What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-09 · 219 added, 274 removed, 452 unchanged (52% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

ASSETS (unaudited)

2 unchanged sentences

Marketable securities 57,710 55,680

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

Accounts receivable, net of allowance for credit losses of $ 1,010 and $ 1,268 as of September 30, 2023 and December 31, 2022, respectively

28,190 27,427

32 unchanged sentences

Authorized 30,000,000 shares;

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

21,066,899 and 20,631,152 shares issued at September 30, 2023 and December 31, 2022, respectively;

and 19,610,790 and 19,198,458 shares outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 164,505 160,475

2 unchanged sentences

169,097 168,507

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

treasury stock at cost, common stock, 1,456,109 and 1,432,694 shares as of September 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

8 unchanged sentences

General and administrative 4,367 5,559 13,139 19,532

Goodwill impairment charge 5,333 — 5,333 —

Long-lived assets impairment charge 657 — 657 —

Total costs and expenses 38,576 36,140 106,660 109,135

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

Loss from operations ( 5,027 ) ( 971 ) ( 5,251 ) ( 6,262 )

Interest income 997 389 2,660 798

1 unchanged sentence

Other (expense) income, net ( 121 ) 569 ( 583 ) 1,561

Income (loss) from continuing operations before income tax expense 971 46 977 ( 3,892 )

Loss from continuing operations before income tax expense ( 4,151 ) ( 14 ) ( 3,174 ) ( 3,906 )

Income tax expense from continuing operations 95 81 159 645

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

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

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

Net income (loss) from continuing operations per common share

Net loss from continuing operations $ ( 4,246 ) $ ( 95 ) $ ( 3,333 ) $ ( 4,551 )

Net income from discontinued operations, net of tax — 29,741 — 28,061

Net (loss) income $ ( 4,246 ) $ 29,646 $ ( 3,333 ) $ 23,510

Net loss from continuing operations per common share

Basic $ ( 0.22 ) $ ( 0.01 ) $ ( 0.17 ) $ ( 0.25 )

Diluted $ ( 0.22 ) $ ( 0.01 ) $ ( 0.17 ) $ ( 0.25 )

Net loss from discontinued operations per common share

Net income from discontinued operations per common share

Basic $ 0.00 $ 1.59 $ 0.00 $ 1.51

Diluted $ 0.00 $ 1.59 $ 0.00 $ 1.51

Net income (loss) per common share

Net (loss) income per common share

Basic $ ( 0.22 ) $ 1.58 $ ( 0.17 ) $ 1.27

6 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands, unaudited)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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

Other comprehensive income (loss), net of tax:

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

Net (loss) income $ ( 4,246 ) $ 29,646 $ ( 3,333 ) $ 23,510

Other comprehensive loss, net of tax:

Unrealized gain on available-for-sale securities — — 12 —

Foreign currency translation adjustment ( 267 ) ( 646 ) ( 124 ) ( 1,258 )

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

Other comprehensive loss, net of tax (1)

( 267 ) ( 646 ) ( 112 ) ( 1,258 )

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

Total comprehensive (loss) income $ ( 4,513 ) $ 29,000 $ ( 3,445 ) $ 22,252

(1) Tax impact was nominal for all periods.

10 unchanged sentences

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

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

Net loss — — — ( 4,246 ) — — — ( 4,246 )

Other comprehensive loss — — — — ( 267 ) — — ( 267 )

Stock-based compensation — — 559 — — — — 559

Issuance of common stock under employee stock purchase plan 17 — 123 — — — — 123

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 81 1 133 — — — — 134

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

Balance at September 30, 2023 21,067 $ 211 $ 164,505 $ 8,603 $ ( 4,222 ) ( 1,456 ) $ ( 12,090 ) $ 157,007

Common Stock Additional

5 unchanged sentences

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

Net income — — — 913 — — — 913

Other comprehensive income — — — — 155 — — 155

Net loss — — — ( 3,333 ) — — — ( 3,333 )

Other comprehensive loss — — — — ( 112 ) — — ( 112 )

Stock-based compensation — — 1,433 — — — — 1,433

Issuance of common stock under employee stock purchase plan 17 — 123 — — — — 123

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

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 419 5 2,474 — — — — 2,479

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

Balance at September 30, 2023 21,067 $ 211 $ 164,505 $ 8,603 $ ( 4,222 ) ( 1,456 ) $ ( 12,090 ) $ 157,007

Common Stock Additional

Capital Accumulated Deficit Accumulated

Capital (Accumulated Deficit) Retained Earnings Accumulated

Comprehensive Loss Treasury Stock Total

1 unchanged sentence

Shares Amount Shares Amount

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

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

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

Net income — — — 29,646 — — — 29,646

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

1 unchanged sentence

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

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

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

Common Stock Additional

Capital Accumulated Deficit Accumulated

Capital (Accumulated Deficit) Retained Earnings Accumulated

Comprehensive Loss Treasury Stock Total

2 unchanged sentences

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

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

Net income — — — 23,510 — — — 23,510

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

3 unchanged sentences

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

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

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

See accompanying Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

(in thousands, unaudited)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

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

Net (loss) income $ ( 3,333 ) $ 23,510

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

Provision for doubtful accounts ( 1 ) 367

Provision for credit losses ( 168 ) 459

Depreciation and amortization 10,119 10,756

Impairment charge to goodwill and long-lived assets 5,990 —

Deferred income taxes 1 ( 31 )

1 unchanged sentence

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

Unrealized currency translation loss (gain) 19 ( 361 )

Unrealized currency translation gain ( 150 ) ( 808 )

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

Gain on sale of inertial navigation business

Changes in operating assets and liabilities:

11 unchanged sentences

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

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

Purchases of marketable securities ( 17,441 ) ( 55,203 )

7 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 14 ) ( 402 )

Net decrease in cash and cash equivalents ( 7,048 ) ( 981 )

Net (decrease) increase in cash and cash equivalents ( 9,572 ) 3,026

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

15 unchanged sentences

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

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

KVH’s service sales primarily represent 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-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.

Revenue from our 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.

9 unchanged sentences

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

however, any maintenance costs on the hardware 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.

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

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.

KVH's marine leisure business is highly seasonal, and seasonality can also impact the Company's commercial marine business, although typically to a lesser degree.

Historically, the Company has generated the majority of its marine leisure product revenues during the first and second quarters of each year, and these revenues typically decline in the third and fourth quarters of each year, compared to the first two quarters.

Temporary suspensions of the Company's airtime services typically increase in the fourth and first quarters of each year as boats are placed out of service during the winter months.

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 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 fee comprised 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 did not have any continuing involvement in these operations other than the transition services, which were recorded as an offset to general and administrative expenses in continuing operations.

As of September 30, 2023, the Company is no longer providing transition services.

For the three and nine months ended September 30, 2023, the Company recognized an offset to general and administrative expenses associated with the Transition Services Agreement of $( 13 ) and $ 710 , respectively.

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

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

The results for the three and nine months ended September 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.

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 Company recorded a total of net foreign currency exchange gains (losses), which are comprised of both realized and unrealized foreign currency exchange gains and losses, in its accompanying consolidated statements of operations of $ 92 and $ 450 for the three months ended September 30, 2023 and 2022, respectively, and $( 18 ) and $ 1,009 for the nine months ended September 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.

2 unchanged sentences

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.

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 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.

There were also modifications to Mr.

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

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 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 .

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

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

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

Bruun, Roger A.

Kuebel, Felise Feingold and Robert Balog in order to retain their services and provide them with certain benefits in the event that the Company terminates the executive’s employment without cause (as defined in the agreement) or the executive terminates his or her employment for good reason (as defined in the agreement) (either such termination, a “Qualifying Termination”), including following a change of control.

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

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.

CEO Executive Employment Agreement

In May 2022, the Company entered into an executive employment agreement with Brent C.

Bruun in order to retain his services and provide him with certain benefits in the event that the Company terminates his employment without cause (as defined in the agreement) or Mr.

Bruun terminates his employment for good reason (as defined in the agreement) (either such termination, a “Qualifying Termination”), including following a change in control.

