What changed in this filing

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Item 1. Financial Statements

2023-08-09 compared with 2023-05-05 · 188 added, 127 removed, 538 unchanged (37% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

ASSETS (unaudited)

2 unchanged sentences

Marketable securities 56,966 55,680

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

Accounts receivable, net of allowance for credit losses of $ 1,187 and $ 1,268 as of June 30, 2023 and December 31, 2022, respectively

26,975 27,427

Inventories, net 23,886 22,730

Inventories 24,179 22,730

Prepaid expenses and other current assets 2,382 3,067

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Authorized 30,000,000 shares;

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

20,969,436 and 20,631,152 shares issued at June 30, 2023 and December 31, 2022, respectively;

and 19,513,327 and 19,198,458 shares outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 163,690 160,475

2 unchanged sentences

172,794 168,507

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

treasury stock at cost, common stock, 1,456,109 and 1,432,694 shares as of June 30, 2023 and December 31, 2022, respectively.

( 12,090 ) ( 11,851 )

6 unchanged sentences

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Product $ 5,425 $ 6,620 $ 10,374 $ 13,183

8 unchanged sentences

Total costs and expenses 33,847 35,596 68,084 72,995

Loss from operations ( 548 ) ( 4,248 )

Income (loss) from operations 324 ( 1,043 ) ( 224 ) ( 5,291 )

Interest income 885 201 1,663 409

3 unchanged sentences

Income tax expense from continuing operations 46 235 64 564

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

Net income (loss) from continuing operations $ 925 $ ( 189 ) $ 913 $ ( 4,456 )

Net loss from discontinued operations, net of tax — ( 1,255 ) — ( 1,680 )

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

Net loss from continuing operations per common share

Net income (loss) $ 925 $ ( 1,444 ) $ 913 $ ( 6,136 )

Net income (loss) from continuing operations per common share

Basic $ 0.05 $ ( 0.01 ) $ 0.05 $ ( 0.24 )

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Diluted $ 0.00 $ ( 0.07 ) $ 0.00 $ ( 0.09 )

Net loss per common share

Net income (loss) per common share

Basic $ 0.05 $ ( 0.08 ) $ 0.05 $ ( 0.33 )

8 unchanged sentences

(in thousands, unaudited)

Three Months Ended

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

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Net income (loss) $ 925 $ ( 1,444 ) $ 913 $ ( 6,136 )

Other comprehensive income (loss), net of tax:

Unrealized gain on available-for-sale securities 13 —

Unrealized (loss) gain on available-for-sale securities ( 1 ) — 12 —

Foreign currency translation adjustment 75 ( 419 ) 143 ( 612 )

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

74 ( 419 ) 155 ( 612 )

Total comprehensive income (loss) $ 999 $ ( 1,863 ) $ 1,068 $ ( 6,748 )

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Shares Amount Shares Amount

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

Net income — — — 925 — — — 925

Other comprehensive income — — — — 74 — — 74

Stock-based compensation — — 578 — — — — 578

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 143 2 1,333 — — — — 1,335

Balance at June 30, 2023 20,969 $ 210 $ 163,690 $ 12,849 $ ( 3,955 ) ( 1,456 ) $ ( 12,090 ) $ 160,704

Common Stock Additional

Capital Retained earnings Accumulated

Comprehensive

Loss Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

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

Net loss — — — ( 12 ) — — — ( 12 )

Net income — — — 913 — — — 913

Other comprehensive income — — — — 155 — — 155

2 unchanged sentences

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 338 4 2,341 — — — — 2,345

Balance at June 30, 2023 20,969 $ 210 $ 163,690 $ 12,849 $ ( 3,955 ) ( 1,456 ) $ ( 12,090 ) $ 160,704

Common Stock Additional

Capital Accumulated Deficit Accumulated

Comprehensive Loss Treasury Stock Total

Stockholders’

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 )

Other comprehensive loss — — — — ( 419 ) — — ( 419 )

Stock-based compensation — — 705 — — — — 705

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 175 2 149 — — — — 151

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

Common Stock Additional

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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

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

See accompanying Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

(in thousands, unaudited)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

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

Net income (loss) $ 913 $ ( 6,136 )

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

4 unchanged sentences

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

Unrealized currency translation gain ( 1 ) ( 50 )

Unrealized currency translation loss (gain) 19 ( 361 )

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

Changes in operating assets and liabilities:

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Cash paid for acquisition of intangible asset ( 23 ) ( 28 )

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

Purchases of marketable securities ( 16,697 ) ( 10 )

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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 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-HTS 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.

The May 2023 introduction of the KVH ONE OpenNet Program expanded access to KVH's global HTS network and airtime services to non-KVH terminals for the first time.

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

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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.

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-HTS series terminal.

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

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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 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 fee comprises 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 Company does not have any continuing involvement in these operations other than the transition services, which are being recorded as an offset to general and administrative expenses in continuing operations.

For the three and six months ended June 30, 2023, the Company recognized an offset to general and administrative expenses associated with the Transition Services Agreement of $ 196 and $ 723 , respectively.

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

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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 months ended March 31, 2023 are not necessarily indicative of operating results for the remainder of the year.

The results for the three and six months ended June 30, 2023 are not necessarily indicative of operating results for the remainder of the year.

Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions

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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 Company recorded a total of net foreign currency exchange (losses) gains, which are comprised of both realized and unrealized foreign currency exchange gains and losses, in its accompanying consolidated statements of operations of $( 56 ) and $ 284 for the three months ended June 30, 2023 and 2022, respectively, and $( 110 ) and $ 559 for the six months ended June 30, 2023 and 2022, respectively.

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.

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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.

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.

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

As of June 30, 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.

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Kits van Heyningen's stock option and restricted stock awards.

Please see Note 5 for further discussion.

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

For the three months ended June 30, 2022, the Company incurred $ 426 in severance payments and other employee benefit costs for employees who had a severance date of June 30, 2022 to December 31, 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:

costs of product sales of $ 17 , costs of service sales of $ 55 , research and development of $ 392 , sales, marketing and support of $ 894 , and general and administrative expenses of $ 787 .

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.

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.

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.

Executive Employment Agreements

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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.

As of June 30, 2023, the Company has accrued approximately $ 236 for the retention bonus payable to Brent Bruun.

In addition to the amendment to Mr.

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2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses .

This update introduced an expected credit loss methodology for the impairment of financial assets measured at amortized cost.

This update introduced an expected credit loss methodology for the impairment of financial assets

measured at amortized cost.

The amendment also clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20.

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(4) Marketable Securities

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

March 31, 2023 Amortized

Marketable securities as of June 30, 2023 and December 31, 2022 consisted of the following:

June 30, 2023 Amortized

Money market mutual funds $ 56,966 $ — $ — $ 56,966

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

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

Interest income from marketable securities was $ 687 and $ 9 during the three months ended June 30, 2023 and 2022, respectively, and $ 1,275 and $ 10 during the six months ended June 30, 2023 and 2022, respectively.

(5) Stockholder's Equity

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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 $ 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-based compensation expense was $ 566 and $ 701 , excluding $ 12 and $ 4 of compensation charges related to our Amended and Restated 1996 Employee Stock Purchase Plan, or the ESPP, for the three months ended June 30, 2023 and 2022, respectively, and $ 850 and $ 1,560 , excluding $ 24 and $ 26 of compensation shares related to ESPP, for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, there was $ 2,513 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.80 years.

As of June 30, 2023, there was $ 2,690 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 3.04 years.

Stock Options

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.

During the three months ended June 30, 2023, the Company issued 147 shares of common stock upon the exercise of stock options and received $ 1,345 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 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.

Additionally, during the three months ended June 30, 2023, no stock options were granted and 261 stock options expired, were canceled or were forfeited.

During the six months ended June 30, 2023, the Company issued 260 shares of common stock upon the exercise of stock options and received $ 2,367 as payment for the exercise price.

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

Additionally, during the six months ended June 30, 2023, 317 stock options were granted and 431 stock options expired, were canceled or were forfeited.

During the six months ended June 30, 2022, 398 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,

The weighted average assumptions utilized to determine the fair value of options granted during the six months ended June 30, 2023 and 2022 are as follows:

Six Months Ended June 30,

Risk-free interest rate 4.49 % 2.97 %

2 unchanged sentences

Dividend yield 0 % 0 %

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.

As of June 30, 2023, there were 1,377 options outstanding with a weighted average exercise price of $ 9.55 per share and 565 options exercisable with a weighted average exercise price of $ 9.63 per share.

Restricted Stock

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.

During the three months ended June 30, 2023, no shares of restricted stock were granted and 3 shares of restricted stock were forfeited.

Additionally, during the three months ended June 30, 2023, 51 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, 2023, 151 shares of restricted stock were granted with a weighted average grant date fair value of $ 9.81 per share and 72 shares of restricted stock were forfeited.

Additionally, during the six months ended June 30, 2023, 94 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, 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

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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 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.

During the three months ended June 30, 2023 and 2022, no shares were issued under the ESPP plan.

During the six months ended June 30, 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 $ 4 for the three months ended June 30, 2023 and 2022, respectively, and $ 24 and $ 26 for the six months ended June 30, 2023 and 2022, respectively.

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,

The following table presents stock-based compensation expense, including expense for the ESPP, in the Company's consolidated statements of operations for the three and six months ended June 30, 2023 and 2022:

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

2023 2022 2023 2022

Cost of product sales $ 9 $ 61 $ 16 $ 135

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General and administrative 356 426 515 904

$ 578 $ 705 $ 874 $ 1,586

(d) Accumulated Other Comprehensive Loss (AOCL)

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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:

The balances for the three months ended June 30, 2023 and 2022 are as follows:

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

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

Other comprehensive income (loss) 75 ( 1 ) 74

Net other comprehensive income (loss) 75 ( 1 ) 74

Balance, June 30, 2023 $ ( 3,955 ) $ — $ ( 3,955 )

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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

Other comprehensive loss ( 419 ) ( 419 )

Net other comprehensive loss ( 419 ) ( 419 )

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

The balances for the six months ended June 30, 2023 and 2022 are as follows:

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

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Net other comprehensive income 143 12 155

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

Balance, June 30, 2023 $ ( 3,955 ) $ — $ ( 3,955 )

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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Net other comprehensive loss ( 612 ) ( 612 )

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.

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

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

Basic net income (loss) 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 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.

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

For the six months ended June 30, 2022, since there was a net loss from continuing operations, the Company excluded 1,802 shares underlying outstanding stock options and non-vested restricted shares, 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

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Weighted average common shares outstanding—basic 19,153 18,564 19,018 18,507

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(7) Inventories

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.

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

Inventories as of June 30, 2023 and December 31, 2022 include the costs of material, labor, and factory overhead.

Components of inventories consist of the following:

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(8) Property and Equipment

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

Property and equipment, net, as of June 30, 2023 and December 31, 2022 consist of the following:

2023 December 31,

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$ 50,790 $ 53,118

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

Depreciation expense was $ 3,404 and $ 3,243 for the three months ended June 30, 2023 and 2022, respectively and $ 6,772 and $ 6,308 for the six months ended June 30, 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 March 31, 2023 and December 31, 2022, the Company had accrued product warranty costs of $ 712 and $ 1,287 , respectively.

As of June 30, 2023 and December 31, 2022, the Company had accrued product warranty costs of $ 688 and $ 1,287 , respectively.

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

Three Months Ended

Six Months Ended

Beginning balance $ 1,287 $ 1,084

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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 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

The following tables present financial assets and liabilities at June 30, 2023 and December 31, 2022 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:

June 30, 2023 Total Level 1 Level 2 Level 3 Valuation

Money market mutual funds $ 56,966 $ 56,966 $ — $ — (a)

United States treasuries 19,965 19,965 — — (a)

December 31, 2022 Total Level 1 Level 2 Level 3 Valuation

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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 during the three months ended March 31, 2023.

