What changed in this filing

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Item 1. Financial Statements

2024-05-06 compared with 2023-11-09 · 167 added, 336 removed, 335 unchanged (60% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

ASSETS (unaudited)

2 unchanged sentences

Marketable securities 55,196 58,477

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

Accounts receivable, net of allowance for credit losses of $ 1,138 and $ 1,168 as of March 31, 2024 and December 31, 2023, respectively

25,965 25,670

1 unchanged sentence

Prepaid expenses and other current assets 4,224 4,331

Current contract assets 1,130 1,243

Total current assets 115,915 118,818

2 unchanged sentences

Intangible assets, net

Goodwill — 5,308

Right of use assets 1,621 1,068

Other non-current assets 3,270 3,618

Non-current contract assets 2,557 3,033

Deferred income tax asset 221 256

3 unchanged sentences

Accounts payable $ 6,945 $ 4,780

Accrued airtime 1,105 5,508

Accrued compensation and employee-related expenses 4,567 4,466

Accrued loss on future firm purchase commitments 3,569 3,569

Accrued other 1,912 2,588

Accrued product warranty costs 726 828

Contract liabilities 3,268 3,108

Deferred revenue 2,167 1,774

Current operating lease liability 1,211 786

2 unchanged sentences

Long-term operating lease liability 398 289

Long-term contract liabilities 3,905 4,315

Deferred income tax liability 2 1

6 unchanged sentences

Authorized 30,000,000 shares;

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

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

21,205,364 and 21,066,899 shares issued at March 31, 2024 and December 31, 2023, respectively;

and 19,749,255 and 19,610,790 shares outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 165,768 165,140

Retained earnings 8,603 11,936

Accumulated deficit ( 4,867 ) ( 1,704 )

Accumulated other comprehensive loss ( 3,956 ) ( 4,185 )

157,157 159,462

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

treasury stock at cost, common stock, 1,456,109 and 1,456,109 shares as of March 31, 2024 and December 31, 2023, respectively.

( 12,090 ) ( 12,090 )

6 unchanged sentences

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Product $ 4,152 $ 6,625 $ 14,526 $ 19,808

Three Months Ended

Service $ 25,038 $ 28,740

Product 4,229 5,403

Net sales 29,267 34,143

Costs and expenses:

Costs of product sales 4,729 6,747 16,596 17,363

Costs of service sales 14,044 16,076

Costs of product sales 5,308 5,313

Research and development 3,038 2,565

1 unchanged sentence

General and administrative 5,291 4,650

Goodwill impairment charge 5,333 — 5,333 —

Long-lived assets impairment charge 657 — 657 —

Total costs and expenses 33,065 34,312

1 unchanged sentence

Interest income 911 778

Interest expense — 1 — 3

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

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

Income tax expense from continuing operations 95 81 159 645

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

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

Other expense, net ( 198 ) ( 224 )

(Loss) income before income tax expense ( 3,085 ) 385

Income tax expense 78 18

Net (loss) income $ ( 3,163 ) $ 367

Net loss from continuing operations per common share

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

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

Net income from discontinued operations per common share

Basic $ 0.00 $ 1.59 $ 0.00 $ 1.51

Diluted $ 0.00 $ 1.59 $ 0.00 $ 1.51

Net (loss) income per common share

9 unchanged sentences

(in thousands, unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Net (loss) income $ ( 3,163 ) $ 367

Other comprehensive loss, net of tax:

Other comprehensive income, net of tax:

Unrealized gain on available-for-sale securities — 13

Foreign currency translation adjustment 229 66

Other comprehensive loss, net of tax (1)

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

Other comprehensive income, net of tax (1)

Total comprehensive (loss) income $ ( 2,934 ) $ 446

6 unchanged sentences

Common Stock Additional

Capital Retained Earnings Accumulated

Comprehensive

Loss Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

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

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

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

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

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

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

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

Common Stock Additional

Capital Retained Earnings Accumulated

Capital Retained Deficit Accumulated

Comprehensive

4 unchanged sentences

Net loss — — — ( 3,163 ) — — — ( 3,163 )

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

Other comprehensive income — — — — 229 — — 229

Stock-based compensation — — 522 — — — — 522

Issuance of common stock under employee stock purchase plan 24 — 95 — — — — 95

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

Exercise of stock options and issuance of restricted stock awards, net of forfeitures 114 1 11 — — — — 12