The agreement provided that, if Mr.

Bruun continued to serve as an employee through December 31, 2022 (the “Retention Date”), the Company would pay him a retention bonus equal to 75% of his base salary on the agreement date, and the Company would accelerate the vesting of his 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.

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

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

In addition to the amendment to Mr.

As of September 30, 2023, the Company has accrued approximately $ 286 for the retention bonus payable to Mr.

Contemporaneously with the amendment to Mr.

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

1 unchanged sentence

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) Recently Issued Accounting Standards

Standards Implemented

ASC Update No.

2016-13, ASC Update No.

2018-19, ASC Update No.

2019-04, ASC Update No.

2019-05, ASC Update No.

2019-10, ASC Update No.

2019-11, ASC Update No.

2020-02 and ASC Update No.

In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Codification (ASC) Update No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

The purpose of Update No.

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.

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.

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

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.

2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments .

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.

2019-05, Financial Instruments—Credit Losses (Topic 326):

Targeted Transition Relief .

The amendments in the update ease the transition for entities adopting ASC Update 2016-13 and increase the comparability of financial statement information.

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.

2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates.

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.

2019-11, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (Topic 326).

The update is effective for entities that have adopted ASU 2016-13.

The purpose of Update No.

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.

2020-02, Financial Instruments – Credit Losses (Topic 326) and

Leases (Topic 842).

The purpose of Update No.

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 .

The vintage disclosure portion of this guidance is applicable to the Company, which requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20.

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.

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.

(3) Recently Issued Accounting Standards and Accounting Standards Not yet Adopted

There are no recent accounting pronouncements issued by the FASB, but not yet effective, that the Company expects would have a material impact on the Company's financial statements.

(4) Marketable Securities

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

June 30, 2023 Amortized

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

September 30, 2023 Amortized

Money market mutual funds $ 57,710 $ — $ — $ 57,710

5 unchanged sentences

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

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.

Interest income from marketable securities was $ 744 and $ 193 during the three months ended September 30, 2023 and 2022, respectively, and $ 2,019 and $ 203 during the nine months ended September 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 $ 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-based compensation expense was $ 558 and $ 1,103 , excluding $ 1 and $ 6 of compensation charges related to our Amended and Restated 1996 Employee Stock Purchase Plan, or the ESPP, for the three months ended September 30, 2023 and 2022, respectively, and $ 1,408 and $ 2,663 , excluding $ 25 and $ 32 of compensation shares related to the ESPP, for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, there was $ 2,272 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.66 years.

As of September 30, 2023, there was $ 2,953 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.52 years.

Stock Options

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.

During the three months ended September 30, 2023, the Company issued 14 shares of common stock upon the exercise of stock options and received $ 113 as payment for the exercise price.

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

Additionally, during the three months ended June 30, 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.

Additionally, during the three months ended September 30, 2023, no stock options were granted and 133 stock options expired, were canceled or were forfeited.

During the nine months ended September 30, 2023, the Company issued 274 shares of common stock upon the exercise of stock options and received $ 2,480 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.

Additionally, during the nine months ended September 30, 2023, 317 stock options were granted and 564 stock options expired, were canceled or were forfeited.

During the nine months ended September 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 six months ended June 30, 2023 and 2022 are as follows:

Six Months Ended June 30,

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

Nine Months Ended September 30,

Risk-free interest rate 4.49 % 2.97 %

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Dividend yield 0 % 0 %

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.

As of September 30, 2023, there were 1,230 options outstanding with a weighted average exercise price of $ 9.57 per share and 510 options exercisable with a weighted average exercise price of $ 9.56 per share.

Restricted Stock

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.

During the three months ended September 30, 2023, 66 shares of restricted stock were granted with a weighted average grant date fair value of 8.75 per share and no shares of restricted stock were forfeited.

Additionally, during the three months ended September 30, 2023, 7 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, 2023, 217 shares of restricted stock were granted with a weighted average grant date fair value of $ 9.49 per share and 72 shares of restricted stock were forfeited.

Additionally, during the nine months ended September 30, 2023, 101 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, 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 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.

During the three months ended September 30, 2023 and 2022, 17 and 0 shares were issued under the ESPP plan, respectively.

During the nine months ended September 30, 2023 and 2022, 17 and 22 shares were issued under the ESPP plan, respectively.

The Company recorded compensation charges related to the ESPP of $ 1 and $ 6 for the three months ended September 30, 2023 and 2022, respectively, and $ 25 and $ 32 for the nine months ended September 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 and six months ended June 30, 2023 and 2022:

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

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 nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

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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 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 )

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

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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

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

Other comprehensive loss ( 267 ) ( 267 )

Net other comprehensive loss ( 267 ) ( 267 )

Balance, September 30, 2023 $ ( 4,222 ) $ ( 4,222 )

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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

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

Other comprehensive loss ( 646 ) ( 646 )

Net other comprehensive loss ( 646 ) ( 646 )

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

The balances for the nine months ended September 30, 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 income 143 12 155

Net other comprehensive income 143 12 155

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

Other comprehensive (loss) income ( 124 ) 12 ( 112 )

Net other comprehensive (loss) income ( 124 ) 12 ( 112 )

Balance, September 30, 2023 $ ( 4,222 ) $ — $ ( 4,222 )

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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

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.

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

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

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

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

For the three 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.

For the three and nine months ended September 30, 2023, since there was a net loss from continuing operations, the Company excluded 1,572 and 1,053 shares, respectively, 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 three and nine months ended September 30, 2022, since there was a net loss from continuing operations, the Company excluded 1,572 and 1,763 shares, respectively, 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 Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

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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.

Inventories as of September 30, 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 June 30, 2023 and December 31, 2022 consist of the following:

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

September 30,

2023 December 31,

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$ 49,407 $ 53,118

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.

Depreciation expense was $ 3,180 and $ 3,283 for the three months ended September 30, 2023 and 2022, respectively and $ 9,952 and $ 9,591 for the nine months ended September 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.

As part of the Company's impairment testing, an internally developed software asset was deemed the primary asset of the asset group known as KVH Media Group.

The $ 383 net asset value was determined to be fully impaired as a result of the review.

The movement associated with the impairment is reflected as a component of the office and computer equipment.

Please see Note 12 for additional details surrounding the impairment.

(9) Product Warranty

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

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

As of September 30, 2023 and December 31, 2022, the Company had accrued product warranty costs of $ 642 and $ 1,287 , respectively.

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

Six Months Ended

Nine Months Ended

September 30,

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 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

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

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

Money market mutual funds $ 57,710 $ 57,710 $ — $ — (a)

8 unchanged sentences

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

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

During the nine months ended September 30, 2023, the Company recorded an impairment charge of $ 5,990 to goodwill and long-lived assets.

There were no other impairments of the Company's non-financial assets noted during the nine months ended September 30, 2023.

Please see Note 12 for further discussion.

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 six months ended June 30, 2023:

(12) Goodwill and Other Long-Lived Assets

The Company performs a goodwill impairment test at least annually, or more frequently if certain events occur, or circumstances change, that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

A goodwill impairment loss is recognized for the amount that the carrying amount of a reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to that reporting unit.

The Company’s two reporting units are:

Mobile Broadband (MBB) and KVH Media Group (Media).

Other long-lived assets, which include intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

Recoverability of other long-lived assets is measured by a comparison of the carrying amount of an asset group to its future undiscounted cash flows.

If these comparisons indicate that an asset group is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset group exceeds its related estimated fair value.

The Company has determined that the assets within each of the Company's reporting units (MBB and Media) are highly interrelated and interdependent on each other to generate revenues, and thus independent cash flows are not identifiable at a level lower than that of these reporting units.

Accordingly, the Company's asset groups were determined to be its reporting units (MBB and Media).

In the third quarter of 2023, the Company experienced a sustained decrease in its stock price, which was identified by the Company as an indicator of impairment.

Consequently, the Company performed a quantitative assessment of impairment of goodwill and other long-lived assets for the MBB and Media reporting units and asset groups.

