What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-03-15 compared with 2023-03-16 · 452 added, 493 removed, 930 unchanged (50% of the section changed)

7 unchanged sentences

Our internal control over financial reporting is the process designed by and under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America.

Management has evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Management has evaluated the effectiveness of our internal control over financial reporting using the criteria

set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013).

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2023 and concluded that it was effective.

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/s/ GRANT THORNTON LLP

Boston, Massachusetts

Hartford, Connecticut

March 15, 2024

Other Information

During the fourth quarter of 2023, no director or officer (as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended) adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as those terms are defined in Item 408(a)(1) of Regulation S-K), including any amendment or modification of the amount, price, or timing of the purchase or sale of securities under such an existing trading arrangement.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

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Consolidated Statements of Operations for the years ended December 31, 202 3 and 202 2

Consolidated Statements of Comprehensive Income ( Loss ) for the years ended December 31, 202 2 and 20 2 1

Consolidated S ta tem ents of Com prehensive (Loss) Income for the years ended December 31, 202 3 and 202 2

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 202 3 and 202 2

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Specimen certificate for the common stock 10-K March 2, 2018 4.1

Stockholder Rights Agreement, dated as of August 18, 2022, between KVH Industries, Inc.

and Computershare Trusts Company, N.A., as Rights Agent 8-K August 19, 2022 4.1

Amendment No.

1 to Stockholder Rights Agreement, dated as of February 3, 2023, by and between KVH Industries, Inc.

and Computershare Trust Company, N.A.

8-K February 3, 2023 4.1

Description of Capital Stock X

6 unchanged sentences

Form of Restricted Stock Agreement granted under the 2016 Equity and Incentive Plan 10-K March 9, 2017 10.7

Policy Regarding Automatic Grants to Non-Employee Directors 10-Q May 6, 2009 10.23

Policy Regarding Automatic Grants to Non-Employee Directors X

Description Filed with

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Form Filing Date Exhibit No.

Amended and Restated Credit Agreement dated as of October 30, 2018 among KVH Industries, Inc., Bank of America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, and the Lenders party hereto 10-Q October 31, 2018 10.1

Amended and Restated Security Agreement dated as of October 30, 2018 between KVH Industries, Inc.

and Bank of America, N.A., as Administrative Agent 10-Q October 31, 2018 10.2

Amended and Restated Pledge Agreement dated as of October 30, 2018 between KVH Industries, Inc.

and Bank of America, N.A., as Administrative Agent with respect to KVH Industries A/S 10-Q October 31, 2018 10.3

Amended and Restated Pledge Agreement dated as of October 30, 2018 between KVH Industries, Inc.

and Bank of America, N.A., as Administrative Agent with respect to KVH Industries U.K.

Limited 10-Q October 31, 2018 10.4

Consent dated as of May 13, 2019 among KVH Industries, Inc., as Borrower, Bank of America, N.A., as Lender and Administrative Agent, and The Washington Trust Company, as Lender, under the Amended and Restated Credit Agreement dated as of October 30, 2018 among such parties 8-K May 16, 2019 10.4

First Amendment to Amended and Restated Credit Agreement as of July 30, 2020 by and among KVH Industries, Inc., Bank of America, N.A., and The Washington Trust Company

July 31, 2020 10.3

Second Amendment to Amended and Restated Credit Agreement dated as of October 29, 2021 by and among KVH Industries, Inc., and Bank of America, N.A.

November 4, 2021 10.1

Cooperation Agreement, dated as of April 8, 2020, by and among KVH Industries, Inc., Vintage Capital Management, LLC, and Kahn Capital Management, LLC

8-K April 9, 2020

Promissory Note dated as of May 1, 2020 and executed on May 3, 2020 by KVH Industries, Inc., in favor of Bank of America, N.A.

8-K May 6, 2020

Separation and Consulting Agreement dated as of March 6, 2022 between KVH Industries, Inc.

and Martin Kits van Heyningen 10-Q May 10, 2022 10.1

Executive Employment Agreement dated as of May 2, 2022 between KVH Industries, Inc.

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Deckoff and the Investor Group Designees (as defined therein) 8-K February 3, 2023 10.1

Form of Indemnification Agreement for directors and executive officers X

KVH Compensation Recovery Policy X

List of Subsidiaries X

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Rule 1350 certification X

101.1 Interactive Data File regarding (a) our Consolidated Balance Sheets as of December 31, 2022 and 2021, (b) our Consolidated Statements of Operations for the years ended December 31, 2022 and 2021, (c) our Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022 and 2021, (d) our Consolidated Statements of Stockholders' Equity for the years ended December 31, 2022 and 2021, (e) our Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021, and (e) the Notes to such Consolidated Financial Statements X

101.1 Interactive Data File regarding (a) our Consolidated Balance Sheets as of December 31, 2023 and 2022, (b) our Consolidated Statements of Operations for the years ended December 31, 2023 and 2022, (c) our Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2023 and 2022, (d) our Consolidated Statements of Stockholders' Equity for the years ended December 31, 2023 and 2022, (e) our Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022, and (e) the Notes to such Consolidated Financial Statements X

104.1 Cover Page Interactive Data File (embedded within the Inline XBRL document) X

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KUEBEL Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) March 15, 2024

/S/ CATHY-ANN MARTINE-DOLECKI Chair of the Board of Directors March 16, 2023

Cathy-Ann Martine-Dolecki

DODEZ Director March 16, 2023

TOLLEY Chairman of the Board of Directors March 15, 2024

/S/ STEPHEN H.

DECKOFF Director March 15, 2024

HERNANDEZ Director March 15, 2024

KAGAN Director March 15, 2024

TOLLEY Director March 16, 2023

/S/ CATHY-ANN MARTINE-DOLECKI Director March 15, 2024

Cathy-Ann Martine-Dolecki

/S/ CHARLES R.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Recognition of satellite connectivity services revenue

As described further in Note 1(e) to the Company’s financial statements, the Company's satellite connectivity services revenue is recognized monthly based primarily on contracted fixed-fee schedules as well as any overages for minutes or megabytes of traffic processed.

We identified satellite connectivity services revenue as a critical audit matter.

The principal considerations for our determination that satellite connectivity service revenue is a critical audit matter is the complexity of the processes used by management for recognizing revenue, given the diversity of data sources and the number of IT systems involved, including third party systems.

Auditing this revenue stream requires a high degree of auditor subjectivity and effort in designing and performing procedures to evaluate the appropriateness of the recorded revenue amounts.

Our audit procedures related to the recognition of satellite connectivity services revenue included the following, among others.

• We tested the design and operating effectiveness of controls related to management’s review and validation of data from third parties used as an input in recorded revenue amounts, as well as the controls over review of appropriate revenue recognition for this revenue stream.

• We obtained the attestation report on the design and operating effectiveness of controls at the third-party billing service provider, and tested controls over management’s review of the attestation report, including identification of controls at the Company which are responsive to the complementary user entity controls identified in the report.

We also tested the design and operating effectiveness of these complementary user entity controls.

• We tested the design and operating effectiveness of IT general controls over the IT system used to process and record the invoices for this stream.

• We selected a sample of invoices and evaluated those invoices for proper revenue recognition based on agreement to billing rates per the signed customer contract and usage data from third party service provider reports.

Impairment analysis for the mobile broadband asset group

As described further in notes 1 and 8 to the financial statements, long-lived assets, which include finite-lived intangible assets and property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable.

In the third quarter of 2023, management identified indicators of potential impairment of its mobile broadband (MBB) asset group.

As a result, management performed an impairment analysis for its MBB asset group and concluded that the carrying value of the MBB asset group can be recovered through the future undiscounted cash flows expected from the use and eventual disposition of the asset group.

We identified the impairment analysis for the MBB asset group as a critical audit matter.

The principal consideration for our determination that the impairment analysis for the MBB asset group is a critical audit matter is that the analysis requires management to use significant inputs and assumptions in developing the MBB asset group’s future undiscounted cash flows, including but not limited to revenue growth rates, cost projections, and disposition values of assets within the asset group.

Evaluating the reasonableness of these inputs and assumptions requires significant auditor judgment.

Our audit procedures related to the impairment analysis for the MBB asset group included the following, among others:

• We tested the design and operating effectiveness of relevant controls, including controls over management’s identification of indicators of impairment and determination of inputs and assumptions used to develop the asset group’s future undiscounted cash flows.

• We evaluated the reasonableness of the inputs and assumptions used to develop the asset group’s future undiscounted cash flows by comparing them to historical amounts, and industry and economic trends and by tracing them to underlying source information.

