What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-05-21 compared with 2020-05-22 · 174 added, 257 removed, 715 unchanged (38% of the section changed)

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The effects of foreign currency on operating results did not have a material impact on our results of operations for the 2021, 2020 and 2019 fiscal years.

Fluctuations in the value of other currencies, particularly the Indian Rupee, could materially impact our revenue, expenses, operating profit and net income.

Fluctuations in the value of other currencies could materially impact our revenue, expenses, operating profit and net income.

Financial Statemen ts and Supplementary Data.

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Schedule II – Valuation and Qualifying Accounts for the years ended March 31, 2021, 2020, and 2019

Report of Independent Regist ered Public Accounting Firm

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of March 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated May 21, 2021 expressed an unqualified opinion.

Change in Accounting Principle

As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for leases as of April 1, 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases .

Basis for opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

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Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $1,634

and $788, respectively

Accounts receivable, net of allowance for expected credit losses of $ 1,220

and for doubtful accounts of $ 1,634 , respectively

Contract assets

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Intangible assets, net

Software development costs, net

Deferred income taxes, non-current

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Commitments and contingencies (see Note 11)

Series A convertible preferred stock, no par value

Shareholders' equity:

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Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total shareholders' equity

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Amortization of intangibles

Restructuring, severance and other charges

Severance and other charges, net

Legal settlements, net

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Interest expense

Other expense (income), net

Other expense, net

Loss before taxes

Income tax expense (benefit)

Series A convertible preferred stock issuance costs

Series A convertible preferred stock dividends

Net loss attributable to common shareholders

Weighted average shares outstanding - basic and diluted

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Adjustments to reconcile net loss to net cash provided by operating activities:

(Gain) loss on disposal of property & equipment

Loss (gain) on disposal of property & equipment

Amortization of intangibles

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Share-based compensation

Changes in operating assets and liabilities:

Accounts receivable

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Financing activities

Preferred stock issuance proceeds, net of issuance costs

Payment of preferred stock dividends

Repurchase of common shares to satisfy employee tax withholding

Principal payments under long-term obligations

Net cash used in financing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

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or vesting of restricted shares

Unrealized translation adjustment

Unrealized translation adjustments

Balance at March 31, 2019

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Restricted shares issued, net

Shares issued upon exercise of

stock options and SSARs

Shares issued upon exercise of SSARs

Shares withheld for taxes upon

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or vesting of restricted shares

Series A convertible preferred stock issuance costs

Series A convertible preferred stock dividends

Unrealized translation adjustments

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COVID-19 Pandemic

During the fourth quarter ended March 31, 2020, concerns related to the spread of novel coronavirus (“COVID-19”) began to create global business disruptions as well as disruptions in our operations and cause potential negative impacts on our revenues and other financial results.

COVID-19 was declared a pandemic by the World Health Organization on March 11, 2020.

The extent to which COVID-19 will impact our financial condition or results of operations is currently uncertain and depends on various factors, including the impact on our customers, partners, and vendors and on the operation of the global markets in general.

The World Health Organization declared novel coronavirus (“COVID-19”) a pandemic on March 11, 2020.

COVID-19 has had a significant impact on our business during the year ended March 31, 2021.

The extent to which COVID-19 will continue impacting our financial condition and results of operations remains uncertain and depends on various factors, including the ongoing or recurring impact on our customers, partners, and suppliers and on the operation of the global markets in general.

Because an increasing portion of our business is based on a subscription model, the effect of COVID-19 on our results of operations may also not be fully reflected for some time.

The COVID-19 pandemic had a significant impact on our business as of March 31, 2020, and the twelve month period then ended.

As a result, we recorded impairments of our capitalized software development costs and certain internal use software as of the balance sheet date due to triggering events identified as of year-end.

We also increased our allowance for doubtful accounts and our customer credit allowance due to the direct negative impact on our customers as of year-end.

Summary of Significant Accounting Policies

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Such investments are readily convertible to cash with no penalty and can include certificates of deposit, commercial paper, treasury bills, money market funds and other investments.

Allowance for doubtful accounts.

We maintain allowances for doubtful accounts for estimated losses resulting from the inability or unwillingness of our customers to make required payments.

These allowances are based on both recent trends of certain customers estimated to be a greater credit risk as well as historic trends of the entire customer pool.

If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

To mitigate this credit risk we perform periodic credit evaluations of our customers.

Allowance for expected credit losses.

We maintain allowances for expected credit losses for estimated losses resulting from the inability or unwillingness of our customers to make required payments.

We base our expected credit loss model on historical experience, adjusted for current conditions and reasonable and supportable forecasts.

To help mitigate the associated credit risk we perform periodic credit evaluations of our customers.

Customer credit allowance .

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Credits are typically due to the timing or amount of customer invoices processed for specific services, including professional and subscription, and maintenance coverage.

In many cases, there has not been clear or timely communication of the need to adjust coverage or service at a location in advance of when we

invoice for the associated coverage or service.

In many cases, there has not been clear or timely communication of the need to adjust coverage or service at a location in advance of when we invoice for the associated coverage or service.

We will issue a credit after agreeing to the service or coverage adjustment as requested by the customer within the terms of our contract.

During fiscal 2021, we have included allowances for various one-time recurring revenue related and other concessions we have given to customers to help them while they deal with the impact of the COVID-19 pandemic on their operational priorities.

Our inventories are comprised of finished goods.

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ROU assets include lease payments made in advance, and excludes any incentives received or initial direct costs incurred.

Lease expense is recognized on a straight-line basis over the lease term.

We recognize lease expense on a straight-line basis over the lease term and sublease income on a straight-line basis over the sublease term.

We have lease agreements with lease and non-lease components which we account for as a single lease component.

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If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized.

Intangible assets.

Purchased intangible assets with finite lives are primarily amortized using the straight-line method over the estimated economic lives of the assets.

Our finite-lived intangible assets are amortized over periods between two and eight years.

Customer relationships are amortized over estimated useful lives between two and seven years;

non-competition agreements are amortized over estimated useful lives between two and eight years;

developed technology is amortized over estimated useful lives between three and eight years;

supplier relationships are amortized over estimated useful lives between two and eight years.

