# LGL Group Inc: Form 10-Q for the period ended Sep 30, 2024

- Company: [LGL Group Inc](/companies/lgl.md) (CIK 61004)
- Form: 10-Q
- Filed: 2024-11-13
- Accepted by EDGAR: Nov 13, 2024, 21:43 ET
- Period: 2024-09-30
- Accession: 0001437749-24-034944
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/61004/000143774924034944/lglg20240930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/61004/000143774924034944/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $650.0k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $1.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $48.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $160.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $72.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $230.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | $0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | $0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 5,531,969 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 5,543,795 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $891.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-09-30 | $41.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $42.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $42.5m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $739.0k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $1.5m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $39.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 27,569 characters.

*The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements, the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with the audited consolidated financial statements and the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC on April 1, 2024. The terms "LGL," "LGL Group," "we," "our," "us," or the "Company" refer to The LGL Group, Inc. and its consolidated subsidiaries and unless otherwise defined herein, capitalized terms used herein shall have the same meanings as set forth in our condensed consolidated financial statements and the notes thereto.*

*In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Actual results may differ materially from those discussed in the forward-looking statements as a result of various factors. See the Cautionary Statement Concerning Forward-Looking Statements included in this Quarterly Report on Form 10-Q.*

#### Unless otherwise stated, all dollar amounts are in thousands.

### Overview

The Company is a holding company engaged in services, merchant investment, and manufacturing business activities. The Company, through its manufacturing business subsidiary, is engaged in the designing, manufacturing, and marketing of high-performance Frequency and Time Reference Standards that form the basis for timing and synchronization in various applications. The Company's primary markets are communications, networking, aerospace, defense, instrumentation, and industrial markets.

The accompanying unaudited condensed consolidated financial statements include the accounts of The LGL Group, Inc., its majority-owned subsidiaries, and variable interest entities (“VIE”) of which we are the primary beneficiary.

We provide our products and services through our Electronic Instruments and Merchant Investment businesses. Activities not related to our business segments, such as our corporate operations and corporate-level assets and financial obligations, are included in Corporate.

As of September 30, 2024, LGL Group had investments (classified within Cash and cash equivalents and Marketable securities) with a fair value of approximately $41.2 million, of which $24.3 million was held within the Merchant Investment business. The Company accounts for its Marketable securities under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 321, *Investments - Equity Securities* ("ASC 321") and as such, its Marketable securities are reported at fair value on its Condensed Consolidated Balance Sheets.

### Electronic Instruments Business

We operate our manufacturing business currently through our subsidiary, Precise Time and Frequency, LLC ("PTF"), a globally positioned producer of industrial Electronic Instruments and commercial products and services. Founded in 2002, PTF operates from our design and manufacturing facility in Wakefield, Massachusetts.

### Merchant Investment Business

The LGL investment business is comprised of various investment vehicles in which LGL is either shareholder, partner, or has general partner interests, and through which LGL invests its capital. The Company seeks to invest available cash and cash equivalents in liquid investments with a view to enhancing returns as we continue to assess further acquisitions of, or investments in, operating businesses broadly. LGL core strengths include identifying and acquiring undervalued assets and businesses, often through the purchase of securities, increasing value through management, financial or other operational changes, and managing complex legal, regulatory or financial issues, which may include technical, engineering, environmental, zoning, permitting and licensing issues among others.

#### Market Conditions and Search Process

During the nine months ended September 30, 2024, mergers and acquisitions continued to be impacted by macroeconomic conditions such as higher borrowing costs, increased regulatory scrutiny, political uncertainty, and higher valuation expectations. The initial public offering ("IPO") market has been relatively weak with continued pressure on private equity sponsors to monetize their portfolio companies, which has improved the pace and quality of deal flow to our team.

