LGL GROUP INC

2. Summary of Significant Accounting Policies

During thethree andsix months ended* June 30, 2026*, there wereno material changes to our significant accounting policies included in the2025 Annual Report, except as noted below.For additional information, refer to Note2* to the audited Consolidated Financial Statements in the2025 * Annual Report.

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Cash and Cash Equivalents and Restricted Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and highly liquid investments withno maturity or with a maturity of less thanthree months when purchased.

Restricted cash and cash equivalents primarily consist of funds received from rights holders electing to exercise their subscription rights as part of the Company's rights offering, held in a separate account designated solely for this purpose as of* June 30, 2026,pending completion of the rights offering. These funds werenot* available for the Company's general use until the rights offering closed. Subsequent to quarter end, the funds were transferred to the subscription agent and the Company received the aggregate offering proceeds upon closing of the rights offering on* July 24, 2026.*

The following table provides a reconciliation of cash and cash equivalents and restricted cash and cash equivalents reported in our Condensed Consolidated Balance Sheet to the total shown in our Condensed Consolidated Statement of Cash Flows:

Convertible Promissory Note

The convertible promissory note held by Skyline SPV (the "Skyline Note") is measured at fair value due to the election of the fair value option. The election was made to reflect the Skyline Note at its current economic value each reporting period, including the value of the embedded conversion feature, without requiring separate accounting for the conversion feature as an embedded derivative.

The Skyline Note is classified as a non-current asset on the Condensed Consolidated Balance Sheet.

Refer to Note4 - Investments and Note5 - Fair Value Measurements for further information.

Fair Value Option

Under the fair value option, the Company* mayelect to measure at fair value financial assets and financial liabilities that arenot* otherwise required to be carried at fair value. The Company elected the fair value option for the Skyline Note upon purchase because it better reflects the economics of a convertible instrument. This election is irrevocable.

Subsequent changes in fair value are reported Net gains (losses) on the Condensed Consolidated Statements of Operations. Interest income on assets measured under the fair value option is recognized and included in Net investment income in the Condensed Consolidated Statements of Operations.

Refer to Note4 - Investments and Note5 - Fair Value Measurements for further information.

Concentration Risks

Customer Concentrations

For thethree months ended* June 30, 2026*, two customers each accounted for10% or more of the Company's Net sales, representing $490, or 65.3%, and $100, or 13.3%, respectively. For thethree months ended* June 30, 2025*, four customers each accounted for10% or more of the Company's Net sales, representing $157, or 32.0%; $108, or 22.0%; $77, or 15.7%; and $51, or 10.4%, respectively.

For thesix months ended* June 30, 2026*, two customers each accounted for10% or more of the Company's Net sales, representing $815, or 56.9%, and $273, or 19.1%, respectively. For thesix months ended* June 30, 2025*, four customers each accounted for10% or more of the Company's Net sales, representing $181, or 18.3%; $109, or 11.0%; $108, or 10.9%; and $100, or 10.1%, respectively.

Customers exceeding10% of Net sales are identified separately for each period presented. A customer that exceeded the threshold inone period wasnot necessarily the same customer, or a10% customer at all, in any other period presented, including as between thethree-month andsix-month periods.

Credit Concentration

A significant portion of the Company's accounts receivable is concentrated with a relatively small number of customers. As of* June 30, 2026*, two of the Company's customers accounted for approximately $466, or 79.0%, of gross accounts receivable. As of* December 31, 2025*, four of the Company's customers accounted for approximately $412, or 66.0%, of gross accounts receivable. The Company carefully evaluates the creditworthiness of its customers in deciding to extend credit. As a result, the Company has historically experienced low credit losses and considers the risk to be minimal.

The Company maintains its cash and cash equivalents with high-credit-quality financial institutions, and at times cash balances on deposit* mayexceed federally insured limits. A significant portion of the Company's cash and cash equivalents is invested in money market mutual funds. Amounts invested in money market mutual funds arenot* deposits, arenot federally insured, and are subject to the credit and market risks of the underlying fund.

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Accounting Standards Adopted

Income Taxes

In* December 2023,the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU")2023-09, "Income Taxes (Topic740) - Improvements to Income Tax Disclosures"* ("ASU2023-09"). 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. The Company adopted ASU2023*-09 in* December 2025.Refer to Note8* - Income Taxes to the Company's Consolidated Financial Statements included in its2025 Annual Report for further information.

Future Application of Accounting Standards

Disaggregation of Income Statement Expenses

In* November 2024,the FASB issued ASU2024*-03*,* "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" ("ASU2024-03"). The standard requires additional disclosure of certain costs and expenses within the notes to the financial statements. The provisions of the standard are effective for annual reporting periods beginning after* December 15, 2026,and interim reporting periods beginning after December 15, 2027,with early adoption permitted. This accounting standards update may*be applied either prospectively or retrospectively. We are assessing the impact of this standard.