Long-lived assets.

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We evaluate the recoverability of our long-lived assets whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable.

An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscount ed cash flows attributable to such assets.

An impairment loss is recognized in the event the carrying value of the assets exceeds the future undiscounted cash flows attributable to such assets.

Our long-lived assets and impairments considerations are discussed further in Note 4, Property and Equipment, Net.

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The cumulative translation effects are reflected as a component of “Accumulated other comprehensive loss” within shareholders’ equity in the Consolidated Balance Sheets.

Gains and losses on monetary transactions denominated in other than the functional currency of an operation are reflected within “Other (income) expenses, net” in the Consolidated Statements of Operations.

Gains and losses on monetary transactions denominated in other than the functional currency of an

operation are reflected within “Other (income) expenses, net” in the Consolidated Statements of Operations.

Foreign currency gains and losses from changes in exchange rates have not been material to our consolidated operating results.

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2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to those contracts that were not completed as of the adoption date.

Results for reporting periods beginning after the adoption date are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under prior guidance.

Revenue recognition under Topic 606

Our customary business practice is to enter into legally enforceable written contracts with our customers.

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The customer can only benefit from the software and software maintenance when provided the right to access the software.

Accordingly, each of the rights to access the software, the maintenance services, and any hosting services is not considered a distinct performance obligation in the context of the contract and should be combined into a single performance

obligation to be recognized over the contract period.

The Company recognizes subscription revenue over a one-month period based on the typical monthly invoicing and renewal cycle in accordance with our customer agreement terms.

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If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation.

Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.

Contracts that contain

multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP basis.

Shipping and handling fees billed to customers are recognized as revenue and the related costs are recognized in cost of goods sold.

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In determining fair value of financial assets and liabilities, we use various valuation techniques.

Additional information regarding fair value measurements is provided in Note 14, Fair Value Measurements .

Investments in corporate-owned life insurance policies.

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For each capitalized software product, the annual amortization is equal to the greater of:

(i) the amount computed using the ratio that

the software product’s current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross r evenues for that product or (ii) the amount computed based on straight-line method over the remaining estimated economic life of the product, which is a range between three and eight years.

Annually, or more frequent as required by triggering events, an an alysis of the net realizable value of the capitalized software is completed and the amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a charge to income in the period it is determined .

See further discuss ion regarding our capitalized software development costs in Note 5, Intangible Assets and Software Development Costs.

(i) the amount computed using the ratio that the software product’s current fiscal year gross revenue bears to the total current fiscal year and anticipated future gross revenues for that product or (ii) the amount computed based on straight-line method over the remaining estimated economic life of the product, which is a range between three and eight years.

Annually, or more frequent as required by triggering events, an analysis of the net realizable value of the capitalized software is completed and the amount by which unamortized software costs exceeds the net realizable value, if any, is recognized as a charge to income in the period it is determined.

See further discussion regarding our capitalized software development costs in Note 5, Intangible Assets and Software Development Costs.

Advertising and Promotion Expense.

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Advertising and promotion expense was $ 0.4 million, $ 2.7 million and $ 2.0 million in fiscal 2021, 2020 and 2019, respectively .

Reclassification.

Certain prior year balances have been reclassed to conform to the current year presentation.

Specifically, we reclassed certain employee benefit obligations from current to non-current liabilities.

Adopted and Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No.

2020-03, Codification Improvements to Financial Instruments .

ASU 2020-03 provides clarifications for questions and comments received regarding how changes to specific guidance related to financial instruments as a result of ASU No.

2016-13 interacts with other areas of the codification.

The guidance was effective upon issuance of the ASU and correlates to the adoption of each of the applicable ASUs.

Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13 and will apply applicable changes from ASU 2020-03 in the period of adoption.

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and

Contracts in an Entity’s Own Equity , which simplifies the accounting for convertible instruments by eliminating the requirement to separate embedded conversion features from the host contract when the conversion features are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging , or that do not result in substantial premiums accounted for as paid-in capital.

By removing the separation model, a convertible debt instrument will be reported as a single liability instrument with no separate accounting for embedded conversion features.

This new standard also removes certain settlement conditions that are required for contracts to qualify for equity classification and simplifies the diluted earnings per share calculations by requiring that an entity use the if-converted method and that the effect of potential share settlement be included in diluted earnings per share calculations.

The new standard will be effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020.

We are currently assessing the impact of adopting this standard on our consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes .

ASU 2019-12 removes certain exceptions previously allowed in the standard and simplifies the accounting for income taxes by providing additional guidance for certain tax situations.

The update is effective for annual periods beginning after December 15, 2020, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted.

We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In April 2019, the FASB issued ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.

ASU 2019-04 provides corrections, updates and clarifications to the previously issued updates ASU 2016-13, ASU 2017-12 and ASU 2016-01.

Various areas of the codification were impacted from the update.

The standard follows the effective dates of the previously issued ASUs, unless an entity has already early adopted the previous ASUs, in which case the effective date will vary according to each specific ASU adoption.

Consistent with the documentation below, we are still assessing the impact of the adoption of ASU 2016-13, and the other two ASUs affected by ASU 2019-04 are not applicable to us.

We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes , which affects general principles within Topic 740, Income Taxes , and is meant to simplify and reduce the cost of accounting for income taxes.

The new standard will be effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

We are currently reviewing this standard but do not expect it will have a material impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No.

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The update does not impact the accounting for the service element of a hosting arrangement that is a service contract.

The update is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods, with early adoption (including early adoption in any interim period) permitted.

We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

We adopted ASU 2018-15 as of April 1, 2020 with no impact on our consolidated financial statements.

In August 2018, the FASB issued ASU No.

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Certain modifications were made to required disclosures and additional requirements were established.

The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods.

Early adoption is permitted.

We do not believe the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2018, the FASB issued ASU No.

2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) .

ASU 2018-02 addresses the effect of the change in the U.S.

federal corporate tax rate on items within accumulated other comprehensive income or loss due to the enactment of the Tax Act on December 22, 2017.

The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted.

We have adopted this standard as of April 1, 2019.

While we have elected to reclassify any amount out of other comprehensive income, we do not have any amounts to reclassify and therefore the adoption had no impact on our consolidated financial statements.

We adopted ASU 2018-13 as of April 1, 2020 with no impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No.

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2017-04 eliminates Step 2 of the goodwill impairment test and requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of its goodwill.

The ASU is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.

still assessing the impact of this standard, we do not believe the adoption of this guidance will have a material impa ct on our consolidated financial statements.

We adopted ASU 2017-04 as of April 1, 2020 with no impact on our consolidated financial statements.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326) .

This new standard changes the impairment model for most financial assets and certain other instruments.

Entities will be required to use a model that will result in the earlier recognition of allowances for losses for trade and other receivables, held-to-maturity debt securities, loans, and other instruments.

For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities.

The new standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted.

We are currently reviewing this standard to assess the impact on our future consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) , which requires lessees to recognize assets and liabilities for leases with lease terms of more than 12 months.

Unlike Accounting Standard Codification Topic 840 (“Topic 840”), which requires only capital leases to be recognized on the balance sheet, the new guidance requires both types of leases to be recognized on the balance sheet.

The most prominent change for lessees is the requirement to recognize both Right-of-Use (ROU) assets and lease liabilities for leases classified as operating leases under Topic 840.

We adopted Topic 842 as of April 1, 2019 using the current period adjustment method of adoption.

Refer to Note 6, Leases for further details.

This new standard requires entities to measure expected credit losses for certain financial assets held at the reporting date using a current expected credit loss model, which is based on historical experience, adjusted for current conditions and reasonable and supportable forecasts.

The Company’s financial instruments within the scope of this guidance primarily includes accounts receivable and contract assets.

We adopted ASU 2016-13 as of April 1, 2020 under the modified retrospective approach.

As a result, comparative information has not been restated and continues to be reported under accounting standards applicable for those periods.

The adoption of ASU 2016-13 did not have a material impact on our consolidated financial statements.

Management continually evaluates the potential impact, if any, of all recent accounting pronouncements on our consolidated financial statements or related disclosures and, if significant, makes the appropriate disclosures required by such new accounting pronouncements.

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2014-09, Revenue from Contracts with Customers (Topic 606) , using the modified retrospective method applied to those contracts that were not completed as of the adoption date.

The cumulative impact of applying the new guidance to all contracts with customers that were not completed as of April 1, 2018 was recorded as an adjustment to retained earnings as of the adoption date.

As a result of applying the modified retrospective method to adopt the new standard, we also impacted accounts receivable, net, contract assets, prepaid expenses and other current assets, other non-current assets, contract liabilities and retained earnings on our Consolidated Balance Sheet as of April 1, 2018.

For in depth discussion regarding our revenue recognition procedures for our revenue streams, see Note 2, Summary of Significant Accounting Policies .

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Contract assets are rights to consideration in exchange for goods or services that we have transferred to a customer when that right is conditional on something other than the passage of time.

The majority of our contract assets represent unbilled amounts related to professional services.

The majority of our contract assets represent unbilled amounts related to products and professional services.

We expect billing and collection of our contract assets to occur within the next twelve months.

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For subscription contracts that are renewed monthly based on an agreement term, we capitalize commission expenses and amortize as we satisfy the underlying performance obligations, generally based on the contract terms and anticipated renewals.

For first year support and maintenance service contracts, commission expenses

are immaterial and therefore expenses as incurred.

Other sales commission expenses are not m aterial or have a period of benefit of one year or less, and are therefore expensed as incurred in line with the practical expedient elected.

As part of our 606 transition adjustments, we capitalized $1.9 million of sales incentive costs incurred in prior periods as of April 1, 2018.

We had $3.2 million and $3.3 million of capitalized sales incentive costs as of March 31, 2020 and 2019, respectively.

These balances are included in other non-current assets on our Consolidated Balance Sheet.

During fiscal 2020 and 2019, we expensed $4.7 million and $4.5 million, respectively, of sales commission, which included amortization of capitalized amounts of $1.4 million and $1.1 million, respectively.

For first year support and maintenance service contracts, commission expenses are immaterial and therefore expenses as incurred.

Other sales commission expenses are not material or have a period of benefit of one year or less, and are therefore expensed as incurred in line with the practical expedient elected.

W e had $ 2.9 million and $ 3.2 million of capitalized sales incentive costs as of March 31, 2021 and 20 20 , respectively .

These balances are included in other non-current assets on our Consolidated Balance Sheet s .

During fiscal 202 1 and 20 20 , we expensed $ 2.8 million and $ 4.7 million, respectively, of sales commission s , which included amortization of capitalized amounts of $ 1.4 million and $ 1.4 million, respectively.

These expenses are included in operating expenses – sales and marketing in our Consolidated Statement of Operations.

All other costs to obtain a contract are not considered incremental and therefore are expensed as incurred.

Financial Statement Impact of Adoption on Previously Reported Results

We adopted Topic 606 using the modified retrospective method beginning fiscal 2019.

The acceleration of revenue that was deferred under prior guidance as of the adoption date was primarily attributable to the requirement of Topic 606 to allocate the transaction price to the performance obligations in the contract on a relative basis using SSP rather than allocating under the residual method, which allocates the entire arrangement discount to the delivered performance obligations.

Due to the Company's full valuation allowance as of the adoption date, there was no tax impact associated with the adoption of Topic 606.

We made certain presentation changes to our Consolidated Balance Sheet on April 1, 2018 to comply with Topic 606.

Prior to adoption of the new standard, we offset accounts receivable and contract liabilities (previously presented as deferred revenue on our Consolidated Balance Sheet) for unpaid deferred performance obligations included in contract liabilities.

Under the new standard, we record accounts receivable and related contract liabilities for non-cancelable contracts with customers when the right to consideration is unconditional.

Upon adoption, the right to consideration in exchange for goods or services that have been transferred to a customer when that right is conditional on something other than the passage of time were reclassified from accounts receivable to contract assets.

Property and Equipment, Net

P roperty and equipment at March 31, 2020 and 2019 is as follows:

Property and equipment at March 31, 2021 and 2020 is as follows:

Year ended March 31,

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Accumulated depreciation and amortization

Accumulated impairment

Property and equipment, net

Total depreciation expense on property and equipment was $ 2.6 million, $2.

5 million, and $2.

6 million during fiscal 20 20 , 201 9 and 201 8 , respectively.

Total depreciation expense on property and equipment was $ 2.8 million, $ 2.6 million, and $ 2.5 million during fiscal 2021, 2020 and 2019, respectively.

The Company capitalizes internal-use software, including software used exclusively in providing services or that is only made available to customers as a software service, as property and equipment under ASC 350-40, Internal-Use Software.

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The following table summarizes our intangible assets and software development costs at March 31, 2021, and 2020:

March 31, 2021 and 2020

(In thousands)

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Management compares the unamortized capitalized software development costs for each external use product to its net realizable value by analyzing critical inputs such as costs necessary to bring the software to market, costs necessary to maintain the software, life of the software, and market capacity.

As of March 31, 2020, management determined the net realizable value of the remaining capitalized software development costs for certain solutions within out rGuest suite of products no longer exceeded their carrying value, and as a result, recorded non-cash impairment charges of $22.0 million.

As of March 31, 2020, management determined the net realizable value of the remaining

capitalized software development costs for certain solutions within out rGuest suite of products no longer exceeded the ir carrying value, and as a result, recorded non-cash impairment charges of $ 22.0 million.

The impact of the COVID-19 pandemic on the hospitality industry resulted in economic conditions which make it difficult to project future sales and revenue accurately for the related rGuest solutions .

After evaluating the Company’s strategy for market development and continued costs to support the software, an impairment charge was required.

The amount of impairment recognized during the period reduced the carry value of capitalized software development costs to zero with no remaining amortization expense to be recognized in future periods.

Amortization expense related to software development costs related to assets to be sold, leased, or otherwise marketed was $12.6 million, $12.6 million and $10.0 million for the fiscal years ended March 31, 2020, 2019 and 2018, respectively.

A fter evaluating the Company’s strategy for market development and continued costs to support the software , an impairment charge was required .

The amount of impairment recognized during the period reduced the carry ing value of capitalized software development costs to zero with no remaining amortization expense to be recognized in future periods.

Amortization expense related to software development costs related to assets to be sold, leased, or otherwise marketed was $ 12.6 million for each of the fiscal years ended March 31, 2020 and 2019.

These charges are included as Products cost of goods sold within the Consolidated Statements of Operations.

Amortization expense relating to other definite-lived intangible assets was $38,000 for the fiscal year end March 31, 2020 and $46,000 for the fiscal years ended March 31, 2019 and 2018.

These charges are classified as operating expenses within the Consolidated Statements of Operations.

Capitalized software development costs are carried on our balance sheets at net realizable value, net of accumulated amortization.

We did not capitalize any software development costs during fiscal 2020.

We capitalized approximately $2.0 million and $8.2 million during fiscal 2019 and 2018, respectively.

We adopted Topic 842 on April 1, 2019 using the current period adjustment method of adoption to recognize leases with a duration greater than 12 months on the balance sheet.

The impact of adoption on April 1, 2019 was recognition of operating lease liabilities of $16.3 million and related Right-of-Use (“ROU”) assets of $13.8 million.

Prior period financial statements have not been restated and therefore the comparative amounts are not presented below or on the Consolidated Balance Sheets as of March 31, 2019.

For operating leases with a term greater than 12 months, we have recorded the lease liability at the present value of lease payments over the remaining lease term and the related ROU asset.

The remaining lease term has been determined for each lease considering factors such as renewal options, termination options, our Company’s historical practices in exercising such options, and current business knowledge which may impact lease related decisions.

The majority of our leases are comprised of real estate leases for our respective offices around the globe.

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We have no residual value guarantees or restrictions or covenants imposed by or associated with our active leases.

Since our current leases do not provide an implicit rate of return, our incremental borrowing rates used to determine the value of lease payments in implementation are estimated as of April 1, 2019, based on collateralized rates for a term similar to each remaining lease term.

We have elected the package of practical expedients permitted under the transition guidance which includes the ability to carryforward the previously determined lease classification (operating or finance), forgo the assessment whether active contracts contain a lease, and whether capitalized costs associated with a lease meet the definition of “initial direct costs” as defined within Topic 842.

In the event that any of our leases contain nonlease components, we have elected the practical expedient to account for each separate lease component and the associated nonlease component(s) as a single lease component.

We have also elected the accounting policy to forgo applying the guidance of Topic 842 to short term leases (defined as a term of 12 months or less, without a purchase option which we are reasonably certain to exercise).

As of March 31, 2021, we do not have any leases which have not yet commenced.

We do not have any related party leases or sublease arrangements.

We do not have any related party leases.

We have variable payments for expenses such as common area maintenance and taxes.

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Any variable costs are expensed as incurred.

The components of lease expenses for the fiscal 2020 period were as follows:

We sublease one of our office leases located in Bellevue, Washington with a lease term that will expire during fiscal year 2024.

The components of lease expenses, which are included in operating expenses in our Consolidated Statements of Operations, were as follows:

Year ended March 31,

(in thousands)

March 31, 2020

Operating leases expense

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Short term lease expense

Sublease income

Total lease expense

Other information related to leases for fiscal 2020 was as follows:

Other information related to leases for fiscal 2021 and 2020 was as follows:

Year ended March 31,

Supplemental cash flow information

March 31, 2020

Cash paid for amounts included in the measurement of lease liabilities

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Total lease liabilities

As previously disclosed on our March 31, 2019 Form 10-K and under the previous lease accounting standard, future minimum lease payments under non-cancelable leases as of March 31, 2019 were as follows:

Year ending (in thousands)

Operating leases

Finance leases

Total lease payments

Amounts representing interest

Present value of lease liabilities

Non-cancellable sublease proceeds for the fiscal years ending March 31, 2022, 2023, and 2024 of $ 0.7 million, $ 0.8 million, and $ 0.7 million, respectively, are not included in the table above.

Supplemental Disclosures of Cash Flow Information

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Cash (receipts) for interest, net

Cash payments (receipts) for income tax, net

Cash payments for income tax, net

Acquisition of property and equipment under lease obligations

Accrued capital expenditures

Accrued capitalized software development costs

Leasehold improvements acquired under operating lease arrangement

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Professional fees

Deferred rent

Other non-current liabilities:

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(In thousands)

(Loss) before income taxes

Income (loss) before income taxes

United States

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Global intangible low-taxed income

Deferred adjustments

Provision to return

Total income tax expense (benefit)

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and certain foreign tax losses due to the uncertainty of the ultimate realization of future benefits from these losses.

The fiscal 2021 tax provision results primarily from foreign tax benefit.

The fiscal 2021 tax provision differs from the statutory rate primarily due to adjustments to deferred tax assets and the recording of net operating losses in a number of foreign jurisdictions offset by current year expense in other foreign jurisdictions.

The fiscal 2020 tax provision results primarily from foreign tax expense.

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permanent book to tax differences.

The fiscal 2019 tax provision primarily results from foreign tax expense, the reversal of reserves for uncertain tax positions and the completion of our accounting for the Tax Act.

The fiscal 2019 effective rate differs from the statutory rate primarily due to the impact of the Tax Act, recognition of net operating losses as deferred tax assets, which were offset by increases in the valuation allowance, certain foreign and state tax effects.

Deferred tax assets and liabilities as of March 31, are as follows:

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Accrued liabilities

Allowance for doubtful accounts

Inventory valuation reserve

Allowance for expected credit losses and doubtful accounts

Federal losses and credit carryforwards

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Operating lease right-of-use assets

Property and equipment and software amortization

Goodwill and other intangible assets

Total deferred tax liabilities

Total deferred tax assets (liabilities)

At March 31, 2021, we had $ 199.1 million of federal net operating loss carryforwards that expire, if unused, in fiscal years 2031 to 2038, and $ 46.8 million of federal net operating loss carryforwards that can be carried forward indefinitely.

Our Hong Kong, Malaysia, and Singapore subsidiaries have $0.4 million, $0.1 million, and $0.

3 million of net operating loss carryforwards , res pectively.

Our Hong Kong, Malaysia, and Singapore subsidiaries have $ 0.4 million, $ 0.1 million, and $ 0.2 million of net operating loss carryforwards, respectively.

The losses for Hong Kong, Malaysia and Singapore can be carried forward indefinitely.

At March 31, 20 20 , our India subsidiary had $0.

8 million of minimum alternative tax credits reported as other noncurrent assets on our Consolidated Balance She et.

Our India subsidiary operates in a “Special Economic Zone (“SEZ”)”.

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The India subsidiary is then subject to 50 % of regular India income taxes during the second five years of operations which includes fiscal 2023 through fiscal 2027.

The aggregate value of the benefit of the SEZ during the current fisca l year is $0.

The aggregate value of the benefit of the SEZ during the current fiscal year is $ 1.4 million as of March 31, 2021.

The Company has paid minimum alternative taxes during the period of regular tax relief resulting in a credit of $ 1.4 million as of March 31, 2021.

At March 31, 2021 we also had $ 165.6 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2022 through 2041.

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income tax liability related to the undistributed earnings is not practicable.

We recorded a liability for unrecognized tax positions.

The aggregate changes in the balance of our gross unrecognized tax benefits were as follows for the years ended March 31:

We recorded a liability for uncertain tax positions.

The aggregate changes in the balance of our uncertain tax positions were as follows for the years ended March 31:

(In thousands)

Balance at April 1

Relating to positions taken during prior year

Relating to lapse in statute

Reductions relating to lapse in statute

Balance at March 31

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due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months which cannot be estimated at this time.

We recognize interest accrued on any unrecognized tax benefits as a component of income tax expense.

We recognize interest accrued on any uncertain tax positions as a component of income tax expense.

Penalties are recognized as a component of general and administrative expenses.

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the CARES Act also provides for certain employee retention tax credits.

As of March 31, 2020, these provisions are expected to provide us with approximately $0.1 million of additional liquidity during the current year due to the ability to accelerate outstanding alternative minimum tax credit refunds.

As of March 31, 2021, these provisions are expected to provide us with approximately $ 0.1 million of additional liquidity due to the ability to accelerate outstanding alternative minimum tax credit refunds.

Due to the net loss position of the Company, we do not anticipate impacts from net loss carryback or deductibility provisions.

We are currently deferring the employer-paid portion of social security taxes but do not currently anticipate qualifying for employee retention tax credits at this time.

Separate from the CARES Act, the IRS extended the dates for estimated tax payments for the first and second calendar quarters of 2020 to July 15, 2020.

Further, many states are offering similar deferrals of various classes of tax payments.

Due to the net loss position of the Company, we do not anticipate material federal or state tax payment deferrals.

Significant uncertainty exists regarding the magnitude and duration of the impact of the COVID-19 pandemic;

We deferred the employer-paid portion of social security taxes through December 31, 2020, but do not anticipate qualifying for employee retention tax credits.

As of March 31, 2021, significant uncertainty continues to exist regarding the magnitude and duration of the impact of the COVID-19 pandemic;

therefore, we cannot predict at this time the ultimate extent of its impact on our business operations, financial results and resulting effects to income taxes in future periods.

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We may also make discretionary contributions each year for the benefit of all eligible employees under the plans.

During fiscal 2021, we suspended matching contributions as part of the

cost reduction measures we have taken in response to uncertainties about the impact COVID-19 will have on our results of operations.

Agilysys matching contributions were $ 0.1 million, $ 1.8 million, and $ 1.6 million in fiscal 20 2 1 , 20 20 , and 201 9 , respectively.

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Legal Contingencies

Agilysys is the subject of various threatened or pending legal actions and contingencies in the normal course of conducting its business.

We provide for costs related to these matters when a loss is probable and the amount can be reasonably estimated.

The effect of the outcome of these matters on our future results of operations and liquidity cannot be predicted because any such effect depends on future results of operations and the amount or timing of the resolution of such matters.

While it is not possible to predict with certainty, management believes that the ultimate resolution of such individual or aggregated matters will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

We are involved in legal actions that arise in the ordinary course of business.

It is the opinion of management that the resolution of any current pending litigation will not have a material adverse effect on our financial position or results of operations.

On April 6, 2012, Ameranth, Inc.

filed a complaint against us in the U.S.

District Court for the Southern District of California alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g.

restaurant menus) for display on electronic devices, and synchronizing the menu content between the devices.

District Court for the Southern District of California alleging that certain of our products infringe patents owned by Ameranth directed to configuring and transmitting hospitality menus (e.g., restaurant menus) for display on electronic devices, and synchronizing the menu content between devices.

The case against us was consolidated with similar cases brought by Ameranth against more than 30 other defendants.

Most of the patents at issue in the case were invalidated by the U.S.

All but one of the patents at issue in the case were invalidated by the U.S.

Court of Appeals for the Federal Circuit in 2016.

Cases against us and our co-defendants remained pending in the District Court with respect to one surviving Ameranth patent.

In September 2018, the District Court found that patent invalid, and granted summary judgment in favor of the movant co-defendants.

In early 2019, Ameranth appealed the District Court's summary judgment ruling to the U.S.

Court of Appeals for the Federal Circuit.

In September 2018, the District Court found the one surviving Ameranth patent invalid, and granted summary judgment in favor of the movant co-defendants.

In November 2019, the U.S.

Court of Appeals for the Federal Circuit affirmed the lower court’s summary judgement with respect to all claims except for two, which were not asserted against Agilysys.

Shortly thereafter, Ameranth moved for a rehearing en banc, which was denied in February 2020.

Finally, Ameranth filed for writ of certiorari to the United States Supreme Court.

The Supreme Court has not yet responded to the writ.

Ameranth’s writ of certiorari to the United States Supreme Court was denied in October 2020.

Subsequently, Ameranth filed further pleading amendments and discovery requests with the District Court, which were opposed by the defendants.

We were not a party to the appeal, and it is currently unclear what impact the summary judgment ruling or writ of certiorari may have on our case.

Ameranth seeks monetary damages, injunctive relief, costs and attorneys’ fees from us.

At this time, we are not able to predict the outcome of this lawsuit.

At this time, we are not able to predict the outcome of the remaining claims in the lawsuit, or any possible monetary exposure associated with the lawsuit.

However, we dispute the allegations of wrongdoing and are vigorously defending ourselves in this matter.

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(In thousands, except per share data)

Series A convertible preferred stock issuance costs

Series A convertible preferred stock dividends

Net loss attributable to common shareholders

Weighted average shares outstanding - basic and diluted

Loss per share - basic and diluted:

Net loss per share-basic and diluted

Anti-dilutive stock options, SSARs, restricted shares and performance shares

Anti-dilutive stock options, SSARs, restricted shares,

performance shares and preferred shares

Basic earnings (loss) per share is computed as net income available to common shareholders divided by the weighted average basic shares outstanding.

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Diluted earnings (loss) per share includes the effect of all potentially dilutive securities on earnings per share.

We have stock options, stock-settled appreciation rights ("SSARs"), unvested restricted shares and unvested performance shares that are potentially dilutive securities.

We have stock-settled appreciation rights ("SSARs") and unvested restricted shares that are potentially dilutive securities.

When a loss is reported, the denominator of diluted earnings per share cannot be adjusted for the dilutive impact of share-based compensation awards because doing so would be anti-dilutive.

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We may distribute authorized but unissued shares or treasury shares to satisfy share option and appreciation right exercises or restricted share and performance share awards.

For stock options and SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date of grant.

The maximum term of stock option and SSAR awards is seven years from the date of grant.

Stock option and SSARs awards vest over a period established by the Compensation Committee of the Board of Directors.

SSARs may be granted in conjunction with, or independently from, stock option grants.

SSARs granted in connection with a stock option are exercisable only to the extent that the stock option to which it relates is exercisable and the SSARs terminate upon the termination or exercise of the related stock option grants.

For SSARs, the exercise price must be set at least equal to the closing market price of our common shares on the date of grant.

The maximum term of SSARs is seven years from the date of grant.

The Compensation Committee of the Board of Directors establishes the period over which SSARs subject to a service condition vest and the vesting criteria for SSARs subject to a market condition.

Restricted shares and restricted share units, whether time-vested or performance-based, may be issued at no cost or at a purchase price that may be below their fair market value, but are subject to forfeiture and restrictions on their sale or other transfer.

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Restricted shares and restricted share units have the right to receive dividends, or dividend equivalents in the case of restricted share units, if any, upon vesting, subject to the same forfeiture provisions that apply to the underlying awards.

Subject to certain exceptions set forth in the 2016 Plan, for awards to employees, no performance-based restricted shares or restricted share units shall be based on a restriction period of less than one year, and any time-based restricted shares or restricted share units shall have a minimum restriction period of three years.

We record compensation expense related to stock options, SSARs, restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date.

The fair value of restricted share and performance share awards is based on the closing price of our common shares on the grant date.

The fair value of stock option and SSAR awards is estimated on the grant date using the Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of our common shares.

During fiscal year 2020, we issued 125,000 SSAR awards which are subject to a market condition.

The fair value of these awards is estimated using the Lattice option pricing model which utilizes a binary tree and includes multiple assumptions which include volatility and life of the award to determine an appropriate fair value based on the award grant date.

We record compensation expense related to SSARs , restricted shares, and performance shares granted to certain employees and non-employee directors based on the fair value of the awards on the grant date.

The fair value of restricted share s is based on the closing price of our common shares on the grant date.

Under the 2020 Plan, the fair value of performance shares is based on the closing price of our common shares on the settlement date of the performance award, which is consistent with our annual bonus incentive plan as approved by the Compensation Committee of the Board of Directors.

The fair value of SSAR s subject to a service condition is estimated on the grant date using the Black-Scholes-Merton option pricing model, which includes assumptions regarding the risk-free interest rate, dividend yield, life of the award, and the volatility of our common shares.

The fair value of SSARs subject to a market condition is estimated using a Lattice option pricing model that utilizes a binary tree and includes multiple assumptions including the volatility and life of the award to determine an appropriate fair value based on the award grant date.

The following table summarizes the share-based compensation expense for options, SSARs, restricted and performance awards included in the Consolidated Statements of Operations for fiscal 2021, 2020 and 2019:

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This value is settled only in common shares of Agilysys.

We use a Black-Scholes-Merton or a Lattice option pricing model to estimate the fair value of SSARs.

The following table summarizes the principal assumptions utilized in valuing SSARs granted in fiscal 2020, 2019 and 2018:

We use a Black-Scholes-Merton option pricing model to estimate the fair value of service condition SSARs.

The following table summarizes the principal assumptions utilized in valuing service condition SSARs granted in fiscal 2021, 2020 and 2019:

Risk-free interest rate

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Expected volatility

32.42% - 32.84%

Weighted-average grant date fair value

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Under this method, the compensation cost related to unvested amounts begins to be recognized as of the grant date.

We use a Lattice option pricing model to estimate the fair value of market condition SSARs.

The following table summarizes the principal assumptions utilized in valuing market condition SSARs granted in fiscal 2021 and 2020:

Risk-free interest rate over contractual term

Expected volatility

Suboptimal exercise factor

Weighted-average grant date fair value

The following table summarizes the activity during fiscal 2021 for SSARs awarded under the 2020 and 2016 Plans:

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Total fair value of SSARs vesting

As of March 31, 2020, total unrecognized share based compensation expense related to non-vested SSARs was $5.6 million, which is expected to be recognized over the weighted-average vesting period of 2.3 years.

As of March 31, 2021, total unrecognized share-based compensation expense related to non-vested service condition SSARs was $ 15.1 million, which is expected to be recognized over the weighted-average vesting period of 2.0 years.

A total of 466,471 shares, net of 127,047 shares withheld to cover the employee’s minimum applicable income taxes, were issued from treasury shares to settle SSARs exercised during the twelve months ended March 31, 2021.

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Outstanding at March 31, 2021

Based on the performance goals, management estimates a liability of $153,000 to be settled through the vesting of a variable number of the performance shares subsequent to March 31, 2020.

Based on the performance goals, management estimates a liability of $ 180,000 to be settled through the granting of performance shares under the 2020 plan after March 31, 2021.

The number of shares granted will be based on the closing price of our common shares on the settlement date.

As of March 31, 2021, total share-based compensation expense related to performance shares has been fully recognized.

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Once attainment of the performance goals becomes probable, compensation expense related to performance share awards is recognized ratably over the vesting period based upon the closing market price of our common shares on the grant date.

Fair Value Measurements

We estimate the fair value of financial instruments using available market information and generally accepted valuation methodologies.

We assess the inputs used to measure fair value using a three-tier hierarchy.

The hierarchy indicates the extent to which pricing inputs used in measuring fair value are observable in the market.

Level 1 inputs include unadjusted quoted prices for identical assets or liabilities and are the most observable.

Level 2 inputs include unadjusted quoted prices for similar assets and liabilities that are either directly or indirectly observable, or other observable inputs such as interest rates, foreign currency exchange rates, commodity rates, and yield curves.

Level 3 inputs are not observable in the market and include our own judgments about the assumptions market participants would use in pricing the asset or liability.

The use of observable and unobservable inputs is reflected in the hierarchy assessment disclosed in the tables below.

There were no significant transfers between Levels 1, 2, and 3 during the twelve months ended March 31, 2020.

The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:

(In thousands)

Corporate-owned life insurance — non-current

(In thousands)

Corporate-owned life insurance — non-current

The recorded value of the corporate-owned life insurance policies is adjusted to the cash surrender value of the policies obtained from the third party life insurance providers, which are not observable in the market, and therefore, are classified within Level 3 of the fair value hierarchy.

Changes in the cash surrender value of these policies are recorded within “Other expenses (income), net” in the Consolidated Statements of Operations.

The following table presents a summary of changes in the fair value of the corporate-owned life insurance Level 3 asset for the fiscal years ended March 31, 2020 and 2019:

(In thousands)

Corporate-owned life insurance:

Balance on April 1

Unrealized gain relating to instruments held at reporting date

Purchases, sales, issuances and settlements, net

Balance on March 31

Quarterly Results (Unaudited)

Because quarterly reporting of per share data is used independently for each reporting period, the sum of per share amounts for the four quarters in the fiscal year will not necessarily equal annual per share amounts.

GAAP prohibits retroactive adjustment of quarterly per share amounts so that the sum of those amounts equals amounts for the full year.

Occasionally, the timing of large one-time orders, such as those associated with significant remarketed product sales around large customer refresh cycles or significant volume rollouts, creates variability in our quarterly results.

Year ended March 31, 2020

(In thousands except per share data)

Restructuring, severance and other charges

Legal settlements, net

Net loss Per share data-basic and diluted

Year ended March 31, 2019

(In thousands except per share data)

Restructuring, severance and other charges

Legal settlements

Net loss Per share data-basic and diluted

Preferred Stock

Series A Convertible Preferred Stock

On May 22, 2020, we completed the sale of 1,735,457 shares of our preferred stock, without par value, designated as “Series A Convertible Preferred Stock” (the “Convertible Preferred Stock”) to MAK Capital Fund L.P.

and MAK Capital Distressed Debt Fund I, LP (the “Holders”) each, in its capacity as a designee of MAK Capital One LLC (the “Purchaser”), pursuant to the terms of the Investment Agreement, dated as of May 11, 2020, between the Company and the Purchaser, for an aggregate purchase price of $ 35 million.

We incurred issuance costs of $ 1.0 million.

We added all issuance costs that were netted against the proceeds upon issuance of the Convertible Preferred Stock to its redemption value.

As disclosed in our Annual Report for the fiscal year ended March 31, 2020, Michael Kaufman, the Chairman of the Company’s Board of Directors, is the Chief Executive Officer of MAK Capital One LLC.

Accounting Policy

We classify convertible preferred stock as temporary equity in the consolidated balance sheets due to certain contingent redemption clauses that are at the election of the Holders.

We increase the carrying value of the convertible preferred stock to its redemption value (described below) for all undeclared dividends using the interest method.

The Convertible Preferred Stock has the following rights, preferences and restrictions (the Certificate of Amendment included as Exhibit 3.1 to our Current Report on Form 8-K, filed on May 26, 2020, defines all terms not otherwise defined below):

The Holders will be entitled to one vote for each share of Convertible Preferred Stock upon all matters presented to the common shareholders of the Company , and except as otherwise provided by the Amended Articles of Incorporation of the Company or required

by law, the Holders and common shareholders will vote together as one class on all matters.

Additionally, certain matters specific to the Convertible Preferred Stock will require the approval of two-thirds of the outstanding Convertible Preferred Stock, voting as a separate class.

Liquidation Preference

Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the purchase price paid by the Purchaser, plus all accrued and unpaid dividends (the “Liquidation Preference”) and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock.

On and after the fifth anniversary of the date the Convertible Preferred Stock is initially issued, the Company will have the right, and the Holders will have the right to require the Company, in each case, at the initiating party’s election, to redeem all, but not less than all, of the then-outstanding Convertible Preferred Stock for an amount equal to the Liquidation Preference.

Each Holder will have the right, at its option, to convert its Convertible Preferred Stock, in whole or in part, into fully paid and non-assessable shares of common stock at a conversion price equal to $ 20.1676 per share (as may be adjusted from time to time, as described in the Certificate of Amendment).

Subject to certain conditions, the Company may, at its option, require conversion of all of the outstanding shares of Convertible Preferred Stock to common stock if, at any time after November 22, 2023 , the daily volume-weighted average price of the Company’s common stock is at least 150 % of the conversion price for at least 20 trading days during the 30 consecutive trading days immediately preceding the date the Company notifies the Holders of the election to convert.

The Holders are entitled to dividends on the Liquidation Preference at the rate of 5.25 % per annum, payable semi-annually either (i) 50% in cash and 50% in kind as an increase in the then-current Liquidation Preference or (ii) 100% in cash, at the option of the Company.

The Holders are not entitled to participate in dividends declared or paid on the common stock on an as-converted basis;

however, certain anti-dilution adjustments to the Convertible Preferred Stock may be made in the event of such dividends.

The Convertible Preferred Stock ranks senior to the Company’s common stock with respect to dividends and distributions on liquidation, winding-up and dissolution.

Upon a liquidation, dissolution or winding up of the Company, each share of Convertible Preferred Stock will be entitled to receive an amount per share equal to the greater of (i) the Liquidation Preference and (ii) the amount that the Holder would have been entitled to receive at such time if the Convertible Preferred Stock were converted into common stock.

Change in Control Events

Upon certain change of control events involving the Company, the Company has the right, and each Holder has the right, in each case, at the initiating party’s election, to require the Company to repurchase all or a portion of its then-outstanding shares of Convertible Preferred Stock for cash consideration equal to (i) 150% of the then-current Liquidation Preference for a change of control occurring prior to the third anniversary of the date the Convertible Preferred Stock is initially issued, (ii) 125% of the then-current Liquidation Preference for a change of control occurring on or following the third anniversary and prior to the fifth anniversary of the date the Convertible Preferred Stock is initially issued and (iii) 100% of the then-current Liquidation Preference for a change of control occurring on or following the fifth anniversary of the date the Convertible Preferred Stock is initially issued.

Standstill Restrictions

The Purchaser and its affiliates are subject to certain customary standstill provisions that restrict them from, among other actions, acquiring additional securities of the Company if such acquisition would result in the Purchaser beneficially owning in excess of 25 % of the outstanding shares of common stock of the Company until the later of the third anniversary of the date the Convertible Preferred

Stock is initially issued and the date on which the Purchaser no longer has record or beneficial ownership of common stock and Convertible Preferred Stock that constitute at least 10 % of the outstanding common stock.

Subsequent Events

COVID-19 has had a significant impact on our business as of and subsequent to our March 31, 2020 fiscal year-end as the travel and hospitality industries including our customers’ businesses suffered an abrupt and steep decline in activity due to property closures, cancelled voyages, cancelled sporting and entertainment events, and many other business operations curtailments.

The change in the business environment for our customers resulted in project delays for our professional service teams, our inability to deliver products to closed property locations and a general reduction in sales activity.

We have taken actions to mitigate the impact on our business.

During the first quarter of our fiscal 2021, we have reduced discretionary costs, implemented a hiring freeze on non-essential positions and reduced payroll and related costs through layoffs, employee furloughs, employee retirement benefit limitations, and salary decreases for executive team members and certain other employees of the Company.

The extent COVID-19 will impact our business including operations and financial results cannot be reasonably estimated at this time.

Many factors will continue to influence the COVID-19 pandemic’s impact on us including its ultimate severity, future government actions in response to COVID-19, and how quickly and to what extent economic conditions return to levels before COVID-19.

In May 2020, the Company announced a $35 million investment from MAK Capital One, LLC (“MAK Capital”), a leading investment management firm who has been a major shareholder of the Company since 2007.

MAK Capital will purchase $35 million of convertible preferred stock carrying a 5.25% dividend that will be convertible into shares of the Company’s common stock at a price of $20.1676 per share.

The transaction is subject to customary closing conditions and is anticipated to finalize during May 2020.

The close of the transaction will add $35 million in preferred stock to the Company’s balance sheet and increase our cash balance by the $35 million investment less estimated closing costs of approximately $1 million.

Related Party Transaction

Subsequent Events , for description of the MAK Capital investment in the Company announced in May 2020.

Preferred Stock , for description of the MAK Capital investment in the Company.

Michael Kaufman, the Chairman of the Company’s Board of Directors, is the Chief Executive Officer of MAK Capital.

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Deferred tax valuation allowance

Allowance for doubtful accounts

Allowance for expected credit losses

Deferred tax valuation allowance

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Allowance for doubtful accounts

Change in and Disagreements With Accou ntants on Accounting and Financial Disclosures.

Change in and Disagreements With Accountants on Accounting and Financial Disclosures.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk