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As of June 30, 2024 and December 31, 2023, our investment in LGL Nevada was recorded in Other assets in the Condensed Consolidated Balance Sheets.
As of June 30, 2024 and December 31, 2023, included investments in money market mutual funds managed or advised by GAMCO Investors, Inc.
For the three and six months ended June 30, 2023, weighted average shares used for calculating earnings per share excludes warrants to purchase 1,051,664 shares of common stock.
Basic and diluted earnings per share are calculated using actual, unrounded amounts. Therefore, the components of earnings per share may not sum to its corresponding total.
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File No. 001-00106
The LGL Group, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 38-1799862 |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
| | |
| 2525 Shader Rd., Orlando, Florida | 32804 |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code): (407) 298-2000
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
| Common Stock, par value $0.01 | | LGL | | NYSE American |
| Warrants to Purchase Common Stock, par value $0.01 | | LGL WS | | NYSE American |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of July 31, 2024, the registrant had 5,373,055 shares of common stock, $0.01 par value per share, outstanding.
The LGL Group, Inc.
Form 10-Q for the Period Ended June 30, 2024
Table of Contents
Cautionary Statement Concerning Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q of The LGL Group, Inc. ("LGL Group" or the "Company") and the Company's other communications and statements, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company intends for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable by law. Such statements include, in particular, statements about the Company's beliefs, plans, objectives, goals, expectations, estimates, projections and intentions. These statements are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond the Company's control. The words "may," "could," "should," "would," "believe," "anticipate," "estimate," "expect," "intend," "plan," "target," "goal" and similar expressions are intended to identify forward-looking statements. All forward-looking statements, by their nature, are subject to risks and uncertainties. Therefore, such statements are not intended to be a guarantee of the Company's performance in future periods. The Company's actual future results may differ materially from those set forth in the Company's forward-looking statements. For information concerning these factors and related matters, see "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2023, filed with the Securities and Exchange Commission ("SEC") on
April 1, 2024, this Quarterly Report on Form 10-Q and our other filings with the SEC. However, other factors besides those referenced could adversely affect the Company's results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by the Company herein speak as of the date of this Quarterly Report on Form 10-Q. The Company does not undertake to update any forward-looking statement, except as required by law. As a result, you should not place undue reliance on these forward-looking statements.
PART I
FINANCIAL INFORMATION
| Item 1. |
Financial Statements |
The LGL Group, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
| (in thousands, except share data) | | June 30, 2024 | | December 31, 2023 |
| Assets: | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 41,074 | | | $ | 40,711 | |
| Marketable securities | | | 18 | | | | 22 | |
| Accounts receivable, net of reserves of $52 and $58, respectively | | | 339 | | | | 356 | |
| Inventories, net | | | 336 | | | | 204 | |
| Prepaid expenses and other current assets | | | 236 | | | | 273 | |
| Total current assets | | | 42,003 | | | | 41,566 | |
| Right-of-use lease assets | | | 41 | | | | 75 | |
| Intangible assets, net | | | 46 | | | | 57 | |
| Deferred income tax assets | | | 157 | | | | 152 | |
| Total assets | | $ | 42,247 | | | $ | 41,850 | |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | | 223 | | | | 93 | |
| Accrued compensation and commissions | | | 219 | | | | 264 | |
| Income taxes payable | | | 73 | | | | 41 | |
| Other accrued expenses | | | 106 | | | | 76 | |
| Total current liabilities | | | 621 | | | | 474 | |
| Other liabilities | | | 722 | | | | 694 | |
| Total liabilities | | | 1,343 | | | | 1,168 | |
| | | | | | | | | |
| Contingencies (Note 12) | | | | | | | | |
| | | | | | | | | |
| Stockholders' equity: | | | | | | | | |
| Common stock ($0.01 par value; 30,000,000 shares authorized; 5,454,639 shares issued and 5,373,055 shares outstanding as of June 30, 2024 and December 31, 2023) | | | 53 | | | | 53 | |
| Treasury stock, at cost (81,584 shares as of June 30, 2024 and December 31, 2023) | | | (580 | ) | | | (580 | ) |
| Additional paid-in capital | | | 46,367 | | | | 46,349 | |
| Accumulated deficit | | | (6,902 | ) | | | (7,060 | ) |
| Total LGL Group stockholders' equity | | | 38,938 | | | | 38,762 | |
| Non-controlling interests | | | 1,966 | | | | 1,920 | |
| Total stockholders' equity | | | 40,904 | | | | 40,682 | |
| Total liabilities and stockholders' equity | | $ | 42,247 | | | $ | 41,850 | |
See accompanying Notes to the Condensed Consolidated Financial Statements.
