mpti20240813

mpti20240813_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ 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. 001-41391

M-tron Industries, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	46-0457944
(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)

(407) 298-2000

(Registrant’s telephone number, including area code)

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		MPTI		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 (§232.405 of this chapter) 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 2,808,579 shares of common stock, $0.01 par value per share, outstanding.

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M-tron Industries, Inc.

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

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					Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)				2
		Condensed Consolidated Statements of Operations			2
		Condensed Consolidated Balance Sheets			3
		Condensed Consolidated Statements of Equity			4
		Condensed Consolidated Statements of Cash Flows			6
		Notes to Condensed Consolidated Financial Statements			7
			1.	Background and Description of Business	7
			2.	Summary of Significant Accounting Policies	7
			3.	Related Party Transactions	9
			4.	Income Taxes	10
			5.	Revolving Credit Agreement	10
			6.	Stockholders' Equity	10
			7.	Earnings per Share ("EPS")	11
			8.	Commitments and Contingencies	11
			9	Other Financial Statement Information	11
			10.	Domestic and Foreign Revenues	12
			11.	Subsequent Events	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations				13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk				18
Item 4.	Controls and Procedures				18

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings				19
Item 5.	Other Information				19
Item 6.	Exhibits				19

	Signatures

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Cautionary Note Concerning Forward-Looking Statements

Certain statements contained in this Quarterly Report on Form 10-Q of M-tron Industries, Inc. ("MtronPTI" 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 the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission ("SEC") on March 25, 2024. 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

M-tron Industries, 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	$	11,808		$	10,140		$	22,993	$	19,507
Costs and expenses:
Manufacturing cost of sales		6,307			5,921			12,713		12,092
Engineering, selling and administrative		3,394			2,654			6,384		5,089
Total costs and expenses		9,701			8,575			19,097		17,181
Operating income		2,107			1,565			3,896		2,326
Other income (expense):
Interest income (expense), net		44			(5	)		76		(7	)
Other (expense) income, net		(5	)		22			37		(18	)
Total other income (expense), net		39			17			113		(25	)
Income before income taxes		2,146			1,582			4,009		2,301
Income tax expense		402			305			779		471
Net income	$	1,744		$	1,277		$	3,230	$	1,830

Income per common share:
Basic	$	0.64		$	0.47		$	1.19	$	0.68
Diluted	$	0.63		$	0.47		$	1.16	$	0.68

Weighted average shares outstanding:
Basic		2,728,599			2,697,696			2,723,293		2,688,065
Diluted		2,779,802			2,711,266			2,783,739		2,709,578

See accompanying Notes to the Condensed Consolidated Financial Statements.

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M-tron Industries, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)	*June 30, 2024*		*December 31, 2023*
Assets:
Current assets:
Cash and cash equivalents	$	6,501	$	3,913
Accounts receivable, net of reserves of $163 and $141, respectively		5,180		4,802
Inventories, net		9,341		8,884
Prepaid expenses and other current assets		640		588
Total current assets		21,662		18,187
Property, plant and equipment, net		4,687		4,131
Right-of-use lease asset		43		97
Intangible assets, net		40		45
Deferred income tax asset		1,943		1,835
Other assets		7		10
Total assets	$	28,382	$	24,305

Liabilities:
Current liabilities:
Accounts payable	$	1,442	$	1,300
Accrued compensation and commissions		2,286		2,196
Other accrued expenses		985		611
Income taxes payable		—		277
Total current liabilities		4,713		4,384
Long-term lease liability		9		26
Total liabilities		4,722		4,410

Commitments and Contingencies (Note 8)

Stockholders' equity:
Preferred stock ($0.01 par value; 5,000,000 shares authorized, none issued)		—		—
Common stock ($0.01 par value; 25,000,000 shares authorized; 2,808,579 and 2,786,321 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively)		27		27
Additional paid-in capital		16,702		16,167
Retained earnings		6,931		3,701
Total stockholders' equity		23,660		19,895
Total liabilities and stockholders' equity	$	28,382	$	24,305

See accompanying Notes to the Condensed Consolidated Financial Statements.

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M-tron Industries, Inc.

Condensed Consolidated Statements of Equity

(Unaudited)

(in thousands)	*Preferred Stock*		*Common Stock*		*Additional Paid-in Capital*		*Retained Earnings*		*Total Equity*
Balance at March 31, 2024	$	—	$	27	$	16,501	$	5,187	$	21,715
Net income		—		—		—		1,744		1,744
Adjustment to The LGL Group, Inc. transfer		—		—		—		—		—
Stock-based compensation expense		—		—		201		—		201
Exercise of stock options		—		—		—		—		—
Forfeiture of shares to pay taxes		—		—		—		—		—
Balance at June 30, 2024	$	—	$	27	$	16,702	$	6,931	$	23,660

(in thousands)	*Preferred Stock*		*Common Stock*		*Additional Paid-in Capital*			*Retained Earnings*		*Total Equity*
Balance at March 31, 2023	$	—	$	27	$	13,954		$	765	$	14,746
Net income		—		—		—			1,277		1,277
Adjustment to The LGL Group, Inc. transfer		—		—		—			—		—
Stock-based compensation expense		—		—		140			—		140
Exercise of stock options		—		—		—			—		—
Forfeiture of shares to pay taxes		—		—		(82	)		—		(82	)
Balance at June 30, 2023	$	—	$	27	$	14,012		$	2,042	$	16,081

See accompanying Notes to the Condensed Consolidated Financial Statements.

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M-tron Industries, Inc.

Condensed Consolidated Statements of Equity

(Unaudited)

(in thousands)	*Preferred Stock*		*Common Stock*		*Additional Paid-in Capital*		*Retained Earnings*		*Total Equity*
Balance at December 31, 2023	$	—	$	27	$	16,167	$	3,701	$	19,895
Net income		—		—		—		3,230		3,230
Adjustment to The LGL Group, Inc. transfer		—		—		—		—		—
Stock-based compensation expense		—		—		408		—		408
Exercise of stock options		—		—		127		—		127
Forfeiture of shares to pay taxes		—		—		—		—		—
Balance at June 30, 2024	$	—	$	27	$	16,702	$	6,931	$	23,660

(in thousands)	*Preferred Stock*		*Common Stock*		*Additional Paid-in Capital*			*Retained Earnings*		*Total Equity*
Balance at December 31, 2022	$	—	$	27	$	14,102		$	212	$	14,341
Net income		—		—		—			1,830		1,830
Adjustment to The LGL Group, Inc. transfer		—		—		(219	)		—		(219	)
Stock-based compensation expense		—		—		211			—		211
Exercise of stock options		—		—		—			—		—
Forfeiture of shares to pay taxes		—		—		(82	)		—		(82	)
Balance at June 30, 2023	$	—	$	27	$	14,012		$	2,042	$	16,081

See accompanying Notes to the Condensed Consolidated Financial Statements.

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M-tron Industries, 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	$	3,230		$	1,830
Adjustments to reconcile net income to net cash provided by operating activities:
Noncash revenues, expenses, gains and losses included in income:
Depreciation		439			385
Amortization of finite-lived intangible assets		5			27
Stock-based compensation expense		408			211
Deferred income tax provision		(108	)		20
Changes in operating assets and liabilities:
Increase in accounts receivable, net		(378	)		(548	)
Increase in inventories, net		(457	)		(1,195	)
(Increase) decrease in prepaid expenses and other assets		(49	)		349
Decrease (increase) in accounts payable, accrued compensation and commissions expense and other		366			(300	)
Total adjustments		226			(1,051	)
Net cash provided by operating activities		3,456			779
Cash flows from investing activities:
Capital expenditures		(995	)		(302	)
Net cash used in investing activities		(995	)		(302	)
Cash flows from financing activities:
Forfeiture of shares to pay taxes		—			(82	)
Proceeds from stock option exercise		127			—
Net cash provided by (used in) financing activities		127			(82	)
Increase in cash and cash equivalents		2,588			395
Cash and cash equivalents at beginning of period		3,913			926
Cash and cash equivalents at end of period	$	6,501		$	1,321

Supplemental Disclosure:
Cash paid for interest	$	5		$	7
Cash paid for income taxes	$	1,275		$	97

See accompanying Notes to the Condensed Consolidated Financial Statements.

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M-tron Industries, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, unless otherwise stated)

1. Background and Description of Business

Originally founded in 1965, M-tron Industries, Inc. (the "Company," "MtronPTI," "we," "us," or "our") is engaged in the designing, manufacturing and marketing of highly engineered, high reliability frequency and spectrum control products used to control the frequency or timing of signals in electronic circuits in various applications. MtronPTI’s primary markets are defense, aerospace, space, and avionics.

Our component-level devices and modules are used extensively in electronic systems for applications in commercial and military defense, aerospace, satellites, down-hole drilling, medical devices, instrumentation, industrial devices and in infrastructure equipment for the telecommunications and network equipment industries. As an engineering-centric company, MtronPTI provides close support to the customer throughout its products' entire life cycle, including product design, prototyping, production and subsequent product upgrades and maintenance. This collaborative approach has resulted in the development and growth of long-standing business relationships with its blue-chip customer base.

The Company offers a wide range of precision frequency control and spectrum control solutions including: radio frequency, microwave and millimeter wave filters; cavity, crystal, ceramic, lumped element and switched filters; high performance and high frequency oven-controlled crystal oscillators ("OCXO"), integrated phase-locked loops OCXOs, temperature-compensated crystal oscillators, voltage-controlled crystal oscillators, low jitter and harsh environment oscillators; crystal resonators, Integrated Microwave Assemblies ("IMA"); and state-of-the-art solid state power amplifier products.

The Company has manufacturing facilities in Orlando, Florida; Yankton, South Dakota; and Noida, India. The Company also has a sales office in Hong Kong. All of MtronPTI’s production facilities are International Organization for Standardization ("ISO") 9001:2015 certified (the international standard for creating a quality management system) and Restriction of Hazardous Substances ("RoHS") compliant. In addition, its U.S. production facilities in Orlando and Yankton are International Traffic in Arms Regulations ("ITAR") registered and International Aerospace Quality Group AS9100 Rev D certified and our Yankton production facility is Military Standard ("MIL-STD")-790 certified.

We maintain our executive offices at 2525 Shader Road, Orlando, Florida 32804. Our telephone number is (407) 298-2000. Our Internet address is www.mtronpti.com. Our common stock is traded on the NYSE American under the symbol "MPTI".

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 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 March 25, 2024. For additional information, refer to Note B to the audited Consolidated and Combined Financial Statements in the 2023 Annual Report.

Basis of Presentation

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 and Combined Financial Statements and the related notes included in the 2023 Annual Report. The consolidated financial information as of December 31, 2023 included herein has been derived from the audited Consolidated and Combined Financial Statements in the 2023 Annual Report.

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 months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024.

Use of Estimates

The preparation of the Condensed Consolidated 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.

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M-tron Industries, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, unless otherwise stated)

Research and Development Costs

Research and development costs are charged to operations as incurred. For the three and six months ended June 30, 2024, research and development costs were approximately $682 and $1,315, respectively. For the three and six months ended June 30, 2023, research and development costs were approximately $535 and $1,064. Such costs are included within Engineering, selling and administrative expenses on the Condensed Consolidated Statements of Operations.

Concentration Risks

For the three months ended June 30, 2024, the Company's largest and second largest customers accounted for $4,452, or 37.7%, and $2,216, or 18.8%, of the Company's Revenues, respectively. For the three months ended June 30, 2023, the Company's largest and second largest customers accounted for $2,723, or 26.9%, and $1,662, or 16.4%, of the Company’s Revenues, respectively.

For the six months ended June 30, 2024, the Company's largest and second largest customers accounted for $9,327, or 40.6%, and $4,419, or 19.2%, of the Company's Revenues, respectively. For the six months ended June 30, 2023, the Company's largest and second largest customers accounted for $5,057, or 25.9%, and $2,671, or 13.7%, of the Company's Revenues, respectively.

A significant portion of the Company's accounts receivable is concentrated with a relatively small number of customers. As of June 30, 2024, the Company's four largest customers accounted for approximately $2,972, or 55.6%, of gross accounts receivable. As of December 31, 2023, four of the Company's largest customers accounted for approximately $3,774, or 76.4%, of gross accounts receivable. The Company carefully evaluates the creditworthiness of its customers in deciding to extend credit. As a result, the Company has experienced very low historical bad debt expense and believes the related risk to be minimal.

Impairments 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 of 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.

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.

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M-tron Industries, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, unless otherwise stated)

3. Related Party Transactions

In the normal course of business, the Company enters into various transactions with affiliated companies. Parties are considered to be related if 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.	$	45	$	—	$	—	$	—
The LGL Group, Inc.		12		27		12		—
Total	$	57	$	27	$	12	$	—

	*Six Months Ended June 30,*
	*2024*				*2023*
	*Income*		*Expense*		*Income*		*Expense*
GAMCO Investors, Inc.	$	79	$	—	$	—	$	—
The LGL Group, Inc.		24		53		24		28
Total	$	103	$	53	$	24	$	28

The following table summarizes assets and liabilities with related parties as of June 30, 2024 and December 31, 2023:

	*June 30, 2024*				*December 31, 2023*
	*Assets*		*Liabilities*		*Assets*		*Liabilities*
GAMCO Investors, Inc.	$	4,844	$	—	$	2,765	$	—
The LGL Group, Inc.		74		—		—		—
Total	$	4,918	$	—	$	2,765	$	—

The material agreements whereby the Company generates revenues and expenses with affiliated entities are discussed below:

Investment Activity with GAMCO Investors, Inc.

Certain balances are held and invested in U.S. Treasury funds managed or advised by GAMCO Investors, Inc. or one of its subsidiaries (collectively, "GAMCO" or the "Fund Manager"), which is related to the Company through certain of our shareholders. For the three and six months ended June 30, 2024, the Company paid the Fund Manager a fund management fee of approximately 8 basis points annually of the asset balances under management. For the three and six months ended June 30, 2023, the Company did not pay the Fund Manager a fund management fee as no assets were under management. The fund management fees are not paid directly by the Company and are deducted prior to the fund striking its net asset value ("NAV").

As of June 30, 2024 and December 31, 2023, the balance with the Fund Manager was $4,844 and $2,765, respectively, all of which was classified within Cash and cash equivalents on the Condensed Consolidated Balance Sheets.

For the three and six months ended June 30, 2024, the Company earned income on its investments with the Fund Manager totaling $45 and $79, respectively, all of which was included in Interest income on the Condensed Consolidated Statements of Operations.

For the three and six months ended June 30, 2023, the Company did not earn any income on its investments with the Fund Manager.

Transactions with The LGL Group, Inc.

Transitional Administrative and Management Services Agreement

On October 7, 2022, the separation of the MtronPTI business from The LGL Group, Inc. ("LGL Group") was completed (the "Separation") and the Company became an independent, publicly traded company trading on the NYSE American under the stock symbol "MPTI." The Separation was completed through LGL Group's distribution (the "Distribution") of 100% of the shares of the Company's common stock to holders of LGL Group's common stock as of the close of business on September 30, 2022, the record date for the Distribution.

MtronPTI and The LGL Group, Inc. ("LGL Group") entered into an Amended and Restated Transitional Administrative and Management Services Agreement ("MtronPTI TSA"), which sets out the terms for services to be provided between the two companies post Separation. The current terms result in a net monthly payment of $4 per month from LGL Group to MtronPTI.

For the three months ended June 30, 2024 and 2023, LGL Group paid the Company $12 under the terms of the MtronPTI TSA, which were recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations. For the six months ended June 30, 2024 and 2023, LGL Group paid the Company $24 under the terms of the MtronPTI TSA, which were recorded in Other income (expense), net on the Condensed Consolidated Statements of Operations.

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M-tron Industries, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, unless otherwise stated)

Tax Indemnity and Sharing Agreement

MtronPTI and LGL Group entered into a Tax Indemnity and Sharing Agreement ("MtronPTI Tax Agreement"), which sets out the terms for which party would be responsible for taxes imposed on LGL Group if the Distribution, together with certain related transactions, were to fail to qualify as a tax-free transaction under Internal Revenue Code ("IRC") Sections 355 and 368(a)(1)(D) if such failure were the result of actions taken after the Distribution by MtronPTI or LGL Group.

For the three and six months ended June 30, 2024 and 2023, no taxes related to the Distribution have been recorded in the Condensed Consolidated Financial Statements.

Other Transactions

MtronPTI and LGL Group agreed to share the salaries and benefits related to certain employees incurred by LGL Group. For the three and six months ended June 30, 2024, the Company reimbursed LGL Group $27 and $53, respectively, of the salaries and benefits of certain employees, which represents 50% of those costs and were recorded in Engineering, selling and administrative on the Condensed Consolidated Statements of Operations.

4. Income Taxes

The Company’s quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the period presented. To determine the annual effective tax rate, the Company estimates both the total income (loss) before income taxes for the full year and the jurisdictions in which that income (loss) is subject to tax. The actual effective tax rate for the full year may differ from these estimates if income (loss) before income taxes is greater than or less than what was estimated or if the allocation of income (loss) to jurisdictions in which it is taxed is different from the estimated allocations.

The effective tax rate for the three months ended June 30, 2024 and 2023 was 18.7% and 19.3%, respectively. The effective tax rate for the six months ended June 30, 2024 and 2023 was 19.4% and 20.5%, respectively. Differences between the Company’s effective income tax rate and the U.S. federal statutory rate of 21.0% are primarily due to the impact of research and development credits, permanent differences, and state taxes.

5. Revolving Credit Agreement

On June 15, 2022, MtronPTI entered into a loan agreement (the “Loan Agreement”) for a revolving line of credit with Fifth Third Bank, National Association (“Fifth Third Bank”), for up to $5,000 bearing interest at the Secured Overnight Financing Rate (“SOFR”) plus a margin of 2.25%, with a SOFR floor of 0.00%. The Loan Agreement has a maturity date of June 15, 2025 and contains various affirmative and negative covenants that are customary for lines of credit and transactions of this type, including limitations on the incurrence of debt and liabilities, as well as financial reporting requirements. The Loan Agreement also imposes certain financial covenants based on Debt Service Coverage Ratio, Current Ratio, and the Ratio of Total Liabilities to Total Net Worth (as such terms are defined in the Loan Agreement). All loans pursuant to the Loan Agreement will be secured by a continuing and unconditional first priority security interest in and to any and all property of the Company.

As of June 30, 2024 and December 31, 2023, there were no outstanding borrowings under the revolving line of credit with Fifth Third Bank.

6. Stockholders' Equity

Shares Outstanding

The following table presents a rollforward of outstanding shares for the periods indicated:

	*Six Months Ended June 30, 2024*						*Year Ended December 31, 2023*
	*Common Stock Issued*		*Held in Treasury*		*Common Stock Outstanding*		*Common Stock Issued*			*Held in Treasury*		*Common Stock Outstanding*
Shares, beginning of period		2,786,321		—		2,786,321		2,725,670			—		2,725,670
Stock-based compensation		12,548		—		12,548		69,597			—		69,597
Exercise of stock options		9,710		—		9,710		—			—		—
Shares withheld for income taxes		—		—		—		(8,946	)		—		(8,946	)
Shares, end of period		2,808,579		—		2,808,579		2,786,321			—		2,786,321

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M-tron Industries, Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

(Dollar amounts in thousands, unless otherwise stated)

7. Earnings per Share ("EPS")

The following table presents a reconciliation of Net income and shares used in calculating basic and diluted net income per common share for the periods indicated:

	*Three Months Ended June 30,*				*Six Months Ended June 30,*
(in thousands, except share data)	*2024*		*2023*		*2024*			*2023*
Numerator for EPS:
Net income	$	1,744	$	1,277	$	3,230		$	1,830
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SEC Form 10-Q filed by M-tron Industries Inc.