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

Common Stock Additional

Capital (Accumulated Deficit) Retained Earnings Accumulated

Comprehensive Loss Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

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

Net income — — — 29,646 — — — 29,646

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

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

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

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

Balance at March 31, 2024 21,205 $ 212 $ 165,768 $ ( 4,867 ) $ ( 3,956 ) ( 1,456 ) $ ( 12,090 ) $ 145,067

Common Stock Additional

Capital (Accumulated Deficit) Retained Earnings Accumulated

Capital Retained Earnings Accumulated

Comprehensive Loss Treasury Stock Total

3 unchanged sentences

Net income — — — 367 — — — 367

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

Other comprehensive income — — — — 79 — — 79

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

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

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

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

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

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

Balance at March 31, 2023 20,826 $ 208 $ 161,779 $ 14,085 $ ( 4,031 ) ( 1,456 ) $ ( 12,090 ) $ 159,951

See accompanying Notes to Unaudited Consolidated Financial Statements.

3 unchanged sentences

(in thousands, unaudited)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

3 unchanged sentences

Depreciation and amortization 3,247 3,461

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

Deferred income taxes 36 1

1 unchanged sentence

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

Unrealized currency translation gain ( 150 ) ( 808 )

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

Gain on sale of inertial navigation business

Unrealized currency translation loss (gain) 241 ( 1 )

Changes in operating assets and liabilities:

1 unchanged sentence

Inventories ( 44 ) ( 1,155 )

Prepaid expenses, other current assets, and current contract assets ( 1,430 ) ( 1,543 )

Other non-current assets and non-current contract assets 1,530 1,574

Prepaid expenses and other current assets 100 ( 111 )

Other non-current assets 328 312

Accounts payable 2,184 ( 15,077 )

Contract liabilities and long-term contract liabilities ( 255 ) 203

Deferred revenue 400 460

Accrued compensation, product warranty and other ( 5,025 ) 3,466

3 unchanged sentences

Cash paid for acquisition of intangible asset ( 10 ) ( 12 )

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

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

Purchases of marketable securities ( 720 ) ( 16,010 )

Maturities and sales of marketable securities 4,000 15,422

Net cash (used in) provided by investing activities $ ( 9,224 ) $ 4,297

Net cash provided by (used in) investing activities $ 871 $ ( 2,703 )

Cash flows from financing activities:

4 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents ( 28 ) 40

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

Net increase (decrease) in cash and cash equivalents 147 ( 8,681 )

Cash and cash equivalents at beginning of period 11,294 21,056

2 unchanged sentences

Changes in accrued other and accounts payable related to property and equipment additions $ 5 $ 119

Taxes accrued for net share settlement of options $ — $ 131

See accompanying Notes to Unaudited Consolidated Financial Statements.

5 unchanged sentences

KVH Industries, Inc.

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

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.

(together with its subsidiaries, the Company or 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.

1 unchanged sentence

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

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

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.

12 unchanged sentences

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

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.

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

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

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

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

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

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

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

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

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

Please see Note 16 for the discontinued operations disclosures.

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

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 2024.

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

(2) Summary of Significant Accounting Policies

2023 10-K - Revision for Correction of Immaterial Errors

As stated in the Company's Annual Report on Form 10-K for the year ended December 31, 2023, which was filed on March 15, 2024, the Company corrected for errors that were immaterial to its previously reported consolidated financial statements.

These errors were identified in connection with the preparation of the Company's consolidated 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.

Basis of Presentation

3 unchanged sentences

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

The 2022 consolidated interim financial statements reflect the sale of the inertial navigation business as discontinued operations.

See Notes 1 and 16 for further information on the sale of the inertial navigation business.

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

These consolidated interim financial statements do not include all disclosures associated with annual financial statements and accordingly should be read in conjunction with the Company’s consolidated financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2023 filed on March 15, 2024 with the Securities and Exchange Commission.

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

The results for the three months ended March 31, 2024 are not necessarily indicative of operating results for the remainder of the year.

Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions

The preparation of interim 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 interim financial statements and the reported amounts of sales and expenses during the reporting periods.