• We performed sensitivity analyses around the inputs and assumptions underlying management’s impairment analysis.

• We involved valuation professionals, with specialized skills and knowledge, to assist in assessing the reasonableness of the undiscounted cash flow model used in the impairment analysis.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2014.

Boston, Massachusetts

Hartford, Connecticut

March 15, 2024

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(in thousands, except share and per share data)

2023 2022 (revised)

Current assets:

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Marketable securities 58,477 55,680

Accounts receivable, net of allowance for doubtful accounts of $ 1,268 and $ 1,597 as of December 31, 2022 & December 31, 2021, respectively

Accounts receivable, net of allowance for credit losses of $ 1,168 and $ 1,268 as of December 31, 2023 & December 31, 2022, respectively

25,670 27,427

Inventories, net 22,730 15,833

Inventories 19,046 22,730

Prepaid expenses and other current assets 4,331 3,067

Current contract assets 1,243 1,230

Current assets held for sale — 15,841

Total current assets 118,818 129,960

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Other non-current assets 3,618 5,037

Non-current contract assets 3,033 3,104

Deferred income tax asset 256 259

Non-current assets held for sale — 7,169

Total assets $ 172,634 $ 196,254

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Accounts payable $ 4,780 $ 20,449

Accrued airtime 5,508 2,108

Accrued compensation and employee-related expenses 4,466 7,621

Accrued loss on future firm purchase commitments 3,569 —

Accrued other 2,588 2,126

Accrued product warranty costs 828 1,287

Contract liabilities 3,108 3,778

Deferred revenue 1,774 1,365

Current operating lease liability 786 1,532

Liability for uncertain tax positions 673 637

Current liabilities held for sale — 3,939

Total current liabilities 24,972 37,125

Other long-term liabilities — 22

Long-term operating lease liability 289 636

Long-term contract liabilities 4,315 4,466

Deferred income tax liability 1 55

Non-current liabilities held for sale — 8

Total liabilities $ 25,262 $ 37,816

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Additional paid-in capital 165,140 160,475

Retained earnings (accumulated deficit) 11,936 ( 12,165 )

(Accumulated deficit) retained earnings ( 1,704 ) 13,718

Accumulated other comprehensive loss ( 4,185 ) ( 4,110 )

159,462 170,289

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

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

( 12,090 ) ( 11,851 )

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Year Ended December 31,

2023 2022 (revised)

Product $ 17,757 $ 26,842

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General and administrative 18,899 24,656

Goodwill impairment charge 5,333 —

Long-lived assets impairment charge 657 —

Total costs and expenses 149,724 144,475

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Interest expense 1 3

Other income, net 772 7,111

Other (expense) income, net ( 1,404 ) 772

Loss from continuing operations before income tax expense ( 15,104 ) ( 3,449 )

Income tax expense (benefit) from continuing operations 546 ( 108 )

Income tax expense from continuing operations 318 546

Net loss from continuing operations ( 15,422 ) ( 3,995 )

Income from discontinued operations, net of tax — 28,025

Net Income (loss) $ 24,101 $ ( 9,763 )

Net (loss) income $ ( 15,422 ) $ 24,030

Net loss from continuing operations per common share

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Diluted $ 0.00 $ 1.50

Net income (loss) per common share

Net (loss) income per common share

Basic $ ( 0.81 ) $ 1.29

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

Year Ended December 31,

Net Income (loss) $ 24,101 $ ( 9,763 )

2023 2022 (revised)

Net (loss) income $ ( 15,422 ) $ 24,030

Other comprehensive loss, net of tax:

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

Unrealized income (loss) on available-for-sale securities 12 ( 12 )

Foreign currency translation adjustment ( 87 ) ( 689 )

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( 75 ) ( 701 )

Total comprehensive income (loss) $ 23,400 $ ( 9,940 )

Total comprehensive (loss) income $ ( 15,497 ) $ 23,329

(1) Tax impact was nominal for all periods.

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Comprehensive

Loss Treasury Stock Total

Loss (revised) Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

Balance at December 31, 2020

Balance at December 31, 2021 (revised)

20,343 $ 203 $ 156,199 $ ( 10,312 ) $ ( 3,409 ) ( 1,433 ) $ ( 11,851 ) $ 130,830

Net loss — — — ( 9,763 ) — — — ( 9,763 )

Net income (revised) — — — 24,030 — — — 24,030

Other comprehensive loss — — — — ( 701 ) — — ( 701 )

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

Stock-based compensation — — 3,424 — — — — 3,424

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Exercise of stock options and issuance of restricted stock awards, net of forfeitures 247 3 675 — — — — 678

Balance at December 31, 2021

Balance at December 31, 2022 (revised)

20,631 $ 206 $ 160,475 $ 13,718 $ ( 4,110 ) ( 1,433 ) $ ( 11,851 ) $ 158,438

Net income — — — 24,101 — — — 24,101

Net loss — — — ( 15,422 ) — — — ( 15,422 )

Other comprehensive loss — — — — ( 75 ) — — ( 75 )

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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 2,464 — — — — 2,469

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

Balance at December 31, 2023 21,067 $ 211 $ 165,140 $ ( 1,704 ) $ ( 4,185 ) ( 1,456 ) $ ( 12,090 ) $ 147,372

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Year Ended December 31,

2023 2022 (revised)

Cash flows from operating activities:

Net income (loss) $ 24,101 $ ( 9,763 )

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

Provision for doubtful accounts

Net (loss) income $ ( 15,422 ) $ 24,030

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

Provision for credit losses 64 221

Depreciation and amortization

13,438 14,030

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

Deferred income taxes

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Gain on sale of inertial navigation business — ( 30,763 )

PPP loan forgiveness — ( 6,979 )

Changes in operating assets and liabilities:

Accounts receivable

3,686 ( 8,493 )

Prepaid expenses, other current assets, and current contract assets

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( 15,648 ) 11,364

Contract liabilities and long-term contract liabilities ( 580 ) ( 665 )

Deferred revenue 377 ( 452 )

Accrued compensation, product warranty and other 3,808 ( 4,578 )

Other long-term liabilities

Net cash provided by operating activities $ 2,530 $ 8,893

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Cash paid for acquisition of intangible assets ( 1,296 ) ( 54 )

Proceeds from sale of fixed assets — 100

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

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Maturities and sales of marketable securities 15,422 13,164

Net cash provided by (used in) investing activities $ 375 $ ( 6,708 )

Net cash (used in) provided by investing activities $ ( 14,714 ) $ 375

Cash flows from financing activities:

Proceeds from stock options exercised and employee stock purchase plan 2,604 972

Repurchase of treasury stock ( 239 ) —

Payment of finance lease ( 22 ) ( 264 )

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Effect of exchange rate changes on cash and cash equivalents 79 ( 296 )

Net increase (decrease) in cash and cash equivalents 9,680 ( 1,202 )

Net (decrease) increase in cash and cash equivalents ( 9,762 ) 9,680

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

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(1) Summary of Significant Accounting Policies

(a) Description of Business

(a) Revision for Correction of Immaterial Errors

KVH Industries, Inc.

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

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

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

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

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

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

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

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

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

(together with its subsidiaries, the Company or KVH) corrected for errors that were immaterial to its previously reported consolidated financial statements for the year ended December 31, 2022.

These errors were identified in connection with the preparation of the financial statements for the year ended December 31, 2023, and related primarily to the adoption and implementation of Accounting Standards Codification (“ASC”) No.

606, Revenue from Contracts with Customers (“ASC 606”) on January 1, 2018, specifically the assessment of performance obligations associated with the sales of antennas and airtime-related equipment.

The Company evaluated the materiality of these errors both qualitatively and quantitatively in accordance with Staff Accounting Bulletin (“SAB”) No.

99, Materiality, and SAB No.

108, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, and determined that the effect of these corrections was not material to the previously issued financial statements.

Therefore, the amounts in the previous period have been revised to reflect the correction of these errors.

Additionally, the Company revised its stockholder’s equity as of January 1, 2022, to correct these errors as of the beginning of the earliest year presented in these consolidated financial statements, resulting in a $ 1.9 million increase in stockholder's equity from the previously reported amount of $ 129.0 million to the corrected amount of $ 130.8 million.

There was no significant impact from these revisions on income taxes or earnings per share.

The consolidated Statement of Stockholders’ Equity for the year ended December 31, 2022 has also been revised to include the changes to net income as noted below.

