What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-07-12 compared with 2022-06-16 · 283 added, 263 removed, 882 unchanged (38% of the section changed)

3 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Daktronics, Inc and subsidiaries (the "Company") as of April 30, 2022 and May 1, 2021, the related consolidated statements of operations, comprehensive (loss) income, shareholders' equity, and cash flows, for each of the three years in the period ended April 30, 2022, and the related notes (collectively referred to as the "financial statements").

We have also audited the Company's internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and May 1, 2021, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2022, in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We have audited the accompanying consolidated balance sheets of Daktronics, Inc.

and subsidiaries (the "Company") as of April 29, 2023 and April 30, 2022, the related consolidated statements of operations, comprehensive income/ (loss), shareholders' equity, and cash flows, for each of the three years in the period ended April 29, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 29, 2023 and April 30, 2022, and the results of its operations and its cash flows for each of the three years in the period ended April 29, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also 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 April 29, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated July 12, 2023, expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

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

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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

Critical Audit Matter

22 unchanged sentences

Minneapolis, Minnesota

June 16, 2022

July 12, 2023

We have served as the Company's auditor since 2017.

3 unchanged sentences

(in thousands, except per share data)

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

CURRENT ASSETS:

13 unchanged sentences

Intangibles, net 1,136 1,472

Debt issuance costs 3,866 —

Investment in affiliates and other assets 27,928 32,321

12 unchanged sentences

Other long-term obligations 5,709 7,076

Long-term income tax payable 477 548

Line of credit 17,750 —

Deferred income taxes 195 287

4 unchanged sentences

Common stock, no par value, authorized 115,000,000 shares;

46,733,544 and 46,264,576 shares issued at April 30, 2022 and May 1, 2021, respectively

45,488,595 and 44,826,099 shares issued as of April 29, 2023 and April 30, 2022, respectively

63,023 61,794

1 unchanged sentence

Retained earnings 103,410 96,608

Treasury stock, at cost, 1,907,445 and 1,297,409 shares at April 30, 2022 and May 1, 2021, respectively

Treasury stock, at cost, 1,907,445 shares as of April 29, 2023 and April 30, 2022, respectively

( 10,285 ) ( 10,285 )

7 unchanged sentences

(in thousands, except per share data)

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Net sales $ 754,196 $ 610,970 $ 482,033

5 unchanged sentences

Product design and development 29,989 29,013 26,846

Goodwill impairment 4,576 — —

129,967 112,651 103,475

Operating income (loss) 4,046 17,108 ( 167 )

Nonoperating income (expense):

Interest income (expense), net 171 ( 65 ) 699

Operating income 21,388 4,046 17,108

Nonoperating (expense) income:

Interest (expense) income, net ( 920 ) 171 ( 65 )

Other expense, net ( 7,211 ) ( 3,109 ) ( 2,983 )

Income (loss) before income taxes 1,108 14,060 ( 9 )

Income tax expense (benefit) 516 3,134 ( 500 )

Income before income taxes 13,257 1,108 14,060

Income tax expense 6,455 516 3,134

Net income $ 6,802 $ 592 $ 10,926

8 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)/INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

(in thousands)

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Net income $ 6,802 $ 592 $ 10,926

Other comprehensive (loss) income:

Other comprehensive income (loss):

Cumulative translation adjustments ( 616 ) ( 2,556 ) 2,942

Unrealized (loss) gain on available-for-sale securities, net of tax ( 34 ) — 44

Unrealized gain (loss) on available-for-sale securities, net of tax 12 ( 34 ) —

Total other comprehensive (loss) income, net of tax ( 604 ) ( 2,590 ) 2,942

Comprehensive (loss) income $ ( 1,998 ) $ 13,868 $ ( 430 )

Comprehensive income (loss) $ 6,198 $ ( 1,998 ) $ 13,868

See notes to consolidated financial statements.

7 unchanged sentences

Comprehensive Loss

Balance as of April 27, 2019:

Balance as of May 2, 2020:

$ 60,010 $ 44,627 $ 85,090 $ ( 7,470 ) $ ( 5,277 ) $ 176,980

1 unchanged sentence

Cumulative translation adjustments — — — — 2,942 2,942

Unrealized gain (loss) on available-for-sale securities, net of tax — — — — 44 44

Share-based compensation — 2,067 — — — 2,067

1 unchanged sentence

Employee savings plan activity 565 — — — — 565

Dividends paid ($ 0.20 per share)

— — ( 8,994 ) — — ( 8,994 )

Treasury stock purchase — — — ( 5,636 ) — ( 5,636 )

Treasury stock reissued — 26 — 173 — 199

Balance as of May 1, 2021:

2 unchanged sentences

Cumulative translation adjustments — — — — ( 2,556 ) ( 2,556 )

Unrealized gain (loss) on available-for-sale securities, net of tax — — — — ( 34 ) ( 34 )

Share-based compensation — 1,973 — — — 1,973

Exercise of stock options 8 — — — — 8

Tax payments related to RSU issuances — ( 200 ) — — — ( 200 )

Employee savings plan activity 1,211 — — — — 1,211

Treasury stock purchase — — — ( 3,184 ) — ( 3,184 )

Treasury stock reissued — 4 — 196 — 200

Balance as of May 1, 2021:

Balance as of April 30, 2022:

61,794 48,372 96,608 ( 10,285 ) ( 4,925 ) 191,564

6 unchanged sentences

Employee savings plan activity 1,208 — — — — 1,208

Treasury stock purchase — — — ( 3,184 ) — ( 3,184 )

Treasury stock reissued — 4 — 196 — 200

Balance as of April 29, 2023:

5 unchanged sentences

(in thousands)

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 6,802 $ 592 $ 10,926

Adjustments to reconcile net income to net cash (used) provided by operating activities:

Adjustments to reconcile net income to net cash provided (used) by operating activities:

Depreciation and amortization 16,993 15,394 17,077

2 unchanged sentences

Equity in loss of affiliates 3,332 2,970 2,370

Provision for doubtful accounts, net of recovery ( 286 ) 1,299 ( 99 )

Provision (recovery) for credit losses accounts, net 1,009 ( 286 ) 1,299

Deferred income taxes, net ( 3,633 ) ( 1,555 ) 1,314

Non-cash impairment changes 9,049 — —

Change in operating assets and liabilities ( 19,864 ) ( 45,380 ) 31,731

Net cash (used)/provided by operating activities ( 27,035 ) 66,212 10,808

Net cash provided by (used in) operating activities 15,024 ( 27,035 ) 66,212

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Proceeds from sales or maturities of marketable securities 3,490 — 1,230

Purchases of and loans to equity investees ( 7,848 ) ( 6,744 ) ( 11,664 )

Purchases of equity and loans to equity investees ( 4,315 ) ( 7,848 ) ( 6,744 )

Net cash used in investing activities ( 25,388 ) ( 31,384 ) ( 10,221 )

2 unchanged sentences

Payments on notes payable ( 360,944 ) ( 46,801 ) ( 15,000 )

Debt issuance costs ( 991 ) — —

Borrowings on long-term obligations 1,233 — —

Principal payments on long-term obligations ( 305 ) ( 200 ) ( 460 )

Dividends paid — — ( 8,994 )

Proceeds from exercise of stock options 8 — —

Payments for common shares repurchased — ( 3,184 ) —

Proceeds from exercise of stock options 21 8 —

Tax payments related to RSU issuances ( 140 ) ( 200 ) ( 125 )

Net cash used in financing activities ( 3,576 ) ( 15,585 ) ( 1,978 )

Net cash provided by (used in) financing activities 17,568 ( 3,576 ) ( 15,585 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 522 ) ( 399 ) ( 416 )

NET (DECREASE)/ INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 62,394 ) 39,990 4,670

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 6,682 ( 62,394 ) 39,990

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

14 unchanged sentences

In each 53-week year, an additional week is added to the first quarter, and each of the last three quarters is comprised of a 13-week period.

The fiscal years ended April 30, 2022 and May 1, 2021 contained operating results for 52 weeks, while the fiscal year ended May 2, 2020 contained operating results for 53 weeks.

The fiscal years ended April 29, 2023, April 30, 2022 and May 1, 2021 contained operating results for 52 weeks.

Principles of consolidation :

2 unchanged sentences

All intercompany accounts and transactions are eliminated in consolidation.

We have a variable interest in a business where we have elected to follow the proportional consolidation method because certain criteria were met under Accounting Standards Codification ("ASC") 810, Consolidations .

We have an arrangement we concluded was a variable interest entity and accounted for it under the proportional consolidation method.

This arrangement had an aggregate amount of contract assets and gross profit of $ 5,223 and $ 2,748 respectively, as of and for the year ended April 29, 2023.

Investments in affiliates :

Investments in affiliates over which we have significant influence are accounted for under the equity method of accounting, recording the investment at cost and then subsequently adjusting to account for our share of the affiliates' profit or losses, in accordance with the provisions of Accounting Standards Codification ("ASC") 323 , Investments - Equity Method and Joint Ventures .

