Financial Performance - Total revenues for the electronic instruments segment were $438,000 for the three months ended September 30, 2023, representing a 27.3% increase from $344,000 for the same period in 2022[92] - The electronic instruments segment reported an operating income of $70,000 for the three months ended September 30, 2023, compared to an operating loss of $39,000 for the same period in 2022[95] - Net income attributable to LGL Group was $108,000 for the three months ended September 30, 2023, compared to losses of $1,459,000 for the same period in 2022[104] - Consolidated gross margin increased to 55.5% for the three months ended September 30, 2023, up from 41.0% for the same period in 2022, reflecting changes in product mix[93] Order Backlog - As of September 30, 2023, the order backlog for the electronic instruments segment was $313,000, a decrease of 13.1% from $360,000 at December 31, 2022, but an increase of 144.5% compared to $128,000 as of September 30, 2022[91] Cash and Investments - Cash and cash equivalents increased to $40,777,000 as of September 30, 2023, from $21,507,000 as of December 31, 2022[105] - Cash provided by investing activities for the nine months ended September 30, 2023 was $18,816,000, reflecting the sale of investments and a shift to U.S. Treasury money market funds[106] - The company aims to invest available cash and cash equivalents in liquid investments to enhance returns while assessing further acquisitions[107] - The company believes existing cash, cash equivalents, and marketable securities will provide sufficient liquidity for the next 12 months[107] Interest Income - The merchant investment segment reported $287,000 of interest income during the three months ended September 30, 2023, and $542,000 during the nine months ended September 30, 2023[96] - Corporate interest income was $257,000 for the three months ended September 30, 2023, compared to $52,000 for the same period in 2022, driven by higher interest rates[98] Tax and Expenses - The company recorded a tax expense of $69,000 for the three months ended September 30, 2023, compared to a tax benefit of $648,000 for the same period in 2022[101] Working Capital - As of September 30, 2023, consolidated working capital was $40,891,000, an increase from $38,753,000 as of December 31, 2022[107] - Current assets as of September 30, 2023, were $41,502,000, with current liabilities of $611,000, resulting in a current assets to current liabilities ratio of 67.92 to 1.00[107] Dividends - The company has not paid cash dividends since January 30, 1989, and none are expected to be paid in the foreseeable future[108] Economic Conditions - Inflation in the U.S. is expected to remain elevated, potentially impacting manufacturing costs and administrative expenses[112] - The U.S. Federal Reserve raised the federal funds rate a total of eleven times from 2022 to 2023, currently ranging from 5.25% to 5.50%[112] - Rising interest rates are anticipated to benefit the company due to a significant portion of its portfolio being invested in U.S. Treasury money market funds[112] - There are no material trends or uncertainties expected to significantly impact revenues or income, aside from national economic conditions[111] Acquisitions - The company continues to evaluate potential acquisitions and investments in operating businesses[107]

(Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q For the quarterly period ended June 30, 2023 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) Delawar ...

Financial Performance - Total revenues for the three months ended March 31, 2023, were $441,000, reflecting a 5.8% increase from $417,000 for the same period in 2022[84]. - Consolidated gross margin increased to 56.5% for the three months ended March 31, 2023, up from 42.0% for the same period in 2022[85]. - The company reported an operating loss of $309,000 for the three months ended March 31, 2023, an improvement from an operating loss of $847,000 for the same period in 2022[87]. - Net income was $157,000 for the three months ended March 31, 2023, compared to $169,000 for the same period in 2022[93]. Income and Expenses - Interest income was $198,000 for the three months ended March 31, 2023, compared to interest expense of $4,000 for the same period in 2022[88]. - Investment income increased to $345,000 for the three months ended March 31, 2023, compared to $45,000 for the same period in 2022[89]. - Total other income was $531,000 for the three months ended March 31, 2023, significantly up from $42,000 for the same period in 2022[90]. Order Backlog and Working Capital - As of March 31, 2023, the order backlog was $399,000, an increase of 10.8% from $360,000 at December 31, 2022, and an increase of 138.9% compared to $167,000 as of March 31, 2022[83]. - Consolidated working capital was $38.799 million as of March 31, 2023, compared to $38.753 million as of December 31, 2022[96]. Cash Position - Cash and cash equivalents as of March 31, 2023, were $21.5 million, slightly down from $21.507 million as of December 31, 2022[94].