These assessments require considerable judgment and are largely based on assumptions and estimates developed by management including estimation of future cash flows, estimation of long-term growth rates, determination of the period over which future cash flows will occur, determination of a weighted average cost of capital, and consideration of market, industry, and other factors.

In performing the quantitative impairment assessment for goodwill, the Company determined the fair value of its reporting units by discounting its estimated future cash flows using an appropriate weighted average cost of capital.

As of September 30, 2023, the estimated fair values of the MBB and Media reporting units were lower than their carrying values.

After recognition of a long-lived asset impairment charge (as discussed below), the Company recognized a goodwill impairment charge of $ 5,333 , which represented the total goodwill for both reporting units, in the consolidated statements of operations for the three and nine months ended September 30, 2023.

In performing the quantitative impairment assessment for other long-lived assets, the Company used undiscounted cash flows expected to be generated over the estimated remaining useful life of the primary asset of each asset group, to determine whether the carrying amounts of each asset group are recoverable.

As of September 30, 2023, the Company’s analysis indicated that the carrying amount of the MBB asset group is recoverable, and therefore no impairment charge was recognized.

As of September 30, 2023, the Company’s analysis indicated that the carrying amount of the Media asset group is not recoverable and that such carrying amount exceeded its fair value.

Accordingly, the Company recognized a long-lived assets impairment charge of $ 657 in the consolidated statements of operations for the three and nine months ended September 30, 2023.

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

Balance at December 31, 2022

Impairment ( 5,333 )

Foreign currency translation adjustment 25

Balance at June 30, 2023

Balance at September 30, 2023

Intangible Assets

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

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

Balance at December 31, 2022

1 unchanged sentence

Intangible assets acquired in asset acquisition 35

Impairment ( 274 )

Foreign currency translation adjustment 2

Balance at June 30, 2023

Balance at September 30, 2023

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

These intangible assets are being amortized on a straight-line basis over the estimated useful life of 10 years for acquired subscriber relationships.

These intangible assets were being amortized on a straight-line basis over the estimated useful life of 10 years for acquired subscriber relationships.

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

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

This acquisition did not meet the definition of a business under ASC 2017-01, Business Combinations (Topic 805)-Clarifying the Definition of a Business , which the Company adopted on October 1, 2016.

The Company ascribed $ 100 of the initial purchase price to the acquired subscriber relationships definite-lived intangible assets with an initial estimated useful life of 10 years.

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

As of June 30, 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 $ 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 June 30, 2023 and December 31, 2022, respectively:

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

Gross Carrying Amount Accumulated Amortization Net Carrying Value

June 30, 2023

September 30, 2023

Subscriber relationships $ — $ — $ —

11 unchanged sentences

$ 10,847 $ 10,443 $ 404

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 related to intangible assets was $ 19 and $ 90 for the three months ended September 30, 2023 and 2022, respectively, and $ 167 and $ 409 for the nine months ended September 30, 2023 and 2022, respectively.

Amortization expense was categorized as general and administrative expense.

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,

Remainder of 2023 39

2028 and thereafter 4

Total future amortization expense $ 283

For definite-lived intangible assets, the Company assesses the carrying value of these assets whenever events or circumstances indicate that the carrying value may not be recoverable.

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

There were no events or changes in circumstances during the six months ended June 30, 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 and six months ended June 30, 2023 and 2022:

Three Months Ended Six Months Ended

June 30, June 30,

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

3 unchanged sentences

Total net sales $ 33,549 $ 35,169 $ 101,409 $ 102,873

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.

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.

Revenue recognized during the three months ended September 30, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $ 533 and $ 572 , respectively.

Revenue recognized during the nine months ended September 30, 2023 and 2022 from amounts included in contract liabilities at the beginning of the period was $ 1,826 and $ 1,645 , respectively.

For product sales, the delivery of the Company’s performance obligations is 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 is 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 other factors.

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 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.

Product sales accounted for 12 % and 19 % of the Company's consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 14 % and 19 % of the Company's consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively.

Service sales of VSAT Broadband airtime service accounted for 82 % and 76 % of the Company's consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 80 % and 74 % of the Company's consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively.

The balance of service sales is 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.

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 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.

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

Revenues are based upon customer location and revenues from international locations represented 69 % and 62 % of consolidated net sales for the three months ended September 30, 2023 and 2022, respectively, and 67 % and 61 % of consolidated net sales for the nine months ended September 30, 2023 and 2022, respectively.

Sales to Singapore customers represented 18 % and 17 % of the Company's consolidated net sales for the three months ended September 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 September 30, 2023 or 2022.

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

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

As of September 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 six months ended June 30, 2023 or 2022.

One customer accounted for 22 % of accounts receivable at June 30, 2023.

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

Two customers accounted for approximately 18 % and 11 % of accounts receivable at September 30, 2023, respectively.

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

One customer accounted for 64 % and 66 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at September 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.

1 unchanged sentence

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 June 30, 2023 and December 31, 2022:

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

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

Current portion of deferred costs Current contract assets $ 1,130 $ 1,243

2 unchanged sentences

Non-current portion of deferred revenues Long-term contract liabilities 3,905 4,315

*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.

*Management notes that the remaining “Contract liabilities” balance not included in the above table (which as of September 30, 2023 and December 31, 2022 is $ 1,600 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 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.

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

The change in the contract liability balance from December 31, 2022 to September 30, 2023 was primarily due to the increase in upfront support billings received in the first nine 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 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 Company’s effective tax rate from continuing operations for the three and nine months ended September 30, 2023 was ( 2.3 )% and ( 5.0 )%, respectively, compared with ( 578.6 )% and ( 16.5 )% for the corresponding periods in the prior year.

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

For the three and six months ended June 30, 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.

For the three and nine months ended September 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.

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.

As of September 30, 2023 and December 31, 2022, the Company had reserves for uncertain tax positions of $ 693 and $ 637 , respectively.

There were no material changes during the nine months ended September 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 September 30, 2023 may decrease $ 38 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 $ 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:

Lease expense from continuing operations was $ 417 and $ 507 for the three months ended September 30, 2023 and 2022, respectively, and was $ 1,291 and $ 1,588 for the nine months ended September 30, 2023 and 2022, respectively.

Short-term operating lease costs were $ 15 and $ 41 for the three months ended September 30, 2023 and 2022, respectively, and were $ 55 and $ 139 for the nine months ended September 30, 2023 and 2022, respectively.

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

Remainder of 2023 $ 400

13 unchanged sentences

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

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 these leases was $ 3,739 as of September 30, 2023 and the non-current portion of the net investment in these leases was $ 3,984 as of September 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 $ 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:

Interest income from sales-type leases was $ 159 and $ 191 during the three months ended September 30, 2023 and 2022, respectively, and was $ 501 and $ 591 during the nine months ended September 30, 2023 and 2022, respectively.

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

Remainder of 2023 $ 1,547

4 unchanged sentences

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

As of June 30, 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.

As of September 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 $ 798 , respectively.

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

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:

Depreciation expense for these assets was $ 94 and $ 282 for the three and nine months ended September 30, 2023, respectively.

Lease revenue recognized was $ 138 and $ 415 for the three and nine months ended September 30, 2023, respectively, in service sales in the consolidated statements of operations.

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

Remainder of 2023 $ 138

2 unchanged sentences

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 June 30, 2023.

There were no assets or liabilities of the inertial navigation business as of December 31, 2022 or September 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 and six months ended 2022:

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

Product $ 1,276 $ 16,042

6 unchanged sentences

Sales, marketing and support 348 3,035

Loss from discontinued operations before income tax expense ( 1,289 ) ( 1,749 )

Other income, net 12 81

Loss from discontinued operations before tax expense $ ( 1,255 ) $ ( 1,680 )

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

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

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

Income tax expense on discontinued operations 228 228

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

Net loss from discontinued operations per common share

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

Net income from discontinued operations per common share

Basic $ 1.59 $ 1.51

4 unchanged sentences

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

Cash used in operating activities - discontinued operations $ ( 252 ) $ ( 3,853 )

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

Cash used in investing activities - discontinued operations $ ( 220 ) $ ( 307 )

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

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

Depreciation $ 91 $ 622

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