Our search process leverages our professional networks and relationships, participation in industry events and conferences, monitoring of industry trends and news, and interactions with our shareholders, investment banks, and other intermediaries. We continue to seek small- to mid-sized opportunities with strong cash flow generating capacity that trade at reasonable multiples with competitive products or services and with defensible market positions or intellectual property.

### Trends and Uncertainties

We are not aware of any material trends or uncertainties, other than global macroeconomic conditions affecting our industry generally that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income other than those listed below and those listed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on April 1, 2024.

### Changing Interest Rates

The U.S. Federal Reserve raised the federal funds rate a total of four times throughout 2023, resulting in a range from 5.25% to 5.50% as of December 31, 2023. Through the date of filing of this Quarterly Report on Form 10-Q, the U.S. Federal Reserve decreased the federal funds rate twice totaling 75 basis points to a range of 4.50% to 4.75%. It is expected that the U.S. Federal Reserve will continue to decrease the federal funds rate during 2024 and 2025 to, among other things, control inflation; however, the timing of any future decreases remains unclear. If interest rates continue to decline, the returns generated by our investments in U.S. Treasuries could be adversely impacted.

### Results of Operations - Consolidated

### Three months ended September 30, 2024 compared to three months ended September 30, 2023

The following table presents our Condensed Statements of Operations for the periods indicated:

*(in thousands)*

| Revenues: | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $650 | $438 | $212 | 48.4% |
| Net investment income | 531 | 544 | (13) | -2.4% |
| Net (losses) gains | (2) | (4) | 2 | -50.0% |
| **Total revenues** | **1,179** | **978** | **201** | **20.6%** |
| **Expenses:** |  |  |  |  |
| Manufacturing cost of sales | 368 | 195 | 173 | 88.7% |
| Engineering, selling and administrative | 673 | 584 | 89 | 15.2% |
| **Total expenses** | **1,041** | **779** | **262** | **33.6%** |
| **Income from continuing operations before income taxes** | **138** | **199** | **(61)** | **-30.7%** |
| Income tax expense (benefit) | 48 | 69 | (21) | -30.4% |
| **Net income from continuing operations** | **90** | **130** | **(40)** | **-30.8%** |
| Income (loss) from discontinued operations, net of tax | — | — | — | n/m |
| **Net income** | **90** | **130** | **(40)** | **-30.8%** |
| Less: Net income attributable to non-controlling interests | 18 | 22 | (4) | -18.2% |
| **Net income attributable to LGL Group common stockholders** | $72 | $108 | $(36) | **-33.3%** |

#### Total Revenues

Total revenues increased $201, or 20.6%, from $978 for the three months ended September 30, 2023 to $1,179 for the three months ended September 30, 2024. The increase was primarily driven by a $212, or 48.4%, increase in Net sales from $438 for the three months ended September 30, 2023 to $650 for the three months ended September 30, 2024 primarily due to higher product shipments during Q3 2024.

#### Total Expenses

Total expenses increased $262, or 33.6%, from $779 for the three months ended September 30, 2023 to $1,041 for the three months ended September 30, 2024. The following items contributed to the overall increase:

- a $173, or 88.7%, increase in Manufacturing cost of sales from $195 for the three months ended September 30, 2023 to $368 for the three months ended September 30, 2024 driven by sales of higher-cost products; and
- a $89, or 15.2%, increase in Engineering, selling and administrative from $584 for the three months ended September 30, 2023 to $673 for the three months ended September 30, 2024 driven by changes in headcount and higher wages and benefits.

#### Gross Margin

Gross margin (Net sales less Manufacturing cost of sales as a percentage of Net sales) decreased 1,210 basis points from 55.5% for the three months ended September 30, 2023 to 43.4% for the three months ended September 30, 2024 reflecting sales of lower margin products.

#### Income Tax Expense

Income tax expense decreased $21, or 30.4%, from $69 for the three months ended September 30, 2023 to $48 for the three months ended September 30, 2024 primarily due to the increase in Income from continuing operations.