Investments in affiliates over which we do not have the ability to exert significant influence over the affiliates' operating and financing activities are accounted for under the cost method of accounting, recording the investment at cost and then subsequently adjusting for any changes in ownership or dividends in accordance with the provisions of ASC 321 , Investments - Equity Securities .

We have evaluated our relationships with our affiliates and have determined that these entities are not variable interest entities.

Equity method investments as a whole are assessed for other-than-temporary impairments whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable.

The aggregate amount of our investments in affiliates accounted for under the equity method was $ 16,916 and $ 19,887 as of April 30, 2022 and May 1, 2021 respectively.

We consolidate entities in which we have a controlling financial interest by first considering if an entity meets the definition of a variable interest entity ("VIE") for which we are deemed to be the primary beneficiary, or if we have the power to control an entity through a majority of voting interest or through other arrangements.

Variable Interest Entities:

A VIE is an entity (i) that lacks sufficient equity to finance its activities without additional subordinated financial support from other parties;

(ii) whose equity holders lack the characteristics of a controlling financial interest;

and/or (iii) that is established with non-substantive voting rights.

A VIE is consolidated by its primary beneficiary, which is defined as the party who has a controlling financial interest in the VIE through (a) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the VIE.

This assessment may involve subjectivity in the determination of which activities most significantly affect the VIE’s performance and making estimates about current and future fair value of the assets held by the VIE and financial performance of the VIE.

In assessing the Company's interests in the VIE, we also consider interests held by its related parties, including de facto agents.

Additionally, we assess whether it is a member of a related party group that collectively meets the power and benefits criteria and, if so, whether we are most closely associated with the VIE.

In performing the related party analysis, we consider both qualitative and quantitative factors including, but not limited to:

the characteristics and size of its investment relative to the related party;

our and the related party's ability to control or significantly influence key decisions of the VIE, including consideration of involvement by de facto agents;

the obligation or likelihood for us or the related party to fund operating losses of the VIE;

and the similarity and significance of the VIE’s business activities to those of us and the related party.

The determination of whether an entity is a VIE and whether we are the primary beneficiary may involve significant judgment and depends upon facts and circumstances specific to an entity at the time of the assessment.

At the end of each reporting period, we reassess whether changes in facts and circumstances cause a change in the status of an entity as a VIE or voting interest entity, and/or a change in our consolidation assessment.

Changes in consolidation status are applied prospectively.

An entity may be consolidated as a result of this reassessment, in which case the assets, liabilities and noncontrolling interest in the entity are recorded at fair value upon initial consolidation.

Any existing equity interest held by us in the entity prior to us obtaining control will be remeasured at fair value, which may result in a gain or loss recognized upon initial consolidation.

However, if the consolidation represents an asset acquisition of a voting interest entity, our existing interest in the acquired assets, if any, is not remeasured to fair value but continues to be carried at historical cost.

We may also deconsolidate a subsidiary as a result of this reassessment, which may result in a gain or loss recognized upon deconsolidation depending on the carrying values of deconsolidated assets and liabilities compared to the fair value of any interests retained.

We evaluated the nature of our investment in affiliates of XdisplayTM company, which is developing micro-LED mass transfer expertise and technologies, and Miortech (dba Etulipa), which is developing low power outdoor electrowetting technology.

We determined that Miortech is a VIE, and based on management's analysis, we determined that Daktronics is not the primary beneficiary;

therefore, the investment in Miortech is accounted for under the equity method.

The aggregate amount of our investments accounted for under the equity method was $ 11,934 and $ 16,916 as of April 29, 2023 and April 30, 2022, respectively.

Our proportional share of the respective affiliates' earnings or losses is included in the "Other (expense) income, net" line item in our consolidated statements of operations.

For the fiscal years 2023, 2022 and 2021, our share of the losses of our affiliates was $ 3,332 , $ 2,970 and $ 2,370 , respectively.

During fiscal 2022, we purchased $ 7,488 of convertible notes (“Notes”) which are included in the “Investment in affiliates and other assets" and "Current maturities of long-term receivables" line items in our consolidated balance sheet.

There were no convertible notes as of May 1, 2021.

In fiscal year 2023, we concluded there was an other-than-temporary impairment of our investment in Miortech and recorded an impairment loss of $ 4,473 to reflect the investment at fair market value (level 3).

The impairment loss is included in the "Other (expense) income, net" line item in our consolidated statements of operations.

We purchased services for research and development activities from our equity method investees.

The total of these related party transactions for fiscal year 2022, 2021 and 2020 was $ 1,520 , $ 460 , and $ 1,113 , respectively, which is included in the "Product design and development" line item in our consolidated statement of operations, and for fiscal 2022, $ 296 of this remains unpaid and is included in the "Accounts payable " line item in our consolidated balance sheet.

The total of these related party transactions for fiscal years 2023, 2022 and 2021 was $ 672 , $ 1,520 , and $ 460 , respectively, which is included in the "Product design and development" line item in our consolidated statement of operations, and for fiscal 2023, $ 52 remains unpaid and is included in the "Accounts payable " line item in our consolidated balance sheet.

Fiscal 2022 had $ 296 unpaid and included in the "Accounts payable" line item in our consolidated balance sheet.

During fiscal 2023, we invested in $ 3,000 of convertible notes and in $ 1,315 of promissory notes (collectively, "Notes") in our affiliates, which is included in the “Investment in affiliates and other assets" line item in our consolidated balance sheets.

During fiscal 2023, we converted $ 2,823 of Notes to stock ownership.

After this conversion of Notes to stock ownership, our ownership increased to 55.9 percent in Miortech.

Our ownership in XdisplayTM company is 16.4 percent as of April 29, 2023.

The total amount of Notes as of April 29, 2023 was $ 8,789 and is included in the "Investments in affiliates and other assets" line item in our consolidated balance sheets.

The Notes balance combined with the investment in affiliates balance totaled $ 20,723 and $ 24,404 as of April 29, 2023 and April 30, 2022, respectively.

Summarized financial information for equity method investments consist of the following:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Balance sheet data:

12 unchanged sentences

Material estimates that are particularly susceptible to significant change in the near-term relate to the determination of the estimated total costs on uniquely configured contracts and estimated costs to be incurred for product warranties and income taxes.

Estimation processes are also used in inventory valuation and determining, the allowance for doubtful accounts, share-based compensation, goodwill impairment, and extended warranty and product maintenance agreements.

Estimation processes are also used in inventory valuation and determining, the allowance for credit losses, share-based compensation, goodwill impairment, investment in affiliates impairment, value of long-term assets, and extended warranty and product maintenance agreements.

Changes in estimates are reflected in the periods in which they become known.

Cash and cash equivalents :

All highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents and consist primarily of government repurchase agreements, savings accounts and money market accounts that are carried at cost, which approximates fair value.

market accounts that are carried at cost, which approximates fair value.

We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits.

4 unchanged sentences

Restricted cash consists of cash and cash equivalents held in bank deposit accounts to secure issuances of foreign bank guarantees.

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Cash and cash equivalents $ 23,982 $ 17,143 $ 77,590

1 unchanged sentence

Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows $ 24,690 $ 18,008 $ 80,402

We have foreign currency cash accounts to operate our global business.

These accounts are impacted by changes in foreign currency rates.

Of our $ 23,982 in cash and cash equivalents balances as of April 29, 2023, $ 15,895 were denominated in United States dollars, of which $ 1,300 were held by our foreign subsidiaries.

As of April 29, 2023, we had an additional $ 8,087 in cash balances denominated in foreign currencies, of which $ 7,651 were maintained in accounts of our foreign subsidiaries.

In accordance with ASC 330 , Inventory, our inventories are stated at the lower of cost (first-in, first-out method) and net realizable value.

Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Cost is measured as the price of the components and allocated expenses for production or betterment of the inventory item.

Cost is measured as the price of the components and allocated expenses for production or betterment of the inventory item are applied to the purchase cost of the raw materials.

When we estimate net realizable value to be lower than cost, any necessary adjustments are charged to cost of sales in that period.

In determining net realizable value, we review various factors such as current inventory levels, forecasted demand, costs of completion, and technological obsolescence.

Allowance for doubtful accounts:

Allowance for credit losses:

We make estimates regarding the collectability of our accounts receivable, long-term receivables, contract assets and other receivables.

In evaluating the adequacy of our allowance for doubtful accounts, we analyze specific balances, customer creditworthiness, changes in customer payment cycles, and current economic trends.

the financial condition of any customer were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances may be required.

We charge off receivables at such time it is determined collection will not occur in accordance with ASC 310, Receivables .

In evaluating the adequacy of our allowance for credit losses, we analyze specific balances, customer creditworthiness, changes in customer payment cycles, and current economic trends.

If the financial condition of any customer were to deteriorate, resulting in an impairment of its ability to make payments, additional allowances may be required.

In addition, in accordance with ASC 326, Financial Instruments - Credit Losses , an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make required payments (current expected losses).

The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers.

We charge off receivables at such time it is determined collection will not occur against the allowance for credit losses.

Revenue recognition:

3 unchanged sentences

Pre-contract costs are generally expensed as incurred, unless they are directly associated with an anticipated contract and recoverability from that contract is probable.

Pre-contract costs directly associated with anticipated contracts expected to be recoverable include $ 117 and $ 492 as of April 30, 2022 and May 1, 2021, respectively.

Pre-contract costs directly associated with anticipated contracts expected to be recoverable include $ 860 and $ 117 as of April 29, 2023 and April 30, 2022, respectively.

These are included in the "Inventories" line item in our consolidated balance sheets.

At contract inception, we identify performance obligations by reviewing the agreement for material distinct goods and services.

Goods and services are distinct when the customer can benefit from them on its own and our promises to transfer these items are identifiable from other promises within the contract.

Goods and services are distinct when the customer can benefit from them on its own and our promises to transfer

these items are identifiable from other promises within the contract.

When we are contracted to provide a single promise (an integrated system), we often treat it as a single performance obligation if we are providing goods and services with the same pattern of transfer that are highly integrated or interdependent, that are modified or customized by other goods or services promised, or that provide a combined outcome for which the customer has contracted.

12 unchanged sentences

Receivables" for amounts recorded in long-term receivables.

When separate performance obligations are identified, we allocate the transaction price to the individual performance obligation based on the best method we judge as faithfully depicting the value of the performance obligation.

When separate performance obligations are identified, we allocate the transaction price to the individual performance obligation based on the best method we judge as a faithful depiction of the value of the performance obligation.

Many of our contracts are bundled, and we do not have separate selling prices for each performance obligation;

17 unchanged sentences

In our judgment, this accounting treatment is most appropriate because the substantial part of our promise to customers is to provide significant integration services and incorporate individual goods and services into a combined output or system.

Often times, the system is customized or significantly modified to the customer's desired configurations and location, and the interrelated goods and services provide utility to the customer as a package.

Revenue for uniquely configured (custom) or integrated systems is recognized over time using the cost incurred input method.

Often times, the system is customized or

significantly modified to the customer's desired configurations and location, and the interrelated goods and services provide utility to the customer as a package.

Revenue for uniquely configured (custom) or integrated systems is recognized over time using the cost-to-cost input method.

Over time revenue recognition is appropriate because we have no alternative use for the uniquely configured system and have an enforceable right to payment for work performed.

The cost incurred input method measures costs incurred to date compared to estimated total costs for each contract.

The cost-to-cost input method measures costs incurred to date compared to estimated total costs for each contract.

This method is the most faithful depiction of our performance because it measures the value of the contract transferred to the customer.

11 unchanged sentences

Limited configuration (standard systems) and after-sale parts contracts :

Limited configured (standard systems) or after-sale parts contracts with limited or no configuration or limited integration are recognized as distinct individual performance obligations when material.

Limited configuration (standard systems) or after-sale parts contracts with limited or no configuration or limited integration are recognized as distinct individual performance obligations when material.

When not distinct, we combine into one performance obligation the goods and/or services with each other until the bundle of goods or services is distinct.

6 unchanged sentences

Therefore, we have an alternative use for the performance obligation and recognize revenue upon our substantial completion and at the point in time we estimate control has transferred to the customer.

When limited configured single performance obligations are more service-type (i.e., installation and integration services), we recognize revenue over time using the cost-to-cost input method, by comparing cumulative costs incurred to the total estimated costs and applying that percentage of completion to the transaction price to recognize revenue.We believe the cost-to-cost input method is the most faithful depiction of the customer obtaining control and benefits from the work performed.

Services and other :

17 unchanged sentences

For service-type warranty contracts, we allocate revenue to this performance obligation, recognize the revenue over time, and recognize costs as incurred.

Long-term receivables and advertising rights:

We occasionally sell and install our products at facilities in exchange for the rights to sell or to retain future advertising revenues.

For these transactions, we recognize revenue equal to the amount of the present value of the future advertising payments if enough advertising is sold to obtain normal margins on the contract, and we record the related receivable in long-term receivables.

We recognize imputed interest as earned.

Property and equipment :

26 unchanged sentences

Fair value is estimated using internally developed forecasts and assumptions and takes into account management plans, business trends, and market and economic conditions.

If the quantitative assessment of good impairment fails, an impairment loss equal to the amount that a reporting unit's carrying value exceeds its fair value will be recognized.

We completed our annual impairment analysis during the third quarter of fiscal 2022, utilizing a quantitative approach.

Based on the outcome of that analysis, goodwill was not impaired.

If the quantitative assessment of goodwill impairment fails, an impairment loss equal to the amount that a reporting unit's carrying value exceeds its fair value will be recognized.

Foreign currency translation :

18 unchanged sentences

We follow the provisions of ASC 220 , Reporting Comprehensive Income , which establishes standards for reporting and displaying comprehensive income and its components, and disclose these components in the consolidated statements of comprehensive income.

Comprehensive (loss) income reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Comprehensive income (loss) reflects the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

For us, comprehensive income represents net income adjusted for cumulative foreign currency translation adjustments and unrealized gains and losses on available-for-sale securities.

The foreign currency translation adjustment included in the

comprehensive income (loss) calculation has not been tax affected, as the investments in foreign affiliates are deemed to be permanent.

The foreign currency translation adjustment included in the comprehensive income (loss) calculation has not been tax affected, as the investments in foreign affiliates are deemed to be permanent.

Product design and development :

4 unchanged sentences

Diluted EPS reflects the potential dilution which may occur if securities or other obligations to issue common stock were exercised or converted into shares of common stock or resulted in the issuance of shares of common stock which share in our earnings.

The following is a reconciliation of the net income and common share amounts used in the calculation of basic and diluted EPS for the fiscal years ended April 30, 2022, May 1, 2021 and May 2, 2020:

The following is a reconciliation of the net income and common share amounts used in the calculation of basic and diluted EPS for the fiscal years ended April 29, 2023, April 30, 2022 and May 1, 2021:

Net income Shares Per share income

3 unchanged sentences

Diluted earnings per share $ 6,802 45,521 $ 0.15

For the year ended May 1, 2021:

For the year ended April 30, 2022:

Basic earnings per share $ 592 45,188 $ 0.01

5 unchanged sentences

Diluted earnings per share $ 10,926 45,202 $ 0.24

Options outstanding to purchase 1,846 , 2,262 and 2,198 shares of common stock with a weighted average exercise price of $ 9.15 , $ 9.11 and $ 9.95 for the fiscal years ended April 30, 2022, May 1, 2021 and May 2, 2020, respectively, were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Options outstanding to purchase 2,084 , 1,846 and 2,262 shares of common stock with a weighted average exercise price of $ 7.47 , $ 9.15 and $ 9.11 for the fiscal years ended April 29, 2023, April 30, 2022 and May 1, 2021, respectively, were not included in the computation of diluted earnings per share because the effects would be anti-dilutive.

Share-based compensation :

3 unchanged sentences

Shareholders' Equity and Share-Based Compensation" for additional information and the assumptions we use to calculate the fair value of share-based employee compensation.

Other Business Developments

Impacts to and changes in global economic conditions are expected as the world economies recover from the COVID-19 pandemic, adjust to supply chain conditions and disruptions, and react to the evolving war and geopolitical environment.

Our ability to fund operations and capital expenditures in the future will be dependent on our ability to generate cash flow from operations in these conditions, to maintain or improve margins, and to use funds from our credit facility or other funding sources.

We anticipate needing to utilize a portion of our line of credit which was recently extended to April 2025 to help with our continued investment in capacity to meet our expanding demand.

We believe it is probable our existing cash balances and future actions will be sufficient to fund our normal business operations over the next twelve months from the date of this filing.

We received governmental wage subsidies from various governmental programs related to COVID-19 implications of $ 293 and $ 1,757 during the fiscal years 2022 and 2021, respectively and recorded the subsidies as a reduction of compensation expense, most of it is included in the "Costs of sales" line item in our consolidated statements of operations.

We also have elected to defer payments of the employer portion of social security taxes during the payroll tax deferral period, which ended on December 31, 2020.

As of April 30, 2022, the total amount of such deferral was $ 2,633 , which is included in the "Accrued expenses" line item in our consolidated balance sheet.

Per the terms of the deferral program, the total amount is due on December 31, 2022.

Liquidity and Going Concern :

The accompanying Consolidated Financial Statements are prepared in accordance with GAAP applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

We previously disclosed in our second and third quarter fiscal 2023 Form 10-Q Quarterly Reports that we had experienced volatility in our business driven by global economic conditions and supply chain disruptions.

Although supply chain disruptions had started to ease, we could not be certain at that time we wouldn't experience future disruptions or need additional liquidity to fund operations.

We also reported our financing plans were not deemed probable.

Those conditions raised substantial doubt about the Company’s ability to continue as a going concern for the twelve months from the date of issuance of the second and third quarter fiscal 2023 Form 10-Q Quarterly Reports.

We adapted to the business environment by raising prices, increased inventory levels and added capacity to improve stability of operations, and instituted a liquidity enhancement program to focus our teams on improving cash flows.

On May 11, 2023, we secured long-term financing to enhance our liquidity.

During fiscal 2023, we recognized operating income of $ 21,388 and generated $ 15,024 in cash flows provided by operating activities.

We project we will have sufficient cash on hand and available under these financing agreements to fund future operations.

Therefore, the events and conditions that gave rise to substantial doubt about our ability to continue as a going concern were resolved.

Refer to "Note 17.

Subsequent Events" for additional considerations related to our financing agreements.

Recent Accounting Pronouncements

Accounting Standards Adopted

In June 2016, the Financial Accounting Standards Board ("FASB") issued ASU 2016-03, Measurement of Credit Losses on Financial Instruments , which provides guidance regarding the measurement and recognition of credit impairment for certain financial assets.

ASU 2016-03 improves financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

Under the new guidance, ASU 2016-03 requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

We adopted ASU 2016-03 and its related guidance during the first quarter of fiscal 2021, and the adoption did not have a material impact on our consolidated financial statements.

We estimate an allowance for doubtful accounts using a loss rate method.

We measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

A reconciliation of the beginning and ending allowance for doubtful accounts is as follows:

April 30, 2022 May 1, 2021

Balance as of Balance at beginning of year $ 3,942 $ 2,828

Charged to costs and expenses 2,083 3,318

Deductions (1) ( 3,271 ) ( 2,204 )

Balance as of Balance at end of year $ 2,754 $ 3,942

(1) Includes account collections and write offs

There have been no significant ASUs issued that we adopted during the fiscal year ended April 30, 2022.

There were no standards adopted since our last Annual Report on Form 10-K.

Accounting Standards Not Yet Adopted

In November 2021, FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities About Government Assistance ("ASU 2021-10"), which requires business entities to disclose information about transactions with a government that are accounted for by applying a grant or contribution model by analogy.

For transactions covered by ASU 2021-10, the new standard requires the disclosure of information about the nature of the transaction, including significant terms and conditions, as well as the amounts and specific financial statement line items affected by the transaction.

ASU 2021-10 is effective for annual periods beginning after December 15, 2021, which for us is the first quarter of fiscal 2023.

Early adoption is permitted.

The Company does not expect the adoption of ASU 2021-10 to have a material impact on future disclosures.

There are no significant new Accounting Standards Updates issued that the Company had not yet adopted as of April 29, 2023.

Revenue Recognition

39 unchanged sentences

$ 127,300 $ 143,049 $ 91,557 $ 58,284 $ 61,843 $ 482,033

See "Note 3 .

Segment Reporting" for a disaggregation of revenue by geography.

3 unchanged sentences

Contract liabilities represent amounts billed to the clients in excess of revenue recognized to date.

The following table reflects the balances and changes in our contract assets and liabilities:

April 30, 2022 May 1, 2021

The following table reflects the changes in our contract assets and liabilities:

April 29, 2023 April 30, 2022 Dollar Change Percent Change

Contract assets $ 46,789 $ 41,687 $ 5,102 12.2 %

1 unchanged sentence

Contract liabilities - non-current 13,096 10,998 2,098 19.1

The changes in our contract assets and contract liabilities from May 1, 2021 to April 30, 2022 were due to the timing of billing schedules and revenue recognition, which can vary significantly depending on the contractual payment terms and the seasonality of the sports markets.

We had no material impairments of contract assets for fiscal 2022.

The changes in our contract assets and contract liabilities from April 30, 2022 to April 29, 2023 were due to the timing of billing schedules and revenue recognition, which can vary significantly depending on the contractual payment terms and the seasonality of the sports markets.

We had no impairments of contract assets for fiscal 2023 and 2022.

For service-type warranty contracts, we allocate revenue to this performance obligation, recognize the revenue over time, and recognize costs as incurred.

1 unchanged sentence

Changes in unearned service-type warranty contracts, net were as follows:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Balance at beginning of year $ 26,346 $ 24,590

3 unchanged sentences

Balance at end of year $ 28,338 $ 26,346

As of April 30, 2022 and May 1, 2021, our contracts in progress that were identified as loss contracts were immaterial.

For these contracts, the provision for losses are included in the "Accrued expenses" line item in our consolidated balance sheets.

During fiscal 2022, we recognized revenue of $ 53,241 related to our contract liabilities as of May 1, 2021.

Remaining performance obligations

Contracts in process identified as loss contracts as of April 29, 2023 and April 30, 2022 were immaterial.

Loss provisions are recorded in "Accrued expenses" line item in our consolidated balance sheets.

During fiscal 2023, we recognized revenue of $ 84,972 related to our contract liabilities as of April 30, 2022.

Remaining performance obligations and revenue recognized from past performance obligations

As of April 29, 2023, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 462,035 .

Remaining performance obligations related to product and service agreements as of April 29, 2023 are $ 400,737 and $ 61,298 , respectively.

We expect approximately $ 385,359 of our remaining performance obligations to be recognized over the next 12 months, with the remainder recognized thereafter.

Remaining performance obligations related to product and service agreements at April 30, 2022 are $ 471,589 and $ 61,751 , respectively.

Although remaining performance obligations reflect business that is considered to be legally binding, cancellations, deferrals or scope adjustments may occur.

Any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals are reflected or excluded in the remaining performance obligation balance, as appropriate.

The amount of revenue recognized associated with performance obligations satisfied in prior years during the years ended April 29, 2023 and April 30, 2022 was immaterial.

Segment Reporting

5 unchanged sentences

Our Commercial business unit primarily consists of sales of our integrated video display systems, digital billboards, Galaxy ® and Fuelight ™ product lines, and dynamic messaging systems to resellers (primarily sign companies), out-of-home ("OOH") companies, national retailers, quick-serve restaurants, casinos, shopping centers, cruise ships, commercial building owners, and petroleum retailers.

Our Live Events business unit primarily consists of sales of integrated scoring and video display systems to college and professional sports facilities and convention centers and sales of our mobile display technology to video rental organizations and other live events type venues.

Our Live Events business unit primarily consists of sales of integrated scoring and video display systems to college and professional sports facilities and convention centers and sales of our mobile

display technology to video rental organizations and other live events type venues.

Our High School Park and Recreation business unit primarily consists of sales of scoring systems, Galaxy ® displays and video display systems to primary and secondary education facilities and resellers (primarily sign companies).

14 unchanged sentences

The following table sets forth certain financial information for each of our five reporting segments for the periods indicated:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Commercial $ 170,590 $ 154,211 $ 127,300

3 unchanged sentences

International 84,652 83,130 61,843

Total company net sales 610,970 482,033 608,932

754,196 610,970 482,033

Gross profit:

9 unchanged sentences

Product design and development 29,989 29,013 26,846

Goodwill impairment 4,576 — —

129,967 112,651 103,475

Operating income (loss) 4,046 17,108 ( 167 )

Operating income 21,388 4,046 17,108

Nonoperating income (expense):

1 unchanged sentence

Other expense, net ( 7,211 ) — ( 3,109 ) — ( 2,983 )

Income (loss) before income taxes $ 1,108 $ 14,060 $ ( 9 )

Income before income taxes $ 13,257 $ 1,108 $ 14,060

Depreciation and amortization:

8 unchanged sentences

The following table presents information about net sales and property and equipment, net of accumulated depreciation, in the United States and elsewhere:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

United States $ 661,312 $ 513,740 $ 413,211

5 unchanged sentences

$ 72,147 $ 66,765 $ 58,682

We have numerous customers worldwide for sales of our products and services, and no customer accounted for 10% or more of net sales;

We have numerous customers worldwide for sales of our products and services, and no customer accounted for 10 percent or more of net sales;

therefore, we are not economically dependent on a limited number of customers for the sale of our products and services.

We have numerous raw material and component suppliers, and no supplier accounts for 10% or more of our cost of sales;

however, we have a number of single-source and limited-source suppliers that could limit our supply or cause delays in obtaining raw material and components needed in manufacturing.

however, we have a complex global supply chain subject to geopolitical and transportation risks and a number of single-source suppliers that could limit our supply or cause delays in obtaining raw materials and components needed in manufacturing.

Goodwill and Intangible Assets

1 unchanged sentence

Live Events Commercial Transportation International Total

Balance as of May 1, 2021:

Balance as of April 30, 2022:

$ 2,296 $ 3,349 $ 68 $ 2,214 $ 7,927

Foreign currency translation ( 15 ) ( 151 ) ( 27 ) 81 ( 112 )

Goodwill impairment ( 2,281 ) — — ( 2,295 ) ( 4,576 )

Balance as of April 29, 2023:

2 unchanged sentences

Our annual analysis is performed during our third quarter of each fiscal year based on the goodwill amount as of the first business day of our third fiscal quarter.

We performed our annual impairment test and concluded no goodwill impairment existed for fiscal years 2022, 2021, and 2020.

We performed our annual impairment test on October 30, 2022 and concluded that the carrying value of the Live Events and International reporting units exceeded their respective fair values and consequently recorded an impairment charge as noted in the above table.

We determined the fair value of the reporting units based on an income approach, using the present value of future discounted cash flows.

Significant estimates used to determine fair value include the weighted average cost of capital and financial forecasts.

The recognized impairment was primarily a result of our weighted average cost of capital being notably higher, which was driven by strains on our liquidity caused by disrupted supply chains and geopolitical conditions.

As a result, the present value of our future cash flows was lower, which caused the $ 4,576 impairment charge.

Based on our annual impairment test, we concluded that the fair value of the Commercial and Transportation reporting units exceeded their respective carrying values and concluded no goodwill impairment existed for those reporting units.

The annual impairment test for fiscal years 2022 and 2021 concluded no goodwill impairment existed.

Intangible Assets

The following table summarizes intangible assets, net, as of April 30, 2022 and May 1, 2021:

The following table summarizes intangible assets, net, as of April 29, 2023 and April 30, 2022:

April 29, 2023

1 unchanged sentence

Registered trademarks 20.0 $ 650 $ 270 $ 380

Software 3.0 2,984 2,984 —

Customer relationships 10.3 2,563 1,807 756

Other 1.0 101 101 —

Total 12.2 $ 3,213 $ 2,077 $ 1,136

April 30, 2022

Weighted Average Life (in years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Registered trademarks 20.0 $ 639 $ 233 $ 406

Software 3.0 6,606 6,412 194

Customer relationships 10.0 2,853 1,787 1,066

Other 1.5 132 131 1

Total 11.8 $ 3,492 $ 2,020 $ 1,472

8 unchanged sentences

Inventories consisted of the following:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Raw materials $ 81,627 $ 71,410

3 unchanged sentences

Property and equipment, net consisted of the following:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Land $ 1,996 $ 1,899

11 unchanged sentences

Accrued expenses consisted of the following:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Compensation $ 17,466 $ 15,944

3 unchanged sentences

Short-term accrued expenses 8,943 6,738

Acquisition-related contingency consideration — 195

$ 36,005 $ 34,959

Other (expense) income, net consisted of the following:

April 30, 2022 May 1, 2021 May 2, 2020

Foreign currency transaction (losses) gains $ ( 227 ) $ ( 675 ) $ 207

April 29, 2023 April 30, 2022 May 1, 2021

Foreign currency transaction gains (losses) $ 479 $ ( 227 ) $ ( 675 )

Equity in losses of affiliates ( 3,332 ) ( 2,970 ) ( 2,370 )

Impairment of equity method investee ( 4,473 ) — —

Other 115 88 62

$ ( 7,211 ) $ ( 3,109 ) $ ( 2,983 )

Accounts Receivables, Net

We invoice customers based on a billing schedule as established in our contracts.

1 unchanged sentence

Foreign sales are at times secured by irrevocable letters of credit or bank guarantees.

Accounts receivable are reported net of an allowance for doubtful accounts of $ 2,754 and $ 3,942 at April 30, 2022 and May 1, 2021, respectively.

Included in accounts receivable as of April 30, 2022 and May 1, 2021 was $ 1,834 and $ 660 , respectively, of retainage on construction-type contracts, all of which is expected to be collected within one year.

Accounts receivable are reported net of an allowance for credit losses of $ 4,182 and $ 2,754 as of April 29, 2023 and April 30, 2022, respectively.

Included in accounts receivable as of April 29, 2023 and April 30, 2022 was $ 1,416 and $ 1,834 , respectively, of retainage on construction-type contracts, all of which is expected to be collected within one year.

In some contracts with customers, we agree to installment payments exceeding 12 months.

2 unchanged sentences

We generally retain a security interest in the equipment or in the cash flow generated by the equipment until the contract is paid.

The present value of long-term contracts, including accrued interest and current maturities, was $ 4,288 and $ 3,097 as of April 30, 2022 and May 1, 2021, respectively.

The present value of long-term contracts, including accrued interest and current maturities, was $ 1,473 and $ 4,288 as of April 29, 2023 and April 30, 2022, respectively.

Contract receivables bearing annual interest rates of 4.5 to 9.0 percent are due in varying annual installments through November 2026.

The face value of long-term receivables was $ 4,364 as of April 30, 2022 and $ 3,438 as of May 1, 2021.

The face value of long-term receivables was $ 1,512 and $ 4,364 as of April 29, 2023 and April 30, 2022, respectively.

Financing Agreements

We have a credit agreement with a bank which provides for a $ 35,000 , line of credit and allows up to $ 20,000 for commercial and standby letters of credit.

The bank has a security interest in certain assets located in the United States.

The interest rate on the line of credit ranges from the secured overnight financing rate ("SOFR") plus 75 basis points to SOFR plus 125 basis points depending on certain ratios.

The line of credit was renewed on April 29, 2022, and the maturity date of our credit agreement and related revolving bank note is April 29, 2025.

The credit agreement and amendments to the credit agreement require us to be in compliance with certain financial ratios, including a covenant to maintain the ratio of interest-bearing debt to earnings before income taxes, depreciation, and amortization of less than 2.5 , and other covenants.

The credit agreement and amendments to the credit agreement also contain customary events of default, including the failure to comply with covenants, the failure to pay or discharge material judgments and taxes, bankruptcy, the failure to pay loans and fees, and experiencing a change of control.

The occurrence of an event of default by us would permit the lenders to terminate their commitments and accelerate repayment of the loans, foreclose on the collateral for the loans, and require collateralization of outstanding letters of credit.

As of April 30, 2022, there were no advances under the loan portion of the line of credit, and the balance of the letters of credit outstanding was approximately $ 4,669 .

As of April 29, 2023, we had a credit agreement with a bank which provided for a $ 45,000 line of credit and allowed up to $ 20,000 for commercial and standby letters of credit.

As of April 29, 2023, $ 17,750 had been advanced under the loan portion of our line of credit, and the balance of letters of credit outstanding was approximately $ 7,783 .

As of April 29, 2023, $ 19,467 of the credit facility was available for borrowing.

Subsequent to April 29, 2023 we secured new financing agreements.

For information on the new financing agreements, see "Note 17.

Subsequent Events."

As of April 29, 2023, we had $ 616 of bank guarantees or other financial instruments for display installations issued by another bank and secured by a restricted cash deposit.

6 unchanged sentences

On December 2, 2021, the Board of Directors of Daktronics voted to reauthorize the stock repurchase program.

During fiscal 2021, we had no repurchases of shares of our outstanding common stock.

During fiscal 2022 and 2020, we repurchased 641 and 1,039 , respectively, shares of common stock at a total cost of $ 3,184 and $ 5,636 , respectively.

During fiscal 2023 and 2021, we had no repurchases of shares of our outstanding common stock.

During fiscal 2022, we repurchased 641 shares of common stock at a total cost of $ 3,184 .

As of April 29, 2023, we had $ 29,355 of remaining capacity under our current share repurchase program.

We lease facilities and various equipment to manufacture products and provide employee collaboration space and tools.

These are all classified as operating leases and have initial lease terms ranging from one to five years .

These are all classified as operating leases and have initial lease terms ranging from 1 year to 5 years.

These operating leases do not contain material residual value guarantees or material restrictive covenants.

6 unchanged sentences

As we are generally not able to determine the rate implicit in our leases, we use the incremental borrowing rate based on the information available at the commencement date in determining the present value of future lease payments.

operating lease right-of-use asset includes any prepaid lease payments and initial direct costs and excludes any lease incentives and impairments.

The operating lease right-of-use asset includes any prepaid lease payments and initial direct costs and excludes any lease incentives and impairments.

Some of our leases include options to extend the term, which is only included in the right-of-use assets and lease liability calculation when it is reasonably certain that we will exercise that option.

5 unchanged sentences

Operating lease cost is recognized on a straight-line basis over the lease term, and short-term lease cost is recognized when paid.

During fiscal 2022, the amount of the operating lease cost included in cost of sales and operating expenses in the consolidated statements of operations was $ 2,425 and $ 870 , respectively, as compared to $ 2,241 and $ 977 , respectively, in fiscal year 2021;

During fiscal 2023, the amount of the operating lease cost included in cost of sales and operating expenses in the consolidated statements of operations was $ 2,560 and $ 906 , respectively;

as compared to $ 2,425 and $ 870 , respectively, in fiscal year 2022;

and $ 2,241 and $ 977 , respectively, in fiscal year 2021.

Operating lease cost includes short-term leases, which are immaterial.

As of April 30, 2022, the weighted average remaining lease term and discount rate related to operating leases was 3.6 years and 2.4 percent as compared to 4.7 years and 3.3 percent as of May 1, 2021.

As of April 29, 2023, the weighted average remaining lease term and discount rate related to operating leases was 2.9 years and 2.7 percent as compared to 3.6 years and 2.4 percent as of April 30, 2022.

Supplemental unaudited cash flow information related to operating leases were as follows:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Cash paid for amounts included in the measurement of lease liabilities:

6 unchanged sentences

Total lease liabilities $ 5,474

(1) Includes $ 3,556 to extend the term of the lease for our Sioux Falls, South Dakota manufacturing facility.

The current and long term portions of the lease liabilities are included in the "Accrued expenses" and "Other long-term obligations" line items in our consolidated balance sheet, respectively.

Shareholders' Equity and Share-Based Compensation

Authorized shares types and shareholder rights plan :

Authorized share types and shareholder rights plan :

Our 120,000 authorized shares consist of 115,000 shares of common stock, 50 shares of Series A Junior Participating Preferred Stock, and 4,950 shares of “undesignated stock.” Our Board of Directors has the power to authorize and issue any or all of the shares of undesignated stock without shareholder approval, including the authority to establish the rights and preferences of the undesignated stock.

Each outstanding share of our common stock includes one preferred share purchase right.

Each right entitles the registered holder of our common stock to purchase from us one one-thousandth of one share of our Series A Junior Participating Preferred Stock at an initial exercise price of $ 20 per right, subject to adjustment and the terms of the shareholder rights agreement under which the dividend was declared and paid.

The rights become exercisable immediately after the earlier of (i) 10 business days following a public announcement that a person or group has acquired beneficial ownership of 20

percent or more of our outstanding common shares (subject to certain exceptions) or (ii) 10 business days following the commencement or announcement of an intention to make a tender offer or exchange offer for our common shares, the consummation of which would result in the beneficial ownership by a person or group of 20 percent or more of our outstanding common shares.

Each right entitles the registered holder of our common stock to purchase from us one one-thousandth of one share of our Series A Junior Participating Preferred Stock at an initial exercise price of $ 20 per right, subject to adjustment under the terms of the shareholder rights agreement under which the dividend was declared and paid.

The rights become exercisable immediately after the earlier of (i) 10 business days following a public announcement that a person or group has acquired beneficial ownership of 20 percent or more of our outstanding common shares (subject to certain exceptions) or (ii) 10 business days following the commencement or announcement of an intention to make a tender offer or exchange offer for our common shares, the consummation of which would result in the beneficial ownership by a person or group of 20 percent or more of our outstanding common shares.

The rights expire on November 19, 2024 , which date may be extended by our Board of Directors subject to certain additional conditions.

9 unchanged sentences

As with stock options, restricted stock and restricted stock unit ownership cannot be transferred during the vesting period.

At April 30, 2022, the aggregate number of shares available for future grants under the 2020 Plan for stock options and restricted stock awards was 2,456 shares.

As of April 29, 2023, the aggregate number of shares available for future grants under the 2020 Plan for stock options and restricted stock awards was 1,801 shares.

Shares of common stock subject to all stock awards granted under the 2020 Plan are counted as one share of stock for each share of stock subject to the award.

6 unchanged sentences

The related compensation expense as calculated under ASC 718, net of estimated forfeitures, is recognized over the applicable vesting period.

Unrecognized compensation expense related to the restricted stock and restricted stock unit awards was approximately $ 1,772 at April 30, 2022, which is expected to be recognized over a weighted-average period of 2.71 years.

Unrecognized compensation expense related to the restricted stock and restricted stock unit awards was approximately $ 1,666 as of April 29, 2023, which is expected to be recognized over a weighted-average period of 2.62 years.

The total fair value of restricted stock vested was $ 1,160 , $ 1,203 , and $ 1,293 in fiscal years 2023, 2022, and 2021, respectively.

A summary of non-vested restricted stock and restricted stock units for fiscal years 2023, 2022, and 2021 is as follows:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Number of Nonvested Shares Weighted Average Grant Date

13 unchanged sentences

Contractual Life (Years) Aggregate Intrinsic Value

Outstanding at May 1, 2021

Outstanding as of April 30, 2022

2,107 $ 8.13 4.98 $ —

2 unchanged sentences

Exercised ( 5 ) 4.11 — 7

Outstanding at April 30, 2022

Outstanding as of April 29, 2023

2,045 $ 7.11 5.52 $ 858

Shares vested and expected to vest 2,010 $ 7.17 5.46 $ 819

Exercisable at April 30, 2022

Exercisable as of April 29, 2023

1,222 $ 8.95 3.70 $ 103

The aggregate intrinsic value of stock options represents the difference between the exercise price of stock options and the fair market value of the underlying common stock for all in-the-money options.

We define in-the-money options at April 30, 2022 as options having exercise prices lower than the $ 3.35 per share market price of our common stock on that date.

There were no shares exercisable that were in-the-money options at April 30, 2022.

We define in-the-money options as of April 29, 2023 as options having exercise prices lower than the $ 4.81 per share market price of our common stock on that date.

There were 147 shares exercisable that were in-the-money options as of April 29, 2023.

The total intrinsic value of options exercised during fiscal years 2023, 2022, and 2021 was $ 7 , $ 2 , and $ 0 , respectively.

15 unchanged sentences

Expected volatility .

We estimate the volatility of our common stock at the date of grant based on historical volatility consistent with ASC 718 and Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No.

We estimate the volatility of our common stock at the date of grant based on historical volatility consistent with ASC 718 and SEC Staff Accounting Bulletin No.

107, Share-Based Payments .

Risk-free interest rate.

The rate is based on the U.S.

Treasury zero-coupon yield curve on the grant date for a term similar to the expected life of the options.

The rate is based on the United States Treasury zero-coupon yield curve on the grant date for a term similar to the expected life of the options.

Dividend yield.

1 unchanged sentence

The following table provides the weighted-average fair value of options granted and the related assumptions used in the Black-Scholes model:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Fair value of options granted $ 1.34 $ 2.43 $ 1.71

Risk-free interest rate 3.37 % 1.07 % 0.43 %

Expected dividend rate — % — % 3.50 %

Expected volatility 41.10 % 40.60 % 40.53 %

6 unchanged sentences

The number of shares of common stock issued under the ESPP totaled 424 , 310 , and 170 shares in fiscal 2023, 2022, and 2021, respectively.

The number of shares of common stock reserved for future employee purchases under the ESPP totaled 705 shares at April 30, 2022.

The number of shares of common stock reserved for future employee purchases under the ESPP totaled 1,575 shares as of April 29, 2023.

The ESPP is intended to qualify under Section 423 of the Internal Revenue Code of 1986 (the "Code").

4 unchanged sentences

The following table presents a summary of the share-based compensation expense by equity type as follows:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Stock options $ 453 $ 458 $ 450

3 unchanged sentences

A summary of the share-based compensation expense for stock options, restricted stock, restricted stock units and shares issued under the ESPP for fiscal years 2023, 2022, and 2021 is as follows:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Cost of sales $ 441 $ 434 $ 472

4 unchanged sentences

We received $ 21 in cash from option exercises under all share-based payment arrangements for the fiscal year ended April 29, 2023.

The tax (expense) benefit related to non-qualified options and restricted stock units under all share-based payment arrangements totale d ($ 47 ), ($ 70 ), and ($ 92 ) for fiscal years 2022, 2021, and 2020, respectively.

The tax expense related to non-qualified options and restricted stock units under all share-based payment arrangements totale d $ 23 , $ 47 , and $ 70 for fiscal years 2023, 2022, and 2021, respectively.

Retirement Benefits

7 unchanged sentences

The following tables reflect the significant components of our income tax provision.

The pretax income (loss) attributable to domestic and foreign operations was as follows:

April 30, 2022 May 1, 2021 May 2, 2020

The pretax income attributable to domestic and foreign operations was as follows:

April 29, 2023 April 30, 2022 May 1, 2021

Domestic $ 10,125 $ ( 2,696 ) $ 10,413

Foreign 3,132 3,804 3,647

Income (loss) before income taxes $ 1,108 $ 14,060 $ ( 9 )

Income before income taxes $ 13,257 $ 1,108 $ 14,060

Income tax expense (benefit) consisted of the following:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Federal $ 6,321 $ 644 $ 507

5 unchanged sentences

$ 6,455 $ 516 $ 3,134

The reconciliation of the provision (benefit) for income taxes and the amount computed by applying the federal statutory rate to income (loss) before income taxes is as follows:

April 30, 2022 May 1, 2021 May 2, 2020

Computed income tax expense (benefit) at federal statutory rates $ 233 $ 2,953 $ ( 2 )

The reconciliation of the provision (benefit) for income taxes and the amount computed by applying the federal statutory rate to income before income taxes is as follows:

April 29, 2023 April 30, 2022 May 1, 2021

Computed income tax expense at federal statutory rates $ 2,784 $ 233 $ 2,953

Change in uncertain tax positions ( 86 ) ( 71 ) ( 34 )

4 unchanged sentences

Base Erosion Anti-Abuse Tax (BEAT) 87 12 ( 285 )

Foreign-Derived Intangible Income (FDII) ( 128 ) ( 5 ) ( 84 )

Stock compensation 262 150 355

Meals and entertainment 149 67 49

Dividends paid to retirement plan — — ( 111 )

Goodwill Impairment 551 — —

State taxes, net of federal benefit 731 139 494

Effect of Foreign Tax Rates different than Statutory 417 ( 43 ) ( 92 )

$ 6,455 $ 516 $ 3,134

The effective income tax rate for fiscal 2022 was impacted by tax benefits from permanent tax credits offset by valuation allowances as well as other various permanent tax adjustments and state taxes with additional expense for prior year provision to return adjustments.

The effective income tax rate for fiscal 2023 was impacted due to valuation allowances on equity investments and on foreign net operating losses in Ireland, goodwill impairment, state taxes, a mix of taxes in foreign countries where the tax rate is higher than the United States, as well as prior year provision to return adjustments reduced in part by tax benefits from permanent tax credits.

During fiscal 2022, our effective income tax rate was impacted by tax benefits from permanent tax credits offset by valuation allowances as well as other various permanent tax adjustments and state taxes with additional expense for prior year provision to return adjustments.

During fiscal 2021, our effective income tax rate was impacted due to tax benefits from permanent tax credits and prior year provision to return adjustments offset by valuation allowances as well as other various permanent tax adjustments and state taxes.

During fiscal 2020, our effective income tax rate was impacted due to a tax benefit of permanent tax credits reduced by a valuation allowance placed on equity investments in proportion to a small pre-tax book loss which results in an abnormal tax rate.

The components of the net deferred tax assets were as follows:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Deferred tax assets:

4 unchanged sentences

Equity compensation 255 276

Allowance for doubtful accounts 528 829

Allowance for credit losses accounts 928 528

Inventory capitalization 1,339 1,278

2 unchanged sentences

Net operating loss carry forwards 1,024 729

Outside basis difference in equity method investments 3,819 1,861

Section 174 Capitalization 5,225 —

Research and development tax credit carry forwards 210 396

8 unchanged sentences

Prepaid expenses ( 471 ) ( 428 )

Intangible assets — ( 69 )

Unrealized gain on foreign currency exchange — ( 180 )

3 unchanged sentences

The classification of the net deferred tax assets in the accompanying consolidated balance sheets is:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Non-current assets $ 16,867 $ 13,331

2 unchanged sentences

The summary of changes in the amounts related to unrecognized uncertain tax benefits are:

April 30, 2022 May 1, 2021

April 29, 2023 April 30, 2022

Balance at beginning of year $ 477 $ 548

11 unchanged sentences

Interest and penalties incurred associated with uncertain tax positions are included in the "Income tax expense" line item in our consolidated statements of operations.

Accrued interest and penalties are included in the related tax liability line item in our consolidated balance sheets of $ 38 and $ 38 as of April 30, 2022 and May 1, 2021, respectively.

Accrued interest and penalties are included in the related tax liability line item in our consolidated balance sheets of $ 28 and $ 38 as of April 29, 2023 and April 30, 2022, respectively.

As of April 29, 2023, we had foreign net operating loss (“NOL”) carryforwards of approximately $ 5,727 primarily related to our operations in Belgium and Ireland, which have indefinite lives.

A deferred tax asset has been recorded for all NOL carryforwards totaling approximately $ 1,018 .

However, due to uncertainty in future taxable income, a valuation allowance totaling approximately $ 581 has been recorded.

However, due to uncertainty in future taxable income, a valuation allowance has been recorded for the full amount of the asset.

If sufficient evidence of our ability to generate future taxable income in the jurisdictions in which we currently maintain a valuation allowance causes us to determine that our deferred tax assets are more likely than not realizable, we would release our valuation allowance, which would result in an income tax benefit being recorded in our consolidated statements of operations.

Additional tax information:

We are subject to U.S.

federal income tax as well as income taxes of multiple state and foreign jurisdictions.

We are subject to United States federal income tax as well as income taxes of multiple state and foreign jurisdictions.

Fiscal years 2020, 2021 and 2022 remain open to federal tax examinations, and fiscal years 2019, 2020, 2021 and 2022 remain open for state income tax examinations.

2 unchanged sentences

As of April 29, 2023, we had no deferred tax liability recognized relating to our investment in foreign subsidiaries where the earnings have been indefinitely reinvested.

The Tax Act of 2017 generally eliminates U.S.

federal income taxes on dividends from foreign subsidiaries, and, as a result, the accumulated undistributed earnings would be subject only to other taxes, such as withholding taxes and state income taxes, on the distribution of such earnings.

No additional withholding or income taxes have been provided for any remaining undistributed foreign earnings not subject to the one-time deemed repatriation tax, as it is our intention for these amounts to continue to be indefinitely reinvested in foreign operations in all of our non-U.S.

jurisdictions.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was enacted in response to the COVID-19 global pandemic.

The CARES Act includes provisions such as:

a deferral of the employer portion of certain payroll taxes, refundable payroll tax credits, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, technical corrections to tax depreciation methods for qualified improvement property, and permitting NOL carryforwards incurred in tax years 2018, 2019, and 2020 (our fiscal years 2019, 2020, and 2021) to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

Subsequently to the CARES Act, the Consolidated Appropriations Act (“CAA”) of 2021 was signed into law on December 27, 2020, expanding and extending rules pertaining to payroll tax credits outlined in the CARES Act.

Additionally, the American Rescue Plan Act of 2021 (“ARPA”) was signed into law on March 11, 2021, further extending the payroll tax credits with

slight modifications.

We continue to evaluate the specific rules, guidance, and procedures allowed by the provisions of the CARES Act, CAA and ARPA.

Some of these provisions do not apply to our income tax results;

however, we are currently participating in the payment deferral of the employer portion of certain payroll taxes.

The Tax Act of 2017 generally eliminates United States federal income taxes on dividends from foreign subsidiaries, and, as a result, the accumulated undistributed earnings would be subject only to other taxes, such as withholding taxes and state income taxes, on the distribution of such earnings.

Cash Flow Information

The changes in operating assets and liabilities consisted of the following:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

(Increase) decrease:

16 unchanged sentences

Supplemental disclosures of cash flow information consisted of the following:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Cash payments for:

2 unchanged sentences

Supplemental schedule of non-cash investing and financing activities consisted of the following:

April 30, 2022 May 1, 2021 May 2, 2020

April 29, 2023 April 30, 2022 May 1, 2021

Demonstration equipment transferred to inventory $ — $ 53 $ 56

1 unchanged sentence

Contributions of common stock under the ESPP 1,207 1,211 565

Debt Issuance costs 2,875 — —

Fair Value Measurement

ASC 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of

unobservable inputs when measuring fair value.

The fair value hierarchy within ASC 820 distinguishes between the following three levels of inputs which may be utilized when measuring fair value:

6 unchanged sentences

The total carrying value of long-term marketing obligations as reported in our consolidated balance sheets within other long-term obligations approximates fair value and has been categorized as a level 2 fair value measurement.

The following table sets forth by Level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis at April 30, 2022 and May 1, 2021 according to the valuation techniques we used to determine their fair values.

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of April 29, 2023 and April 30, 2022 according to the valuation techniques we used to determine their fair values.

There have been no transfers of assets or liabilities among the fair value hierarchies presented.

5 unchanged sentences

Available-for-sale securities:

US Government Securities 3,486 — — 3,486

US Government Sponsored entities — 534 — 534

Derivatives - asset position — 934 — 934

Derivatives - liability position — ( 579 ) — ( 579 )

$ 24,690 $ ( 45 ) $ — $ 24,645

Balance as of May 1, 2021:

Balance as of April 30, 2022:

Cash and cash equivalents $ 17,143 $ — $ — $ 17,143

Restricted cash 865 — — 865

Available-for-sale securities:

US Government Securities 3,486 — — 3,486

US Government Sponsored entities — 534 — 534

Derivatives - asset position — 934 — 934

Derivatives - liability position — ( 311 ) — ( 311 )

Acquisition-related contingent consideration — — ( 363 ) ( 363 )

$ 21,494 $ 1,157 $ — $ 22,651

A roll forward of the Level 3 contingent liabilities, both short- and long-term, for the fiscal year ended April 30, 2022 is as follows:

Acquisition-related contingent consideration as of May 1, 2021

Settlements ( 400 )

Acquisition-related contingent consideration as of April 30, 2022

The following methods and assumptions were used to estimate the fair value of each class of financial instrument.

There have been no changes in the valuation techniques used by us to value our financial instruments.

There have been no changes in the valuation techniques used by us to value our financial instruments during fiscal year 2023.

Cash and cash equivalents :

11 unchanged sentences

Derivative Financial Instruments" for more information regarding our derivatives.

Contingent liabilities :

Consists of the fair value of liabilities measured on expected future payments relating to business acquisitions if conditions are met.

The contingent liabilities were calculated by estimating the discounted present value of expected future payments as of the acquisition date and subsequently at the end of each reporting period.

The fair value measurement is based on significant unobservable inputs as of May 1, 2021.

There were no contingent liabilities as of April 30, 2022.

Non-recurring measurements:

1 unchanged sentence

Certain long-lived assets such as goodwill, intangible assets and property and equipment are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

Nature of Business and Summary of Significant Accounting Policies" for further details of impairment loss of $ 4,473 for our investment in Miortech.

Other measurements using fair value :

1 unchanged sentence

Derivative Financial Instruments

We utilize derivative financial instruments to manage the economic impact of fluctuations in currency exchange rates on those transactions denominated in currencies other than our functional currency, which is the U.S.

We enter into currency forward contracts to manage these economic risks.

We account for all derivatives in the consolidated balance sheets within accounts receivable or accounts payable measured at fair value, and changes in fair values are recognized in earnings unless specific hedge accounting criteria are met for cash flow or net investment hedges.

As of April 30, 2022 and May 1, 2021, we had not designated any of our derivative instruments as accounting hedges, and thus we recorded the changes in fair value in the "Other (expense) income, net" line item in the consolidated statements of operations.

The foreign currency exchange contracts in aggregated notional amounts in place to exchange U.S.

dollars at April 30, 2022 and May 1, 2021 were as follows:

April 30, 2022 May 1, 2021

Dollars Foreign Currency U.S.

Dollars Foreign Currency

As of April 29, 2023 and April 30, 2022, we had not designated any of our derivative instruments as accounting hedges, and thus we recorded the changes in fair value in the "Other (expense) income, net" line item in the consolidated statements of operations.

The foreign currency exchange contracts in aggregated notional amounts in place to exchange United States dollars as of April 29, 2023 and April 30, 2022 were as follows:

April 29, 2023 April 30, 2022

United States Dollars Foreign Currency United States Dollars Foreign Currency

Foreign Currency Exchange Forward Contracts:

Dollars/Australian Dollars — — 2,410 3,464

Dollars/Canadian Dollars 942 1,189 — —

Dollars/British Pounds 1,774 1,345 418 300

Dollars/Euros 8,575 7,513 — —

As of April 30, 2022, there was an asset and liability of $ 934 and $ 311 , respectively, and as of May 1, 2021, there was an asset and liability of $ 4 and $ 261 , respectively, representing the fair value of foreign currency exchange forward contracts, which were determined using Level 2 inputs from a third-party bank.

As of April 30, 2022, all contracts mature within ten months.

United States Dollars/Canadian Dollars — — 942 1,189

United States Dollars/British Pounds — — 1,774 1,345

United States Dollars/Euros 7,758 7,513 8,575 7,513

As of April 29, 2023, there was an asset and liability of $ 0 and $ 579 , respectively, and, as of April 30, 2022, there was an asset and liability of $ 934 and $ 311 , respectively, representing the fair value of foreign currency exchange forward contracts, which were determined using level 2 inputs from a third-party bank.

As of April 29, 2023, all contracts mature within six months.

Commitments and Contingencies

2 unchanged sentences

We establish accruals for those contingencies when the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued if such disclosure is necessary for our financial statements to not be misleading.

We do not record an accrual when the likelihood of loss being incurred is probable, but the amount cannot be reasonably estimated, or when the loss is believed to be only reasonably possible or remote, although disclosures will be made for material matters as required by ASC 450-20, Contingencies - Loss Contingencies.

We do not record an accrual when the likelihood of loss being incurred is probable, but the amount cannot be reasonably estimated, or when the loss is believed to be only reasonably possible or

remote, although disclosures will be made for material matters as required by ASC 450-20, Contingencies - Loss Contingencies .

Our assessment of whether a loss is reasonably possible or probable is based on our assessment and consultation with legal counsel regarding the ultimate outcome of the matter following all appeals.

As of May 2, 2020, we recorded a $ 2,072 reserve for the probable and reasonably estimated cost to settle a patent litigation claim, which was included in the "Accrued expenses" line item in our consolidated balance sheets and "Cost of Sales" in consolidated statement of operations.

During fiscal 2021, an appellate court ruled in our favor on this matter.

Since we no longer estimate we have a probable loss, we recorded a credit to the "Cost of sales" line item in our consolidated statement of operations and removed the liability from our consolidated balance sheet during fiscal 2021.

For other unresolved legal proceedings or claims, we do not believe there is a reasonable probability that any material loss would be incurred.

2 unchanged sentences

Nature of Business and Summary of Significant Accounting Policies" for more information regarding warranties.

Changes in our warranty obligation for the fiscal years ended April 30, 2022 and May 1, 2021 consisted of the following:

April 30, 2022 May 1, 2021

Changes in our warranty obligation for the fiscal years ended April 29, 2023 and April 30, 2022 consisted of the following:

April 29, 2023 April 30, 2022

Beginning accrued warranty obligations $ 28,878 $ 25,960

15 unchanged sentences

Fiscal years ending Amount

Subsequent Events

On May 11, 2023, the Company entered into a Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A..

The Credit Agreement provides for a $ 60,000 senior secured asset-based revolving credit facility ("ABL") maturing on May 11, 2026 and a delayed draw loan (the "Mortgage") term loan commitment.

Under the ABL, certain factors can impact our borrowing capacity.

As of May 11, 2023, our borrowing capacity was $ 47,459 , and there were no borrowings outstanding.

The interest rate on the senior credit facility is set on a sliding scale

based on the trailing twelve-month fixed charge coverage and ranges from 2.5 percent to 3.5 percent over the standard overnight financing rate (SOFR).

The ABL is secured by a first priority lien on the Company's assets described in the Credit Agreement and the JPMorgan Pledge and Security Agreement dated as of May 11, 2023 by and between the Company and JPMorgan Chase Bank, N.A.

(the “JPMorgan Security Agreement”).

The $ 15,000 delayed draw on the Mortgage closed on July 7, 2023, is secured by a mortgage on the Company's Brookings, South Dakota real estate, amortizes over 10 years and is payable monthly.

The Mortgage is subject to the terms of the Credit Agreement and matures on May 11, 2026.

The Mortgage interest rate is set on a sliding scale based on the trailing twelve month fixed charge coverage ratio and ranges between 3.5 percent to 4.5 percent.

On May 11, 2023, the Company entered into a Securities Purchase Agreement (the "Securities Purchase Agreement") with Alta Fox Opportunities Fund, LP (the “Investor”) under which the Company agreed to sell and issue to the Investor its senior secured convertible note (the “Convertible Note”) in exchange for the payment by the Investor to the Company of $ 25,000 .

The Convertible Notes allow the Investor to convert shares of the Company’s common stock, subject to certain conditions and limitations, at the initial conversion price of $ 6.31 per share, subject to adjustments in accordance with the terms of the Convertible Note.

The Company also has a forced conversion right, which is exercisable on the occurrence of certain conditions.

The Convertible Note incurs interest at an annual rate of 9.0 percent when interest is paid in cash or an annual rate of 10.0 percent if interest is capitalized.

Upon an event of default under the Convertible Note, the annual interest rate will increase to 12.0 percent.

Under the Pledge and Security Agreement dated as of May 11, 2023 between the Company and the Investor (the “Alta Fox Security Agreement”), the Convertible Note is secured by a second priority lien on assets securing the ABL facility and a first priority lien on substantially all of the other assets of the Company, excluding all real property, subject to the Intercreditor Agreement dated as of May 11, 2023 by and among the Company, JPMorgan Chase Bank, N.A., and the Investor (the “Intercreditor Agreement”).

The Convertible Note has a maturity date of May 11, 2027 (the “Maturity Date”).

On the Maturity Date, the Company must pay to the Investor an amount in cash representing all outstanding principal, any accrued and unpaid interest, and any accrued and unpaid late charges on such principal and interest.

Effective on May 11, 2023, in connection with the Company’s entry into the Securities Purchase Agreement, the Company also entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”).

Pursuant to the Registration Rights Agreement, the Company agreed to file with the SEC by the dates set forth in the Registration Rights Agreement a registration statement covering the resale of the shares of common stock issuable upon conversion of the Convertible Note.

Pursuant to the Registration Rights Agreement, the Company is required to use reasonable best efforts to have such registration statement declared effective by the SEC by the dates set forth in the Registration Rights Agreement.

If the registration statement is not filed with the SEC or declared effective by the SEC on a timely basis, certain penalties would be applicable to the Company.

The Credit Agreement and the Convertible Note require a fixed charged coverage ratio of greater than 1.1 and include other customary non-financial covenants.

In fiscal year 2023, we incurred $ 3,866 in debt issuance costs, which is included in the "Debt issuance costs" line item in our consolidated balance sheet.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data