LGL GROUP INC [LGL-WT] Filings

10-Q 1 lglg20240630_10q.htm FORM 10-Q lglg20240630_10q.htm

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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

☐ 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.

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The LGL Group, Inc.

Form 10-Q for the Period Ended June 30, 2024

Table of Contents

				Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets			2
	Condensed Consolidated Statements of Operations			3
	Condensed Consolidated Statements of Stockholders’ Equity			4
	Condensed Consolidated Statements of Cash Flows			6
	Notes to the Condensed Consolidated Financial Statements
		1.	Basis of Presentation	7
		2.	Summary of Significant Accounting Policies	7
		3.	Segment Information	8
		4.	Investments	11
		5.	Fair Value Measurements	12
		6.	Variable Interest Entities	13
		7.	Related Party Transactions	14
		8.	Income Taxes	15
		9.	Stock-Based Compensation	15
		10.	Stockholders' Equity	16
		11.	Earnings Per Share	16
		12.	Contingencies	17
		13.	Other Financial Statement Information	17
		14.	Domestic and Foreign Revenues	17
		15.	Subsequent Events	17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			25
Item 4.	Controls and Procedures			25

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings			26
Item 1A.	Risk Factors			26
Item 5.	Other Information			26
Item 6.	Exhibits			26

	Signatures			28

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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.

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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.

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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.

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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.

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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.

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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.

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The LGL Group, Inc.

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.

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The LGL Group, Inc.

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.

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The LGL Group, Inc.

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	)

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The LGL Group, Inc.

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.

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The LGL Group, Inc.

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

Table of Contents

The LGL Group, Inc.

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.

Table of Contents

The LGL Group, Inc.

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 event LGL Nevada resigns as manager of LGL Systems, it has the sole right to appoint a new manager.

Table of Contents

The LGL Group, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, unless otherwise stated)

7. Related Party Transactions

In the normal course of business, the Company enters into various transactions with affiliated companies. Parties are considered to be related of one party has the ability to control or exercise significant influence over the other party in making financial or operating decisions.

The following tables summarize income and expenses from transactions with related parties for the three and six months ended June 30, 2024 and 2023:

	*Three Months Ended June 30,*
	*2024*					*2023*
	*Income*		*Expense*			*Income*		*Expense*
GAMCO Investors, Inc.	$	441	$	—		$	388	$	—
M-tron Industries, Inc.		—		(15	)		—		12
Total	$	441	$	(15	)	$	388	$	12

Six Months Ended June 30,

2024

LGL GROUP INC [LGL-WT] Filings
LGL GROUP INC [LGL] Filings
10-Q	[2024-08-13]
10-Q	[2024-05-15]
10-K	[2024-04-01]
10-Q	[2023-11-14]
10-Q	[2023-08-14]
10-Q	[2023-05-15]
10-K	[2023-04-17]
10-Q	[2022-11-14]
10-Q	[2022-08-09]
10-Q	[2022-05-12]
10-K	[2022-03-28]
10-Q	[2021-11-15]
10-Q	[2021-08-11]
10-Q	[2021-05-12]
10-K	[2021-03-29]
10-Q	[2020-11-12]
S-1	[2020-10-23]
10-Q	[2020-08-12]
10-Q	[2020-05-14]
10-K	[2020-03-30]
10-Q	[2019-11-14]
10-Q	[2019-08-12]
10-Q	[2019-05-09]
10-K	[2019-03-21]
10-Q	[2018-11-08]
10-Q	[2018-08-09]
10-Q	[2018-05-10]
10-K	[2018-03-22]
10-Q	[2017-11-06]
10-Q	[2017-08-11]
S-1	[2017-06-22]
10-Q	[2017-05-12]
10-K	[2017-03-29]
10-Q	[2016-11-14]
10-Q	[2016-08-12]
10-Q	[2016-05-13]
10-K	[2016-03-29]
10-Q	[2015-11-13]
10-Q	[2015-08-13]
10-Q	[2015-05-14]
10-K	[2015-03-31]
10-Q	[2014-11-14]
10-Q	[2014-08-14]
10-Q	[2014-05-15]
10-K	[2014-03-31]
10-Q	[2013-11-14]
10-Q	[2013-08-14]
10-Q	[2013-05-15]
10-K	[2013-04-01]
10-Q	[2012-11-14]
10-Q	[2012-08-14]
10-Q	[2012-05-15]
10-K	[2012-03-30]

LGL GROUP INC [LGL-WT] Filings

LGL GROUP INC [LGL] Filings