#### Net Income Attributable to Non-Controlling Interests

Net income attributable to non-controlling interests decreased $4, or 18.2%, from $22 for the three months ended September 30, 2023 to $18 for the three months ended September 30, 2024 primarily due to lower Net income from LGL Systems in 2024 than in 2023.

### Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

The following table presents our Condensed Statements of Operations for the periods indicated:

*(in thousands)*

| Revenues: | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $1,573 | $1,282 | $291 | 22.7% |
| Net investment income | 1,568 | 1,017 | 551 | 54.2% |
| Net (losses) gains | (6) | 384 | (390) | -101.6% |
| **Total revenues** | **3,135** | **2,683** | **452** | **16.8%** |
| **Expenses:** |  |  |  |  |
| Manufacturing cost of sales | 786 | 595 | 191 | 32.1% |
| Engineering, selling and administrative | 1,895 | 1,771 | 124 | 7.0% |
| **Total expenses** | **2,681** | **2,366** | **315** | **13.3%** |
| **Income from continuing operations before income taxes** | **454** | **317** | **137** | **43.2%** |
| Income tax expense | 160 | 132 | 28 | 21.2% |
| **Net income from continuing operations** | **294** | **185** | **109** | **58.9%** |
| Income (loss) from discontinued operations, net of tax | — | (28) | 28 | -100.0% |
| **Net income** | **294** | **157** | **137** | **87.3%** |
| Less: Net income attributable to non-controlling interests | 64 | 22 | 42 | 190.9% |
| **Net income attributable to LGL Group common stockholders** | $230 | $135 | $95 | **70.4%** |

#### Total Revenues

Total revenues increased $452, or 16.8%, from $2,683 for the nine months ended September 30, 2023 to $3,135 for the nine months ended September 30, 2024. The following items contributed to the overall increase:

- a $291, or 22.7%, increase in Net sales from $1,282 for the nine months ended September 30, 2023 to $1,573 for the nine months ended September 30, 2024 primarily due to higher product shipments; and
- a $551, or 54.2%, increase in Net investment income from $1,017 for the nine months ended September 30, 2023 to $1,568 for the nine months ended September 30, 2024 primarily due to investments in higher yielding United States Treasury money market funds.

The increase was partially offset by a $390, or 101.6%, decrease in Net gains (losses) from $384 for the nine months ended September 30, 2023 to ($6) for the nine months ended September 30, 2024 primarily due to lower mark-to-market movements and no sales of Marketable securities.

#### Total Expenses

Total expenses increased $315, or 13.3%, from $2,366 for the nine months ended September 30, 2023 to $2,681 for the nine months ended September 30, 2024. The following items contributed to the overall increase:

- a $191, or 32.1%, increase in Manufacturing cost of sales from $595 for the nine months ended September 30, 2023 to $786 for the nine months ended September 30, 2024 consistent with the overall growth in revenues and sales of higher-cost products during Q3 2024; and
- a $124, or 7.0%, increase in Engineering, selling and administrative from $1,771 for the nine months ended September 30, 2023 to $1,895 for the nine months ended September 30, 2024 driven by changes in headcount and higher wages and benefits.

#### Gross Margin

Gross margin (Net sales less Manufacturing cost of sales as a percentage of Net sales) decreased 360 basis points from 53.6% for the nine months ended September 30, 2023 to 50.0% for the nine months ended September 30, 2024 reflecting sales of lower margin products.

#### Income Tax Expense

Income tax expense increased $28, or 21.2%, from $132 for the nine months ended September 30, 2023 to $160 for the nine months ended September 30, 2024 primarily due to the increase in Income from continuing operations.

#### Net Income Attributable to Non-Controlling Interests

Net income attributable to non-controlling interests increased $42, or 190.9%, from $22 for the nine months ended September 30, 2023 to $64 for the nine months ended September 30, 2024 primarily due to the consolidation of LGL Systems in June 2023, which has minority shareholders.