As described in the Company’s annual report on Form 10-K, 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.

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 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 amortization 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.

2 unchanged sentences

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.

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 (expense) income, net” in the accompanying consolidated statements of operations.

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

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

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

The Company recorded net foreign currency exchange losses, which are comprised of both realized and unrealized foreign currency exchange gains and losses, in its accompanying consolidated statements of operations of $( 21 ) and $( 54 ) for the three months ended March 31, 2024 and 2023, 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.

1 unchanged sentence

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.

CEO Executive Employment Agreement

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

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

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

The agreement provided that, if Mr.

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

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

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).

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

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

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

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

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

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

Contemporaneously with the amendment to Mr.

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

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

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

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

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

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.

(4) Marketable Securities

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

September 30, 2023 Amortized

Marketable securities as of March 31, 2024 and December 31, 2023 consisted of the following:

March 31, 2024 Amortized

Money market mutual funds $ 55,196 $ — $ — $ 55,196

United States treasuries — — — —

Total marketable securities designated as available-for-sale $ 55,196 $ — $ — $ 55,196

1 unchanged sentence

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

Interest income from marketable securities was $ 744 and $ 193 during the three months ended September 30, 2023 and 2022, respectively, and $ 2,019 and $ 203 during the nine months ended September 30, 2023 and 2022, respectively.

Interest income from marketable securities was $ 720 and $ 588 during the three months ended March 31, 2024 and 2023, respectively.

(5) Stockholder's Equity

2 unchanged sentences

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

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

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

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

Stock-based compensation expense was $ 517 and $ 284 , excluding $ 5 and $ 12 of compensation expense related to our Amended and Restated 1996 Employee Stock Purchase Plan, or the ESPP, for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, there was $ 1,918 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.68 years.

As of March 31, 2024, there was $ 2,399 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.65 years.

Stock Options

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

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

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

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

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

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

During the nine months ended September 30, 2022, 398 stock options were granted.

During the three months ended March 31, 2024, no shares of common stock were issued upon the exercise of stock options.

Additionally, during the three months ended March 31, 2024, 266 stock options were granted and 14 stock options expired, were canceled or were forfeited.

During the three months ended March 31, 2023, 317 stock options were granted.

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

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

Nine Months Ended September 30,

The weighted average assumptions utilized to determine the fair value of options granted during the three months ended March 31, 2024 and 2023 are as follows:

Three Months Ended March 31,

Risk-free interest rate 4.36 % 4.49 %

2 unchanged sentences

Dividend yield 0 % 0 %

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

As of March 31, 2024, there were 1,482 options outstanding with a weighted average exercise price of $ 8.75 per share and 641 options exercisable with a weighted average exercise price of $ 9.86 per share.

Restricted Stock

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

Additionally, during the three months ended September 30, 2023, 7 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

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

Additionally, during the nine months ended September 30, 2023, 101 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

As of September 30, 2023, the Company had no unvested outstanding options and no outstanding shares of restricted stock that were subject to performance-based or market-based vesting conditions.

Common Stock Repurchase

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

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

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

During the three months ended March 31, 2024, 122 shares of restricted stock were granted with a weighted average grant date fair value of $ 5.03 per share and 8 shares of restricted stock were forfeited.

Additionally, during the three months ended March 31, 2024, 66 shares of restricted stock vested, of which no shares of common stock were surrendered to the Company as payment by employees in lieu of cash to satisfy minimum tax withholding obligations in connection with the vesting of restricted stock.

As of March 31, 2024, the Company had no unvested outstanding options and no outstanding shares of restricted stock that were subject to performance-based or market-based vesting conditions.

(b) Employee Stock Purchase Plan

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

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

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

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

During the three months ended March 31, 2024 and 2023, 24 and 0 shares were issued under the ESPP plan, respectively.

The Company recorded compensation charges related to the ESPP of $ 5 and $ 12 for the three months ended March 31, 2024 and 2023, respectively.

