Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the accompanying unaudited Condensed Consolidated Financial Statements, the notes thereto and the other unaudited financial data included in this Quarterly Report on Form 10-Q. The following discussion should also be read in conjunction with the audited consolidated financial statements and the notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025 as filed with the SEC on March 30, 2026. The terms "LGL," "LGL Group," "we," "our," "us," or the "Company" refer to The LGL Group, Inc. and its consolidated subsidiaries and unless otherwise defined herein, capitalized terms used herein shall have the same meanings as set forth in our condensed consolidated financial statements and the notes thereto.

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

Unless otherwise stated, all dollar amounts are in thousands.

Overview

The LGL Group, Inc. is a holding company that acquires, owns, and builds businesses and makes strategic investments, with an emphasis on critical technologies. We operate through two complementary business activities: Platform Operations and Merchant Investment. Through Platform Operations, we build operating businesses through organic growth, operational improvement, and complementary acquisitions, currently conducted through our Electronic Instruments reportable segment and anchored by our subsidiary Precise Time and Frequency, LLC ("PTF"). Through Merchant Investment, we deploy capital through minority investments, co-investments, and strategic partnerships to broaden our opportunity set and support future platform development. We seek to create long-term stockholder value through disciplined capital allocation and active ownership.

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

We report our results of operations through two reportable segments: Electronic Instruments and Merchant Investment. Activities not related to our business segments, such as our corporate operations and corporate-level assets and financial obligations, are included in Corporate.

During 2026, we have strengthened our capital resources, expanded the order backlog at PTF and invested in the people and capabilities needed to support our operating and investment activities. Our priorities include converting customer orders into shipments, continuing to develop a defense technology platform called ZuluTime LLC ("ZuluTime"), expanding our acquisition pipeline and reducing reliance on historical shared services arrangements.

Platform Operations

Our Platform Operations activities are currently conducted through our Electronic Instruments segment, anchored by our subsidiary PTF, a globally positioned producer of industrial Electronic Instruments and commercial products and services. Founded in 2002, PTF operates from our design and manufacturing facility in Wakefield, Massachusetts. Through PTF, we design, manufacture, and market high-performance Frequency and Time Reference Standards that form the basis for timing and synchronization in various applications. Our primary markets are communications, networking, aerospace, defense, instrumentation, and industrial markets.

Merchant Investment

Our Merchant Investment activities are conducted through our subsidiary Lynch Capital International, LLC ("Lynch Capital") and comprise various investment vehicles through which we deploy capital, including minority investments, co-investments, strategic partnerships, and certain special purpose vehicles that may be syndicated for investment and that involve certain fee-generating activities. We seek to invest available cash and cash equivalents with a view to enhancing returns while broadening our opportunity set and supporting future platform development.

As of September 30, 2026, LGL Group had investments (classified within Cash and cash equivalents and Marketable securities) with a fair value of approximately $86.6 million, of which $26.3 million was held within the Merchant Investment business. The Company accounts for its Marketable securities under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 321, Investments - Equity Securities ("ASC 321") and as such, its Marketable securities are reported at fair value on its Condensed Consolidated Balance Sheets.

Our investment associated with Skyline Instruments Corporation ("Skyline") is held through Skyline Instruments May 2026, a Series of CGF2021 LLC ("Skyline SPV"), a consolidated investment vehicle that owns a convertible promissory note issued by Skyline (the "Skyline Note"). Through Lynch Capital, we invested $850 in Skyline SPV and held a 33.9% interest as of September 30, 2026. This investment provides exposure to technologies complementary to our precision timing strategy and may create opportunities for commercial or strategic collaboration. We consolidate Skyline SPV, but we do not consolidate Skyline's operating business.

Recent Developments

PTF Customer Awards

During the third quarter of 2026, we announced customer awards supporting military communications and space-based communications infrastructure. On July 2, 2026, we announced a HaveQuick military timing contract supporting a partner nation in the Indo-Pacific region, with deliveries extending over 24 months. On August 5, 2026, we announced $6.0 million in satellite communications awards from an existing major customer. Those awards included $3.4 million already reflected in backlog at June 30, 2026. Award values and backlog do not represent revenue recognized in the period of announcement; revenue depends on delivery schedules and satisfaction of the applicable contractual performance obligations.

Rights Offering

In July 2026, we completed our transferable subscription rights offering, issuing 6,062,714 shares of common stock and receiving approximately $41.8 million in gross proceeds and $41.5 million in net proceeds. The shares were issued on July 23, 2026, and completion was announced on July 24, 2026. The offering materially increased our capital resources and shares outstanding and provides additional resources for the growth of our businesses, potential acquisitions and strategic investments.

Operating Independence and MtronPTI Services

During 2026, we have been working to reduce our reliance on M-tron Industries, Inc. ("MtronPTI") for administrative support and on the transitional services arrangements established following the 2022 separation. We are developing the internal capabilities and third-party support needed to manage these functions within LGL Group and support the continued development of our operating businesses. We are targeting the fourth quarter of 2026 for transition of the remaining services, subject to completion of the necessary operational and contractual steps.

The transition is intended to improve operational independence, accountability and our ability to support future growth. During implementation, we may incur overlapping service costs and expenses to establish replacement capabilities. The net effect on recurring corporate expenses will depend on the scope and cost of the functions transferred and the arrangements ultimately implemented.

For the three and nine months ended September 30, 2026, net fees under the transitional administrative and management services agreement were $12 and $36, respectively. Separate reimbursements for employee services were $28 and $84 for those periods, respectively. Our tax-sharing arrangements are separate from the services transition.

Acquisition Pipeline and Strategic Relationships

During the third quarter, we expanded our sourcing and evaluation of potential acquisitions for ZuluTime that could broaden the platform's technical capabilities, customer relationships and addressable markets. Our evaluation emphasizes strategic fit, the quality and durability of earnings and cash flows, customer and program concentration, management capabilities, integration requirements and valuation. We intend to maintain discipline in the pace and terms of capital deployment, and there can be no assurance that evaluated opportunities will result in definitive agreements or completed transactions.

The timing and financial effects of any acquisition will depend on the opportunities available, satisfactory due diligence, negotiated terms, required approvals and the resources needed to operate and integrate the acquired businesses. Our current operating results do not include the operating results of businesses that have not been acquired.

Our strategic relationships, including our previously announced relationship with Legion Capital Partners, LLC, support the sourcing and evaluation of opportunities across defense and other critical technologies. Any investment or other transaction involving LGL Group would be evaluated on its strategic and financial merits and would be subject to applicable approvals and related-party review procedures.

Nevada Redomestication

Effective September 1, 2026, the Company completed its redomestication from Delaware to Nevada following stockholder approval on May 12, 2026. Each outstanding share of common stock continued as one share of the Nevada corporation. The redomestication did not change our business, operations, management, assets, liabilities or workforce, other than costs associated with the conversion, and our common stock continues to trade on NYSE American under the symbol "LGL."

Trends and Uncertainties

We are not aware of any material trends or uncertainties that may reasonably be expected to have a material impact, favorable or unfavorable, on our revenues or income, other than global macroeconomic conditions affecting our industry generally, those described below, and those described in Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the SEC on March 30, 2026 and in Part II, Item 1A of this Quarterly Report.

Demand and Capacity for Precision Timing and Frequency Products

We believe several long-term trends in the defense and aerospace markets are increasing the strategic importance of precision timing and frequency technologies. Modern defense systems increasingly depend on accurate and resilient timing for communications, radar, electronic warfare, autonomous systems, distributed sensing and secure networks. The increasing complexity of distributed and networked defense architectures, together with greater awareness of the vulnerability of GPS- and GNSS-dependent systems in contested environments, is driving demand for more resilient positioning, navigation and timing ("PNT") capabilities, including high-performance timing references and synchronization products capable of maintaining accuracy and reliability in GPS-denied, degraded or disrupted environments. Continued investment in defense modernization, space-based systems, autonomous platforms and advanced communications may create additional opportunities for suppliers of precision timing technologies.

Consistent with these trends, we have experienced increasing demand for our frequency and timing products, reflected in growth in customer orders and order backlog over recent periods. We seek to position our precision timing business and related investments to benefit from this demand through continued product development, investment in security and resiliency capabilities, and selective investments and acquisitions. The extent to which this demand converts into shipments and revenue is uncertain, however, and depends on factors including customer procurement decisions, government spending priorities, program and production schedules, the availability and lead times of key components and raw materials, and our available manufacturing capacity.

A higher and more concentrated volume of orders may require us to expand or accelerate production capacity, add personnel, and increase purchases of materials and components in advance of shipment. These actions could increase our working capital requirements and affect the timing of our operating cash flows, as expenditures to fulfill orders may precede the related customer collections. We continue to monitor demand against our capacity and liquidity, but we cannot provide assurances as to the timing or extent to which this demand will result in revenue, or as to its impact on our operating results, cash flows or working capital in any given period.

Changing Interest Rates

The U.S. Federal Reserve decreased the federal funds rate a total of three times throughout 2025, resulting in a range from 3.50% to 3.75% as of December 31, 2025. The U.S. Federal Reserve maintained the federal funds rate within that range until September 16, 2026, when it increased the target range by 25 basis points to 3.75% to 4.00%. Through the date of filing of this Quarterly Report on Form 10-Q, the U.S. Federal Reserve has maintained the federal funds rate in the range of 3.75% to 4.00%. If interest rates continue to increase, the returns generated by our investments in U.S. Treasury money market funds could be favorably impacted.

Tariffs

The current U.S. federal administration has imposed tariffs on certain products and materials entering the United States imported from other countries. Additionally, foreign governments have imposed retaliatory tariffs on products and materials exported from the United States. Following the U.S. Supreme Court's February 2026 decision striking down certain tariffs, the Trump Administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended, and the impacts of such actions on our business. The effect on our results will depend on the products and jurisdictions affected, the timing of implementation and our ability to manage costs and delivery requirements.

Results of Operations - Consolidated

Three months ended September 30, 2026 compared to three months ended September 30, 2025

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

		Three Months Ended September 30,
(in thousands)		2026				2025				$ Change				% Change
Revenues:
Net sales		$	720			$	661			$	59				8.9	%
Net investment income			744				442				302				68.3	%
Net gains			-				5				(5	)			n/m
Total revenues			1,464				1,108				356				32.1	%
Expenses:
Manufacturing cost of sales			491				312				179				57.4	%
Engineering, selling and administrative			948				676				272				40.2	%
Total expenses			1,439				988				451				45.6	%
Income before income taxes			25				120				(95	)			(79.2	%)
Income tax expense (benefit)			25				(674	)			699				n/m
Net income			-				794				(794	)			n/m
Less: Net income attributable to non-controlling interests			45				22				23				104.5	%
Net (loss) income attributable to LGL Group common stockholders		$	(45	)		$	772			$	(817	)			n/m

Total Revenues

Total revenues increased $356, or 32.1%, from $1,108 for the three months ended September 30, 2025 to $1,464 for the three months ended September 30, 2026. The increase was primarily due to the following:

•

a $59, or 8.9%, increase in Net sales from $661 for the three months ended September 30, 2025 to $720 for the three months ended September 30, 2026 driven by higher product shipments as orders in backlog as of June 30, 2026 converted to revenue; and

•

a $302, or 68.3%, increase in Net investment income from $442 for the three months ended September 30, 2025 to $744 for the three months ended September 30, 2026 driven by higher balances invested in United States Treasury money market funds and accrued interest earned on the Skyline Note.

Total Expenses

Total expenses increased $451, or 45.6%, from $988 for the three months ended September 30, 2025 to $1,439 for the three months ended September 30, 2026. The increase was primarily due to the following:

•

a $179, or 57.4%, increase in Manufacturing cost of sales from $312 for the three months ended September 30, 2025 to $491 for the three months ended September 30, 2026 driven by the growth in revenues and changes in product and pricing mix; and

•

a $272, or 40.2%, increase in Engineering, selling and administrative from $676 for the three months ended September 30, 2025 to $948 for the three months ended September 30, 2026 driven by a $134 increase in salaries and wages, $91 increase in stock-based compensation due to grants made to key employees in January and May 2026, and a $71 increase in professional service fees.

Gross Margin

Gross margin (Net sales less Manufacturing cost of sales as a percentage of Net sales) decreased 2,100 basis points from 52.8% for the three months ended September 30, 2025 to 31.8% for the three months ended September 30, 2026 reflecting changes in product and pricing mix associated volume-based pricing extended to a single customer in connection with increased order volume as well as higher inventory reserves associated with increased inventory levels.

Income Tax Expense

Income tax expense (benefit) increased $699, or 103.7%, from a benefit of ($674) for the three months ended September 30, 2025 to an expense of $25 for the three months ended September 30, 2026, primarily due to the non-recurrence of a 2025 benefit from the reversal of a previously recorded uncertain tax position for a matter that was no longer subject to examination by the relevant taxing authority.

Net Income Attributable to Non-Controlling Interests

Net income attributable to non-controlling interests increased $23, or 104.5%, from $22 for the three months ended September 30, 2025 to $45 for the three months ended September 30, 2026 primarily due to accrued interest income related to the Skyline Note.

Nine months ended September 30, 2026 compared to nine months ended September 30, 2025

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

		Nine Months Ended September 30,
(in thousands)		2026				2025				$ Change				% Change
Revenues:
Net sales		$	2,152			$	1,650			$	502				30.4	%
Net investment income			1,545				1,287				258				20.0	%
Net gains			5				13				(8	)			(61.5	%)
Total revenues			3,702				2,950				752				25.5	%
Expenses:
Manufacturing cost of sales			1,206				760				446				58.7	%
Engineering, selling and administrative			3,703				2,060				1,643				79.8	%
Total expenses			4,909				2,820				2,089				74.1	%
(Loss) income before income taxes			(1,207	)			130				(1,337	)			n/m
Income tax benefit			(250	)			(632	)			382				60.4	%
Net (loss) income			(957	)			762				(1,719	)			n/m
Less: Net income attributable to non-controlling interests			63				47				16				34.0	%
Net (loss) income attributable to LGL Group common stockholders		$	(1,020	)		$	715			$	(1,735	)			n/m

Total Revenues

Total revenues increased $752, or 25.5%, from $2,950 for the nine months ended September 30, 2025 to $3,702 for the nine months ended September 30, 2026. The increase was primarily due to the following:

•

a $502, or 30.4%, increase in Net sales from $1,650 for the nine months ended September 30, 2025 to $2,152 for the nine months ended September 30, 2026 primarily due to higher product shipments; and

•

a $258, or 20.0%, increase in Net investment income from $1,287 for the nine months ended September 30, 2025 to $1,545 for the nine months ended September 30, 2026 driven by higher balances invested in United States Treasury money market funds and accrued interest earned on the Skyline Note.

Total Expenses

Total expenses increased $2,089, or 74.1%, from $2,820 for the nine months ended September 30, 2025 to $4,909 for the nine months ended September 30, 2026. The increase was primarily due to the following:

•

a $446, or 58.7%, increase in Manufacturing cost of sales from $760 for the nine months ended September 30, 2025 to $1,206 for the nine months ended September 30, 2026 driven by the growth in revenues and changes in product and pricing mix; and

•

a $1,643, or 79.8%, increase in Engineering, selling and administrative from $2,060 for the nine months ended September 30, 2025 to $3,703 for the nine months ended September 30, 2026 driven by an $874 increase in stock-based compensation due to grants made to key employees in January and May 2026, a $451 increase in professional service fees, a $140 increase in salaries, wages, and benefits, and a $178 increase in other corporate expenses.

Gross Margin

Gross margin (Net sales less Manufacturing cost of sales as a percentage of Net sales) decreased 1,000 basis points from 53.9% for the nine months ended September 30, 2025 to 44.0% for the nine months ended September 30, 2026 reflecting changes in product and pricing mix associated volume-based pricing extended to a single customer in connection with increased order volume as well as higher inventory reserves associated with increased inventory levels.

Income Tax Benefit

Income tax benefit decreased $382, or 60.4%, from $632 for the nine months ended September 30, 2025 to $250 for the nine months ended September 30, 2026 primarily due to the tax effect of loss before income taxes in 2026 compared to the reversal of a previously recorded uncertain tax position for a matter that was no longer subject to examination by the relevant taxing authority in 2025.

Net Income Attributable to Non-Controlling Interests

Net income attributable to non-controlling interests increased $16, or 34.0%, from $47 for the nine months ended September 30, 2025 to $63 for the nine months ended September 30, 2026 primarily due to accrued interest income related to the Skyline Note.

Backlog

As of September 30, 2026, our order backlog was $6,463, an increase of $5,838, or 934.1%, from $625 as of December 31, 2025 and an increase of $5,687, or 732.9%, from $776 as of September 30, 2025. Backlog consists of amounts under signed contracts that have not yet been fulfilled. Backlog is adjusted quarterly to reflect cancellations, deferrals, and revisions to scope and cost, if any.

Results of Operations - Operating Segments and Corporate

Electronic Instruments

Three months ended September 30, 2026 compared to three months ended September 30, 2025

The following table presents income before income taxes of our Electronic Instruments segment for the periods indicated:

		Three Months Ended September 30,
(in thousands)		2026				2025				$ Change				% Change
Revenues:
Net sales		$	720			$	661			$	59				8.9	%
Total revenues			720				661				59				8.9	%
Expenses:
Manufacturing cost of sales			491				312				179				57.4	%
Engineering, selling and administrative			293				245				48				19.6	%
Total expenses			784				557				227				40.8	%
(Loss) income before income taxes		$	(64	)		$	104			$	(168	)			n/m

(Loss) Income Before Income Taxes

(Loss) income before income taxes decreased $168 from income of $104 for the three months ended September 30, 2025 to a loss of ($64) for the three months ended September 30, 2026. The decrease was primarily due to:

•	a $179, or 57.4%, increase in Manufacturing cost of sales driven by the growth in revenues and changes in product and pricing mix; and

•	a $48, or 19.6%, increase in Engineering, selling and administrative driven by higher engineering-related costs due to changes in headcount and higher professional services fees.

The decrease was partially offset by a $59, or 8.9%, increase in Net sales driven by higher product shipments.

Nine months ended September 30, 2026 compared to nine months ended September 30, 2025

The following table presents income before income taxes of our Electronic Instruments segment for the periods indicated:

		Nine Months Ended September 30,
(in thousands)		2026				2025				$ Change				% Change
Revenues:
Net sales		$	2,152			$	1,650			$	502				30.4	%
Total revenues			2,152				1,650				502				30.4	%
Expenses:
Manufacturing cost of sales			1,206				760				446				58.7	%
Engineering, selling and administrative			965				699				266				38.1	%
Total expenses			2,171				1,459				712				48.8	%
(Loss) income before income taxes		$	(19	)		$	191			$	(210	)			n/m

(Loss) Income Before Income Taxes

(Loss) income before income taxes decreased $210 from income of $191 for the nine months ended September 30, 2025 to a loss of ($19) for the nine months ended September 30, 2026. The decrease was primarily due to:

•

a $446, or 58.7%, increase in Manufacturing cost of sales driven by the growth in revenues and changes in product and pricing mix; and

•

a $266, or 38.1%, increase in Engineering, selling and administrative driven by higher engineering-related costs due to changes in headcount and higher professional services fees.

The decrease was partially offset by a $502, or 30.4%, increase in Net sales driven by higher product shipments.

Merchant Investment

Three months ended September 30, 2026 compared to three months ended September 30, 2025

The following table presents income before income taxes of our Merchant Investment segment for the periods indicated:

		Three Months Ended September 30,
(in thousands)		2026				2025				$ Change				% Change
Revenues:
Net investment income		$	291			$	274			$	17				6.2	%
Total revenues			291				274				17				6.2	%
Expenses:
Engineering, selling and administrative			169				145				24				16.6	%
Total expenses			169				145				24				16.6	%
Income before income taxes		$	122			$	129			$	(7	)			(5.4	%)

Income Before Income Taxes

Income before income taxes decreased $7, or 5.4%, from $129 for the three months ended September 30, 2025 to $122 for the three months ended September 30, 2026. The decrease was primarily due to a $24, or 16.6%, increase in Engineering, selling and administrative driven by higher corporate-level expenses allocated to the Merchant Investment segment.

The decrease was partially offset by a $17, or 6.2%, increase in Net investment income. The increase was driven by accrued interest earned on the Skyline Note partially offset by lower yields on investments in United States Treasury money market funds.

Nine months ended September 30, 2026 compared to nine months ended September 30, 2025

The following table presents income before income taxes of our Merchant Investment segment for the periods indicated:

		Nine Months Ended September 30,
(in thousands)		2026				2025				$ Change				% Change
Revenues:
Net investment income		$	753			$	783			$	(30	)			(3.8	%)
Total revenues			753				783				(30	)			(3.8	%)
Expenses:
Engineering, selling and administrative			496				353				143				40.5	%
Total expenses			496				353				143				40.5	%
Income before income taxes		$	257			$	430			$	(173	)			(40.2	%)

Income Before Income Taxes

Income before income taxes decreased $173, or 40.2%, from $430 for the nine months ended September 30, 2025 to $257 for the nine months ended September 30, 2026. The decrease was primarily due to:

•

a $30, or 3.8%, decrease in Net investment income related to lower yields on investments in United States Treasury money market funds partially offset by accrued interest earned on the Skyline Note; and

•

a $143, or 40.5%, increase in Engineering, selling and administrative driven by higher corporate-level expenses allocated to the Merchant Investment segment and formation costs related to Skyline SPV.

Corporate

Three months ended September 30, 2026 compared to three months ended September 30, 2025

The following table presents income before income taxes of Corporate for the periods indicated:

		Three Months Ended September 30,
(in thousands)		2026				2025				$ Change				% Change
Revenues:
Net investment income		$	453			$	168			$	285				169.6	%
Net gains			-				5				(5	)			n/m
Total revenues			453				173				280				161.8	%
Expenses:
Engineering, selling and administrative			486				286				200				69.9	%
Total expenses			486				286				200				69.9	%
Loss before income taxes		$	(33	)		$	(113	)		$	80				70.8	%

Loss Before Income Taxes

Loss before income taxes decreased $80, or 70.8%, from $113 for the three months ended September 30, 2025 to $33 for the three months ended September 30, 2026. The decrease was primarily due to a $285, or 169.6%, increase in Net investment income driven by higher balances invested in United States Treasury money market funds partially offset by a $200, or 69.9%, increase in Engineering, selling and administrative related to higher stock-based compensation, higher salaries and wages and related benefits, and higher professional services fees.

Nine months ended September 30, 2026 compared to nine months ended September 30, 2025

The following table presents income before income taxes of Corporate for the periods indicated:

		Nine Months Ended September 30,
(in thousands)		2026				2025				$ Change				% Change
Revenues:
Net investment income		$	792			$	504			$	288				57.1	%
Net gains			5				13				(8	)			(61.5	%)
Total revenues			797				517				280				54.2	%
Expenses:
Engineering, selling and administrative			2,242				1,008				1,234				122.4	%
Total expenses			2,242				1,008				1,234				122.4	%
Loss before income taxes		$	(1,445	)		$	(491	)		$	(954	)			(194.3	%)

Loss Before Income Taxes

Loss before income taxes increased $954, or 194.3%, from $491 for the nine months ended September 30, 2025 to $1,445 for the nine months ended September 30, 2026. The increase was primarily due to a $1,234, or 122.4%, increase in Engineering, selling and administrative driven by higher stock-based compensation, higher salaries and wages and related benefits, and higher professional services fees partially offset by a $288, or 57.1%, increase in Net investment income driven by higher balances invested in United States Treasury money market funds.

Liquidity and Capital Resources

Overview

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

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

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

As of September 30, 2026 and December 31, 2025, Cash and cash equivalents were $86,930 and $41,514, respectively.

On July 24, 2026, the Company completed the Rights Offering. Rightsholders exercised 3,419,215, or 52.1%, of the Rights, in a net share settlement of 3,419,215 shares of Common Stock. The remaining 3,131,220 Rights expired unexercised in accordance with their terms. The Company distributed 2,643,499 shares of the 3,131,220 unallocated shares of Common Stock to Rightsholders who elected to participate in the over-subscription privilege. The gross proceeds to the Company were $41.8 million.

Cash Flow Activity

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

		As of September 30,
(in thousands)		2026				2025
Cash, cash equivalents, and restricted cash, beginning of period		$	41,514			$	41,585
Cash provided by operating activities			107				425
Cash used in investing activities			(2,481	)			-
Cash provided by (used in) financing activities			47,810				(439	)
Net change in cash and cash equivalents			45,436				(14	)
Cash, cash equivalents, and restricted cash, end of period		$	86,950			$	41,571

Operating Activities

Cash provided by operating activities was $107 for the nine months ended September 30, 2026 compared to $425 for the nine months ended September 30, 2025, a decrease of $318, primarily due to the following:

•

Higher net loss;

•

Higher non-cash adjustments, including;

◦

Stock-based compensation increased $915 from $44 for the nine months ended September 30, 2025 to $959 for the nine months ended September 30, 2026;

•

Working capital movements, including:

◦

Accounts receivable, which decreased $14 for the nine months ended September 30, 2026 compared to a decrease of $33 for the nine months ended September 30, 2025, due to the timing of collection of receivables;

◦

Inventories, net, which increased $695 for the nine months ended September 30, 2026 compared to an increase of $1 for the nine months ended September 30, 2025, due to purchases of materials to meet increased demand;

◦

Contract liabilities, which increased $792 for the nine months ended September 30, 2026 compared to an increase of $43 for the nine months ended September 30, 2025, due to advance payments received from customers prior to the shipment of the related products, which will be recognized as Net sales as the related performance obligations are satisfied; and

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Accounts payable, accrued compensation and commissions, other accrued expenses and liabilities, and other liabilities, which increased $252 for the nine months ended September 30, 2026 compared to an increase of $134 for the nine months ended September 30, 2025, due to higher expenses incurred and the timing of payments.

Our working capital metrics and ratios were as follows:

(in thousands)		September 30, 2026				December 31, 2025
Current assets		$	88,741			$	46,324
Less: Current liabilities			1,955				915
Working capital		$	86,786			$	45,409
Current ratio			45.4				50.6

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

Investing Activities

Cash used in investing activities was $2,481 for the nine months ended September 30, 2026 compared to $0 for the nine months ended September 30, 2025, an increase of $2,481 primarily due to the investment in the Skyline Note in June and July 2026.

Financing Activities

Cash provided by financing activities was $47,810 for the nine months ended September 30, 2026 compared to cash used in financing activities of $439 for the nine months ended September 30, 2025, an increase of $48,249, primarily due to $41.5 million in net proceeds from the exercise of subscription rights, $4.6 million in net proceeds from the settlement of the warrants in January 2026, and $1.7 million in capital contributions from non-controlling interest in Skyline SPV in June and July 2026.

Capital Resources

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

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

Contractual Obligations

As of September 30, 2026, there have been no material changes in our contractual obligations from December 31, 2025, a description of which may be found in Part II, Item 7. Management Discussion and Analysis - Liquidity and Capital Resources - Contractual Obligations in the 2025 Annual Report.

Critical Accounting Estimates

Our accompanying Condensed Consolidated Financial Statements are prepared in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying footnotes. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions. For a discussion of the Company's critical accounting estimates, other than those described below, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2025.

Fair Value of the Skyline Note

Through our consolidated variable interest entity, Skyline SPV, we hold the Skyline Note, for which we have elected the fair value option under FASB ASC Topic 825, Financial Instruments ("ASC 825"). Because the Skyline Note is an obligation of an early-stage, privately held company for which there is no active market and no observable market prices, its fair value is measured using unobservable inputs and is classified within Level 3 of the fair value hierarchy.

We determined the fair value of the Skyline Note as of September 30, 2026 based on its transaction price plus accrued interest. We concluded that the transaction price represented fair value at issuance and continues to approximate fair value, supported by Skyline's issuance during the quarter of additional notes on identical terms to third parties at the same price, most recently on August 31, 2026.

At each subsequent measurement date, we assess whether events or changes in circumstances indicate that the transaction price no longer approximates fair value, including Skyline's financial condition and operating results, its progress against development milestones, the terms of any subsequent financing transactions, and changes in market conditions. As time passes after these transactions, they become less representative of current value. Determining whether such events have occurred, and whether they would result in a change in fair value, requires significant management judgment given the limited financial and market information available for an early-stage company.

If we determine in a future period that the transaction price no longer represents fair value, for example because Skyline completes a financing at a price implying a lower value for the Skyline Note or because its financial condition or ability to fund operations until a qualifying financing deteriorates, we would estimate fair value using other unobservable inputs and valuation techniques, which could result in a materially different measurement. We continue to evaluate the valuation technique we will apply to the Skyline Note in future periods.

Because we consolidate Skyline SPV, the full carrying amount of the Skyline Note is reflected in our Condensed Consolidated Financial Statements, and our maximum exposure to loss with respect to Skyline is the carrying amount of the Skyline Note and the related accrued interest. As a result, changes in this estimate could have a material effect on our reported financial position and results of operations.