The LGL Group, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| (in thousands, except share data) |
|
2024 |
|
2023 |
|
2024 |
|
2023 |
| Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales |
|
$ |
531 |
|
|
$ |
403 |
|
|
$ |
923 |
|
|
$ |
844 |
|
| Net investment income |
|
|
538 |
|
|
|
275 |
|
|
|
1,037 |
|
|
|
473 |
|
| Net (losses) gains |
|
|
(1 |
) |
|
|
43 |
|
|
|
(4 |
) |
|
|
388 |
|
| Total revenues |
|
|
1,068 |
|
|
|
721 |
|
|
|
1,956 |
|
|
|
1,705 |
|
| Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Manufacturing cost of sales |
|
|
214 |
|
|
|
208 |
|
|
|
418 |
|
|
|
400 |
|
| Engineering, selling and administrative |
|
|
617 |
|
|
|
645 |
|
|
|
1,222 |
|
|
|
1,187 |
|
| Total expenses |
|
|
831 |
|
|
|
853 |
|
|
|
1,640 |
|
|
|
1,587 |
|
| Income (loss) from continuing operations before income taxes |
|
|
237 |
|
|
|
(132 |
) |
|
|
316 |
|
|
|
118 |
|
| Income tax (benefit) expense |
|
|
76 |
|
|
|
(2 |
) |
|
|
112 |
|
|
|
63 |
|
| Net income (loss) from continuing operations |
|
|
161 |
|
|
|
(130 |
) |
|
|
204 |
|
|
|
55 |
|
| Income (loss) from discontinued operations, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(28 |
) |
| Net income (loss) |
|
|
161 |
|
|
|
(130 |
) |
|
|
204 |
|
|
|
27 |
|
| Less: Net income attributable to non-controlling interests |
|
|
24 |
|
|
|
— |
|
|
|
46 |
|
|
|
— |
|
| Net income (loss) attributable to LGL Group common stockholders |
|
$ |
137 |
|
|
$ |
(130 |
) |
|
$ |
158 |
|
|
$ |
27 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) per common share attributable to LGL Group common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from continuing operations |
|
$ |
0.03 |
|
|
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
| Income (loss) from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
| Net income (loss) attributable to LGL Group common stockholders |
|
$ |
0.03 |
|
|
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted (a): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) from continuing operations |
|
$ |
0.02 |
|
|
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
| Income (loss) from discontinued operations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.01 |
) |
| Net income (loss) attributable to LGL Group common stockholders |
|
$ |
0.02 |
|
|
$ |
(0.02 |
) |
|
$ |
0.03 |
|
|
$ |
0.01 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
5,352,937 |
|
|
|
5,352,937 |
|
|
|
5,352,937 |
|
|
|
5,352,937 |
|
| Diluted |
|
|
5,482,543 |
|
|
|
5,352,937 |
|
|
|
5,548,869 |
|
|
|
5,352,937 |
|
| (a) |
Basic and diluted earnings per share are calculated using actual, unrounded amounts. Therefore, the components of earnings per share may not sum to its corresponding total. |
See accompanying Notes to the Condensed Consolidated Financial Statements.