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

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

2023 2022 2023 2022

Cost of product sales $ 9 $ 333 $ 25 $ 468

The following table presents stock-based compensation expense, including expense for the ESPP, in the Company's consolidated statements of operations for the three months ended March 31, 2024 and 2023, respectively:

Three Months Ended March 31,

Cost of service sales $ 7 $ 4

Cost of product sales 9 7

Research and development 89 88

1 unchanged sentence

General and administrative 346 159

$ 559 $ 1,109 $ 1,433 $ 2,695

(d) Accumulated Other Comprehensive Loss (AOCL)

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

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

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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

Other comprehensive loss ( 267 ) ( 267 )

Net other comprehensive loss ( 267 ) ( 267 )

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

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

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

Other comprehensive loss ( 646 ) ( 646 )

Net other comprehensive loss ( 646 ) ( 646 )

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

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

The balances for the three months ended March 31, 2024 and 2023 are as follows:

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

Balance, December 31, 2023 $ ( 4,185 ) $ — $ ( 4,185 )

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

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

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

Foreign Currency Translation Total Accumulated Other Comprehensive Loss

Other comprehensive income 229 — 229

Net other comprehensive income 229 — 229

Balance, March 31, 2024 $ ( 3,956 ) $ — $ ( 3,956 )

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

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

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

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

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

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

Other comprehensive income 66 13 79

Net other comprehensive income 66 13 79

Balance, March 31, 2023 $ ( 4,032 ) $ 1 $ ( 4,031 )

(6) Net (Loss) Income per Common Share

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

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

For the three and nine months ended September 30, 2023, since there was a net loss from continuing operations, the Company excluded 1,572 and 1,053 shares, respectively, underlying outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these convertible securities would have reduced the net loss per share.

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

For the three months ended March 31, 2024, since there was a net loss, the Company excluded 1,584 shares underlying outstanding stock options and non-vested restricted shares from its diluted loss per share calculation, as inclusion of these convertible securities would have reduced the net loss per share.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Weighted average common shares outstanding—basic 19,286 18,882

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

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

Inventories as of March 31, 2024 and December 31, 2023 include the costs of material, labor, and factory overhead.

Components of inventories consist of the following:

September 30,

2024 December 31,

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(8) Property and Equipment

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

September 30,

Property and equipment, net, as of March 31, 2024 and December 31, 2023 consist of the following:

2024 December 31,

9 unchanged sentences

$ 46,230 $ 47,680

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

Depreciation expense was $ 3,147 and $ 3,368 for the three months ended March 31, 2024 and 2023, respectively.

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

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

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

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

Please see Note 12 for additional details surrounding the impairment.

As of March 31, 2024 and December 31, 2023, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets.

(9) Product Warranty

4 unchanged sentences

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

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

As of March 31, 2024 and December 31, 2023, the Company had accrued product warranty costs of $ 726 and $ 828 , respectively.

The following table summarizes product warranty activity during 2024 and 2023:

Nine Months Ended

September 30,

Three Months Ended

Beginning balance $ 828 $ 1,287

11 unchanged sentences

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

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

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

Quoted prices for similar assets or liabilities in active markets;

4 unchanged sentences

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

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

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

The following tables present financial assets and liabilities at March 31, 2024 and December 31, 2023 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:

March 31, 2024 Total Level 1 Level 2 Level 3 Valuation

Money market mutual funds $ 55,196 $ 55,196 $ — $ — (a)

1 unchanged sentence

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

3 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 indications of impairment exist.

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

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

Please see Note 12 for further discussion.

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

There was no impairment of the Company's non-financial assets noted during the three months ended March 31, 2024 or 2023.

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

(12) Goodwill and Other Long-Lived Assets

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

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

The Company’s two reporting units are:

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

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

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

(12) Intangible Assets

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Balance at December 31, 2022

Impairment ( 5,333 )

Foreign currency translation adjustment 25

Balance at September 30, 2023

Intangible Assets

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

The changes in the carrying amount of intangible assets during the three months ended March 31, 2024 are as follows:

Balance at December 31, 2023

1 unchanged sentence

Intangible assets acquired in asset acquisition 10

Impairment ( 274 )

Foreign currency translation adjustment 1

Balance at September 30, 2023

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

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

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

Balance at March 31, 2024

Intangible assets arose from the purchase of distribution rights from Kognitive Networks Inc.

and the purchase of KVH Industries Norway AS.

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.

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 .

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 .

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

Acquired intangible assets are subject to amortization.