Financial Position - As of December 31, 2022, LGL had cash and cash equivalents and marketable securities with a fair market value of approximately $38.1 million[18]. - As of December 31, 2022, the company had investments in cash and marketable securities with a fair market value of approximately $38.1 million[84]. - The company reported a net loss of approximately $2,992,000 for the year ended December 31, 2022, compared to a net income of $14,638,000 for 2021, indicating significant fluctuations in financial performance[122]. - The company recorded a tax benefit of $1,529,000 for 2022, compared to an expense of $3,472,000 for 2021, largely influenced by investment losses from marketable securities[207]. - Interest income, net for 2022 was $194,000, significantly higher than $1,000 for 2021, due to increased interest rates and cash proceeds from prior stock sales[198]. - The company has not paid cash dividends since January 30, 1989, and none are expected to be paid for the foreseeable future[179]. - The company has repurchased a total of 81,584 shares of common stock at a cost of $580,000 under its share repurchase program[178]. Business Operations - LGL's manufacturing subsidiary, PTF, focuses on high-performance frequency and time reference standards for applications including satellite communication and network synchronization[15]. - PTF offers a comprehensive portfolio of time and frequency instrumentation, including NTP servers and RF distribution amplifiers[15]. - The company aims to expand operations through opportunistic acquisitions and strategic partnerships[21]. - The company is currently dependent on a single line of manufacturing business following the Spin-Off of MtronPTI on October 7, 2022, which increases vulnerability to market demand changes[119]. - The company’s business is not seasonal, although shipment schedules may be affected by customer production schedules[47]. - The company has developed long-term real-time synchronization capability of less than 10 nanoseconds, with multiple systems delivered to date[34]. - The latest product developments target the rapidly growing Precision Time Protocol (PTP) market, utilizing Ethernet networks for accurate time and frequency reference signals[43]. - The company’s distribution amplifiers cover multiple signal types and are designed for cost-effective performance solutions, including options for remote monitoring[35]. Investment Strategy - LGL's investment strategy includes identifying undervalued companies and enhancing returns through management and operational changes[19]. - The company has a history of acquiring businesses, having acquired 32 companies and sold 11 since 1985[11]. - LGL's investment business includes various private investment funds, primarily not offered to outside investors[16]. - The company invested $3.35 million for a 20% ownership stake in LGL Systems Acquisition Holding Company, a SPAC focused on aerospace and defense[23]. - The company invested $6.1 million in LGL Systems Acquisition Holdings, LLC, which later completed a business combination with IronNet Cybersecurity, Inc.[86]. - The company plans to form new direct investment vehicles to replace SPACs, focusing on the manufacturing sector for growth opportunities[60]. Revenue and Customer Concentration - In 2022, the largest customer accounted for 18.9% and the second largest for 11.8% of total revenues, with the top seven customers contributing approximately 65% of total revenue[40]. - International revenues reached $460,000 in 2022, representing 27.8% of total consolidated revenues, an increase from $308,000 or 21.3% in 2021[45]. - The order backlog was $360,000 as of December 31, 2022, slightly up from $358,000 in 2021, indicating stable demand[48]. - The company's order backlog may not be indicative of future revenues, creating uncertainty in revenue projections[10]. - The majority of the company's revenues in 2022 and 2021 were derived from sales to manufacturers in the defense, aerospace, instrumentation, and industrial markets, which are cyclical and subject to fluctuations in demand[124]. Market and Economic Risks - The company may experience adverse effects from macroeconomic fluctuations, inflation, and rising interest rates[10]. - The company is subject to procurement regulations as a supplier to U.S. Government defense contractors, which could impact operations[10]. - The company may face significant risks related to its investment business, including potential losses from investments in special purpose acquisition companies (SPACs)[89]. - The company’s markets are highly competitive, and it may lose business to larger and better-financed competitors[10]. - The company may face substantial tax liabilities if the spin-off is determined to be taxable, affecting both the company and its stockholders[164]. - The spin-off may not achieve the expected strategic and financial benefits, potentially leading to adverse effects on the company's business and financial condition[163]. - The company faces challenges related to the COVID-19 pandemic, including higher raw material prices and disruptions in global supply chains, which may adversely affect operations and financial performance[118]. Financial Performance - Total revenues for 2022 were $1,655,000, an increase of $209,000, or 14.5%, from $1,446,000 in 2021, driven by strong performance in defense and communication markets[194]. - Consolidated gross margin for 2022 was 49.4%, down from 50.8% in 2021, impacted by inflationary cost pressures[194]. - The company reported an operating loss of $2,047,000 for 2022, an improvement from an operating loss of $3,521,000 in 2021[197]. - Net loss for 2022 was $2,992,000, compared to net income of $14,638,000 for 2021, primarily due to realized and unrealized losses on marketable securities[209]. - Unrealized gain on marketable securities for 2022 was $18,121,000, compared to a $22,949,000 unrealized loss in 2021[202]. Regulatory and Compliance - The company is required to comply with the Sarbanes-Oxley Act, which mandates effective internal control over financial reporting[146]. - The company is subject to environmental regulations that may increase costs and affect profitability, requiring potential changes in manufacturing processes[142]. - Cybersecurity risks could disrupt operations and negatively impact financial results, highlighting the importance of robust information security measures[145]. - The regulatory environment is subject to changes that could adversely affect the Investment business's operations and profitability[105]. Shareholder and Stock Information - As of March 31, 2023, officers, directors, and 10% or greater stockholders control approximately 37.5% of the voting power of the outstanding shares[150]. - The common stock price fluctuated significantly, with a high of $15.00 and a low of $3.94 from January 1, 2022, to December 31, 2022[149]. - The market for the common stock is limited, making it difficult for holders to sell shares without impacting the market price[149]. - The warrants to purchase shares of common stock have an adjusted exercise price of $4.75, with a trigger price for potential acceleration set at $6.65[155]. - The company has not opted out of the restrictions under Section 203 of the Delaware General Corporation Law, which could affect future mergers or acquisitions[154]. Risks Related to Investments - The Investment business may leverage capital to achieve higher returns, but this also increases the risk of significant losses[99]. - The use of short-term margin borrowings can lead to margin calls if the value of pledged securities declines[100]. - The Investment business may invest in distressed securities, which carry substantial financial and legal risks, potentially leading to total losses[108]. - Investments in non-U.S. securities expose the Investment business to additional risks, including currency exchange risks and political instability[110]. - The ability to hedge investments successfully is subject to numerous risks, including market fluctuations and the effectiveness of hedging strategies[106][107]. - The Investment business may engage in short-selling, which carries theoretically unlimited risk of loss due to price appreciation of the underlying security[112].

PART I [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, and cash flows, and notes the MtronPTI spin-off and quarterly net loss [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show total assets decreased to $57.9 million, driven by reduced cash, while liabilities increased and stockholders' equity declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | $52,784 | $55,836 | | Cash and cash equivalents | $22,291 | $29,016 | | Marketable securities | $17,070 | $16,167 | | Inventories, net | $7,584 | $5,492 | | **Total Assets** | **$57,904** | **$59,906** | | **Total Current Liabilities** | $5,132 | $4,426 | | **Total Liabilities** | **$5,725** | **$5,163** | | **Total Stockholders' Equity** | **$52,179** | **$54,743** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Revenues increased in Q3 2022, but the company reported a net loss of $1.46 million due to the absence of a prior-year investment gain and current investment losses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | **Revenues** | $8,761 | $7,501 | $24,303 | $20,919 | | **Operating Income (Loss)** | $121 | $(746) | $466 | $(190) | | Gain on equity investment | $— | $60,205 | $— | $59,453 | | Investment loss | $(2,121) | $(18,867) | $(4,449) | $(18,665) | | **Net (Loss) Income** | **$(1,459)** | **$31,780** | **$(3,088)** | **$31,789** | | **Diluted Net (Loss) Income per Share** | **$(0.27)** | **$5.97** | **$(0.58)** | **$5.96** | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased to $52.2 million due to a net loss for the nine-month period, partially offset by compensation and option exercises - Total stockholders' equity decreased to **$52,179,000** at September 30, 2022, from **$54,743,000** at December 31, 2021. The change was driven by a net loss of **$3,088,000** for the nine-month period, offset by stock-based compensation and option exercises[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased, and cash used in investing activities rose due to marketable securities purchases, leading to a $6.7 million decrease in cash and cash equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(831) | $227 | | Net cash used in investing activities | $(6,015) | $(2,996) | | Net cash provided by financing activities | $121 | $31 | | **Decrease in cash and cash equivalents** | **$(6,725)** | **$(2,738)** | | **Cash and cash equivalents at end of period** | **$22,291** | **$15,593** | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies and events, including the MtronPTI spin-off, a $4.4 million investment loss from IronNet securities, and subsequent adjustments to warrant exercise prices - On October 7, 2022, the company completed the separation of its MtronPTI business