The LGL Group, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| (in thousands) |
|
Common Stock |
|
Treasury Stock |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Total LGL Stockholders' Equity |
|
Non-Controlling Interests |
|
Total Equity |
| Balance at March 31, 2024 |
|
$ |
53 |
|
|
$ |
(580 |
) |
|
$ |
46,358 |
|
|
$ |
(7,039 |
) |
|
$ |
38,792 |
|
|
$ |
1,942 |
|
|
$ |
40,734 |
|
| Net income attributable to LGL Group or non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
137 |
|
|
|
137 |
|
|
|
24 |
|
|
|
161 |
|
| Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
9 |
|
|
|
— |
|
|
|
9 |
|
|
|
— |
|
|
|
9 |
|
| Consolidation of non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Balance at June 30, 2024 |
|
$ |
53 |
|
|
$ |
(580 |
) |
|
$ |
46,367 |
|
|
$ |
(6,902 |
) |
|
$ |
38,938 |
|
|
$ |
1,966 |
|
|
$ |
40,904 |
|
| (in thousands) |
|
Common Stock |
|
Treasury Stock |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Total LGL Stockholders' Equity |
|
Non-Controlling Interests |
|
Total Equity |
| Balance at March 31, 2023 |
|
$ |
53 |
|
|
$ |
(580 |
) |
|
$ |
46,346 |
|
|
$ |
(7,172 |
) |
|
$ |
38,647 |
|
|
$ |
— |
|
|
$ |
38,647 |
|
| Net loss attributable to LGL Group or non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(130 |
) |
|
|
(130 |
) |
|
|
— |
|
|
|
(130 |
) |
| Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Consolidation of non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,872 |
|
|
|
1,872 |
|
| Balance at June 30, 2023 |
|
$ |
53 |
|
|
$ |
(580 |
) |
|
$ |
46,346 |
|
|
$ |
(7,302 |
) |
|
$ |
38,517 |
|
|
$ |
1,872 |
|
|
$ |
40,389 |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
The LGL Group, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| (in thousands) |
|
Common Stock |
|
Treasury Stock |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Total LGL Stockholders' Equity |
|
Non-Controlling Interests |
|
Total Equity |
| Balance at December 31, 2023 |
|
$ |
53 |
|
|
$ |
(580 |
) |
|
$ |
46,349 |
|
|
$ |
(7,060 |
) |
|
$ |
38,762 |
|
|
$ |
1,920 |
|
|
$ |
40,682 |
|
| Net income attributable to LGL Group or non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
158 |
|
|
|
158 |
|
|
|
46 |
|
|
|
204 |
|
| Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
18 |
|
|
|
— |
|
|
|
18 |
|
| Consolidation of non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Balance at June 30, 2024 |
|
$ |
53 |
|
|
$ |
(580 |
) |
|
$ |
46,367 |
|
|
$ |
(6,902 |
) |
|
$ |
38,938 |
|
|
$ |
1,966 |
|
|
$ |
40,904 |
|
| (in thousands) |
|
Common Stock |
|
Treasury Stock |
|
Additional Paid-In Capital |
|
Accumulated Deficit |
|
Total LGL Stockholders' Equity |
|
Non-Controlling Interests |
|
Total Equity |
| Balance at December 31, 2022 |
|
$ |
53 |
|
|
$ |
(580 |
) |
|
$ |
46,346 |
|
|
$ |
(7,329 |
) |
|
$ |
38,490 |
|
|
$ |
— |
|
|
$ |
38,490 |
|
| Net income attributable to LGL Group or non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
27 |
|
|
|
27 |
|
|
|
— |
|
|
|
27 |
|
| Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Consolidation of non-controlling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,872 |
|
|
|
1,872 |
|
| Balance at June 30, 2023 |
|
$ |
53 |
|
|
$ |
(580 |
) |
|
$ |
46,346 |
|
|
$ |
(7,302 |
) |
|
$ |
38,517 |
|
|
$ |
1,872 |
|
|
$ |
40,389 |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
The LGL Group, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| |
|
Six Months Ended June 30, |
| (in thousands, except share data) |
|
2024 |
|
2023 |
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
| Net income |
|
$ |
204 |
|
|
$ |
27 |
|
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
| Noncash revenues, expenses, gains and losses included in income: |
|
|
|
|
|
|
|
|
| Depreciation |
|
|
— |
|
|
|
1 |
|
| Amortization of finite-lived intangible assets |
|
|
11 |
|
|
|
6 |
|
| Stock-based compensation |
|
|
18 |
|
|
|
— |
|
| Realized loss on sale of marketable securities |
|
|
— |
|
|
|
4,316 |
|
| Unrealized loss (gain) on marketable securities |
|
|
4 |
|
|
|
(4,704 |
) |
| Deferred income taxes |
|
|
17 |
|
|
|
18 |
|
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Decrease in accounts receivable, net |
|
|
17 |
|
|
|
170 |
|
| (Increase) decrease in inventories, net |
|
|
(132 |
) |
|
|
39 |
|
| Decrease in prepaid expenses and other assets |
|
|
37 |
|
|
|
185 |
|
| Decrease (increase) in accounts payable, accrued compensation, income taxes and commissions and other |
|
|
187 |
|
|
|
(67 |
) |
| Total adjustments |
|
|
159 |
|
|
|
(36 |
) |
| Net cash provided by (used in) operating activities |
|
|
363 |
|
|
|
(9 |
) |
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Cash from consolidation of LGL Systems |
|
|
— |
|
|
|
1,869 |
|
| Proceeds from sale of marketable securities |
|
|
— |
|
|
|
16,947 |
|
| Net cash provided by investing activities |
|
|
— |
|
|
|
18,816 |
|
| Increase in cash and cash equivalents |
|
|
363 |
|
|
|
18,807 |
|
| Cash and cash equivalents at beginning of period |
|
|
40,711 |
|
|
|
21,507 |
|
| Cash and cash equivalents at end of period |
|
$ |
41,074 |
|
|
$ |
40,314 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental Disclosure: |
|
|
|
|
|
|
|
|
| Income taxes paid |
|
$ |
76 |
|
|
$ |
134 |
|
See accompanying Notes to the Condensed Consolidated Financial Statements.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, unless otherwise stated)
1. Basis of Presentation
The LGL Group, Inc. is a holding company engaged in services, merchant investment, and manufacturing business activities. The Company was incorporated in 1928 under the laws of the State of Indiana and reincorporated under the laws of the State of Delaware in 2007. Unless the context indicates otherwise, the terms "LGL," "LGL Group," "we," "us," "our," or the "Company" mean The LGL Group, Inc. and its consolidated subsidiaries.
The Company’s manufacturing business is operated through its subsidiary Precise Time and Frequency, LLC ("PTF"), which has operations in Wakefield, Massachusetts. PTF is engaged in the design of high-performance Frequency and Time Reference Standards that form the basis for timing and synchronization in various applications.
These unaudited Condensed Consolidated Financial Statements do not include all disclosures that are normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and should be read in conjunction with the audited Consolidated Financial Statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "2023 Annual Report") filed with the Securities and Exchange Commission (the "SEC") on April 1, 2024. The consolidated financial information as of December 31, 2023 included herein has been derived from the audited Consolidated Financial Statements in the 2023 Annual Report
The Condensed Consolidated Financial Statements include the accounts of The LGL Group, Inc., its majority-owned subsidiaries, and variable interest entities ("VIEs") of which we are the primary beneficiary.
In the opinion of management, these Condensed Consolidated Financial Statements contain all adjustments (consisting of normal recurring adjustments, including eliminations of material intercompany accounts and transactions) considered necessary for a fair statement of the results presented herein. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024.
2. Summary of Significant Accounting Policies
During the
three and six months ended June 30, 2024, there were
no material changes to our significant accounting policies included in the
2023 Annual Report.
For additional information, refer to Note 2 to the audited Consolidated Financial Statements in the 2023
Annual Report.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Impairment of Long-Lived Assets
Long-lived assets, including intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Long-lived assets are grouped with other assets to the lowest level to which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Management assesses the recoverability of the carrying cost of the assets based on a review of projected undiscounted cash flows. If an asset is held for sale, management reviews its estimated fair value less cost to sell. Fair value is determined using pertinent market information, including appraisals or broker's estimates, and/or projected discounted cash flows. In the event an impairment loss is identified, it is recognized based on the amount by which the carrying value exceeds the estimated fair value of the long-lived asset.
We performed an assessment to determine if there were any indicators of impairment as a result of the operating conditions resulting as of the periods ended June 30, 2024 and December 31, 2023. We concluded that, while there were events and circumstances in the macro-environment that did impact us, we did not experience any entity-specific indicators of asset impairment and no triggering events occurred.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, unless otherwise stated)
Future Application of Accounting Standards
Segment Reporting
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, "Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), to address improvements to reportable segment disclosures. The standard primarily requires the following disclosure on an annual and interim basis: (i) significant segment expenses that are regularly provided to chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss; and (ii) other segment items and description of its composition. The standard also requires current annual disclosures about a reportable segment's profits or losses and assets to be disclosed in interim periods and the title and position of the CODM with an explanation of how the CODM uses the report measure(s) of segment profits or losses in assessing segment performance. The provisions of the standard are effective for public companies for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The standard is applied retrospectively to all prior periods presented. We are assessing the impact of this standard.
Income Taxes
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740) - Improvements to Income Tax Disclosures" ("ASU 2023-09"). The standard requires disaggregated information about a company's effective tax rate reconciliation as well as information on income taxes paid. The provisions of the standard are effective for public companies for fiscal years beginning after December 15, 2024, with early adoption permitted. This standard applies prospectively; however, retrospective application is permitted. We are assessing the impact of this standard.
3. Segment Information
The Company has identified two reportable business segments: Electronic Instruments and Merchant Investment. These segments are consistent with the manner in which the chief operating decision maker reviews the business to assess performance and allocate resources. A brief description of each segment is below:
The Electronic Instruments segment includes all products manufactured and sold by PTF.
The Merchant Investment segment includes all activity produced by Lynch Capital International, LLC ("Lynch Capital").
The Company includes in Corporate the following corporate and business activities:
| | • | corporate level assets and financial obligations such as cash and cash equivalents invested in highly liquid U.S. Treasury money market funds and other marketable securities; |
| | • | other items not allocated to or directly related to the Company's operating segments, including items such as deferred tax balances; and |
| | • | intercompany eliminations. |
The Electronic Instruments and Merchant Investment segments are allocated overhead expenses based on each segment's assets as percentage of total assets.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, unless otherwise stated)
The following tables presents LGL Group's operations by segment:
| | | Three Months Ended June 30, 2024 |
| | | Electronic Instruments | | Merchant Investment | | Corporate | | Consolidated |
| Revenues: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 531 | | | $ | — | | | $ | — | | | $ | 531 | |
| Net investment income | | | — | | | | 315 | | | | 223 | | | | 538 | |
| Net (losses) gains | | | — | | | | — | | | | (1 | ) | | | (1 | ) |
| Total revenues | | | 531 | | | | 315 | | | | 222 | | | | 1,068 | |
| Expenses: | | | | | | | | | | | | | | | | |
| Manufacturing cost of sales | | | 214 | | | | — | | | | — | | | | 214 | |
| Engineering, selling and administrative | | | 243 | | | | 78 | | | | 296 | | | | 617 | |
| Total expenses | | | 457 | | | | 78 | | | | 296 | | | | 831 | |
| Income (loss) from continuing operations before income taxes | | | 74 | | | | 237 | | | | (74 | ) | | | 237 | |
| Income tax expense | | | — | | | | — | | | | 76 | | | | 76 | |
| Net income (loss) from continuing operations | | | 74 | | | | 237 | | | | (150 | ) | | | 161 | |
| Income (loss) from discontinued operations, net of tax | | | — | | | | — | | | | — | | | | — | |
| Net income (loss) | | | 74 | | | | 237 | | | | (150 | ) | | | 161 | |
| Less: Net income attributable to non-controlling interests | | | — | | | | 24 | | | | — | | | | 24 | |
| Net income (loss) attributable to LGL Group common stockholders | | $ | 74 | | | $ | 213 | | | $ | (150 | ) | | $ | 137 | |
| | | Three Months Ended June 30, 2023 |
| | | Electronic Instruments | | Merchant Investment | | Corporate | | Consolidated |
| Revenues: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 403 | | | $ | — | | | $ | — | | | $ | 403 | |
| Net investment income | | | — | | | | — | | | | 275 | | | | 275 | |
| Net (losses) gains | | | — | | | | — | | | | 43 | | | | 43 | |
| Total revenues | | | 403 | | | | — | | | | 318 | | | | 721 | |
| Expenses: | | | | | | | | | | | | | | | | |
| Manufacturing cost of sales | | | 208 | | | | — | | | | — | | | | 208 | |
| Engineering, selling and administrative | | | 173 | | | | — | | | | 472 | | | | 645 | |
| Total expenses | | | 381 | | | | — | | | | 472 | | | | 853 | |
| Income (loss) from continuing operations before income taxes | | | 22 | | | | — | | | | (154 | ) | | | (132 | ) |
| Income tax expense (benefit) | | | — | | | | — | | | | (2 | ) | | | (2 | ) |
| Net income (loss) from continuing operations | | | 22 | | | | — | | | | (152 | ) | | | (130 | ) |
| Income (loss) from discontinued operations, net of tax | | | — | | | | — | | | | — | | | | — | |
| Net income (loss) | | | 22 | | | | — | | | | (152 | ) | | | (130 | ) |
| Less: Net income attributable to non-controlling interests | | | — | | | | — | | | | — | | | | — | |
| Net income (loss) attributable to LGL Group common stockholders | | $ | 22 | | | $ | — | | | $ | (152 | ) | | $ | (130 | ) |
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, unless otherwise stated)
| | | Six Months Ended June 30, 2024 |
| | | Electronic Instruments | | Merchant Investment | | Corporate | | Consolidated |
| Revenues: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 923 | | | $ | — | | | $ | — | | | $ | 923 | |
| Net investment income | | | — | | | | 604 | | | | 433 | | | | 1,037 | |
| Net (losses) gains | | | — | | | | — | | | | (4 | ) | | | (4 | ) |
| Total revenues | | | 923 | | | | 604 | | | | 429 | | | | 1,956 | |
| Expenses: | | | | | | | | | | | | | | | | |
| Manufacturing cost of sales | | | 418 | | | | — | | | | — | | | | 418 | |
| Engineering, selling and administrative | | | 429 | | | | 127 | | | | 666 | | | | 1,222 | |
| Total expenses | | | 847 | | | | 127 | | | | 666 | | | | 1,640 | |
| Income (loss) from continuing operations before income taxes | | | 76 | | | | 477 | | | | (237 | ) | | | 316 | |
| Income tax expense | | | — | | | | — | | | | 112 | | | | 112 | |
| Net income (loss) from continuing operations | | | 76 | | | | 477 | | | | (349 | ) | | | 204 | |
| Income (loss) from discontinued operations, net of tax | | | — | | | | — | | | | — | | | | — | |
| Net income (loss) | | | 76 | | | | 477 | | | | (349 | ) | | | 204 | |
| Less: Net income attributable to non-controlling interests | | | — | | | | 46 | | | | — | | | | 46 | |
| Net income (loss) attributable to LGL Group common stockholders | | $ | 76 | | | $ | 431 | | | $ | (349 | ) | | $ | 158 | |
| | | Six Months Ended June 30, 2023 |
| | | Electronic Instruments | | Merchant Investment | | Corporate | | Consolidated |
| Revenues: | | | | | | | | | | | | | | | | |
| Net sales | | $ | 844 | | | $ | — | | | $ | — | | | $ | 844 | |
| Net investment income | | | — | | | | — | | | | 473 | | | | 473 | |
| Net (losses) gains | | | — | | | | — | | | | 388 | | | | 388 | |
| Total revenues | | | 844 | | | | — | | | | 861 | | | | 1,705 | |
| Expenses: | | | | | | | | | | | | | | | | |
| Manufacturing cost of sales | | | 400 | | | | — | | | | — | | | | 400 | |
| Engineering, selling and administrative | | | 350 | | | | — | | | | 837 | | | | 1,187 | |
| Total expenses | | | 750 | | | | — | | | | 837 | | | | 1,587 | |
| Income (loss) from continuing operations before income taxes | | | 94 | | | | — | | | | 24 | | | | 118 | |
| Income tax expense | | | — | | | | — | | | | 63 | | | | 63 | |
| Net income (loss) from continuing operations | | | 94 | | | | — | | | | (39 | ) | | | 55 | |
| Income (loss) from discontinued operations, net of tax | | | — | | | | — | | | | (28 | ) | | | (28 | ) |
| Net income (loss) | | | 94 | | | | — | | | | (67 | ) | | | 27 | |
| Less: Net income attributable to non-controlling interests | | | — | | | | — | | | | — | | | | — | |
| Net income (loss) attributable to LGL Group common stockholders | | $ | 94 | | | $ | — | | | $ | (67 | ) | | $ | 27 | |
The following table presents LGL Group's identifiable assets by segment:
| | | June 30, 2024 | | December 31, 2023 |
| Electronic Instruments | | $ | 835 | | | $ | 843 | |
| Merchant Investment | | | 24,134 | | | | 23,530 | |
| Corporate | | | 17,278 | | | | 17,477 | |
| Total | | $ | 42,247 | | | $ | 41,850 | |