### Backlog

As of September 30, 2024, our order backlog was $505, an increase of $362, or 253.1%, from $143 as of December 31, 2023 and an increase of $192, or 61.3%, from $313 as of September 30, 2023. The backlog of unfilled orders includes amounts based on signed contracts likely to be fulfilled largely in the next 12 months but usually will ship within the next 90 days. Order backlog is adjusted quarterly to reflect project cancellations, deferrals, and revised project scope and cost, if any.

### Results of Operations - Operating Segments

### Electronic Instruments

#### Three months ended September 30, 2024 compared to three months ended September 30, 2023

The following table presents income from continuing operations of our Electronic Instruments segment for the periods indicated:

*(in thousands)*

| Revenues: | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $650 | $438 | $212 | 48.4% |
| **Total revenues** | **650** | **438** | **212** | **48.4%** |
| **Expenses:** |  |  |  |  |
| Manufacturing cost of sales | 368 | 195 | 173 | 88.7% |
| Engineering, selling and administrative | 238 | 173 | 65 | 37.6% |
| **Total expenses** | **606** | **368** | **238** | **64.7%** |
| **Income from continuing operations before income taxes** | $44 | $70 | $(26) | **-37.1%** |

#### Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes decreased $26, or 37.1%, from $70 for the three months ended September 30, 2023 to $44 for the three months ended September 30, 2024. The decrease: was primarily due to:

- a $173, or 88.7%, increase in Manufacturing cost of sales driven by sales of lower margin products; and
- a $65, or 37.6%, increase in Engineering, selling and administrative driven by higher wages and benefits.

The decrease was partially offset by a $212, or 48.4%, increase in Net sales reflecting higher product shipments during Q3 2024 and higher backlog as of June 30, 2024.

#### Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

The following table presents income from continuing operations of our Electronic Instruments segment for the periods indicated:

*(in thousands)*

| Revenues: | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $1,573 | $1,282 | $291 | 22.7% |
| **Total revenues** | **1,573** | **1,282** | **291** | **22.7%** |
| **Expenses:** |  |  |  |  |
| Manufacturing cost of sales | 786 | 595 | 191 | 32.1% |
| Engineering, selling and administrative | 667 | 523 | 144 | 27.5% |
| **Total expenses** | **1,453** | **1,118** | **335** | **30.0%** |
| **Income from continuing operations before income taxes** | $120 | $164 | $(44) | **-26.8%** |

#### Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes decreased $44, or 26.8%, from $164 for the three months ended September 30, 2023 to $120 for the three months ended September 30, 2024. The decrease was primarily due to:

- a $191, or 32.1%, increase in Manufacturing cost of sales consistent with the overall growth in revenues and sales of higher-cost products during Q3 2024; and
- a $144, or 27.5%, increase in Engineering, selling and administrative driven by higher wages and benefits.

The decrease was partially offset by a $291, or 22.7%, increase in Net sales driven by operational efficiencies and higher product shipments.

### Merchant Investment

#### Three months ended September 30, 2024 compared to three months ended September 30, 2023

The following table presents income from continuing operations of our Merchant Investment segment for the periods indicated:

*(in thousands)*

| Revenues: | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net investment income | $318 | $287 | $31 | 10.8% |
| **Total revenues** | **318** | **287** | **31** | **10.8%** |
| **Expenses:** |  |  |  |  |
| Engineering, selling and administrative | 90 | 64 | 26 | 40.6% |
| **Total expenses** | **90** | **64** | **26** | **40.6%** |
| **Income from continuing operations before income taxes** | $228 | $223 | $5 | **2.2%** |

#### Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes increased $5, or 2.2%, from $223 for the three months ended September 30, 2023 to $228 for the three months ended September 30, 2024. The increase was primarily due to:

- a $31, or 10.8%, increase in Net investment income driven by higher balances invested in United States Treasury money market funds in Q3 2024; and
- a $26, or 40.6%, increase in Engineering, selling and administrative driven by lower administrative expenses.

#### Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

The following table presents income from continuing operations of our Merchant Investment segment for the periods indicated:

*(in thousands)*

| Revenues: | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net investment income | $922 | $542 | $380 | 70.1% |
| **Total revenues** | **922** | **542** | **380** | **70.1%** |
| **Expenses:** |  |  |  |  |
| Engineering, selling and administrative | 217 | 152 | 65 | 42.8% |
| **Total expenses** | **217** | **152** | **65** | **42.8%** |
| **Income from continuing operations before income taxes** | $705 | $390 | $315 | **80.8%** |

#### Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes increased $315, or 80.8%, from $390 for the nine months ended September 30, 2023 to $705 for the nine months ended September 30, 2024. The increase was primarily due to a $380, or 70.1%, increase in Net investment income related to the commencement of operations of Lynch Capital International, LLC in June 2023 partially offset by a $65, or 42.8%, increase in Engineering, selling, and administrative driven by higher corporate-level expenses allocated to the Merchant Investment segment.

### Corporate

#### Three months ended September 30, 2024 compared to three months ended September 30, 2023

The following table presents income from continuing operations of our Corporate segment for the periods indicated:

*(in thousands)*

| Revenues: | Three Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net investment income | $213 | $257 | $(44) | -17.1% |
| Net (losses) gains | (2) | (4) | 2 | -50.0% |
| **Total revenues** | **211** | **253** | (42) | **-16.6%** |
| **Expenses:** |  |  |  |  |
| Engineering, selling and administrative | 345 | 347 | (2) | -0.6% |
| **Total expenses** | **345** | **347** | **(2)** | **-0.6%** |
| **Loss from continuing operations before income taxes** | $(134) | $(94) | $(40) | **42.6%** |

#### Loss from Continuing Operations Before Income Taxes

Loss from continuing operations before income taxes increased $40, or 42.6%, from $94 for the three months ended September 30, 2023 to $134 for the three months ended September 30, 2024. The increase was primarily due to a $44, or 17.1%, decrease in Net investment income reflecting lower balances invested in United States Treasury money market funds partially offset by a $2, or 0.6%, decrease in Engineering, selling and administrative related to changes in headcount and higher wages and benefits.

#### Nine months ended September 30, 2024 compared to nine months ended September 30, 2023

The following table presents income from continuing operations of our Corporate segment for the periods indicated:

*(in thousands)*

| Revenues: | Nine Months Ended September 30, 2024 | 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net investment income | $646 | $475 | $171 | 36.0% |
| Net (losses) gains | (6) | 384 | (390) | -101.6% |
| **Total revenues** | **640** | **859** | **(219)** | **-25.5%** |
| **Expenses:** |  |  |  |  |
| Engineering, selling and administrative | 1,011 | 1,096 | (85) | -7.8% |
| **Total expenses** | **1,011** | **1,096** | **(85)** | **-7.8%** |
| **Loss from continuing operations before income taxes** | $(371) | $(237) | $(134) | **56.5%** |

#### Loss from Continuing Operations Before Income Taxes

Loss from continuing operations before income taxes increased $134, or 56.5%, from ($237) for the nine months ended September 30, 2023 to ($371) for the nine months ended September 30, 2024. The increase was primarily due to a $390, or 101.6%, decrease in Net (losses) gains as there were lower mark-to-market movements and sales of Marketable securities during the nine months ended September 30, 2024.

The increase was partially offset by:

- a $171, or 36.0%, increase in Net investment income reflecting investments in higher yielding United States Treasury money market funds; and
- a $85, or 7.8%, decrease in Engineering, selling and administrative reflecting lower accounting and other professional service fees as well as other administrative and corporate expenses.

### Liquidity and Capital Resources

### Overview

*Liquidity* refers to our ability to access sufficient sources of cash to meet the requirements of our operating, investing and financing activities.

*Capital* refers to our long-term financial resources available to support business operations and future growth.