into an independent, publicly-traded company. LGL stockholders received **one-half share of MtronPTI for every share of LGL**. LGL retained no ownership interest. MtronPTI's historical financial results will be reflected as discontinued operations starting in **Q4 2022**[24](index=24&type=chunk)[25](index=25&type=chunk)[68](index=68&type=chunk) - The company's investment in IronNet (IRNT) securities is classified as marketable securities. For the nine months ended September 30, 2022, the company recognized an investment loss of **$4,449,000**, primarily related to these holdings[35](index=35&type=chunk)[36](index=36&type=chunk) - Following the MtronPTI spin-off, the exercise price of LGL's outstanding warrants was adjusted from **$12.50 to $4.75**, and the acceleration trigger price was adjusted from **$17.50 to $6.65**, effective **October 18, 2022**[71](index=71&type=chunk)[74](index=74&type=chunk) - As of September 30, 2022, the company had no borrowings outstanding under its **$5 million revolving line of credit** with Fifth Third Bank[62](index=62&type=chunk)[63](index=63&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=15&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses operational performance, financial condition, and the MtronPTI spin-off, highlighting record order backlog, Q3 revenue growth, IronNet investment volatility, and sufficient liquidity [Overview](index=15&type=section&id=OVERVIEW) The company operates as a holding company for electronic component businesses serving aerospace and defense, with the MtronPTI spin-off and a volatile IronNet investment as key strategic events - The company is a holding company for businesses designing and manufacturing frequency and spectrum control products for the **aerospace and defense markets**[79](index=79&type=chunk) - On **October 7, 2022**, the company completed the spin-off of its MtronPTI business into an independent, publicly-traded company (**NYSE: MPTI**). LGL's historical financials will reflect MtronPTI as discontinued operations starting in **Q4 2022**[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) [Results of Operations](index=16&type=section&id=Results%20of%20Operations) The company achieved a record order backlog and increased Q3 revenues, but gross margin declined, resulting in a net loss primarily due to investment losses and the absence of a prior-year gain - Order backlog reached a record **$44,202,000** as of September 30, 2022, a **102.3% increase** from **$21,849,000** a year prior. This growth is attributed to the recovery in the avionics market and strong defense orders[85](index=85&type=chunk) Q3 2022 vs. Q3 2021 Performance | Metric | Q3 2022 | Q3 2021 | Change | | :--- | :--- | :--- | :--- | | Revenues | $8,761,000 | $7,501,000 | +16.8% | | Gross Margin | 32.8% | 36.2% | -3.4 p.p. | | Operating Income (Loss) | $121,000 | $(746,000) | N/A | | Net (Loss) Income | $(1,459,000) | $31,780,000 | N/A | Nine Months 2022 vs. Nine Months 2021 Performance | Metric | Nine Months 2022 | Nine Months 2021 | Change | | :--- | :--- | :--- | :--- | | Revenues | $24,303,000 | $20,919,000 | +16.2% | | Gross Margin | 35.8% | 36.3% | -0.5 p.p. | | Operating Income (Loss) | $466,000 | $(190,000) | N/A | | Net (Loss) Income | $(3,088,000) | $31,789,000 | N/A | [Liquidity and Capital Resources](index=18&type=section&id=Liquidity%20and%20Capital%20Resources) The company held $22.3 million in cash and $47.7 million in working capital, with management confident in sufficient liquidity for the next 12 months, and no anticipated cash dividends - Cash and cash equivalents stood at **$22,291,000** as of September 30, 2022, down from **$29,016,000** at December 31, 2021[103](index=103&type=chunk) - Consolidated working capital was **$47,652,000** with a current ratio of **10.29 to 1.00** as of September 30, 2022[107](index=107&type=chunk) - Management believes existing cash and cash generated from operations will provide **sufficient liquidity for the next 12 months**[110](index=110&type=chunk) - The company has a policy of **not paying cash dividends** to support long-term growth objectives and does not expect to pay any in the foreseeable future[111](index=111&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=19&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section on market risk disclosures is stated as not applicable for the current reporting period - The report states that Quantitative and Qualitative Disclosures About Market Risk are **not applicable**[117](index=117&type=chunk) [Item 4. Controls and Procedures](index=19&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective** as of **September 30, 2022**[119](index=119&type=chunk) - No changes in the Company's internal control over financial reporting occurred during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[120](index=120&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=20&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no awareness of any material pending legal proceedings beyond routine litigation incidental to its business - The company is **not aware of any material pending legal proceedings** outside of the ordinary course of business[122](index=122&type=chunk) [Item 1A. Risk Factors](index=20&type=section&id=Item%201A.%20Risk%20Factors) This section highlights new risks from the MtronPTI spin-off, including potential negative business impacts, earnings dilution, and failure to achieve expected strategic benefits - The completed spin-off of the MtronPTI business introduces risks that could **negatively impact the company's business and financial results**[124](index=124&type=chunk) - Potential risks from the spin-off include **earnings per share dilution**, failure to achieve expected strategic and financial benefits, **loss of synergies**, and the possibility that the combined stock value will not exceed LGL's pre-spin-off value[124](index=124&type=chunk)[125](index=125&type=chunk) [Item 5. Other Information](index=20&type=section&id=Item%205.%20Other%20Information) This section provides unaudited pro forma consolidated financial information illustrating the MtronPTI spin-off's financial impact, presenting results as if the spin-off occurred on January 1, 2021 [Unaudited Pro Forma Consolidated Financial Information](index=20&type=section&id=UNAUDITED%20PRO%20FORMA%20CONSOLIDATED%20FINANCIAL%20INFORMATION%20FOR%20THE%20COMPANY) The pro forma financials adjust for the MtronPTI spin-off, showing a pro forma revenue of $1.1 million, a net loss of $4.2 million, and total assets of $40.3 million - Unaudited pro forma financial statements are provided to illustrate the company's financial position and results as if the MtronPTI spin-off had occurred on **January 1, 2021** (for income statements) and **September 30, 2022** (for the balance sheet)[128](index=128&type=chunk) Unaudited Pro Forma Consolidated Statement of Income - Nine Months Ended Sep 30, 2022 (in thousands) | Description | Historical LGL (as reported) | Discontinued Operations (MtronPTI) | Pro Forma LGL | | :--- | :--- | :--- | :--- | | **REVENUES** | $24,303 | $(23,172) | $1,131 | | **OPERATING INCOME (LOSS)** | $466 | $(2,047) | $(1,006) | | **NET LOSS (INCOME)** | **$(3,088)** | **$(1,608)** | **$(4,244)** | Unaudited Pro Forma Consolidated Balance Sheet - As of Sep 30, 2022 (in thousands) | Description | Historical LGL (as reported) | Discontinued Operations (MtronPTI) | Pro Forma LGL | | :--- | :--- | :--- | :--- | | **Total Assets** | $57,904 | $(17,460) | $40,250 | | **Total Liabilities** | $5,725 | $(4,814) | $911 | | **Total Stockholders' Equity** | $52,179 | $(12,646) | $39,339 | [Item 6. Exhibits](index=26&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, credit agreements, and Sarbanes-Oxley certifications - Lists exhibits filed with the report, including **corporate governance documents**, **credit agreements**, and **Sarbanes-Oxley certifications**[143](index=143&type=chunk)

Financial Performance - Total revenues for the three months ended June 30, 2022, were $7,434,000, representing an 8.0% increase from $6,882,000 for the same period in 2021[79] - For the six months ended June 30, 2022, total revenues were $15,542,000, a 15.8% increase from $13,418,000 for the same period in 2021[87] - The company reported a net loss of $1,798,000 for the three months ended June 30, 2022, compared to a net loss of $18,000 for the same period in 2021[86] - The company reported an investment loss of $2,328,000 for the six months ended June 30, 2022, compared to investment income of $202,000 for the same period in 2021[91] Order Backlog - As of June 30, 2022, the order backlog was $43,384,000, an increase of 45.6% from $29,797,000 at December 31, 2021, and an increase of 103.2% compared to $21,347,000 as of June 30, 2021[77] Margins and Costs - Consolidated gross margin decreased to 37.6% for the three months ended June 30, 2022, down from 39.7% for the same period in 2021, due to inflation and product mix[80] Cash and Liquidity - As of June 30, 2022, cash and cash equivalents were $22,325,000, down from $29,016,000 as of December 31, 2021[95] - Consolidated working capital as of June 30, 2022, was $49,469,000, compared to $51,410,000 as of December 31, 2021[99] - Existing cash, cash equivalents, and marketable securities are expected to provide sufficient liquidity for the next 12 months[102] - The company had no borrowings outstanding under its revolving line of credit as of June 30, 2022[101] - The company utilized $5,339,000 for investment activities related to marketable securities during the six months ended June 30, 2022[95] - The company has not paid cash dividends since January 30, 1989, and none are expected in the foreseeable future[103] Spin-Off - The Spin-Off of MtronPTI was approved by stockholders on June 21, 2022, creating two separate publicly-traded companies[104] - The Spin-Off is expected to allow each entity to pursue distinct business strategies and capital allocation policies[105] COVID-19 Impact - The company experienced adverse impacts from COVID-19, including higher raw material prices and disruptions in global supply chains[109] - Operations in India were closed on March 23, 2020, and resumed limited operations on May 7, 2020, with full operations by the end of June 2020[110] - U.S. production facilities continued to operate in support of essential products, but facility closures or slowdowns have occurred[111] - The ultimate impact of COVID-19 on operations and financial performance remains uncertain and depends on various uncontrollable factors[112] Credit Facilities - The MtronPTI subsidiary has a revolving line of credit agreement for up to $5,000,000 with Fifth Third Bank N.A., maturing on June 15, 2025[100]

Financial Performance - Total revenues for the first quarter of 2022 were $8,108,000, representing a 24.1% increase from $6,536,000 for the same period in 2021, driven by strong defense product shipments and a recovering avionics market[83] - The consolidated gross margin improved to 37.6% for the first quarter of 2022, up from 32.7% for the same period in 2021, reflecting increased business volume[84] - The company reported operating income of $221,000 for the first quarter of 2022, compared to an operating loss of ($60,000) for the same period in 2021[85] - Net income for the first quarter of 2022 was $169,000, compared to $27,000 for the same period in 2021, with diluted net income per share increasing to $0.03 from $0.01[90] Order Backlog - As of March 31, 2022, the company's order backlog was $36,991,000, a 24.1% increase from $29,797,000 at December 31, 2021, and an 81.4% increase compared to $20,388,000 as of March 31, 2021[81] Cash and Investments - Cash used in investing activities for the first quarter of 2022 was $6,810,000, significantly higher than $55,000 for the same period in 2021, primarily due to the purchase of $7,000,000 in marketable securities[93] - As of March 31, 2022, the company's consolidated working capital was $51,611,000, slightly up from $51,410,000 as of December 31, 2021[94] - The company has no borrowings outstanding under its revolving line of credit with Synovus Bank as of March 31, 2022, which has a limit of $3.5 million[96] - The company believes that existing cash, marketable securities, and cash generated from operations will provide sufficient liquidity for the next 12 months[97] Spin-Off Plans - The company plans to proceed with the Spin-Off of MtronPTI, which is expected to create two separate publicly-traded companies, allowing each to pursue distinct business strategies[99] Impact of COVID-19 - The effectiveness and adoption of COVID vaccines and therapeutics continue to impact business operations and financial performance[108] - Global vaccination programs' failure to achieve intended results may lead to prolonged economic and supply chain disruptions, adversely affecting operations[108] - Governmental and business actions in response to the pandemic include shutdown orders and travel restrictions, influencing supplier impacts[108] - The ongoing pandemic situation remains a significant risk factor for the company's future performance and operational results[108] - Market risk disclosures are not applicable for the current reporting period[109]

Financial Data and Key Metrics Changes - Fourth quarter revenues were $7.2 million, a decrease of $0.2 million or 2.6% compared to $7.4 million in Q4 2020 [6] - Full year revenues were $28.1 million, down $3.1 million or 9.7% from $31.2 million in 2020 [8] - Operating loss for Q4 was $596,000 compared to a loss of $138,000 in Q4 2020 [6] - Net income for the year was $14.6 million, significantly up from $1 million in the previous year, primarily due to SPAC-related investments [10] - Diluted earnings per share increased to $2.74 from $0.19 in 2020 [10] - Year-end net cash position, including marketable securities, was $45.8 million, equating to more than $8.5 per share [10] Business Line Data and Key Metrics Changes - The backlog at the end of the quarter was $29.8 million, up from $19.8 million at the beginning of the year and $21.8 million at the end of Q3 2021 [7] - Gross margins improved to 35.8% compared to 35.1% in the previous year [8] - The company reported an operating loss of $0.8 million for the full year, but excluding a non-cash charitable donation, operating income was $0.5 million compared to $1.4 million in 2020 [9] Market Data and Key Metrics Changes - The avionics market is recovering, contributing to backlog growth, with a significant order of $6.3 million related to a missile defense program expected to ship after 2022 [7][12] - The company noted that approximately 10% of the backlog growth is related to new products introduced in the past 12 to 18 months [17] Company Strategy and Development Direction - The MTronPTI spin-off plan is progressing, with shareholder approval targeted for Q2 2022, allowing each entity to pursue distinct strategic plans [14] - Post spin-off, the company will focus on profitable growth through acquisitions [33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges from inflation, supply chain disruptions, and workforce issues but expressed confidence in maintaining workforce levels [12][22] - The company is in the early stages of recovery in the avionics market, indicating potential for further growth in the coming quarters [21] Other Important Information - The company has released several new products in 2021, enhancing its presence in the military and aerospace markets [13] - Management has identified a team for the MTronPTI business and expects the spin-off to be completed in Q3 2022 [25] Q&A Session Summary Question: Can you quantify how much backlog growth is related to new business versus supply chain challenges? - Approximately 10% of the backlog growth is related to new products introduced in the past 12 to 18 months, with a small portion related to advanced orders due to supply chain issues [17] Question: Are there any new customers contributing to the backlog? - There is some new customer penetration, but a large part of the backlog is with existing customers [19] Question: What is the lag time for passing on cost increases to customers? - The lag generally varies from eight to 12 weeks or slightly beyond that [20] Question: How is the company addressing inflationary pressures and labor shortages? - The company is actively working with suppliers and identifying additional sources to combat inflationary pressures, while maintaining workforce levels [22] Question: What is the expected timeline for the MTronPTI spin-off? - The shareholder vote is targeted for Q2 2022, with the spin-off expected to be completed in Q3 2022 [23][25] Question: How might the war in Ukraine affect the defense business? - Increased defense spending could benefit the company, and there may be opportunities arising from sanctions on Russia [41]

Business Segments and Operations - The LGL Group operates through two segments: Electronic Components and Electronic Instruments, focusing on high-reliability frequency and spectrum control products[24]. - MtronPTI's product offerings include quartz crystal resonators and various types of oscillators, designed for applications requiring high reliability in harsh environments[30]. - PTF's Frequency and Time Reference Standards include GPS/GNS disciplined quartz frequency standards, which are critical for satellite communications[36]. - The company remains dependent on a single line of business, with virtually all revenues derived from electronic components[69]. Financial Performance - Total revenues for 2021 were $28,140,000, a decrease of $3,022,000, or 9.7%, from $31,162,000 in 2020[151]. - Net income for the year ended December 31, 2021, was approximately $14,638,000, a significant increase from $968,000 in 2020[72]. - The Company reported an operating loss of ($786,000) for 2021, compared to operating income of $1,415,000 for 2020[155]. - Basic net income per share for 2021 was $2.77, compared to $0.19 for 2020[164]. - The Company recognized a gain on equity investment in unconsolidated subsidiary of $59,453,000 for 2021, compared to a loss of ($262,000) in 2020[156]. - Realized loss on marketable securities was ($16,962,000) for 2021, compared to $74,000 of realized income for 2020[157]. - Unrealized loss on marketable securities was ($22,949,000) for 2021, with significant losses attributed to IRNT common stock[159]. - Cash provided by operating activities decreased to $1.4 million in 2021 from $3.2 million in 2020, primarily due to lower operating earnings[173]. Customer Concentration and Revenue Sources - In 2021, the largest customer accounted for $7.87 million, or 28.0%, of total revenues, while the second largest contributed $3.14 million, or 11.2%[42]. - As of December 31, 2021, four of the largest customers accounted for approximately 53.2% of accounts receivable, highlighting customer concentration risk[43]. - Domestic revenues in 2021 were $22,096,000, representing 78.5% of total consolidated revenues, a decrease from $23,752,000 or 76.2% in 2020[49]. - International revenues in 2021 were $6,044,000, accounting for 21.5% of total consolidated revenues, down from $7,410,000 or 23.8% in 2020[50]. - The majority of the company's revenues in 2021 and 2020 were derived from sales to manufacturers in the defense, aerospace, instrumentation, and industrial markets, with expectations for continued revenue from these sectors in 2022[78]. Spin-Off and Corporate Strategy - The Spin-Off of MtronPTI is intended to allow shareholders to evaluate the performance of each entity independently, pending stockholder approval[19]. - The Company plans to complete a Spin-Off of MtronPTI, subject to stockholder approval, creating two separate publicly-traded companies[180]. - The Spin-Off is expected to allow each entity to pursue distinct business strategies and capital allocation policies, potentially enhancing shareholder value[181]. - MtronPTI may face challenges in meeting capital needs post-Spin-Off due to the loss of financial support from the parent company[124]. Risks and Challenges - The COVID-19 pandemic has led to increased raw material prices and disruptions in global supply chains, affecting operations[67]. - The company faces risks related to supply chain inefficiencies and limited visibility in forecasting revenue projections due to the cyclical nature of its markets[78]. - The company is subject to significant procurement regulations as a supplier to U.S. Government defense contractors, which could increase compliance costs and affect operating margins[89]. - The company competes in highly competitive markets, with larger competitors having greater financial resources and capabilities, which could impact its operating results[86]. - The company may experience operational inefficiencies if it fails to integrate acquired businesses successfully, which could adversely affect financial condition and results[83]. Governance and Internal Controls - The management concluded that internal controls over financial reporting were effective as of December 31, 2021[197]. - The company is focused on maintaining adequate internal controls as part of its governance strategy[197]. - The board includes members with experience in mergers and acquisitions, enhancing the company's strategic capabilities[205]. - The Audit Committee consists of three members, all of whom are financially literate and independent under NYSE listing standards[212]. Shareholder Information - As of March 10, 2022, officers, directors, and 10% or greater stockholders control approximately 38.7% of the voting power of the outstanding shares[110]. - The common stock price fluctuated between $14.50 and $9.90 during the year 2021, indicating significant volatility in the market[108]. - The distribution of MtronPTI common stock may not qualify for tax-free treatment, potentially resulting in tax liabilities for stockholders[122].

Financial Performance - Total revenues for the three months ended September 30, 2021, were $7,501,000, a decrease of 7.1% from $8,071,000 for the same period in 2020[90]. - For the nine months ended September 30, 2021, total revenues were $20,919,000, a decrease of 11.9% from $23,748,000 for the same period in 2020[99]. - For the three months ended September 30, 2021, revenues were $7.501 million, a decrease from $8.071 million for the same period in 2020, representing a decline of approximately 7%[114]. - For the nine months ended September 30, 2021, revenues totaled $20.919 million, down from $23.748 million in 2020, reflecting a decrease of about 13%[114]. - The operating loss for the three months ended September 30, 2021, was $(746,000), compared to an operating income of $709,000 for the same period in 2020[114]. Net Income and Gains - The company reported a net income of $31,780,000 for the three months ended September 30, 2021, compared to $629,000 for the same period in 2020, driven by a gain from the Sponsor investment[98]. - The company recognized a gain on equity investment in unconsolidated subsidiary of $59,453,000 for the nine months ended September 30, 2021, compared to a loss of ($200,000) for the same period in 2020[102]. Cash Flow and Working Capital - Cash provided by operating activities for the nine months ended September 30, 2021, was $227,000, a significant decrease of $1.603 million compared to $1.830 million in 2020[116]. - Cash used in investing activities increased to $2.996 million for the nine months ended September 30, 2021, from $329,000 in 2020, primarily due to funding for the Company's PIPE subscription agreement[117]. - As of September 30, 2021, consolidated working capital was $74.170 million, a substantial increase from $30.384 million as of December 31, 2020[119]. - The Company had current assets of $77.126 million and current liabilities of $2.956 million as of September 30, 2021, resulting in a current ratio of 26.09 to 1.00[120]. Order Backlog - As of September 30, 2021, the company's order backlog was $21,849,000, a 10.3% increase from $19,801,000 at December 31, 2020, and a 1.8% increase compared to $21,456,000 as of September 30, 2020[87]. - The company expects to fill substantially all of its order backlog within the next twelve months but cannot assure what portion will be fulfilled in a given year[89]. Marketable Securities and Investments - The company held 1,388,620 IRNT common shares as of October 31, 2021, including 1,250,000 restricted shares[112]. - As of October 31, 2021, the Company sold 1,405,315 shares of IRNT common stock for approximately $16.9 million, retaining 1,388,620 shares in its portfolio[125]. - The Company's IRNT securities held at September 30, 2021, were marked to fair value of $44.4 million, with an average fair value of $15.90 per share[127]. Tax and Expenses - The company recorded a tax expense of $9,080,000 for the nine months ended September 30, 2021, compared to $282,000 for the same period in 2020, primarily due to increased income from the Sponsor investment[106]. COVID-19 Impacts - The company has identified potential delivery impacts from suppliers due to COVID-19, which could adversely affect contract deliveries[133]. - Delays in inspection, acceptance, and payment by customers, particularly for classified work, may impact sales and cash flows[134]. - Government funding priorities may shift due to the costs associated with the COVID-19 pandemic, potentially affecting future contract awards[134]. - The company is monitoring the impacts of COVID-19 on the fair value of its assets, with no current material impairments anticipated[136]. - Future changes in expectations for sales, earnings, and cash flows could lead to impairments of intangible assets and goodwill[136]. Strategic Initiatives - The Company plans to proceed with a spin-off of its MTronPTI subsidiary, which will be submitted for shareholder approval, aiming to enhance strategic focus and value for both entities[124].