The Company did not have any capital expenditures as of June 30, 2024 or December 31, 2023.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, unless otherwise stated)
4. Investments
Marketable Securities
Details of marketable securities held as of June 30, 2024 and December 31, 2023 are as follows:
| | | June 30, 2024 |
| | | | | | | | | | | Cumulative |
| | | | | | | | | | | Unrealized |
| | | Fair Value | | Basis | | (Loss) Gain |
| Equity securities | | $ | 18 | | | $ | 34 | | | $ | (16 | ) |
| Total | | $ | 18 | | | $ | 34 | | | $ | (16 | ) |
| | | December 31, 2023 |
| | | | | | | | | | | Cumulative |
| | | | | | | | | | | Unrealized |
| | | Fair Value | | Basis | | (Loss) Gain |
| Equity securities | | $ | 22 | | | $ | 34 | | | $ | (12 | ) |
| Total | | $ | 22 | | | $ | 34 | | | $ | (12 | ) |
Net Investment Income
Net investment income represents income primarily from the following sources:
| | • | Income earned from investments in money market funds (recorded in Cash and cash equivalents) |
| | • | Dividends received from Marketable securities |
| | • | Income from unconsolidated or equity method investments |
The following table presents the components of Net investment income:
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| Interest on cash and cash equivalents | | $ | 538 | | | $ | 275 | | | $ | 1,037 | | | $ | 473 | |
| Net investment income | | $ | 538 | | | $ | 275 | | | $ | 1,037 | | | $ | 473 | |
Net Gains (Losses)
Net gains and losses are determined by specific identification. The net realized gains and losses are generated primarily from the following sources:
| | • | Realized gains and losses from investments in Marketable securities |
| | • | Changes in the fair value of investments in Marketable securities |
The following table presents the components of Net gains (losses):
| | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2024 | | 2023 | | 2024 | | 2023 |
| Marketable securities | | $ | (1 | ) | | $ | 43 | | | $ | (4 | ) | | $ | 388 | |
| Net (losses) gains | | $ | (1 | ) | | $ | 43 | | | $ | (4 | ) | | $ | 388 | |
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, unless otherwise stated)
5. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value guidance identifies three primary valuation techniques: the market approach, the income approach and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset.
Fair Value Hierarchy
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to observable inputs such as quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The maximization of observable inputs and the minimization of the use of unobservable inputs are required.
Classification within the fair value hierarchy is based upon the objectivity of the inputs that are significant to the valuation of an asset or liability as of the measurement date. The three levels within the fair value hierarchy are characterized as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Unobservable inputs for the asset or liability for which there is little, if any, market activity for the asset or liability at the measurement date. Unobservable inputs reflect the Company's own assumptions about what market participants would use to price the asset or liability. These inputs may include internally developed pricing models, discounted cash flow methodologies as well as instruments for which the fair value determination requires significant management judgment.
The following is a description of the valuation methodologies used for instruments carried at fair value. These methodologies are applied to asset and liabilities across the levels discussed above, and the observability of the inputs used determines the appropriate level in the fair value hierarchy for the respective asset or liability.
Valuation Methodologies of Financial Instruments Measured at Fair Value
Cash and cash equivalents - Money market instruments are measured at cost, which approximates fair values because of the relatively short time to maturity.
Equity securities - Whenever available, we obtained quoted prices in active markets for identical assets as of the balance sheet date to measure equity securities. Market price data is generally obtained from exchange or dealer markets.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about assets measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of inputs used:
| | | June 30, 2024 |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Cash and cash equivalents (a) | | $ | 40,612 | | | $ | — | | | $ | — | | | $ | 40,612 | |
| Marketable securities: | | | | | | | | | | | | | | | | |
| Equity securities | | | 18 | | | | — | | | | — | | | | 18 | |
| Total marketable securities | | | 18 | | | | — | | | | — | | | | 18 | |
| Total | | $ | 40,630 | | | $ | — | | | $ | — | | | $ | 40,630 | |
| | | December 31, 2023 |
| | | Level 1 | | Level 2 | | Level 3 | | Total |
| Cash and cash equivalents (a) | | $ | 40,229 | | | $ | — | | | $ | — | | | $ | 40,229 | |
| Marketable securities: | | | | | | | | | | | | | | | | |
| Equity securities | | | 22 | | | | — | | | | — | | | | 22 | |
| Total marketable securities | | | 22 | | | | — | | | | — | | | | 22 | |
| Total | | $ | 40,251 | | | $ | — | | | $ | — | | | $ | 40,251 | |
| (a) | As of June 30, 2024 and December 31, 2023, included investments in money market mutual funds managed or advised by GAMCO Investors, Inc. |
There were no liabilities subject to fair value on a recurring basis as of June 30, 2024 and December 31, 2023.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in thousands, unless otherwise stated)
Fair Value Measurements on a Non-Recurring Basis
The Company has other assets that may be subject to measurement at fair value on a non-recurring basis including goodwill and intangible assets and other long-lived assets. The Company reviews goodwill annually and the carrying value of long-lived assets whenever events and circumstances indicate that the carrying amounts of the assets may not be recoverable. If it is determined that the assets are impaired, the carrying value would be reduced to an estimated recoverable value. The Company's common stock warrants (as defined below) were measured at fair value as disclosed in Note 10 - Stockholders' Equity.
As of June 30, 2024 and December 31, 2023, the Company did not write down any assets to fair value.
Fair Value Information about Financial Instruments Not Measured at Fair Value
As of June 30, 2024 and December 31, 2023, the Company did have any assets or liabilities classified as financial instruments that were not measured at fair value.
6. Variable Interest Entities
The Company holds variable interests in certain entities in the form of equity investments. The Company consolidates an entity under the variable interest entity ("VIE") guidance when it is determined the Company is the primary beneficiary.
The Company has no right to the benefits from, nor does it bear the risk associated with, VIEs beyond the Company's direct equity investments in these entities. If the Company were to liquidate, the assets held by VIEs would not be available to the general creditors of the Company as a result of the liquidation.
During June 2023, the Company was appointed as sole managing member of LGL Systems Nevada Management Partners, LLC ("LGL Nevada") and invested approximately $4 into LGL Nevada, representing the Company's 1.0% general partnership interest. Concurrently, Lynch Capital, a wholly owned subsidiary of the Company, invested $1,000 into LGL Systems Acquisition Holding Company, LLC ("LGL Systems"), representing 34.8% of the memberships in LGL Systems, which is controlled by LGL Nevada. As a result, the Company determined it was the primary beneficiary of LGL Systems and was therefore required to consolidate LGL Systems.
Consolidated VIEs
The Company's only consolidated VIE is LGL Systems.
The following table summarizes the assets and liabilities of LGL Systems included in the Condensed Consolidated Balance Sheets:
| | | June 30, 2024 | | December 31, 2023 |
| Assets: | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 3,004 | | | $ | 2,932 | |
| Accounts receivable | | | 14 | | | | 14 | |
| Total current assets | | | 3,018 | | | | 2,946 | |
| Total assets | | $ | 3,018 | | | $ | 2,946 | |
| | | | | | | | | |
| Total liabilities | | $ | — | | | $ | — | |
As of June 30, 2024 and December 31, 2023, the non-controlling interests in LGL Systems was $1,966 and $1,920, respectively.
Unconsolidated VIEs
The Company's only unconsolidated VIE is LGL Nevada.
We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE and (ii) other commitments and guarantees to the VIE.
| | | June 30, 2024 | | December 31, 2023 |
| Total assets | | $ | 595 | | | $ | 588 | |
| | | | | | | | | |
| Maximum exposure to loss: | | | | | | | | |
| On-balance sheet (a) | | | 3 | | | | 3 | |
| Off-balance sheet | | | — | | | | — | |
| Total | | $ | 3 | | | $ | 3 | |
| (a) | As of June 30, 2024 and December 31, 2023, our investment in LGL Nevada was recorded in Other assets in the Condensed Consolidated Balance Sheets. |
LGL Systems Nevada Management Partners LLC
LGL Nevada was formed in October 2019 for the purpose of performing key management and controls decisions of LGL Systems. The remaining 99.0% of ownership interests are held by four individuals, two of which are members of Company management. In the