Our ability to generate and maintain sufficient liquidity and capital depends on the profitability of the businesses, timing of cash flows, general economic conditions and access to the capital markets and the other sources of liquidity and capital described herein.

As of September 30, 2024 and December 31, 2023, Cash and cash equivalents were $41,602 and $40,711, respectively.

### Cash Flow Activity

The following table presents the cash flow activity for the periods indicated:

*(in thousands)*

|  | As of September 30, 2024 | 2023 |
| --- | ---: | ---: |
| **Cash and cash equivalents, beginning of period** | $40,711 | $21,507 |
| Cash provided by operating activities | 891 | 454 |
| Cash provided by investing activities | — | 18,816 |
| Net change in cash and cash equivalents | 891 | 19,270 |
| **Cash and cash equivalents, end of period** | $41,602 | $40,777 |

#### Operating Activities

Cash provided by operating activities was $891 for the nine months ended September 30, 2024 compared to cash used in operating activities of $454 for the nine months ended September 30, 2023, an increase of $437, primarily due to a $390 decrease in Net gains (losses) from $384 for the nine months ended September 30, 2023 to ($6) for the nine months ended September 30, 2024 as there were lower mark-to-market movements and no sales of Marketable securities during the nine months ended September 30, 2024 partially offset by a $94 decrease in the net change in operating assets and liabilities from $617 for the nine months ended September 30, 2023 to $523 for the nine months ended September 30, 2024.

Our working capital metrics and ratios were as follows:

*(in thousands)*

|  | September 30, 2024 | December 31, 2023 |
| --- | ---: | ---: |
| Current assets | $42,274 | $41,566 |
| Less: Current liabilities | 739 | 474 |
| **Working capital** | $41,535 | $41,092 |
| **Current ratio** | **57.2** | **87.7** |

Management continues to focus on efficiently managing working capital requirements to match operating activity levels and will seek to deploy the Company’s working capital where it will generate the greatest returns.

#### Investing Activities

Cash provided by investing activities was $0 for the nine months ended September 30, 2024 compared to cash provided by investing activities of $18,816 for the nine months ended September 30, 2023, a decrease of $18,816, primarily due to sales of IronNet, Inc. during the nine months ended September 30, 2023.

### Capital Resources

We believe that existing cash and cash equivalents, marketable securities and cash generated from operations will provide sufficient liquidity to meet our ongoing working capital and capital expenditure requirements for the next 12 months from the date of this filing and for the foreseeable future.

Our Board has adhered to a practice of not paying cash dividends. This policy takes into account our long-term growth objectives, including our anticipated investments for organic growth, potential acquisitions and stockholders' desire for capital appreciation of their holdings. No cash dividends have been paid to the Company's stockholders since January 30, 1989, and none are expected to be paid for the foreseeable future.

### Contractual Obligations

As of September 30, 2024, there have been no material changes in our contractual obligations from December 31, 2023, a description of which may be found in Part II, Item 7. Management Discussion and Analysis - Liquidity and Capital Resources - Contractual Obligations in the 2023 Annual Report.

### Critical Accounting Estimates

Our accompanying Condensed Consolidated Financial Statements are prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying footnotes. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions. For a discussion of the Company’s critical accounting estimates, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023.

## Controls and procedures

As filed, 1,876 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of September 30, 2024 was conducted under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures, as of September 30, 2024, were effective.

### Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

### PART II

### OTHER INFORMATION

## Risk factors

As filed, 677 characters.

For a discussion of the Company's potential risks and uncertainties, refer to Part I, Item 1A. Risk Factors in the 2023 Annual Report and *Trends and Uncertainties* in Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2. of this Quarterly Report on Form 10-Q.

We are not aware of any material trends or uncertainties, other than national economic conditions affecting our industry generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income other than those listed in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2023.

Filed Nov 13, 2024.
Source: SEC EDGAR, the filing index for accession 0001437749-24-034944. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.