There was no impairment of the Company's non-financial assets noted during the six months ended June 30, 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 three months ended March 31, 2023:

The following table sets forth the changes in the carrying amount of goodwill for the six months ended June 30, 2023:

Balance at December 31, 2022

Foreign currency translation adjustment 43

Balance at March 31, 2023

Balance at June 30, 2023

Intangible Assets

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

The changes in the carrying amount of intangible assets during the six months ended June 30, 2023 are as follows:

Balance at December 31, 2022

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Foreign currency translation adjustment 4

Balance at March 31, 2023

Balance at June 30, 2023

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

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

As of June 30, 2023, the carrying value of the intangible assets acquired in the asset acquisition was $ 485 .

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

An additional $ 23 and $ 28 of consideration was earned under the contingent consideration arrangement during the six months ended June 30, 2023 and 2022, respectively.

Acquired intangible assets are subject to amortization.

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

The following table summarizes acquired intangible assets at June 30, 2023 and December 31, 2022, respectively:

Gross Carrying Amount Accumulated Amortization Net Carrying Value

March 31, 2023

June 30, 2023

Subscriber relationships $ 7,672 $ 7,389 $ 283

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$ 10,847 $ 10,443 $ 404

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

Amortization expense related to intangible assets was $ 55 and $ 125 for the three months ended June 30, 2023 and 2022, respectively, and $ 148 and $ 319 for the six months ended June 30, 2023 and 2022, respectively.

Amortization expense was categorized as general and administrative expense.

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:

As of June 30, 2023, the total weighted average remaining useful lives of the definite-lived intangible assets was 0.3 years.

Estimated future amortization expense remaining at June 30, 2023 for intangible assets acquired was as follows:

Years ending December 31,

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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 three months ended March 31, 2023 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 six months ended June 30, 2023 which indicated that an assessment of the impairment of goodwill and intangible assets was required.

(13) Revenue from Contracts with Customers

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Disaggregation of Revenue for Continuing Operations

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

Three Months Ended

The following table summarizes net sales from contracts with customers for the three and six months ended June 30, 2023 and 2022:

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Product, transferred at point in time $ 4,544 $ 5,976 $ 9,047 $ 12,083

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Total net sales $ 34,171 $ 34,553 $ 67,860 $ 67,704

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.

Revenue recognized during the three months ended June 30, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $ 846 and $ 621 , respectively.

Revenue recognized during the six months ended June 30, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $ 1,293 and $ 1,073 , 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.

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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.

Product sales accounted for 16 % and 19 % of the Company's consolidated net sales for the three months ended June 30, 2023 and 2022, respectively, and 15 % and 19 % of the Company's consolidated net sales for the six months ended June 30, 2023 and 2022, respectively.

Service sales of VSAT Broadband airtime service accounted for 79 % and 75 % of the Company's consolidated net sales for the three months ended June 30, 2023 and 2022, respectively, and 80 % and 74 % of the Company's consolidated net sales for the six months ended June 30, 2023 and 2022, respectively.

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

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

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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.

Revenues are based upon customer location and internationally represented 66 % and 61 % of consolidated net sales for the three months ended June 30, 2023 and 2022, respectively, and 66 % and 61 % of consolidated net sales for the six months ended June 30, 2023 and 2022, respectively.

Sales to Singapore customers represented 19 % and 16 % of the Company's consolidated net sales for the three months ended June 30, 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 June 30, 2023 and 2022.

Sales to Singapore customers represented 18 % and 16 % of the Company's consolidated net sales for the six months ended June 30, 2023 and 2022, respectively.

No other individual foreign country represented 10% or more of the Company's consolidated net sales for the six months ended June 30, 2023 and 2022.

As of June 30, 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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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.

No single customer accounted for 10% or more of consolidated net sales for the six months ended June 30, 2023 or 2022.

One customer accounted for 22 % of accounts receivable at June 30, 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.

One customer accounted for 59 % and 66 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at June 30, 2023 and December 31, 2022, respectively.

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

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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

Contract Balance Type Balance Sheet Location June 30, 2023 December 31, 2022

Current portion of deferred costs Current contract assets $ 1,162 $ 1,243

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Non-current portion of deferred revenues Long-term contract liabilities 4,220 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.

*Management notes that the remaining “Contract liabilities” balance not included in the above table (which as of June 30, 2023 and December 31, 2022 is $ 1,602 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.

There were no material changes to contract asset balances for the six months ended June 30, 2023 as a result of changes in estimates or impairments.

The change in the contract liability balance from December 31, 2022 to June 30, 2023 was primarily due to the increase in upfront support billings received in the first six 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 months ended March 31, 2023 was 300.0 % compared with ( 8.4 )% for the corresponding period in the prior year.

The Company’s effective tax rate from continuing operations for the three and six months ended June 30, 2023 was 4.7 % and 6.6 %, respectively, compared with 510.9 % and ( 14.5 )% 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 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.

For the three and six months ended June 30, 2023 and 2022, the effective tax rates from continuing operations differed from 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.

As of June 30, 2023 and December 31, 2022, the Company had reserves for uncertain tax positions of $ 674 and $ 637 , respectively.

There were no material changes during the six months ended June 30, 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 June 30, 2023 may decrease $ 37 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.

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

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:

Lease expense from continuing operations was $ 422 and $ 537 for the three months ended June 30, 2023 and 2022, respectively, and was $ 874 and $ 1,081 for the six months ended June 30, 2023 and 2022, respectively.

Short-term operating lease costs were $ 15 and $ 43 for the three months ended June 30, 2023 and 2022, respectively, and were $ 40 and $ 98 for the six months ended June 30, 2023 and 2022, respectively.

Maturities of lease liabilities as of June 30, 2023 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Remainder of 2023 $ 820

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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 $ 3,843 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 these leases was $ 4,145 as of June 30, 2023 and the non-current portion of the net investment in these leases was $ 4,584 as of June 30, 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 $ 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:

Interest income from sales-type leases was $ 174 and $ 193 during the three months ended June 30, 2023 and 2022, respectively, and was $ 342 and $ 400 during the six months ended June 30, 2023 and 2022, respectively.

The future undiscounted cash flows from these leases as of June 30, 2023 are:

Remainder of 2023 $ 2,822

2 unchanged sentences

Difference between undiscounted cash flows and discounted cash flows $ 975

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.

In 2021, the Company began entering 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 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.

As of June 30, 2023, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $ 1,880 and $ 704 , respectively.

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

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:

Depreciation expense for these assets was $ 94 and $ 188 for the three and six months ended June 30, 2023, respectively.

Lease revenue recognized was $ 139 and $ 277 for the three and six months ended June 30, 2023, respectively, in service sales in the consolidated statements of operations.

As of June 30, 2023, minimum future lease payments to be recognized on the operating leases are as follows:

Remainder of 2023 $ 277

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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.

There were no assets or liabilities of the inertial navigation business as of December 31, 2022 or June 30, 2023.

Please see Note 1 for further discussion.

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

Three Months Ended Six Months Ended

June 30, June 30,

Product $ 6,959 $ 14,766

Service 325 461

Net sales 7,284 15,227

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Weighted average number of common shares outstanding:

Basic 18,564 18,507

Diluted 18,564 18,507

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

Three months ended

Cash provided by operating activities - discontinued operations $ 366

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

Three Months Ended Six Months Ended

June 30, June 30,

Cash used in operating activities - discontinued operations $ ( 3,967 ) $ ( 3,601 )

Cash provided by (used in) investing activities - discontinued operations $ 35 $ ( 87 )

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

Three months ended

Three Months Ended Six Months Ended

June 30, June 30,

Depreciation $ 223 $ 531

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