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

The following table summarizes acquired intangible assets at March 31, 2024 and December 31, 2023, respectively:

Gross Carrying Amount Accumulated Amortization Net Carrying Value

September 30, 2023

March 31, 2024

Subscriber relationships $ 21 $ 2 $ 19

Distribution rights 1,250 164 1,086

Internally developed software — — —

Proprietary content — — —

Intellectual property 2,284 2,284 —

3 unchanged sentences

Distribution rights 1,250 66 1,184

Internally developed software 446 446 —

Proprietary content 153 153 —

Intellectual property 2,284 2,284 —

$ 3,545 $ 2,351 $ 1,194

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

Amortization expense related to intangible assets was $ 100 and $ 93 for the three months ended March 31, 2024 and 2023, respectively.

Amortization expense was categorized as general and administrative expense.

As of March 31, 2024, 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 March 31, 2024 is as follows:

Years ending December 31, Amortization

Total amortization expense $ 1,105

(13) Revenue from Contracts with Customers

1 unchanged sentence

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

Disaggregation of Revenue for Continuing Operations

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Product, transferred at point in time $ 3,531 $ 5,974 $ 12,578 $ 18,057

Product, transferred over time 621 651 1,948 1,751

Service 29,397 28,544 86,883 83,065

Disaggregation of Revenue

The following table summarizes net sales from contracts with customers for the three months ended March 31, 2024 and 2023:

Three Months Ended

Service - over time $ 25,038 $ 28,740

Product - point in time 4,229 5,403

Total net sales $ 29,267 $ 34,143

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

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

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

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

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

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

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

Product sales accounted for 14 % and 16 % of the Company's consolidated net sales for the three months ended March 31, 2024 and 2023, respectively.

Service sales of VSAT Broadband airtime service accounted for 78 % and 79 % of the Company's consolidated net sales for the three months ended March 31, 2024 and 2023, respectively.

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

1 unchanged sentence

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

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

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

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

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

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

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

As of September 30, 2023 and December 31, 2022, the long-lived tangible assets related to the Company’s international subsidiaries were less than 10% of the Company’s long-lived tangible assets.

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 72 % and 65 % of consolidated net sales for the three months ended March 31, 2024 and 2023, respectively.

Sales to Singapore customers represented 22 % and 18 % of the Company's consolidated net sales for the three months ended March 31, 2024 and 2023, respectively.

No other individual foreign country represented 10% or more of the Company's consolidated net sales for the three months ended March 31, 2024 or 2023.

Business and Credit Concentrations

2 unchanged sentences

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 nine months ended September 30, 2023 or 2022.

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

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

One customer accounted for 64 % and 66 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at September 30, 2023 and December 31, 2022, respectively.

No single customer accounted for 10% or more of consolidated net sales for the three months ended March 31, 2024 or 2023.

One customer accounted for approximately 20 % and 23 % of accounts receivable at March 31, 2024 and December 31, 2023, respectively.

One customer accounted for 61 % and 62 % of long-term accounts receivable included in other non-current assets on the consolidated balance sheets related to sales-type leases at March 31, 2024 and December 31, 2023, respectively.

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

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

Customer Contract Balances

The following table provides the balance sheet location and amounts of contract assets, or unbilled accounts receivable, and contract liabilities, or deferred revenue, from contracts with customers as of September 30, 2023 and December 31, 2022:

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

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

Non-current portion of deferred costs Non-current contract assets 2,557 3,033

Current portion of deferred revenues Contract liabilities* 1,668 1,743

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

*Management notes that the remaining “Contract liabilities” balance not included in the above table (which as of September 30, 2023 and December 31, 2022 is $ 1,600 and $ 1,365 , respectively) relates to deferred income unaffiliated with the Company’s primary revenue streams, the majority of which relates to our content subscription business.

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

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

The change in the contract liability balance from December 31, 2022 to September 30, 2023 was primarily due to the increase in upfront support billings received in the first nine months of 2023 in comparison to revenues recognized in the prior period from historical support billings.

(14) Income Taxes

The Company’s effective tax rate from continuing operations for the three and nine months ended September 30, 2023 was ( 2.3 )% and ( 5.0 )%, respectively, compared with ( 578.6 )% and ( 16.5 )% for the corresponding periods in the prior year.

The Company’s effective tax rate for the three months ended March 31, 2024 was ( 2.5 )% compared with 4.7 % for the corresponding periods in the prior year.

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

For the three and nine months ended September 30, 2023 and 2022, the effective tax rates from continuing operations differed from the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its U.S.

For the three months ended March 31, 2024 and 2023, the effective tax rates differed from the statutory tax rate primarily due to the Company maintaining a valuation allowance reserve on its U.S.

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

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

There were no material changes during the nine months ended September 30, 2023 to the Company’s reserve for uncertain tax positions.

The Company estimates that it is reasonably possible that the balance of unrecognized tax

benefits as of September 30, 2023 may decrease $ 38 in the next twelve months as a result of a lapse of statutes of limitations and settlements with taxing authorities.

As of March 31, 2024 and December 31, 2023, the Company had reserves for uncertain tax positions of $ 693 and $ 673 , respectively.

There were no material changes during the three months ended March 31, 2024 to the Company’s reserve for uncertain tax positions.

The Company estimates that it is reasonably possible that the balance of unrecognized tax benefits as of March 31, 2024 may decrease $ 27 in the next twelve months as a result of a lapse of statutes of limitations and settlements with taxing authorities.

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

2 unchanged sentences

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

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

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

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

Lease expense was $ 353 and $ 452 for the three months ended March 31, 2024 and 2023, respectively.

Short-term operating lease costs were $ 19 and $ 25 for the three months ended March 31, 2024 and 2023, respectively.

Maturities of lease liabilities as of March 31, 2024 under operating leases having an initial or remaining non-cancelable term of one year or more are as follows:

Remainder of 2024 $ 1,023

13 unchanged sentences

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

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

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 $ 3,284 as of March 31, 2024 and the non-current portion of the net investment in these leases was $ 3,269 as of March 31, 2024.

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

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

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

Interest income from sales-type leases was $ 129 and $ 168 during the three months ended March 31, 2024 and 2023, respectively.

The future undiscounted cash flows from these leases as of March 31, 2024 are:

Remainder of 2024 $ 2,989

4 unchanged sentences

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

As of September 30, 2023, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $ 1,880 and $ 798 , respectively.

As of March 31, 2024, the gross costs and accumulated depreciation associated with these operating leases are included in revenue generating assets and amounted to $ 1,861 and $ 975 , respectively.

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

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

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

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

Depreciation expense for these assets was $ 93 for the three months ended March 31, 2024, respectively.

Lease revenue recognized was $ 125 for the three months ended March 31, 2024, respectively, in service sales in the consolidated statements of operations.

As of March 31, 2024, minimum future lease payments to be recognized on the operating leases are as follows:

Remainder of 2024 $ 217

(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.

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

Please see Note 1 for further discussion.

The following table presents a reconciliation of the major financial line items constituting the results for discontinued operations to the net income from discontinued operations, net of tax, presented separately in the Company's consolidated statement of operations for the three and nine months ended 2022:

Three Months Ended Nine Months Ended

September 30, September 30,

Product $ 1,276 $ 16,042

Service 218 679

Net sales 1,494 16,721

Costs and expenses:

Costs of product sales 1,504 12,732

Costs of service sales 169 457

Research and development 374 3,147

Sales, marketing and support 348 3,035

Other income, net 12 81

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

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

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

Income tax expense on discontinued operations 228 228

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

Net income from discontinued operations per common share

Basic $ 1.59 $ 1.51

Diluted $ 1.59 $ 1.51

Weighted average number of common shares outstanding:

Basic 18,706 18,574

Diluted 18,706 18,574

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

Three Months Ended Nine Months Ended

September 30, September 30,

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

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

Depreciation $ 91 $ 622

Compensation expense related to stock-based awards and employee stock purchase plan $ 237 $ 475

(16) Restructuring

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 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 this restructuring, the Company will reduce its headcount by approximately 75 employees, or approximately 20 % of its total workforce as of the time the Company announced the restructuring.

Approximately one-half of the employee terminations have been completed, and the remaining terminations are expected to be completed by the end of the second quarter of 2024.

Approximately $ 2.2 million of severance charges were incurred in the three months ended March 31, 2024.

The Company expects to incur aggregate severance charges for this restructuring 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements