022-02, Financial Instruments – Credit Losses (Topic 326) – Troubled Debt Restructurings and Vintage Disclosures .

1 unchanged sentence

Gross write-off information must included the amortized cost basis of financing receivables by credit-quality indicator and class of financing receivable by year of origination.

As a smaller reporting company the effective date for Topic 326 will be the fiscal year beginning after December 15, 2022.

The adoption of Update Nos.

2016-13, 2018-19, 2019-04, 2019-05, 2019-10, 2019-11, 2020-20 and 2022-02 is not expected to have a material impact on the Company's financial position or results of operations.

2022-02 did not have a material impact on the Company's financial position or results of operations.

ASC Update No.

In January 2017, the FASB issued ASC Update No.

2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment .

The purpose of Update No.

2017-04 is to eliminate Step 2 from the goodwill impairment test and instead an entity should perform its annual, or interim, goodwill impairment quantitative test by comparing the fair value of a reporting unit with its carrying amount.

An entity will then recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, to the extent of the amount of goodwill allocated to that reporting unit.

2017-04 did not have a material impact on the Company's financial position or results of operations.

There are no other recent accounting pronouncements issued by the FASB that the Company expects would have a material impact on the Company's financial statements.

(4) Marketable Securities

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

September 30, 2022 Amortized

Marketable securities as of March 31, 2023 and December 31, 2022 consisted of the following:

March 31, 2023 Amortized

Money market mutual funds $ 36,315 $ — $ — $ 36,315

3 unchanged sentences

Money market mutual funds $ 30,977 $ — $ — $ 30,977

United States treasuries 24,715 — ( 12 ) 24,703

Total marketable securities designated as available-for-sale $ 55,692 $ — $ ( 12 ) $ 55,680

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.

Interest income from marketable securities was $ 588 and $ 1 during the three months ended March 31, 2023 and 2022, respectively.

(5) Stockholder's Equity

2 unchanged sentences

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-based compensation expense was $ 284 and $ 859 , excluding $ 12 and $ 22 of compensation charges related to our Amended and Restated 1996 Employee Stock Purchase Plan, or the ESPP, for the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, there was $ 2,753 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 3.01 years.

As of March 31, 2023, there was $ 3,115 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 3.03 years.

Stock Options

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.

During the three months ended March 31, 2023, the Company issued 113 shares of common stock upon the exercise of stock options and received $ 1,022 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 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 nine months ended September 30, 2022 are as follows:

Nine Months Ended September 30,

Additionally, during the three months ended March 31, 2023, 317 stock options were granted and 170 stock options expired, were canceled or were forfeited.

During the three months ended March 31, 2022, no stock options were granted.

The Company has historically 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 three months ended March 31, 2023 are as follows:

Three Months Ended March 31,

Risk-free interest rate 4.49 %

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Dividend yield 0 %

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 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.

As of March 31, 2023, there were 1,784 options outstanding with a weighted average exercise price of $ 9.80 per share and 905 options exercisable with a weighted average exercise price of $ 10.18 per share.

Restricted Stock

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 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.

During the three months ended March 31, 2023, 151 shares of restricted stock were granted with a weighted average grant date fair value of $ 9.81 per share and 69 shares of restricted stock were forfeited.

Additionally, during the three months ended March 31, 2023, 43 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 March 31, 2023, 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.

Common Stock Repurchase

In the first quarter of 2023, the Company’s Board of Directors authorized the repurchase of a portion of executive common stock.

The Company repurchased 23 shares of common stock held by executives at the Company to satisfy minimum tax withholding obligations in lieu of cash payment.

No shares of common stock were repurchased during the twelve months ended December 31, 2022.

(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 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.

During the three months ended March 31, 2023 and 2022, 0 and 22 shares were issued under the ESPP plan, respectively.

The Company recorded compensation charges related to the ESPP of $ 12 and $ 22 for the three months ended March 31, 2023 and 2022, 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 nine months ended September 30, 2022 and 2021:

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

2022 2021 2022 2021

The following table presents stock-based compensation expense, including expense for the ESPP, in the Company's consolidated statements of operations for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

Cost of product sales $ 7 $ 74

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General and administrative 159 478

$ 1,109 $ 1,042 $ 2,695 $ 3,029

(d) Accumulated Other Comprehensive Loss (AOCL)

Comprehensive loss includes net loss and unrealized gains and losses from foreign currency translation.

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 September 30, 2022 and 2021 are as follows:

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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

Other comprehensive loss ( 646 ) ( 646 )

Net other comprehensive loss ( 646 ) ( 646 )

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

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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

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

Comprehensive income (loss) includes net income (loss), unrealized gains and losses from foreign currency translation, and unrealized gains and losses on available for sale marketable securities.

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

The balances for the three months ended March 31, 2023 and 2022 are as follows:

Foreign Currency Translation Unrealized (Loss) Gain on Available for Sale Marketable Securities Total Accumulated Other Comprehensive Loss

Balance, December 31, 2022 $ ( 4,098 ) $ ( 12 ) $ ( 4,110 )

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

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

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

Other comprehensive income 68 13 81

Net other comprehensive income 68 13 81

Balance, March 31, 2023 $ ( 4,030 ) $ 1 $ ( 4,029 )

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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Net other comprehensive loss ( 193 ) ( 193 )

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

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

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

(6) Net Loss 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 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.

For the three months ended March 31, 2023 and 2022, since there was a net loss from continuing operations, the Company excluded 920 and 1,861 shares underlying outstanding stock options and non-vested restricted shares, respectively, from its diluted loss per share calculation, as inclusion of these convertible 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 Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended

Weighted average common shares outstanding—basic 18,882 18,449

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(7) Inventories

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

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

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

Inventories as of March 31, 2023 and December 31, 2022 include the costs of material, labor, and factory overhead.

Components of inventories consist of the following:

September 30,

2023 December 31,

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(8) Property and Equipment

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

September 30,

Property and equipment, net, as of March 31, 2023 and December 31, 2022 consist of the following:

2023 December 31,

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$ 51,792 $ 53,118

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.

Depreciation expense was $ 3,368 and $ 3,065 for the three months ended March 31, 2023 and 2022, respectively.

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

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

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

As of March 31, 2023 and December 31, 2022, the Company had accrued product warranty costs of $ 712 and $ 1,287 , respectively.

The following table summarizes product warranty activity during 2023 and 2022:

Nine Months Ended

September 30,

Three Months Ended

Beginning balance $ 1,287 $ 1,084

2 unchanged sentences

Ending balance $ 712 $ 1,090

Paycheck Protection Program Loan

In May 2020, the Company received a $ 6,927 loan (the PPP Loan) from Bank of America, N.A., (the Lender) under the Paycheck Protection Program (PPP), which was established under the Coronavirus Aid, Relief, and Economic Security Act (as modified by the Paycheck Protection Flexibility Act of 2020, the CARES Act) and is administered by the U.S.

Small Business Administration (the SBA).

The term of the PPP Loan was two years from the funding date, and the interest rate was 1.00%.

Interest on the loan accrued from the funding date, but was deferred.

In August 2021, the Company applied for forgiveness of the full amount of the PPP Loan.

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

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 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 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 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.

(10) Legal Matters

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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 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

The following tables present financial assets and liabilities at March 31, 2023 and December 31, 2022 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:

March 31, 2023 Total Level 1 Level 2 Level 3 Valuation

Money market mutual funds $ 36,315 $ 36,315 $ — $ — (a)

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Money market mutual funds $ 30,977 $ 30,977 $ — $ — (a)

United States treasuries $ 24,703 $ 24,703 $ — $ — (a)

(a) Market approach—prices and other relevant information generated by market transactions involving identical or comparable assets.

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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 September 30, 2022.

There was no impairment of the Company's non-financial assets noted during the three months ended March 31, 2023.

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

(12) Goodwill and Intangible Assets

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

The following table sets forth the changes in the carrying amount of goodwill for the three months ended March 31, 2023:

Balance at December 31, 2022

Sale of KVH Media Group Entertainment Limited ( 1,038 )

Foreign currency translation adjustment 21

Balance at September 30, 2022

Balance at March 31, 2023

Intangible Assets

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

The changes in the carrying amount of intangible assets during the three months ended March 31, 2023 are as follows:

Balance at December 31, 2022

1 unchanged sentence

Intangible assets acquired in asset acquisition 12

Sale of KVH Media Group Entertainment Limited ( 352 )

Foreign currency translation adjustment 2

Balance at September 30, 2022

Balance at March 31, 2023

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

1 unchanged sentence

The intangible assets were recorded in pounds sterling and fluctuations in exchange rates cause these amounts to increase or decrease from time to time.

As a result of the sale of KVH Media Group Entertainment Limited in April 2022, the Company determined the goodwill and intangible assets associated with this business based on an income approach which estimated the fair value of the reporting unit before and after the sale, and included such amounts in the determination of the gain on sale of the subsidiary.

In January 2017, the Company completed the acquisition of certain subscriber relationships from a third party.

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

As of March 31, 2023, the carrying value of the intangible assets acquired in the asset acquisition was $ 474 .

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

An additional $ 12 and $ 14 of consideration was earned under the contingent consideration arrangement during the three months ended March 31, 2023 and 2022, respectively.

Acquired intangible assets are subject to amortization.

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

The following table summarizes acquired intangible assets at March 31, 2023 and December 31, 2022, respectively:

Gross Carrying Amount Accumulated Amortization Net Carrying Value

September 30, 2022

March 31, 2023

Subscriber relationships $ 7,663 $ 7,338 $ 325

11 unchanged sentences

$ 10,847 $ 10,443 $ 404

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 related to intangible assets was $ 93 and $ 194 for the three months ended March 31, 2023 and 2022, respectively.

Amortization expense was categorized as general and administrative expense.

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:

As of March 31, 2023, the total weighted average remaining useful lives of the definite-lived intangible assets was 0.5 years.

Estimated future amortization expense remaining at March 31, 2023 for intangible assets acquired was as follows:

Years ending December 31,

Remainder of 2023 $ 91

2028 and thereafter 3

Total future amortization expense $ 325

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 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)

There were no events or changes in circumstances during the three months ended March 31, 2023 which indicated that an assessment of the impairment of goodwill and intangible assets was required.

(13) Revenue from Contracts with Customers

In accordance with ASC 606, revenue is recognized when a customer obtains control of promised products and services.

1 unchanged sentence

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

The following table summarizes net sales from contracts with customers for the three months ended March 31, 2023 and 2022:

Three Months Ended

Product, transferred at point in time $ 4,503 $ 6,107

2 unchanged sentences

Total net sales $ 33,689 $ 33,151

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.

Revenue recognized during the three months ended March 31, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $ 447 and $ 452 , 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 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.

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

Product sales accounted for 15 % and 20 % of the Company's consolidated net sales for the three months ended March 31, 2023 and 2022, respectively.

Service sales of VSAT Broadband airtime service accounted for 80 % and 72 % of the Company's consolidated net sales for the three months ended March 31, 2023 and 2022, 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 Singapore, Canada, European Union countries and other European countries, countries in Africa, Asia/Pacific and the Middle East, and India.

Revenues are based upon customer location and internationally represented 64 % and 61 % of consolidated net sales for the three months ended March 31, 2023 and 2022, respectively.

Sales to Singapore customers represented 18 % and 16 % of the Company's consolidated net sales for the three months ended March 31, 2023 and 2022, respectively.

No other individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended March 31, 2023 and 2022.

As of March 31, 2023 and December 31, 2022, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets.

Business and Credit Concentrations

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Although the Company does not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of those individual customers.

The Company establishes allowances for potential bad debts and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and its expectations for future collectability concerns.

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 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.

The Company establishes allowances for credit losses and evaluates, on a monthly basis, the adequacy of those reserves based upon expected losses, historical experience and its expectation for future collectability concerns.

No single customer accounted for 10% or more of consolidated net sales for the three months ended March 31, 2023 or 2022.

One customer accounted for 17 % of accounts receivable at March 31, 2023.

Two customers accounted for approximately 16 % and 12 %, respectively, of accounts receivable at December 31, 2022.

One customer accounted for 66 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at March 31, 2023 and December 31, 2022.

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

The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interrupt the Company’s delivery of products and thereby materially adversely affect the Company’s revenues and operating results.

Customer Contract Balances

The following table provides the balance sheet location and amounts of contract assets, or unbilled accounts receivable, and contract liabilities, or deferred revenue, from contracts with customers as of March 31, 2023 and December 31, 2022:

Contract Balance Type Balance Sheet Location March 31, 2023 December 31, 2022

Current portion of deferred costs Current contract assets $ 1,273 $ 1,243

Non-current portion of deferred costs Non-current contract assets 3,079 3,033

Current portion of deferred revenues Contract liabilities* 1,844 1,743

Non-current portion of deferred revenues Long-term contract liabilities 4,667 4,315

*Management notes that the remaining “Contract liabilities” balance not included in the above table (which as of March 31, 2023 and December 31, 2022 is $ 1,840 and $ 1,365 , respectively) relates to deferred income unaffiliated with the Company’s primary revenue streams, the majority of which relates to our content subscription business.

These values are therefore excluded from the contract assets and contract liabilities from contracts with customers.

There were no material changes to contract asset balances for the three months ended March 31, 2023 as a result of changes in estimates or impairments.

The change in the contract liability balance from December 31, 2022 to March 31, 2023 was primarily due to the increase in upfront support billings received in the first three months of 2023 in comparison to revenues recognized in the prior period from historical support billings.

(14) Income Taxes

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 Company’s effective tax rate from continuing operations for the three months ended March 31, 2023 was 300.0 % compared with ( 8.4 )% 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 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.

For the three months ended March 31, 2023, the effective tax rate from continuing operations was higher than the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its U.S.

deferred tax assets, discrete tax adjustments and the composition of income from foreign jurisdictions taxed at lower rates.

For the three months ended March 31, 2022, the effective tax rate from continuing operations was lower than the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its U.S.

deferred tax assets and to the composition of income from foreign jurisdictions taxed at lower rates.

As of March 31, 2023 and December 31, 2022, the Company had reserves for uncertain tax positions of $ 654 and $ 637 , respectively.

There were no material changes during the three months ended March 31, 2023 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 March 31, 2023 may decrease $ 36 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 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:

Lease expense from continuing operations was $ 452 and $ 544 for the three months ended March 31, 2023 and 2022, respectively.

Short-term operating lease costs were $ 25 and $ 55 for the three months ended March 31, 2023 and 2022, respectively.

Maturities of lease liabilities as of March 31, 2023 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Remainder of 2023 $ 1,170

2027 and thereafter 82

Total minimum lease payments $ 1,857

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Weighted-average discount rate - operating leases 5.50 %

During the first quarter of 2018, the Company entered into a five-year financing lease for three satellite hubs for its HTS network.

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 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.

The property and equipment held under this financing lease are amortized on a straight-line basis over the seven-year estimated useful life of the asset, since the lease meets the bargain purchase option criteria.

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

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

Total minimum lease payments $ 88

Less amount representing interest $ —

Present value of net minimum financing lease payments $ 88

Less current installments of obligation under accrued other $ 88

Obligations under other long-term liabilities, excluding current installments $ —

Weighted-average remaining lease term - finance leases (years) 0.42

Weighted-average discount rate - finance leases 1.53 %

The Company enters into leases with certain customers primarily for the TracPhone mini-VSAT systems.

These leases are classified as sales-type leases as title of the equipment transfers to the customer at the end of the lease term.

The Company enters into leases with certain customers primarily for the TracPhone VSAT systems.

These leases are classified as sales-type leases because title to the equipment transfers to the customer at the end of the lease term.

The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount.

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

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 these leases was $ 3,843 as of March 31, 2023 and the non-current portion of the net investment in these leases was $ 4,703 as of March 31, 2023.

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 $ 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:

Interest income from sales-type leases was $ 168 and $ 207 during the three months ended March 31, 2023 and 2022, respectively.

The future undiscounted cash flows from these leases as of March 31, 2023 are:

Remainder of 2023 $ 3,478

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Difference between undiscounted cash flows and discounted cash flows $ 1,005

In 2021, the Company entered into three-year leases for its TracPhone mini-VSAT systems, in which ownership of the hardware does not transfer to the lessee by the end of the lease term.

In 2021, the Company entered into three-year leases for its TracPhone VSAT systems, in which ownership of the hardware does not transfer to the lessee by the end of the lease term.

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

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.

As of March 31, 2023, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $ 1,880 and $ 610 , respectively.

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

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:

Depreciation expense for these assets was $ 94 for the three months ended March 31, 2023.

Lease revenue recognized was $ 138 for the three months ended March 31, 2023 in service sales in the consolidated statements of operations.

As of March 31, 2023, minimum future lease payments to be recognized on the operating leases are as follows:

Remainder of 2023 $ 415

Total $ 1,180

(16) Discontinued Operations

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

There were no assets or liabilities of the inertial navigation business as of December 31, 2022 or March 31, 2023.

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

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 statement of operations for the three months ended March 31, 2022:

Three months ended

Product $ 7,807

Service 218 208 679 837

Net sales 7,943

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Sales, marketing and support 1,388

Loss from discontinued operations before income tax expense ( 460 )

Other income, net 35

(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

Loss from discontinued operations before tax expense $ ( 425 )

Income tax expense on discontinued operations —

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

Net income from discontinued operations per common share

Net loss from discontinued operations, net of tax $ ( 425 )

Net loss from discontinued operations per common share

Basic $ ( 0.02 )

1 unchanged sentence

Weighted average number of common shares outstanding:

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

Diluted 18,449

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

Three months ended

Cash provided by operating activities - discontinued operations $ 366

Cash used in investing activities - discontinued operations $ ( 122 )

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

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three months ended

Depreciation $ 308

1 unchanged sentence

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