The following table presents the effect of the error correction on the Company’s consolidated balance sheet as of December 31, 2022:

As of December 31, 2022

As Reported Adjustment As Corrected

Current contract assets $ 1,243 $ ( 1,243 ) $ —

Total current assets 131,203 ( 1,243 ) 129,960

Non-current contract assets 3,033 ( 3,033 ) —

Total assets 200,530 ( 4,276 ) 196,254

Contract liabilities 3,108 ( 1,743 ) 1,365

Total current liabilities 38,868 ( 1,743 ) 37,125

Long-term contract liabilities 4,315 ( 4,315 ) —

Total liabilities 43,874 ( 6,058 ) 37,816

Retained earnings (accumulated deficit) 11,936 1,782 13,718

Total stockholders’ equity 156,656 1,782 158,438

Total liabilities and stockholders’ equity 200,530 ( 4,276 ) 196,254

The following table presents the effect of the error corrections on the consolidated statement of income for the year ended December 31, 2022:

Year Ended December 31, 2022

As Reported Adjustment As Corrected

Net sales $ 138,878 $ ( 128 ) $ 138,750

Cost of product sales 25,184 ( 26 ) 25,158

Sales, marketing and support 23,229 ( 31 ) 23,198

Net loss from continuing operations ( 3,924 ) ( 71 ) ( 3,995 )

Net income (loss) 24,101 ( 71 ) 24,030

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

The following table presents the effect of the error corrections on the consolidated statement of cash flows for the year ended December 31, 2022:

Year Ended December 31, 2022

As Reported Adjustment As Corrected

Net income (loss) $ 24,101 $ ( 71 ) $ 24,030

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

Prepaid expenses, other current assets, and current contract assets ( 1,096 ) 13 ( 1,083 )

Other non-current assets and non-current contract assets 1,731 ( 71 ) 1,660

Contract liabilities and long-term contract liabilities ( 580 ) 128 ( 452 )

Net cash provided by operating activities 8,894 ( 1 ) 8,893

Effect of exchange rate changes on cash and cash equivalents (297) 1 (296)

The impact of these error corrections on relevant quarterly financial information is presented in Note 16 to these consolidated financial statements.

(b) Description of Business

KVH designs, develops, manufactures and markets mobile connectivity services and products for the marine and land markets.

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.

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 service and product 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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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 INDUSTRIES, INC.

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(in thousands, except per share amounts)

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

The working finalized capital adjustment, which resulted in a payment of $ 96 to EMCORE, was recorded in the fourth quarter of 2022.

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

government vessels.

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

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

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

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.

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.

In February 2024, the Company announced a staged wind-down of its product manufacturing operations at its Middletown, Rhode Island location.

The Company expects that it will continue its product manufacturing activities in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand and that it will cease substantially all manufacturing activity by the end of the second quarter of 2024.

The Company expects to continue to facilitate customer transition to third-party hardware products compatible with its mobile satellite communications services.

Please see Note 15 for additional details surrounding the wind-down of the Company's manufacturing activities.

On August 9, 2022, the Company sold its inertial navigation business to EMCORE Corporation for net proceeds of $ 54,904 , less specified deductions.

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

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

The 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.

As of December 31, 2022, the company recognized $ 923 of contra-expense associated with the Transition Services Agreement.

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 December 31, 2023, the Company is no longer providing transition services.

For the years ended December 31, 2023 and 2022, the Company recognized an offset to general and administrative expenses associated with the Transition Services Agreement of $ 710 and $ 923 , respectively.

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

Please see Note 14 for the discontinued operations disclosures.

(b) Principles of Consolidation

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

The accompanying consolidated financial statements of KVH Industries, Inc.

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See Note 14 for further information on the sale of the inertial navigation business.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods.

The 2021 consolidated financial statements reflect a $ 6,979 gain in other income related to the U.S.

Small Business Administration’s forgiveness of the PPP loan during the third quarter of 2021.

On an on-going basis, the Company evaluates its significant estimates, including those related to terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets and goodwill and estimated fair values of long-lived assets, including goodwill, amortization methods and periods.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates.

Changes in estimates are recorded in the period in which they become known.

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

Management Transition and Restructuring

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

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

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

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

Kits van Heyningen over the 12 months following his retirement.

Approximately $ 90 is accrued as of December 31, 2022.

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

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.

Please see Note 7 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

KVH INDUSTRIES, INC.

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(in thousands, except per share amounts)

the second quarter of 2022.

For the year ended December 31, 2022, the Company incurred $ 1,844 in severance and health insurance costs and $ 327 in legal and advisory fees in connection with this restructuring.

The combined expense of $ 2,171 was included in the financial statement line items of the accompanying consolidated statements of operations as follows:

costs of product sales of $ 12 , costs of service sales of $ 58 , research and development of $ 365 , sales, marketing and support of $ 935 , and general and administrative expenses of $ 801 .

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

Please see Note 7 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.

Approximately $ 388 of severance payments, other employee benefits, and legal and advisory fees were incurred in connection with this restructuring for the year ended December 31, 2022.

Dispositions;

Termination of Credit Facility

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

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

The Company recorded a gain on the sale of $ 682 , which is recorded in other income, net in the accompanying consolidated statements of operations.

See Note 9 for the reduction of goodwill and intangibles associated with the KVH Media Group reporting unit as it relates to the sale of this subsidiary.

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

Please see Notes 16 for further discussion.

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

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

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

Executive Employment Agreements

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

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 terminated the executive’s employment without cause (as defined in the agreement) or the executive terminated his or her employment for good reason (as defined in the agreement), 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 provide 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.

Bruun, Roger A.

Kuebel, Felise Feingold and Robert Balog continued to serve as an employee as of December 31, 2022.

Please see Note 7 for further discussion regarding the equity compensation modifications.

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

(d) Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions

The estimates and assumptions used by management affect the Company’s revenue recognition, valuation of accounts receivable, valuation of inventory, expected future cash flows including growth rates, discount rates, terminal values and other assumptions and estimates used to evaluate the recoverability of long-lived assets and goodwill, estimated fair values of long-lived assets, including goodwill, amortization methods and periods, certain accrued expenses and other related charges, stock-based compensation, contingent liabilities, forfeitures and key valuation assumptions for its share-based awards, estimated fulfillment costs for warranty obligations, tax reserves and recoverability of the Company’s net deferred tax assets and related valuation allowance, and the valuation of right-of-use assets and lease liabilities.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates.

Changes in estimates are recorded in the period in which they become known.

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

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 terminated his employment without cause (as defined in the agreement) or Mr.

Bruun terminated 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.

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

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

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

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

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

Bruun on or before the date he became entitled to receive the retention bonus.

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

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

As of December 31, 2022, the Company accrued approximately $ 867 for the executive employment agreements.

In addition to the amendment to Mr.

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

As of December 31, 2023, the Company accrued approximately $ 381 for the retention bonus payable to Mr.

In January 2024, we paid Mr.

Bruun the full amount of his retention bonus as the applicable conditions of his agreement were satisfied on December 31, 2023.

Contemporaneously with the amendment to Mr.

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

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

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

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

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approximately $ 100 .

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

(d) Concentration of Credit Risk and Single Source Suppliers

(e) Concentration of Credit Risk and Single Source Suppliers

Cash, cash equivalents and marketable securities.

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

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

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

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

Activity within the Company’s allowance for doubtful accounts for the periods presented is as follows:

Activity within the Company’s allowance for credit losses for the periods presented is as follows:

Beginning balance $ 1,268 $ 1,597

Additions (subtractions) 174 502

Additions 64 174

Deductions (write-offs/recoveries) from reserve ( 164 ) ( 503 )

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

(e) Revenue Recognition

(f) Revenue Recognition

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

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The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors, including the customer’s historical payment pattern or, in the case of a new customer, published credit and financial information pertaining to the customer.

2) Identify the performance obligations in the contract

Performance obligations promised in a contract are identified based on the products and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the product or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the product or service is separately identifiable from other promises in the contract.

To the extent a contract includes multiple promised products and services, the Company must apply judgment to determine whether promised products and services are capable of being distinct and distinct in the context of the contract.

If these criteria are not met, the promised products and services are accounted for as a combined performance obligation.

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2) Identify the performance obligations in the contract

If these criteria are not met, the promised products and services are accounted for as a combined performance obligation.

3) Determine the transaction price

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Product sales

Revenue from product sales is recognized when control of the goods is transferred to the customer, which generally occurs at the Company’s plant or warehouse upon delivery to the carrier for shipment.

Revenue from product sales is recognized when control of the goods is transferred to the customer, which generally occurs upon shipment.

Revenue related to shipping and handling is recognized when the products are shipped and the associated costs are accrued for based on the Company’s election to account for shipping and handling activities as a fulfillment of the promise to transfer the products and not as a combined promise.

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The Company establishes reserves for potential sales returns, credits, and allowances, and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and expectations for the future.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

Contract assets held by the Company include deferred costs related to performance under long-term contracts, including product and supporting costs associated to revenue previously billed to the client.

Contract liabilities consist of advance payments and billings in excess of revenue recognized and are reported as deferred revenue in the consolidated balance sheets.

Deferred revenue consist of advance payments and billings in excess of revenue recognized.

The Company classifies any billings in excess of revenue recognized as deferred revenue as current or non-current based on the timing of when revenue is expected to be recognized.

Contracts with multiple performance obligations

The Company sells products and services through arrangements that in certain instances bundle equipment, satellite connectivity and other services.

For these arrangements, the Company has determined that the performance obligations are not distinct in the context of the contracts with certain customers.

The Company recognizes product revenue under these arrangements over the estimated satellite connectivity customer life, which is estimated to be five years based on historical evidence.

Satellite connectivity and media content service sales

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The applicable indicators of gross revenue reporting include, but are not limited to, the following:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

• The Company is the primary obligor in its arrangements with its subscribers.

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The Company typically recognizes revenue from media content sales ratably over the period of the service contract.

The accounting estimates related to the recognition of satellite connectivity and media content service sales require the Company to make assumptions about future billing adjustments for disputes with subscribers as well as unauthorized usage.

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

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

In accounting for the related service revenue, the Company has applied the practical expedient allowed under ASC 606-10-55-18 to recognize

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

rental revenues in proportion to the amount of the right to invoice.

In accounting for the related service revenue, the Company has applied the practical expedient allowed under ASC 606-10-55-18 to recognize rental revenues in proportion to the amount of the right to invoice.

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

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Many of our lease agreements contain renewal options which are recognized if it is determined that the Company is reasonably certain to renew the lease at inception or when a triggering event occurs.

Some of our lease agreements contain rent escalation clauses, rent holidays, capital improvement funding or other lease concessions.

The Company recognizes the minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement and amortize such expense over the term of the lease beginning with the commencement date.

Some of our lease agreements contain rent

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

escalation clauses, rent holidays, capital improvement funding or other lease concessions.

The Company recognizes operating lease costs on a straight-line basis based on the fixed components of a lease arrangement and amortize such expense over the term of the lease beginning with the commencement date.

Variable lease components that are not fixed at the beginning of the lease are recognized as incurred.

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The present value of lease payments is determined using the incremental borrowing rate based on the information available at the lease commencement date.

(g) Fair Value of Financial Instruments

(h) Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, which include cash equivalents, marketable securities, accounts receivable, accounts payable and accrued expenses, approximate their fair values due to the short maturity of these instruments.

See Note 2 for more information on the fair value of the Company’s marketable securities.

The carrying amount of capital leases approximate fair value based on currently available quoted rates of similarly structured debt facilities.

The carrying amount of finance leases approximate fair value based on currently available quoted rates of similarly structured debt facilities.

See Note 13 for the Company's finance lease.

(h) Cash, Cash Equivalents, and Marketable Securities

(i) Cash, Cash Equivalents, and Marketable Securities

In accordance with the Company’s investment policy, cash in excess of operational needs is invested in money market mutual funds, government agency bonds, United States treasuries, municipal bonds, corporate notes, or certificates of deposit.

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As of December 31, 2023 and 2022, all of the Company’s marketable securities have been designated as available-for-sale and are carried at their fair value with unrealized gains and losses included in accumulated other comprehensive loss in the accompanying consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

The Company reviews investments in debt securities for other than temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time.

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The Company has reviewed its securities with unrealized losses as of December 31, 2023 and 2022 and has concluded that no other-than-temporary impairments exist.

(i) Inventories

(j) Inventories

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

The Company adjusts the carrying value of its inventory based on the consideration of excess and obsolete components based on future estimate demand.

The Company adjusts the carrying value of its inventory based on the consideration of excess and obsolete components and future estimated demand.

The Company records inventory charges to costs of product sales.

(j) Property and Equipment

Property and equipment are stated at cost.

(k) Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization.

Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the respective assets.

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and motor vehicles, 5 years.

(k) Goodwill, Intangible Assets and other Long-Lived Assets

The Company’s goodwill and intangible assets are associated with the purchase of Virtek Communication (now known as KVH Industries Norway AS) in September 2010 and Headland Media Limited (now known as the KVH Media Group) in May 2013.

In accordance with ASC Update No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test of Goodwill Impairment.

(ASC 350), the Company performs a goodwill impairment test at least annually based on either an optional qualitative assessment or a quantitative analysis comparing the estimated fair value of a reporting unit to its carrying value as of the test date.

Any impairment charges would be based on the quantitative analysis.

For the October 1, 2022 test, the Company performed a qualitative assessment of goodwill impairment (Step 0) and concluded that for the mobile broadband reporting unit, it was more likely than not that, for this reporting unit, the fair value exceeded the carrying value.

For the KVH Media Group reporting unit, the Company determined that it was necessary to perform the Step 1 quantitative analysis due to the ongoing global pandemic and its impacts.

The Company utilized an income approach to estimate the fair value of the reporting unit.

The Company believes that the assumptions used to estimate the fair value of its KVH Media Group reporting unit were reasonable.

The Company estimated that, as of October 1, 2022, the fair value of its KVH Media Group exceeded its carrying value by more than 140 %.

A negative trend of operating results or material changes to forecasted operating results could result in the requirement for additional interim goodwill impairment tests and the potential of future goodwill impairment charges, which could be material.

The Company did not identify any impairment indicators that required an interim goodwill impairment test as of December 31, 2022.

Intangible assets with estimated lives and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of intangible assets with estimated lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted cash flows expected to be generated by the asset or asset group.

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

Estimated fair value is based on either discounted future operating cash flows or appraised values, depending on the nature of the asset.

During 2022, there were no events or changes in circumstances that indicated any of the carrying amounts of the Company’s intangible assets or other long-lived assets may not be recoverable.

See Note 9 for further discussion of goodwill and intangible assets.

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(l) Other Non-Current Assets

(l) Goodwill, Intangible Assets and other Long-Lived Assets

As of December 31, 2023, the Company's intangible assets are primarily associated with the purchase of distribution rights from Kognitive Networks Inc.

in October 2023 and the purchase of Virtek Communication (now known as KVH Industries Norway AS) in September 2010.

Prior to the fourth quarter of 2023, the Company’s goodwill and intangible assets were also associated with the purchase of Headland Media Limited (now known as the KVH Media Group) in May 2013.

In accordance with ASC Update No.

2017-04, Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test of Goodwill Impairment (ASC 350), 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 (frequently referred to as impairment indicators or triggering events).

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.

Intangible assets with finite lives and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of intangible assets with finite lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future undiscounted cash flows expected to be generated by the asset or asset group.

Asset groups are determined at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

(m) Other Non-Current Assets

Other non-current assets are primarily comprised of long-term lease receivables, prepaid expenses, and deposits.

(m) Product Warranty

(n) Product Warranty

The Company’s products carry standard limited warranties that range from one to two years and vary by product.

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Ending balance $ 828 $ 1,287

(n) Shipping and Handling Costs

(o) Shipping and Handling Costs

Shipping and handling costs are expensed as incurred and included in cost of sales.

Billings for shipping and handling are reflected within net sales in the accompanying consolidated statements of operations.

(o) Research and Development

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

(p) Research and Development

Expenditures for research and development are expensed as incurred.

(p) Advertising Costs

(q) Advertising Costs

Costs related to advertising are expensed as incurred.

Advertising expense was $ 580 and $ 482 for the years ended December 31, 2023 and 2022, respectively, and is included in sales, marketing, and support expense in the accompanying consolidated statements of operations.

(q) Foreign Currency Translation

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

(r) Foreign Currency Translation and Transaction

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

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

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

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

For the years ended December 31, 2022 and 2021, the Company recorded a total of net foreign currency exchange gains (losses) in its accompanying consolidated statements of operations of $ 517 and $( 3 ), respectively, which is comprised of both realized and unrealized foreign currency exchange gains and losses.

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

The Company translates the assets and liabilities of these foreign subsidiaries at the exchange rates in effect at year-end.

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

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

For the years ended December 31, 2023 and 2022, the Company recorded a total of net foreign currency exchange (losses) gains, which are comprised of both realized and unrealized foreign currency exchange losses and gains, in its accompanying consolidated statements of operations $( 33 ) and $ 517 , respectively.

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

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

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

(r) Income Taxes

(s) Income Taxes

The Company is subject to income taxes in the U.S.

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See Note 7 for further discussion of income taxes.

(s) Net Loss per Common Share

(t) Net Loss per Common Share

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

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For the years ended December 31, 2023 and 2022 since there was a net loss from continuing operations, the Company excluded all 1,419 and 1,359 shares, respectively, in outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these securities would have reduced the net loss per share.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

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

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Weighted average common shares outstanding—diluted 19,130 18,632

(t) Contingent Liabilities

(u) Contingent Liabilities

The Company estimates the amount of potential exposure it may have with respect to claims, assessments and litigation in accordance with ASC 450, Contingencies .

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Additionally, it is not always possible for management to make meaningful estimates of the potential loss or range of loss associated with such litigation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

(u) Operating Segments

(v) Operating Segments

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

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

Revenues are generated from international locations, primarily consisting of Singapore, Canada, European Union countries and other European countries, countries in Africa, Asia/Pacific and the Middle East, and India (see Note 12, " Segment Reporting ").

(v) Recently Issued Accounting Standards

Revenues are generated from international locations, primarily consisting of Singapore, Canada, South American countries, European Union countries and other European countries, and countries in Africa, the Middle East and Asia/Pacific, including India (see Note 10, " Revenue from Contracts with Customers ").

(w) Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies.

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Prior to their effective date, the Company evaluates the pronouncements to determine the potential effects of adoption on our consolidated financial statements.

Standards to be 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, ASC Update No.

2022-02 and ASC Update No.

In June 2016, the FASB issued 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.

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.

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.

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 .

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.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments, which requires an entity to utilize the current expected credit loss (“CECL”) impairment model to estimate its lifetime “expected credit loss” and record an allowance that is deducted from the amortized cost basis of the financial assets and certain other instruments, including but not limited to available-for-sale debt securities.

Credit losses relating to available-for-sale debt securities are recorded through an allowance for credit losses.

ASU 2016-13 requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842):

Effective Dates, which defers the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022 for all entities except SEC reporting companies that are not smaller reporting companies.

The Company adopted ASU 2016-13 as of January 1, 2023.

The adoption did not have a material impact on the Company’s financial statements.

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

KVH INDUSTRIES, INC.

3 unchanged sentences

(in thousands, except per share amounts)

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.

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.

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.

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

The adoption of Update Nos.

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

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.

As a smaller reporting company, the effective date for Topic 350 will be the fiscal year beginning after December 15, 2022.

The adoption of Update No.

2017-04 is not expected to 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.

(2) Marketable Securities

2 unchanged sentences

Money market mutual funds $ 58,477 $ — $ — $ 58,477

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

Total marketable securities designated as available-for-sale $ 58,477 $ — $ — $ 58,477

1 unchanged sentence

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

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

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

1 unchanged sentence

Interest income from marketable securities was $ 2,785 and $ 723 for the years ended December 31, 2023 and 2022, respectively.

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

(3) Inventories

6 unchanged sentences

$ 19,046 $ 22,730

In 2023, the Company recorded a $ 5,225 inventory write-down relating to the reduced demand for the Company's hardware products.

Please see Note 15 for additional details surrounding the future wind-down of the Company's manufacturing activities.

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

(4) Property and Equipment

12 unchanged sentences

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

(5) Debt and Line of Credit

Paycheck Protection Program Loan

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

Small Business Administration (the SBA).

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

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

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

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

The forgiveness of the PPP Loan including all interest accrued of $ 6,979 is recognized in other income, net in the accompanying consolidated statements of operations for the year ended December 31, 2021.

As of December 31, 2023 and 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.

As part of the Company's impairment testing during the third quarter of 2023, 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 8 for additional details surrounding the impairment.

In 2023, there was a $ 1,534 disposal of property and equipment related to the discontinuation of a project for implementing a new manufacturing-centric accounting system.

KVH INDUSTRIES, INC.

3 unchanged sentences

(in thousands, except per share amounts)

Line of Credit

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

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

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

(5) Commitments and Contingencies

3 unchanged sentences

2024 $ 30,451

Thereafter 33

Total minimum payments $ 82,518

3 unchanged sentences

In the normal course of business, the Company enters into unconditional purchase order obligations with its suppliers for inventory and other operational purchases.

Outstanding and unconditional purchase order obligations were $ 15,841 as of December 31, 2022, of which the Company expects to fulfill $ 15,048 in 2023 and $ 793 in 2024.

Except for certain satellite service capacity obligations that are not considered operating or financing leases under ASC 842, the Company did not have any off-balance sheet commitments, guarantees, or standby repurchase obligations as of December 31, 2022.

Outstanding and unconditional purchase order obligations were $ 8,363 as of December 31, 2023.

The Company has determined that $ 3,569 of these obligations relate to excess purchase orders and the Company has recorded a purchase obligation accrual which has been charged to costs of product sales, net as of December 31, 2023.

As of December 31, 2023, the Company had certain satellite service capacity obligations that were not considered operating or financing leases under ASC 842.

The Company did not have any off-balance sheet arrangements, guarantees, or standby repurchase obligations as of December 31, 2023.

KVH INDUSTRIES, INC.

11 unchanged sentences

Shares issued under options or stock appreciation rights will reduce the shares reserved for issuance on a share-for-share basis.

The Company accounts for forfeitures as they occur.

The 2016 Plan and earlier equity compensation plans, pursuant to which an aggregate of 15,495 shares of the Company’s common stock were reserved for issuance, were all approved by the Company's shareholders.

1 unchanged sentence

The Compensation Committee of the Board of Directors administers the equity compensation plans, approves the individuals to whom awards will be granted and determines the number of shares and other terms of each award.

Outstanding options under the Company's equity compensation plans at December 31, 2022 expire from June 2023 through October 2027.

Outstanding options under the Company's equity compensation plans at December 31, 2023 expire from April 2024 through March 2028.

None of the Company’s outstanding options includes performance-based or market-based vesting conditions as of December 31, 2023.

46 unchanged sentences

1,751 $ 9.77 2.19 $ 1,948

During 2022, upon the net exercise of 307 stock options, the Company issued 100 shares of common stock, 14 shares were surrendered to the Company to satisfy minimum tax withholding obligations, and 193 shares were cancelled.

The total aggregate intrinsic value of options exercised was $ 542 and $ 387 in 2023 and 2022, respectively.

3 unchanged sentences

During 2023 and 2022, cash received under stock option plans for exercises was $ 2,480 and $ 664 , respectively.

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

Kits van Heyningen, which resulted in a reduction of approximately $ 317 in compensation cost.

During 2022, there were accelerated vesting term modifications of stock options for employees terminated as part of the Company's restructuring, which resulted in a reduction of approximately $ 26 in compensation cost.

During 2022, there were accelerated vesting term modifications of stock options for executive employment agreements, which resulted in an acceleration of compensation expense of approximately $ 182 .

During 2022, there were accelerated vesting term modifications of stock options for employees transitioned as part of the sale of the Company's inertial navigation business, which resulted in a reduction of compensation expense of approximately $ 46 , included in discontinued operations.

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

(b) Restricted Stock

The Company granted 249 and 217 restricted stock awards to employees under the terms of the 2016 Plan or the Amended and Restated 2006 Stock Incentive Plan (2006 Plan) for the years ended December 31, 2022 and 2021, respectively.

The Company granted 217 and 249 restricted stock awards to employees under the terms of the 2016 Plan for the years ended December 31, 2023 and 2022, respectively.

The restricted stock awards have generally provided for vesting annually over four years from the date of grant subject to the recipient remaining an employee through the applicable vesting dates.

2 unchanged sentences

The weighted-average grant-date fair value of restricted stock granted during 2023 and 2022 was $ 9.49 and $ 8.51 per share, respectively.

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

As of December 31, 2023, there was $ 2,567 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.34 years.

2 unchanged sentences

In 2023 and 2022, the Company recorded compensation charges of $ 1,270 and $ 2,297 , respectively, related to restricted stock awards.

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

Kits van Heyningen, which resulted in a reduction in compensation expense of approximately $ 83 .

During 2022, there were accelerated vesting term modifications of restricted stock for employees terminated as part of the Company's restructuring, which resulted in an acceleration in compensation expense of approximately $ 134 .

During 2022, there were accelerated vesting term modifications of restricted stock for executive employment agreements, which resulted in an acceleration in compensation expense of approximately $ 189 .

During 2022, there were accelerated vesting term modifications of restricted stock for employees transitioned as part of the sale of the Company's inertial navigation business, which resulted in an acceleration in compensation expense of approximately $ 287 , included in discontinued operations.

Restricted stock activity under the 2006 Plan and the 2016 Plan for 2022 is as follows:

Restricted stock activity under the 2016 Plan for 2023 is as follows:

Shares Weighted-

4 unchanged sentences

Outstanding at December 31, 2023, unvested

During the twelve months ended December 31, 2023, the Company’s Board of Directors authorized the repurchase of a portion of executive common stock.

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

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

(d) Employee Stock Purchase Plan

Under the Company's ESPP, an aggregate of 1,650 shares of common stock have been reserved for issuance, of which 763 shares remain available as of December 31, 2023.

12 unchanged sentences

(in thousands, except per share amounts)

(d) Stock-Based Compensation Expense

(e) Stock-Based Compensation Expense

The following presents stock-based compensation expense, including expense for the ESPP, in the Company's consolidated statements of operations for the years ended December 31, 2023 and 2022.

5 unchanged sentences

$ 2,078 $ 3,424

(e) Accumulated Other Comprehensive Loss (AOCL)

(f) Accumulated Other Comprehensive Loss (AOCL)

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

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).

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

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

Balance, December 31, 2021

4 unchanged sentences

( 4,098 ) ( 12 ) ( 4,110 )

Other comprehensive loss ( 689 ) ( 12 ) ( 701 )

Net other comprehensive loss ( 689 ) ( 12 ) ( 701 )

Other comprehensive (loss) income ( 87 ) 12 ( 75 )

Net other comprehensive (loss) income ( 87 ) 12 ( 75 )

Balance, December 31, 2023

15 unchanged sentences

Federal $ 404 $ — $ 404

State ( 13 ) — ( 13 )

Foreign 500 ( 345 ) 155

$ 891 $ ( 345 ) $ 546

Actual income tax expense (benefit) differs from the “expected” income tax expense (benefit) computed by applying the United States Federal statutory income tax rate of 21% for both 2022 and 2021 to loss from continuing operations before tax (benefit) expense, as follows:

Actual income tax expense (benefit) differs from the “expected” income tax expense (benefit) computed by applying the United States Federal statutory income tax rate of 21% for both 2023 and 2022 to loss from continuing operations before income tax expense, as follows:

Year Ended December 31,

Income tax benefit at Federal statutory income tax rate $ ( 3,172 ) $ ( 710 )

$ ( 710 ) $ ( 2,447 )

Increase (decrease) in income taxes resulting from:

State income tax benefit, net of federal benefit ( 17 ) ( 386 )

State income tax benefit (expense), net of federal benefit 971 ( 17 )

State research and development, investment credits 291 265

9 unchanged sentences

Change in valuation allowance 3 530

PPP loan forgiveness — ( 1,455 )

Goodwill impairment 1,157 —

Sale of KVH Media Group Entertainment Limited — ( 206 )

Prior period adjustments — ( 117 )

Income tax expense (benefit) $ 546 $ ( 108 )

Other ( 13 ) 168

Income tax expense $ 318 $ 546

KVH INDUSTRIES, INC.

3 unchanged sentences

(in thousands, except per share amounts)

Loss from continuing operations before income tax expense (benefit) determined by tax jurisdiction, are as follows:

Loss from continuing operations before income tax expense determined by tax jurisdiction, are as follows:

Year Ended December 31,

6 unchanged sentences

Inventories 1,633 1,335

Operating loss carry-forwards 4,546 5,784

Operating loss carryforwards 5,179 4,443

Stock-based compensation expense 666 881

Property and equipment, due to difference in depreciation 68 283

Research and development tax credit carry-forwards 5,743 6,247

Foreign tax credit carry-forwards 2,345 2,345

State tax credit carry-forwards 3,710 3,975

Research and development tax credit carryforwards 5,852 5,743

Foreign tax credit carryforwards 2,345 2,345

State tax credit carryforwards 3,378 3,710

Capitalized research and development 5,354 5,003

10 unchanged sentences

Total deferred tax liabilities ( 3,602 ) ( 4,040 )

Net deferred tax asset (liability) $ 204 $ ( 159 )

Net deferred tax asset $ 255 $ 204

Deferred income tax asset $ 256 $ 259

3 unchanged sentences

The state losses expire through the year 2043.

As of December 31, 2022, the Company had federal research and development tax credit carry-forwards in the amount of $ 5,734 and other general business credits of $ 9 that expire in years 2029 through 2042.

As of December 31, 2022, the Company had foreign tax credit carry-forwards in the amount of $ 2,345 that expire in years 2026 through 2027.

As of December 31, 2022, the Company had state research and development tax credit carry-forwards in the amount of $ 4,562 that expire in years 2023 through 2029.

The Company also had other state tax credit carry-forwards of $ 134 available to reduce future state tax expense that expire in years 2023 through 2029.

The Company’s ability to utilize these net operating loss carry-forwards and tax credit carry-forwards may be limited in the future if the Company experiences an ownership change pursuant to Internal Revenue Code Section 382.

As of December 31, 2023, the Company had federal research and development tax credit carryforwards in the amount of $ 5,842 and other general business credits of $ 9 that expire in years 2029 through 2042.

As of December 31, 2023, the Company had foreign tax credit carryforwards in the amount of $ 2,345 that expire in years 2026 through 2027.

As of December 31, 2023, the Company had state research and development tax credit carryforwards in the amount of $ 4,181 that expire in years 2023 through 2030.

The Company also had other state tax credit carryforwards of $ 96 available to reduce future state tax expense that expire in years 2023 through 2030.

The Company’s ability to utilize these net operating loss carryforwards and tax credit carryforwards may be limited in the future if the Company experiences an ownership change pursuant to Internal Revenue Code Section 382.

An ownership change occurs when the ownership percentages of 5% or greater stockholders change by more than 50% over a three-year period.

6 unchanged sentences

As of December 31, 2023, the valuation decreased by $ 682 .

The change was primarily the result of the utilization of domestic tax credits and net operating losses to offset the gain on discontinued operations as well as the movement in other temporary items.

The change was primarily the result of the current year loss, the expiration of stock compensation deferred assets, the reduction in the state effective tax rate and the expiration of state loss carryforwards.

As part of the Company’s analysis, the Company evaluated, among other factors, its recent history of generating tax losses and its near-term forecasts of future taxable income or losses.

24 unchanged sentences

(in thousands, except per share amounts)

(9) Goodwill and Intangible Assets

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.

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

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

(8) Goodwill and Other Long-Lived Assets

As of December 31, 2023, the Company's intangible assets are primarily associated with the purchase of distribution rights from Kognitive Networks Inc.

in October 2023 and the purchase of Virtek Communication (now known as KVH Industries Norway AS) in September 2010.

Prior to the fourth quarter of 2023, the Company’s goodwill and intangible assets were also associated with the purchase of Headland Media Limited (now known as the KVH Media Group) in May 2013.

In the third quarter of 2023, the Company observed a sustained stock price decline resulting in a significant shortfall in market capitalization when compared to the aggregate carrying value of our net assets.

These circumstances led us to conclude that quantitative goodwill impairment assessments of the Mobile Broadband (MBB) and KVH Media Group (Media) reporting units were required.

Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors.

Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding future plans, as well as industry and economic conditions.

These assumptions and estimates include estimated future cash flows, income tax rates, discount rates, growth rates, and other market factors.

In performing the quantitative assessment, the Company estimated the fair value of its reporting units using the income approach, also known as the discounted cash flow ("DCF") method, which utilizes the present value of estimated future cash flows to estimate fair value.

The DCF method involves estimating the discounted cash flows of a reporting unit by forecasting cash flows each year, calculating a terminal value, and discounting all of the cash flows to present value at an appropriate discount rate (in consideration of the time value of money, the risk inherent in the cash flow stream, and in the context of current rates of return for equity and debt capital).

The final determination of fair value was based on a probability-weighted approach comparing management’s forecasts with a market expectation forecast.

As of September 30, 2023, the determined 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 goodwill impairment charges equal to the total amount of goodwill attributed to the MBB and Media reporting units, which were approximately $ 4,400 and $ 900 , respectively.

The Company also determined that the sustained decrease in stock price and shortfall in market capitalization indicated that the carrying amounts of our asset groups (MBB and Media) may not be recoverable.

The Company therefore performed impairment tests on the long-lived assets in each asset group, including definite-lived intangible assets using an undiscounted cash flow analysis over the estimated remaining useful life of the primary asset, to determine whether the carrying amounts of each asset group were recoverable.

As of September 30, 2023, our analysis indicated that the carrying amount of the MBB asset group was recoverable, and therefore no fair value estimate was required.

The Media asset group failed the undiscounted cash flow recoverability test and therefore the Company estimated the fair value of the asset group to determine whether any asset impairment was present.

Our estimation of the fair value of the long-lived assets included the use of discounted cash flow and cost analyses, reflecting estimates of future revenues, cost factors, cash flows, discount rates, and obsolescence.

Based on these analyses, the Company concluded that the fair values of certain assets were lower than their carrying amounts.

As of September 30, 2023, the Company recognized long-lived asset impairment charges totaling approximately $ 400 and $ 300 for the KVH Media Group’s internally developed software assets and acquired subscriber relationships, respectively, reducing the carrying amounts to zero.

Intangible Assets

Intangible assets arose from the purchase of distribution rights from Kognitive Networks Inc., the purchase of KVH Industries Norway AS and the acquisition of KVH Media Group.

The assets related to the distribution rights with Kognitive Networks are being amortized on a straight-line basis over the estimated useful life of 3 years.

The assets related to the purchase of KVH Industries Norway AS for acquired intellectual property are fully amortized, while the assets related to acquisition of KVH Media Group were previously being amortized on a straight-line basis over the estimated useful life of 10 years.

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

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.

This acquisition did not meet the definition of a business under ASC 2017-01, Business Combinations (Topic 805)-Clarifying the Definition of a Business .

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 December 31, 2022, the carrying value of the intangible assets acquired in the asset acquisition was $ 462 .

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 $ 54 and $ 62 of consideration was earned under the contingent consideration arrangement during the years ended December 31, 2022 and 2021, respectively.

Acquired intangible assets are subject to amortization.

16 unchanged sentences

Amortization expense related to intangible assets was $ 234 and $ 499 for years ended December 31, 2023 and 2022, respectively, and was categorized as general and administrative expense.

As of December 31, 2022, the total weighted average remaining useful lives of the definite-lived intangible assets was 1.2 and the weighted average remaining useful lives by the definite-lived intangible asset category are as follows:

As of December 31, 2023, the total weighted average remaining useful lives of the definite-lived intangible assets was 3.0 .

Estimated future amortization expense for intangible assets recorded by the Company at December 31, 2023 is as follows:

Years ending December 31, Amortization

Total amortization expense $ 1,194

KVH INDUSTRIES, INC.

3 unchanged sentences

(in thousands, except per share amounts)

Intangible Asset Weighted Average Remaining Useful Life in Years

Subscriber relationships 1.2

Estimated future amortization expense for intangible assets recorded by the Company at December 31, 2022 is as follows:

Years ending December 31, Amortization

Total amortization expense $ 404

The changes in the carrying amount of intangible assets during the year ended December 31, 2023 is as follows:

2 unchanged sentences

Intangible assets acquired in asset acquisition 1,296

Sale of KVH Media Group Entertainment Limited ( 352 )

Impairment ( 274 )

Foreign currency translation adjustment 2

4 unchanged sentences

Balance at December 31, 2022 $ 5,308

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

Impairment ( 5,333 )

Foreign currency translation adjustment 25

14 unchanged sentences

(in thousands, except per share amounts)

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

(10) Revenue from Contracts with Customers

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

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

Disaggregation of Revenue

Disaggregation of Revenue for Continuing Operations

The following table summarizes net sales from contracts with customers for the years ended December 31, 2023 and 2022:

Product, transferred at point in time $ 24,482 $ 27,490

Product, transferred over time 2,488 2,522

Service 111,908 103,899

Product - point in time $ 17,757 $ 26,842

Service - over time 114,622 111,908

Total net sales $ 132,379 $ 138,750

Revenue recognized during the years ended December 31, 2022 and 2021 from amounts included in contract liabilities at the beginning of the fiscal year was approximately $ 2,177 and $ 2,281 , 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.

Business and Credit Concentrations

No single customer accounted for 10% or more of consolidated net sales for the years ended December 31, 2022 or 2021.

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

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

One customer accounted for 66 % and 54 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at December 31, 2022 and December 31, 2021, respectively.

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 December 31, 2022 and 2021:

Contract Balance Type Balance Sheet Location 2022 2021

Current portion of deferred costs Current contract assets $ 1,243 $ 1,230

Non-current portion of deferred costs Non-current contract assets 3,033 3,104

Current portion of deferred revenues Contract liabilities* 1,743 1,720

Non-current portion of deferred revenues Long-term contract liabilities 4,315 4,466

*Management notes that the remaining “Contract liabilities” balance not included in the above table (as of December 31, 2022 and 2021 is $ 1,365 and $ 2,058 , respectively) relates to deferred income unaffiliated with the Company’s primary revenue streams.

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

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

There were no material changes to contract asset balances for the year ended December 31, 2022 as a result of changes in estimates or impairments.

The change in the contract liability balance from December 31, 2021 to December 31, 2022 was primarily due to recognition of revenues in the current year related to prior year upfront support billings.

(12) Segment Reporting

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

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

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.

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

Revenues for these service agreements are recognized over time using an output method based upon the passage of time, as this provides a faithful depiction of the pattern of transfer of control.

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 television, the Internet and VoIP services while on the move.

Product sales accounted for 19 % and 22 % of our consolidated net sales for 2022 and 2021, respectively.

Service sales of VSAT airtime service accounted for approximately 74 % and 69 % of our consolidated net sales for 2022 and 2021, respectively.

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

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 13 % and 19 % of the Company's consolidated net sales for 2023 and 2022, respectively.

Service sales of VSAT Broadband airtime service accounted for approximately 81 % and 75 % of the Company's consolidated net sales for 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 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 62 % and 58 % of consolidated net sales for 2022 and 2021, respectively.

Revenues from international locations primarily include Singapore, Canada, South American 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 68 % and 63 % of consolidated net sales for 2023 and 2022, respectively.

Sales to Singapore customers represented 19 % of the Company's consolidated net sales for 2023.

2 unchanged sentences

No other individual foreign country represented 10% or more of the Company's consolidated net sales for 2022.

As of December 31, 2022 and 2021, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets and were deemed not material.

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

Business and Credit Concentrations

Concentrations of risk with respect to trade accounts receivable are generally limited due to the large number of customers and their dispersion across several geographic areas.

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 years ended December 31, 2023 or 2022.

One customer accounted for approximately 23 % of accounts receivable at December 31, 2023.

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

One customer accounted for 62 % and 66 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at December 31, 2023 and December 31, 2022, respectively.

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

(11) Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures (ASC 820), provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements.

ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

9 unchanged sentences

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

The valuation techniques are:

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

KVH INDUSTRIES, INC.

3 unchanged sentences

(in thousands, except per share amounts)

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

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

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

Money market mutual funds $ 58,477 $ 58,477 $ — $ — (a)

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

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

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

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

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

The carrying amount of certain financial instruments approximates fair value due to their short-term, highly liquid nature.

2 unchanged sentences

Assets Measured and Recorded at Fair Value on a Nonrecurring Basis

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 an impairment exists.

There was no impairment of the Company's non-financial assets noted during the twelve months prior to December 31, 2022.

See Note 1(k) and Note 9 for additional details.

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

During the twelve months prior to December 31, 2023, the Company recorded an impairment charge of $ 5,990 to goodwill and long-lived assets.

See Note 1(l) and Note 8 for additional details.

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

(12) Legal Matters

8 unchanged sentences

Lease expense was $ 1,702 and $ 2,103 for the year ended December 31, 2023 and 2022, respectively.

Short-term operating lease costs was $ 182 and $ 237 for the years ended December 31, 2022 and 2021, respectively.

Short-term operating lease costs were $ 130 and $ 182 for the years ended December 31, 2023 and 2022, respectively.

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

8 unchanged sentences

Weighted-average discount rate - operating leases 5.50 %

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

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

As of December 31, 2022, the gross costs and accumulated depreciation associated with this lease are included in revenue generating assets and amounted to $ 1,268 and $ 891 , respectively.

The obligations under financing leases are stated at the present value of minimum lease payments.

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

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

Depreciation expense for the remaining capital assets was $ 181 for both the years ended December 31, 2022 and 2021.

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2022 and 2021

(in thousands, except per share amounts)

The future undiscounted lease payments under this financing lease as of December 31, 2022 are:

Total undiscounted lease payments $ 22

Less amount representing interest $ —

Present value of financing lease liabilities $ 22

Less current installments of obligation under accrued other $ 22

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

Weighted-average remaining lease term - finance leases (years) 0.17

Weighted-average discount rate - finance leases 1.53 %

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

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

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

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

2 unchanged sentences

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

Upon adoption of ASC 842, the Company elected to apply the practical expedient provided to lessors to combine the lease and non-lease component of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease.

The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component.

The current portion of the net investment in these leases was $ 3,654 as of December 31, 2023 and the non-current portion of the net investment in these leases was $ 3,617 as of December 31, 2023.

1 unchanged sentence

Interest income from sales-type leases was $ 644 and $ 764 during the year ended December 31, 2023 and 2022, respectively.

The future undiscounted cash flows from these leases as of December 31, 2022 are:

Total undiscounted cash flows $ 9,906

Present value of lease payments $ 8,847

Difference between undiscounted cash flows and discounted cash flows $ 1,059

KVH INDUSTRIES, INC.

3 unchanged sentences

(in thousands, except per share amounts)

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.

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

Total undiscounted cash flows $ 8,024

Present value of lease payments $ 7,271

Difference between undiscounted cash flows and discounted cash flows $ 753

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.

1 unchanged sentence

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

Depreciation expense for these assets was $ 360 for the year ended December 31, 2022.

For the year ended December 31, 2022, lease revenue of $ 537 was recognized in service sales in the statements of operations.

Depreciation expense for these assets was $ 376 and $ 360 for the year ended December 31, 2023 and 2022, respectively.

Lease revenue recognized was $ 553 and $ 537 for the year ended December 31, 2023 and 2022, respectively, in service sales in the statements of operations.

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

(16) Discontinued Operations

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

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

Please see Note 1 for further discussion.

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

December 31, 2021

Accounts receivable, net $ 5,882

Inventories, net 8,807

Prepaid expenses and other current assets 1,152

Current assets held for sale $ 15,841

Property and equipment, net 7,169

Non-current assets held for sale $ 7,169

Accounts payable 1,764

Accrued compensation and employee-related expenses 914

Accrued other 955

Accrued product warranty costs 95

Contract liabilities 211

Current liabilities held for sale $ 3,939

Other long-term liabilities 8

Non-current liabilities held for sale $ 8

Net assets held for sale 19,063

KVH INDUSTRIES, INC.

3 unchanged sentences

(in thousands, except per share amounts)

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, presently separately in the Company's consolidated statements of operations (through August 9, 2022, the date the inertial navigation business was sold):

(14) Discontinued Operations

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

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

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

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 year ended December 31, 2022:

December 31, 2022

Product $ 16,042

Service 679 998

Net sales 16,721

5 unchanged sentences

Other income, net 81

(Loss) income from discontinued operations before income tax expense ( 2,569 ) 1,783

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

Gain on sale of discontinued operations before tax expense 30,763

7 unchanged sentences

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

Cash (used in) provided by operating activities—discontinued operations $ ( 3,853 ) $ 3,416

December 31, 2022

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

Cash used in investing activities—discontinued operations $ ( 307 )

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

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

2 unchanged sentences

Provision for doubtful accounts $ 47

(15) Subsequent Events

On February 9, 2024, the Board of Directors of the Company voted to implement a staged wind-down of the Company’s manufacturing activities at its facility in Middletown, Rhode Island.

The Board made this determination following a strategic review of the Company’s manufacturing operations, driven by reduced demand for the Company’s hardware products in the face of intensifying competition during the third and fourth quarters of 2023.

The Board concluded that the Company should discontinue its capital-intensive manufacturing activities and concentrate its efforts on growing sales of its multi-orbit, multi-channel, integrated communications solutions, which in recent years have constituted the largest portion of the Company’s overall revenues.

The Company expects that it will continue its product manufacturing activities for a period of time in order to generate a targeted amount of inventory of maritime satellite connectivity and satellite television terminals to meet anticipated demand and that it will cease substantially all manufacturing activity at the Middletown facility by the end of the second quarter of 2024.

The Company expects to continue to facilitate customer transition to third-party hardware products compatible with the Company’s mobile satellite communications services.

The Company also plans to continue to conduct maintenance, service, warehousing, shipping and receiving activities at the Middletown location.

As part of the restructuring, the Company expects to reduce its headcount by approximately 75 employees, or approximately 20 % of its total workforce at the time of the Board's determination.

Approximately one-third of the employee terminations are expected to take place by mid-March, and the remaining terminations are expected to be completed by the end of the second quarter of 2024.

The Company expects to incur aggregate severance charges of approximately $ 3.3 million, consisting of approximately $ 3.0 million of cash charges and approximately $ 0.3 million of non-cash charges arising from pre-existing contractual obligations to accelerate vesting of certain outstanding equity compensation awards.

KVH INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

December 31, 2023 and 2022

(in thousands, except per share amounts)

(16) Quarterly Financial Results (Unaudited)

The quarterly financial information provided below for each of the quarters in the years ended December 31, 2023 and 2022 reflects the corrections described in Note 1(a) - Summary of Significant Accounting Policies - Revision for Correction of Immaterial Errors.

As a result of the immaterial errors discussed in Note 1(a), net sales, cost of product sales, and sales, marketing and support expense were each corrected from those amounts reported in the respective Form 10-Q as follows:

First Quarter Second Quarter Third Quarter Fourth Quarter

(in thousands, except per share amounts)

Net sales - as originally reported $ 33,689 $ 34,171 $ 33,549 (n/a)

Net sales - adjustment (1) 454 ( 585 ) ( 354 )

Net sales - as corrected (1) 34,143 33,586 33,195

Cost of product sales - as originally reported 5,234 6,633 4,729

Cost of product sales - adjustment (1) 79 ( 415 ) ( 218 )

Cost of product sales - as corrected (1) 5,313 6,218 4,511

Sales, marketing and support - as originally reported 5,712 5,142 4,854

Sales, marketing and support - adjustment (1) ( 4 ) ( 18 ) ( 13 )

Sales, marketing and support - as corrected (1) 5,708 5,124 4,841

Net (loss) income from continuing operations - as originally reported ( 12 ) 925 ( 4,246 )

Net income (loss) from continuing operations - adjustment (1) 379 ( 152 ) ( 123 )

Net income (loss) from continuing operations - as corrected (1) 367 773 ( 4,369 )

Net (loss) income - as originally reported ( 12 ) 925 ( 4,246 )

Net income (loss) - adjustment (1) 379 ( 152 ) ( 123 )

Net income (loss) - as corrected (1) 367 773 ( 4,369 )

Net sales - as originally reported $ 33,151 $ 34,553 $ 35,169 $ 36,005

Net sales - adjustment (1) 9 ( 216 ) 93 ( 14 )

Net sales - as corrected (1) 33,160 34,337 35,262 35,991

Cost of product sales - as originally reported 5,418 5,198 6,747 7,821

Cost of product sales - adjustment (1) 58 ( 124 ) 204 ( 164 )

Cost of product sales - as corrected (1) 5,476 5,074 6,951 7,657

Sales, marketing and support - as originally reported 6,969 5,676 5,710 4,874

Sales, marketing and support - adjustment (1) ( 2 ) ( 8 ) ( 10 ) ( 11 )

Sales, marketing and support - as corrected (1) 6,967 5,668 5,700 4,863

Net (loss) income from continuing operations - as originally reported ( 4,267 ) ( 189 ) ( 95 ) 627

Net (loss) income from continuing operations - adjustment (1) ( 47 ) ( 84 ) ( 101 ) 161

Net (loss) income from continuing operations - as corrected (1) ( 4,314 ) ( 273 ) ( 196 ) 788

Net (loss) income - as originally reported ( 4,692 ) ( 1,444 ) 29,646 591

Net (loss) income - adjustment (1) ( 47 ) ( 84 ) ( 101 ) 161

Net (loss) income - as corrected (1) ( 4,739 ) ( 1,528 ) 29,545 752

(1) The Company has adjusted certain prior period amounts for the correction of immaterial errors.

See Note 1 — Summary of Significant Accounting Policies — Revision for Correction of Immaterial Errors.

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-K

Item 9A. Controls and Procedures