What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-06-26 compared with 2023-07-12 · 369 added, 215 removed, 950 unchanged (38% of the section changed)

6 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 27, 2024 and April 29, 2023, and the results of its operations and its cash flows for each of the three years in the period ended April 27, 2024, 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.

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 27, 2024, 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 June 26, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

16 unchanged sentences

Certain of the Company’s contracts are for the delivery, installation, and integration of uniquely configured audio-visual communication systems.

Revenue for these uniquely configured systems is recognized over time using the cost incurred input method.

Revenue for these uniquely configured systems is recognized over time using the cost-to-cost input method.

This input method requires management to make estimates of the costs that will ultimately be incurred at the completion of each contract.

5 unchanged sentences

Our audit procedures related to estimates of total cost used to recognize revenue for uniquely configured contracts included the following, among others:

• We tested the effectiveness of controls over uniquely configured contracts, including management’s controls over the estimates of total costs.

• We tested the design and operating effectiveness of controls over uniquely configured contracts, including management’s controls over the estimates of total costs.

• We selected a sample of uniquely configured contracts and performed the following:

6 unchanged sentences

Minneapolis, Minnesota

July 12, 2023

June 26, 2024

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

19 unchanged sentences

Intangibles, net 840 1,136

Debt issuance costs 3,866 —

Debt issuance costs, net 2,530 3,866

Investment in affiliates and other assets 21,163 27,928

1 unchanged sentence

TOTAL ASSETS $ 527,884 $ 468,104

DAKTRONICS, INC.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (continued)

(in thousands, except per share data)

April 27, 2024 April 29, 2023

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt $ 1,500 $ —

Accounts payable 60,757 67,522

7 unchanged sentences

Other long-term obligations 5,759 5,709

Line of credit 17,750 —

Long-term debt, net 53,164 17,750

Deferred income taxes 143 195

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(in thousands, except per share data)

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

April 27, 2024 April 29, 2023 April 30, 2022

Net sales $ 818,083 $ 754,196 $ 610,970

10 unchanged sentences

Interest (expense) income, net ( 3,418 ) ( 920 ) 171

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

Change in fair value of convertible note ( 16,550 ) — —

Other expense and debt issuance costs write-off, net ( 13,096 ) ( 7,211 ) ( 3,109 )

Income before income taxes 54,051 13,257 1,108

12 unchanged sentences

(in thousands)

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

April 27, 2024 April 29, 2023 April 30, 2022

Net income $ 34,621 $ 6,802 $ 592

2 unchanged sentences

Unrealized gain (loss) on available-for-sale securities, net of tax 24 12 ( 34 )

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

Total other comprehensive (loss), net of tax ( 996 ) ( 604 ) ( 2,590 )

Comprehensive income (loss) $ 33,625 $ 6,198 $ ( 1,998 )

8 unchanged sentences

Comprehensive Loss

Number Amount Number Amount

Balance as of May 1, 2021:

2 unchanged sentences

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

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

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

Tax payments related to RSU issuances — ( 125 ) — — — ( 125 )

Exercise of stock options 2 8 — — — — — 8

Shares withheld for taxes on Restricted Stock Unit issuances ( 33 ) — ( 200 ) — — — — ( 200 )

Common stock issued upon vesting of Restricted Stock Units 190 — — — — — — —

Employee savings plan activity 310 1,211 — — — — — 1,211

Treasury stock reissued — — 4 — 31 196 — 200

Balance as of May 1, 2021:

Treasury stock purchase — — — — ( 641 ) ( 3,184 ) — ( 3,184 )

Balance as of April 30, 2022:

46,733 61,794 48,372 96,608 ( 1,907 ) ( 10,285 ) ( 4,925 ) 191,564

1 unchanged sentence

Cumulative translation adjustments — — — — — — ( 616 ) ( 616 )

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

Unrealized gain on available-for-sale securities, net of tax — — — — — — 12 12

Share-based compensation — — 2,027 — — — — 2,027

Exercise of stock options 5 21 — — — — — 21

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

Shares withheld for taxes on Restricted Stock Unit issuances ( 33 ) — ( 140 ) — — — — ( 140 )

Common stock issued upon vesting of Restricted Stock Units 267 — — — — — — —

Employee savings plan activity 424 1,208 — — — — — 1,208

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

Treasury stock reissued — 4 — 196 — 200

Balance as of April 29, 2023:

2 unchanged sentences

Cumulative translation adjustments — — — — — — ( 1,020 ) ( 1,020 )

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

Unrealized gain on available-for-sale securities, net of tax — — — — — — 24 24

Share-based compensation — — 2,090 — — — — 2,090

Exercise of stock options 219 1,302 — — — — — 1,302

Tax payments related to RSU issuances — ( 140 ) — — — ( 140 )

Shares withheld for taxes on Restricted Stock Unit issuances ( 37 ) — ( 303 ) — — — — ( 303 )

Common stock issued upon vesting of Restricted Stock Units 188 — — — — — — —

Employee savings plan activity 355 1,200 — — — — — 1,200

6 unchanged sentences

(in thousands)

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

April 27, 2024 April 29, 2023 April 30, 2022

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 34,621 $ 6,802 $ 592

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

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

Depreciation and amortization 19,291 16,993 15,394

Gain on sale of property, equipment and other assets ( 691 ) ( 743 ) ( 572 )

Loss (gain) on sale of property, equipment and other assets 44 ( 691 ) ( 743 )

Share-based compensation 2,090 2,027 1,973

Equity in loss of affiliates 3,764 3,332 2,970

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

Provision (recovery) for doubtful accounts, net 373 1,009 ( 286 )

Deferred income taxes, net ( 9,069 ) ( 3,633 ) ( 1,555 )

Non-cash impairment changes 9,049 — —

Non-cash impairment charges 6,359 9,049 —

Change in fair value of convertible note 16,550 — —

Debt issuance costs write-off 3,353 — —

Change in operating assets and liabilities ( 14,135 ) ( 19,864 ) ( 45,380 )

33 unchanged sentences

When April 30 falls on a Wednesday, the fiscal year ends on the preceding Saturday.

Within each fiscal year, each quarter is comprised of 13-week periods following the beginning of each fiscal year.

Within each fiscal year, each quarter is comprised of a 13-week periods following the beginning of each fiscal year.

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

The fiscal years ended April 27, 2024, April 29, 2023 and April 30, 2022 contained operating results for 52 weeks.

Principles of consolidation :

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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.

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

We have arrangements we concluded were a variable interest entity and accounted for them under the proportionate consolidation method.

These arrangements had an aggregate amount of contract assets, contract liabilities and gross profit of $ 1,955 , $ 38 and $ 2,761 , respectively, as of and for the year ended April 27, 2024.

As of April 29, 2023, the aggregate amount of contract assets and gross profit was $ 5,223 and $ 2,748 , respectively.

Investments in affiliates :

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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.

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

In assessing the Company's interests in a 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.

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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.

Upon occurrence of certain events such as changes to the entity's legal formation or equity at risk, 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.

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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.

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 the deconsolidated assets and liabilities compared to the fair value of any interests retained.

We use the equity method to account for investments in companies if our investment provides us with the ability to exercise significant influence over operating and financial policies of the investee.

Our consolidated net income includes our Company's proportionate share of the net income or loss of these companies.

Our judgment regarding the level of influence over each equity method investee includes considering key factors such as our ownership interest, representation on the board of directors, participation in policy-making decisions, other commercial arrangements and material intercompany transactions.

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

Our ownership in Miortech was 55.9 percent and in XDC was 16.4 percent as of April 27, 2024.

The aggregate amount of our investments accounted for under the equity method was $ 1,813 and $ 11,934 as of April 27, 2024 and April 29, 2023, 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.

We determined both entities are a VIE, and based on management's analysis, we determined that Daktronics is not the primary beneficiary because the power criterion was not met;

therefore, the investments in Miortech and XDC are accounted for under the equity method.

Our consolidated net income includes our Company's proportionate share of the net income or loss of each affiliates.

Our proportional share of the respective affiliates' earnings or losses is included in the "Other expense and debt issuance costs write-off, net" line item in our consolidated statements of operations.

For the fiscal years 2024, 2023 and 2022, our share of the losses of our affiliates was $ 3,764 , $ 3,332 and $ 2,970 , respectively.

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 review our investments in affiliates for impairment indicators.

In fiscal years 2024 and 2023, we concluded there was an other-than-temporary impairment of our investment in Miortech and recorded an impairment loss of $ 1,392 and $ 4,473 , respectively, to reflect the investment at fair market value (level 3).

In fiscal year 2024, we concluded there was other-than-temporary impairment of our investment in XDC and recorded an impairment loss of $ 4,967 , to reflect the investment at fair market value (level 3).

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

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.

The total of these related party transactions for fiscal years 2024, 2023 and 2022 was $ 577 , $ 672 , and $ 1,520 , respectively, which is included in the "Product design and development" line item in our consolidated statements of operations, and as of April 27, 2024 and April 29, 2023, $ 146 and $ 52 , respectively, remains unpaid and is included in the "Accounts payable " line item in our consolidated balance sheet.

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Balance sheet data:

5 unchanged sentences

Net loss $ ( 13,609 ) $ ( 16,932 ) $ ( 11,928 )

Loans to affiliates.

We also have advanced our affiliates convertible and promissory notes (collectively, the "Affiliate Notes").

We advanced $ 5,050 and $ 4,315 in fiscal 2024 and in fiscal 2023, respectively.

The total amount of Affiliate Notes was $ 14,241 and $ 8,789 as of April 27, 2024 and April 29, 2023, respectively.

The balances of Affiliate Notes are included in the "Investments in affiliates and other assets" line item in our consolidated balance sheets.

We evaluate the Affiliate Notes for impairment and credit losses.

As of April 27, 2024 and April 29, 2023, no provision for losses were recorded as management's analysis concluded the Affiliate Notes were collectable or realizable based on the rights of these instruments and related valuation of each affiliate.

The Affiliate Notes balance combined with the investment in affiliates balance totaled $ 16,054 and $ 20,723 as of April 27, 2024 and April 29, 2023.

We are committed to invest an additional $ 500 in fiscal 2025 in our current affiliates.

Use of estimates :

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities;

amounts of assets and liabilities;

the disclosure of contingent assets and liabilities at the date of the financial statements;

2 unchanged sentences

Due to the inherent uncertainty involved in making estimates, actual results in future periods may differ from those estimates.

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 credit losses, share-based compensation, goodwill impairment, investment in affiliates impairment, value of long-term assets, and extended warranty and product maintenance agreements.

Estimation processes are also used in inventory valuation and for determining the allowance for credit losses, share-based compensation, goodwill 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.

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

1 unchanged sentence

Restricted cash :

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

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

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the totals of the same amounts shown in the consolidated statements of cash flows.

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Cash and cash equivalents $ 81,299 $ 23,982 $ 17,143

3 unchanged sentences

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.

Of our $ 81,299 in cash and cash equivalents balances as of April 27, 2024, $ 67,830 was denominated in United States dollars, of which $ 275 was held by our foreign subsidiaries.

As of April 27, 2024, we had an additional $ 13,469 in cash balances denominated in foreign currencies, of which $ 8,029 was 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.

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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.

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See "Note 6 .

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 a faithful depiction of the value of the performance obligation.

Accounts Receivable, net" for amounts recorded in long-term receivables.

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

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

therefore, for these contracts, we primarily use the cost plus a margin approach to allocate the relative transaction price to identified performance obligations, as it is the best representative of our pricing methods.

Estimated contract revenues and costs include management’s latest estimate using significant judgments with respect to the complexity of the scope and duration of a particular contract, project to-date performance and conditions, knowledge of any stated or expected project dispute or other claim, and market conditions for input costs.

Unanticipated costs that exceed our original estimates may not be recoverable under fixed price contracts.

Changes in costs may occur as a result of several factors including, but not limited to, the cost, shortages or non-availability of materials or labor;

unanticipated technical problems;

required project modifications not initiated by the customer;

suppliers’ or subcontractors’ failure to perform or delay in performing their obligations;

logistics disruptions or delays;

and capacity constraints.

Contingencies for unknown or uncertain cost estimates may be utilized based on the complexity of scope and duration of a project and are relieved when conditions resolve.

We evaluate changes in estimates on a contract-by-contract basis, and estimates are made when the revisions are probable and reasonably estimable.

Provisions of estimated losses on uncompleted contracts are made in

the period when such losses are capable of being estimated.

The cumulative catch-up method is used to account for revisions in estimates.

Revenue is recognized when we satisfy a performance obligation.

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Balances are also impacted by the seasonality in our business.

Significant judgments and estimates are used in our revenue policies.

Significant judgments and estimates are used in applying our revenue policies.

In order to assure appropriate and consistent revenue recognition, we regularly evaluate available project related information and update estimates accordingly.

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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-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.

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 by comparing cumulative costs incurred to the total estimated costs and applying that percentage of completion to the transaction price to recognize revenue.

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, including a reasonable profit margin.

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.

Costs to perform include direct and indirect costs for contract design, production, integration, installation, and assurance-type warranty reserve.

Costs to perform the contract include direct and indirect costs for contract design, production, integration, installation, and assurance-type warranty reserve.

Direct costs include materials and components;

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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.

When not distinct, we combine into one performance

obligation the goods and/or services until the bundle of goods or services is distinct.

For standard display purchases made in large quantities, we account for each piece of equipment separately as a distinct performance obligation from which a customer derives benefit.

2 unchanged sentences

engineering services, project management services, video display(s), control solution(s), installation and integration services, scoring, messaging and audio equipment, training, spare parts, software licenses, assurance-type warranties, and after-sale parts.

Revenue is recognized at a point in time when control passes, or over time as services are performed.

Revenue is recognized at a point in time when control passes, or over time as services are performed or control passes.

When fulfilling limited configuration performance obligations, we are typically able to redirect the video displays or scoring, messaging, or audio equipment to another customer without incurring significant economic losses.

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.

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 :

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Revenues from software license fees on sales, other than uniquely configured type contracts, are recognized when delivery of the product has occurred.

Subscription-based licenses include the right for a customer to use our licenses and receive related support for a specified term, and revenue is recognized pro-rata over the term of the engagement.

Subscription-based licenses include the right for a customer to use our licenses and receive related support for a specified term, and revenue is recognized pro-rata over the term of the agreement.

Shipping and handling costs:

Shipping and handling costs collected from our customers in connection with our sales are recorded as revenue.

Shipping and handling costs collected from our customers in connection with our sales are recorded as a component of net sales.

We record shipping and handling costs as a component of cost of sales at the time the product is shipped.

1 unchanged sentence

We also offer additional types of warranties to include on-site labor, routine maintenance and event support.

In addition, the terms of warranties on some installations can vary from one to 10 years.

The terms of warranties on some installations can vary from one to 10 years.

The specific terms and conditions of these warranties vary primarily depending on the type of product sold.

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Goodwill and Other Intangible Assets :

We account for goodwill and other intangible assets with indefinite lives in accordance with ASC 350 , Goodwill and Other.

We account for goodwill and other intangible assets with indefinite lives in accordance with ASC 350 , Intangibles - Goodwill and Other.

Under these provisions, goodwill is not amortized but is tested for impairment on at least an annual basis.

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These assets and liabilities are analyzed regularly, and we assess the likelihood that deferred tax assets will be recoverable from future taxable income.

When necessary, a valuation allowance is established if it is more likely than not the deferred tax asset will not be realized.

When necessary, a valuation allowance is established if it is more

likely than not the deferred tax asset will not be realized.

We report the net deferred tax asset and liability as a long-term asset or liability.

Net deferred assets or liabilities are calculated by combining them based on their jurisdiction.

In addition, because we operate in multiple income tax jurisdictions both within the United States and internationally, the calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws.

In addition, because we operate in multiple income tax jurisdictions both within the United States and internationally, the calculation of tax liabilities involves judgment in estimating the impact of uncertainties in the application of complex tax laws.

Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our financial condition and operating results.

1 unchanged sentence

Income Taxes" for further information.

Self-Insurance :

Generally, we self-insure a portion of health insurance, product liability claims, and workers' compensation.

Under these plans, liabilities are recognized for claims incurred, including those incurred but not reported.

We use historical expense trend information and claim information or third-party administrators and actuaries who use historical claims experience and various state statutes to assist in the determination of the accrued liability balance.

We self-insure our health insurance benefit and maintain an excess liability insurance policy with outside insurance carriers to minimize the risks related to catastrophic claims in excess $ 250 per occurrence for health insurance and personal injury matters.

Any material change in the aforementioned factors could have an adverse impact on operating results.

Balances are included within accrued expenses on the consolidated balance sheets.

Comprehensive income (loss) :

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.

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

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.

For us, comprehensive income (loss) 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.

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

Net income Shares Per share income

For the year ended April 29, 2023:

Basic earnings per share $ 6,802 45,404 $ 0.15

Dilution associated with stock compensation plans — 117 —

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

For the year ended April 30, 2022:

Basic earnings per share $ 592 45,188 $ 0.01

Dilution associated with stock compensation plans — 138 —

Diluted earnings per share $ 592 45,326 $ 0.01

For the year ended May 1, 2021:

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 27, 2024, April 29, 2023 and April 30, 2022:

April 27, 2024 April 29, 2023 April 30, 2022

Earnings per share - basic

Net income $ 34,621 $ 6,802 $ 592

Weighted average shares outstanding 45,901 45,404 45,188

Basic earnings per share $ 0.75 $ 0.15 $ 0.01

Earnings per share - diluted

Net income $ 34,621 $ 6,802 $ 592

Diluted net income $ 34,621 $ 6,802 $ 592

Weighted average common shares outstanding 45,901 45,404 45,188

Dilution associated with stock compensation plans 642 117 138

Dilution associated with convertible note — — —

Weighted average common shares outstanding, assuming dilution 46,543 45,521 45,326

Diluted earnings per share $ 0.74 $ 0.15 $ 0.01

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.

Options outstanding to purchase 675 , 2,084 and 1,846 shares of common stock with a weighted average exercise price of $ 10.29 , $ 7.47 and $ 9.15 for the fiscal years ended April 27, 2024, April 29, 2023 and April 30, 2022, respectively, were not included in the computation of diluted EPS because the effects would be anti-dilutive.

During the fiscal year ended April 27, 2024, shares of common stock issuable upon conversion of the secured convertible note in the original principal amount of $ 25,000 due on May 11, 2027 (the "Convertible Note") were not included in the computation of diluted EPS, as the effect would be anti-dilutive.

For the fiscal year ended April 27, 2024, 3,915 potential common shares related to the Convertible Note were excluded from the calculation of diluted EPS.

Share-based compensation :

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

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

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

In August 2020, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

ASU 2020-06 simplified the accounting for certain financial instruments with characteristics of liabilities and equity.

ASU 2020-06 (1) simplified the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt:

Debt with Conversion and Other Options , that required entities to account for beneficial conversion features and cash conversion features in equity separately from the host convertible debt or preferred stock;

(2) revised the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity by removing certain criteria required for equity classification;

and (3) revised the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted EPS for convertible instruments by using the if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

For SEC filers, excluding smaller reporting companies, ASU 2020-06 was effective for

fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.

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

For all other entities, ASU 2020-06 was effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

In the first quarter of fiscal 2024, we adopted ASU 2020-06 with no material impact to the consolidated financial statements.

On May 11, 2023, we borrowed $ 25,000 in aggregate principal amount evidenced by the secured Convertible Note due May 11, 2027.

Financing Agreements" for further information on the Convertible Note.

Accounting Standards Not Yet Adopted

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

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures ("ASU 2023-07").

ASU 2023-07 requires enhanced disclosures about significant segment expenses.

The Company is required to adopt ASU 2023-07 for its annual reporting in fiscal year 2025 and for interim period reporting beginning in the first quarter of fiscal year 2026 on a retrospective basis.

Early adoption is permitted.

We are currently evaluating the impact of ASU 2023-07 on our segment disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures ("ASU 2023-09").

ASU 2023-09 requires the disclosure of specified additional information in its income tax rate reconciliation and to provide additional information for reconciling items that meet a quantitative threshold.

ASU 2023-09 will also require disaggregation of income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions.

The Company is required to adopt this guidance for its annual reporting in fiscal year 2026 on a prospective basis.

Early adoption and retroactive application are permitted.

We are currently evaluating the impact of ASU 2023-09 on our income tax disclosures.

Revenue Recognition

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The changes in our contract assets and contract liabilities from April 29, 2023 to April 27, 2024 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.

We had no significant impairments of contract assets for fiscal 2024, and 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.

Earned and unearned revenues for these contracts are included in the "Contract assets" and "Contract liabilities".

Earned and unearned revenues for these contracts are included in the "Contract assets" and "Contract liabilities" line items of our consolidated balance sheets.

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

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As of April 27, 2024, the aggregate amount of the transaction price allocated to the remaining performance obligations was $ 382,939 .

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

Remaining performance obligations related to product and service agreements as of April 27, 2024 were $ 316,905 and $ 66,034 , respectively.

We expect approximately $ 323,421 of our remaining performance obligations to be recognized over the next 12 months, with the remainder recognized thereafter.

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Commercial, Live Events, High School Park and Recreation, Transportation, and International.

These segments are based on the customer type or geography and are the same as our business units.

Separate financial information is available and regularly evaluated by our chief operating decision-maker (CODM), who is our president and chief executive officer, in making resource allocation decisions for our segments.

Our CODM evaluates segment performance according to the GAAP measure of gross profit.

These segments are based on the customer type or geography and are the same as our operating segments/business units.

Our chief operating decision-maker (CODM), who is our president and chief executive officer, regularly reviews the consolidated financial results in their entirety and the operating segment financials results to the GAAP measure of gross profit.

The CODM has ultimate responsibility for enterprise decisions and making resource allocation decisions for our company and our segments.

Management of each operating segment has the responsibility for operating decisions, allocating resources, and assessing performance within their segment.

• 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).

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In our International business unit, we focus on product lines related to integrated scoring and video display systems for sports and commercial applications, OOH advertising products, architectural lighting, and transportation related products for sale outside of the United States and Canada to the related type of company, including sports and commercial business facilities, OOH companies, and governmental transportation agencies.

Assets are not allocated to the segments.

Depreciation and amortization are allocated to each segment based on various financial measures;

however, some depreciation and amortization are corporate in nature and remain unallocated.

Our segments follow the same accounting policies as those described in "Note 1.

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Shared manufacturing, buildings and utilities, and procurement costs are allocated based on payroll dollars, square footage and various other financial measures in the segment analysis.

Assets are not allocated to the segments.

Depreciation and amortization are allocated to each segment based on various financial measures;

however, some depreciation and amortization are corporate in nature and remain unallocated

We do not maintain information on sales by products;

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Commercial $ 161,626 $ 170,590 $ 154,211

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Interest income (expense), net ( 3,418 ) ( 920 ) 171

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

Change in fair value of convertible note ( 16,550 ) — —

Other expense and debt issuance costs write-off, net ( 13,096 ) ( 7,211 ) ( 3,109 )

Income before income taxes $ 54,051 $ 13,257 $ 1,108

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

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

April 27, 2024 April 29, 2023 April 30, 2022

United States $ 744,419 $ 661,312 $ 513,740

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The changes in the carrying amount of goodwill related to each reportable segment for the fiscal year ended April 27, 2024 were as follows:

Live Events Commercial Transportation International Total

Commercial Transportation Total

Balance as of April 29, 2023:

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$ 3,188 $ 38 $ 3,226

We perform an analysis of goodwill on an annual basis and test for impairment more frequently if events or changes in circumstances indicate that an asset might be impaired.

We perform an analysis of goodwill on an annual basis, and it is tested for impairment more frequently if events or changes in circumstances indicate that an asset might be impaired.

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 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 performed our annual impairment test on October 29, 2023 and conclude d no goodwill impairment existed for fiscal year 2024 .

The annual impairment test for fiscal year 2023 concluded that the carrying value of the Live Events and International reporting units exceeded their respective fair values and consequently recorded an a $ 4,576 impairment charge.

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 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.

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 year 2022 concluded no goodwill impairment existed.

Accumulated impairments to goodwill as of April 27, 2024 was $ 4,576 .

Intangible Assets

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$ 43,028 $ 36,005

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

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Interest expense:

Interest expense $ ( 3,397 ) $ ( 1,127 ) $ ( 49 )

Debt issuance amortization expense ( 1,551 ) — —

Total interest expense ( 4,948 ) ( 1,127 ) ( 49 )

Interest income:

Interest income 1,530 207 220

Interest (expense) income, net $ ( 3,418 ) $ ( 920 ) $ 171

Other expense and debt issuance costs write-off, net consisted of the following:

April 27, 2024 April 29, 2023 April 30, 2022

Foreign currency transaction gains (losses) $ 284 $ 479 $ ( 227 )

Equity in losses of affiliates ( 3,764 ) ( 3,332 ) ( 2,970 )

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

Impairment of equity method investees ( 6,359 ) ( 4,473 ) —

Debt issuance costs write off ( 3,353 ) — —

Other 96 115 88

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

The present value of these contracts is recorded as a receivable as the revenue is recognized in accordance with GAAP, and profit is recognized to the

extent the present value is in excess of cost.

The present value of these contracts is recorded as a receivable as the revenue is recognized in accordance with GAAP, and profit is recognized to the extent the present value is in excess of cost.

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 $ 859 and $ 1,473 as of April 27, 2024 and April 29, 2023, respectively.

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

Contract receivables bearing annual interest rates of 8.0 to 9.0 percent are due in varying annual installments through February 2026.

The face value of long-term receivables was $ 863 and $ 1,512 as of April 27, 2024 and April 29, 2023, respectively.

Financing Agreements

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.

If we are unable to meet the terms of the arrangement, the bank would subrogate its loss by drawing on the secured cash deposit.

Long-term debt consists of the following:

2024 April 29,

ABL credit facility/prior line of credit $ — $ 17,750

Mortgage 13,875 —

Convertible note 25,000 —

Long-term debt, gross 38,875 17,750

Debt issuance costs, net ( 761 ) —

Change in fair value of convertible note 16,550 —

Current portion ( 1,500 ) —

Long-term debt, net $ 53,164 $ 17,750

Credit Agreements

On May 11, 2023, we closed on a $ 75,000 senior credit facility (the "Credit Facility").

The Credit Facility consists of a $ 60,000 asset-based revolving credit facility (the "ABL") maturing on May 11.

2026, which is secured by first priority lien on the Company's assets and is subject to certain factors that can impact our borrowing capacity, and a $ 15,000 delayed draw loan (the "Delayed Draw Loan") secured by a first priority mortgage on our Brookings, South Dakota real estate (the "Mortgage").

The ABL and Delayed Draw Loan are evidenced by a Credit Agreement dated as of May 11, 2023 (the "Credit Agreement") between the Company and JPMorgan Chase Bank, N.A., as the lender.

On May 11, 2023, the Company paid all amounts outstanding on the prior credit agreement, and this prior credit agreement was terminated as of that date.

No gain or loss was recognized upon termination, and the Company incurred no early termination penalties in connection with such termination.

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

As of April 27, 2024, our total borrowing capacity was $ 39,507 there were no borrowings outstanding, and there was $ 5,342 used to secure letters of credit outstanding leaving $ 34,165 available to borrow.

We made no borrowings on this ABL during fiscal 2024.

The interest rate on the ABL is set on a sliding scale based on the trailing 12-month fixed charge coverage and ranges from 2.5 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 Pledge and Security Agreement dated as of May 11, 2023 by and among the Company, Daktronics Installation, Inc.

and JPMorgan Chase Bank, N.A.

The $ 15,000 Delayed Draw Loan was funded on July 7, 2023 and is secured by the Mortgage on the Company's Brookings, South Dakota real estate.

It amortizes over 10 years and has monthly payments of $ 125 .

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

The interest rate on the Delayed Draw Loan is set on a sliding scale based on the trailing 12-month fixed charge coverage ratio and ranges between 1.0 and 2.0 percent over the Commercial Bank Floating Rate (CBFR).

The interest rate as of April 27, 2024 for Delayed Draw Loan was 9.5 percent.

Convertible Note

On May 11, 2023, we borrowed $ 25,000 in aggregate principal amount evidenced by the secured Convertible Note due May 11, 2027.

The Convertible Note holder (the "Holder") has 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 Holder of the Convertible Note.

Conversion Features

• The Convertible Note allows the Holder and any of the Holder’s permitted transferees, donees, pledgees, assignees or successors-in-interest (collectively, the “Selling Shareholders”) to convert all or any portion of the principal amount of the Convertible Note, together with any accrued and unpaid interest and any other unpaid amounts, including late charges, if any (together, the “Conversion Amount”), into shares of the Company’s common stock at an initial conversion price of $ 6.31 per share, subject to adjustment in accordance with the terms of the Convertible Note (the “Conversion Price”).

• The Company also has a forced conversion right, which is exercisable on the occurrence of certain conditions set forth in the Convertible Note, pursuant to which it can cause all or any portion of the outstanding and unpaid Conversion Amount to be converted into shares of common stock at the Conversion Price.

Additionally, if the Company fails other than by reason of a failure by the Holder to comply with its obligations, the Holder is permitted to cash payments from the Company until such conversion failure is cured.

Redemption Features

• If the Company were to have an "Event of Default", as defined by the Convertible Note, then the Holder may require the Company to redeem all or any portion of the Convertible Note.

• If the Company has a "Change of Control", as defined by the Convertible Note, then the Holder is entitled to payment of the outstanding amount of the Convertible Note at the "Change in Control Redemption Price," as defined in the Convertible Note.

Interest accruing under the Convertible Note is payable, at the option of the Company, in either (i) cash or (ii) a combination of cash interest and capitalized interest;

provided, however, that at least fifty percent (50%) of the interest paid on each interest date must be paid as cash interest.

The Convertible Note accrues interest (or is payable) quarterly 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 paid in kind.

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

The annual rate of 9.0 percent was used to calculate the interest accrued as of April 27, 2024, as interest will be paid in cash.

We elected the fair value option to account for the Convertible Note as described in "Note 14.

Fair Value Measurement".

The financial liability was initially measured at its issue-date fair value and is subsequently remeasured at fair value on a recurring basis at each reporting period date.

We have elected to present the fair value and the accrued interest component separately in the consolidated statements of operations.

Therefore, interest will be recognized and accrued separately in interest expense, with changes in fair value of the Convertible Note presented in the "Change in fair value of convertible note" line item in our consolidated statements of operations.

The changes in fair value of the Convertible Note during fiscal 2024 was as follows:

Liability Component

(in thousands)

Balance as of May 11, 2023 $ 25,000

Redemption of convertible promissory note —

Fair value change recognized 16,550

Balance as of April 27, 2024 $ 41,550

The estimated fair value of the Convertible Note upon its issuance date of May 11, 2023 was its face value because it was negotiated at arms length and as of April 27, 2024 was computed using a binomial lattice model which incorporates significant inputs that are not observable in the market and thus represents a Level 3 measurement.

We determined the fair value by using the following key assumptions in the binomial lattice model:

Risk-Free Rate (Annual) 4.78 %

Implied Yield 16.28 %

Volatility (Annual) 40.00 %

Dividend Yield (Annual) — %

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

As of April 27, 2024, we were in compliance with our financial covenants under the Credit Agreement and the Convertible Note.

Debt Issuance Costs

Debt issuance costs incurred and capitalized are amortized on a straight-line basis over the term of the associated debt agreement.

If early principal payments or conversions occur, a proportional amount of unamortized debt issuance costs is expensed.

As part of these financings, we capitalized $ 8,195 in debt issuance costs.

During the fiscal year ended April 27, 2024, due to the Convertible Note being accounted for at fair value, we expensed $ 3,353 of the related debt issuance costs which is included in the "Other expense and debt issuance costs write-off, net" line item in our consolidated statements of operations.

During the fiscal year ended April 27, 2024, we amortized $ 1,551 of debt issuance costs.

The remaining debt issuance costs of $ 3,291 are being amortized over the three-year term of the Credit Facility.

Future Maturities

Aggregate contractual maturities of debt in future fiscal years are as follows:

Fiscal years ending Amount

2029 and beyond —

Total debt $ 38,875

Share Repurchase Program

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Our lease for our facility in Sioux Falls, South Dakota has a purchase option.

We do not have any financing leases.

We have no material financing leases.

We determine if an arrangement is a lease at the inception of the lease.

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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.

We have lease agreements with lease and non-lease components, and we have elected to account for all asset classes as a single lease component.

We have lease agreements with lease and non-lease components, and we have elected to account for all asset classes as a single lease

Our operating leases also typically require payment of real estate taxes, insurance, and common area maintenance.

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

April 29, 2023 April 30, 2022

April 27, 2024 April 29, 2023 April 30, 2022

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

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Total lease liabilities $ 4,042

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.

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 sheets, respectively.

Shareholders' Equity and Share-Based Compensation

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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.

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.

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Stock options issued to employees under the 2015 Plan and 2020 Plan generally have a 10-year life, an exercise price equal to the closing market value on the grant date and a five-year annual vesting period.

Stock options granted to independent directors under these plans have a seven-year life and an exercise price equal to the closing market value on the date of grant.

Stock options granted to independent directors vest in one year , provided that the directors remain on the Board.

The restricted stock granted to independent directors vests in one year , provided that the directors remain on the Board.

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A summary of non-vested restricted stock and restricted stock units for fiscal years 2024, 2023, and 2022 is as follows:

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

April 27, 2024 April 29, 2023 April 30, 2022

Number of Nonvested Shares Weighted Average Grant Date

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Granted 37 9.85 — —

Canceled or forfeited ( 393 ) 9.08 — —

Cancelled or forfeited ( 228 ) 10.26 — —

Exercised ( 219 ) 5.94 — 708

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Fair value of options granted $ 4.92 $ 1.34 $ 2.43

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Stock options $ 420 $ 453 $ 458

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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 2024, 2023, and 2022 is as follows:

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

April 27, 2024 April 29, 2023 April 30, 2022

Cost of sales $ 452 $ 441 $ 434

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We made matching cash contributions equal to 50 percent of the employee's qualifying contribution up to six percent of such employee's compensation.

however, we eliminated our matching contribution as one of our cost savings initiatives for fiscal 2021.

These benefits were reinstated for fiscal 2022.

Employees are eligible to participate in the 401(k) savings plan the first day of the calendar month following completion of 30 days of continuous service if they have attained the age of 21 .

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

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

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Domestic $ 46,763 $ 10,125 $ ( 2,696 )

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Income tax expense (benefit) consisted of the following:

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

April 27, 2024 April 29, 2023 April 30, 2022

Federal $ 21,174 $ 6,321 $ 644

5 unchanged sentences

$ 19,430 $ 6,455 $ 516

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Computed income tax expense at federal statutory rates $ 11,351 $ 2,784 $ 233

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

State taxes, net of federal benefit 3,771 731 139

Change in fair value on convertible debt 3,476 — —

Change in valuation allowances 2,076 2,078 609

Research and development tax credit ( 1,203 ) ( 684 ) ( 382 )

Foreign-Derived Intangible Income (FDII) ( 322 ) ( 128 ) ( 5 )

Meals and entertainment 282 149 67

Stock compensation ( 178 ) 262 150

Other, net 114 288 ( 179 )

Change in valuation allowances 2,078 609 402

Effect of foreign tax rates different than statutory 79 417 ( 43 )

Change in uncertain tax positions ( 35 ) ( 86 ) ( 71 )

GILTI 19 6 ( 14 )

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

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

Stock compensation 262 150 355

Meals and entertainment 149 67 49

Goodwill Impairment — 551 —

State taxes, net of federal benefit 731 139 494

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

$ 19,430 $ 6,455 $ 516

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.

Our effective tax rate for fiscal 2024 was 35.9 percent.

The effective income tax rate for fiscal 2024 was primarily impacted due to the fair value adjustment to the Convertible Note that is not deductible for tax purposes.

Additional other items impacting the rate were valuation allowances on equity investments, state taxes, as well as prior year provision to return adjustments reduced in part by tax benefits from permanent tax credits.

Our effective tax for fiscal 2023 was 48.7 percent.

During fiscal 2023, our effective income tax rate 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.

Our effective tax for fiscal 2022 was 46.6 percent.

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.

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

48 unchanged sentences

Accrued interest and penalties are included in the related tax liability line item in our consolidated balance sheets of $ 21 and $ 28 as of April 27, 2024 and April 29, 2023, respectively.

As of April 27, 2024, we had total valuation allowances against deferred tax assets of $ 7,197 , as compared to $ 4,900 as of April 29, 2023, representing an increase of $ 2,297 during fiscal 2024.

The increase in valuation allowance as well as the majority of the total balance is related to the outside basis difference and impairments in equity method investments.

A small portion of the total valuation allowances are related to foreign net operating loss carryfowards as detailed below.

We consider all positive and negative evidence available in determining the potential of realizing deferred tax assets including its past operating results and the forecast of future earnings, category of income, future taxable income, and prudent and feasible tax planning strategies.

If sufficient evidence of our ability to generate applicable 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.

As of April 27, 2024, we had foreign net operating loss (“NOL”) carryforwards of approximately $ 5,136 primarily related to our operations in Belgium and Ireland, which have indefinite lives.

1 unchanged sentence

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:

2 unchanged sentences

Certain subsidiaries are also subject to income tax in several foreign jurisdictions which have open tax years varying by jurisdiction beginning in fiscal 2013.

In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense in our consolidated statement of operations.

In the event of any future tax assessments, we have elected to record the income taxes and any related interest and penalties as income tax expense in our consolidated statements of operations.

As of April 27, 2024, we had no deferred tax liability recognized relating to our investment in foreign subsidiaries where the earnings have been indefinitely reinvested.

3 unchanged sentences

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

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

April 27, 2024 April 29, 2023 April 30, 2022

(Increase) decrease:

16 unchanged sentences

Supplemental disclosures of cash flow information consisted of the following:

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

April 27, 2024 April 29, 2023 April 30, 2022

Cash payments for:

1 unchanged sentence

Income taxes, net of refunds 26,452 7,489 1,951

Non-cash impairment charges consisted of the following:

April 27, 2024 April 29, 2023 April 30, 2022

Non-cash impairment charges:

Equity investees impairment $ 6,359 $ 4,473 $ —

Goodwill impairment — 4,576 —

Total non-cash impairment charges $ 6,359 $ 9,049 $ —

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

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

April 27, 2024 April 29, 2023 April 30, 2022

Demonstration equipment transferred to inventory $ — $ — $ 53

4 unchanged sentences

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:

13 unchanged sentences

Restricted cash 379 — — 379

Available-for-sale securities:

US Government Sponsored entities — 534 — 534

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

Convertible note — — ( 41,550 ) ( 41,550 )

$ 81,678 $ — $ ( 41,550 ) $ 40,128

3 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 )

1 unchanged sentence

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 during fiscal year 2023.

During fiscal 2024, we added the fair value of the Convertible Note.

There have been no other changes in the valuation techniques used by us to value our financial instruments since the end of fiscal 2023.

Cash and cash equivalents :

6 unchanged sentences

The carrying amount approximates fair value.

Convertible Note :

We elected to value the Convertible Note at fair value in accordance with ASC 825-10-15-4(a) because of the embedded derivatives contained in the Convertible Note.

The fair value of the Convertible Note was estimated using a binomial lattice model.

Binomial lattice allows for the examination of the value to a holder and understanding the investment decision that would occur at each node.

The fair value of the Convertible Note entered into during the first quarter of fiscal 2024 was classified as Level 3 because certain inputs for the valuation were not readily determinable or observable.

Derivatives – currency forward contracts :

6 unchanged sentences

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.

Nature of Business and Summary of Significant Accounting Policies" for further details of impairment loss of $ 6,359 for our investments in Miortech and XDC.

Other measurements using fair value :

4 unchanged sentences

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 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:

As of April 27, 2024 and April 29, 2023, 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 and debt issuance costs write-off, net" line item in the consolidated statements of operations.

There were no foreign currency agreements outstanding as of April 27, 2024.

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

April 27, 2024 April 29, 2023

1 unchanged sentence

Foreign Currency Exchange Forward Contracts:

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

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.

As of April 27, 2024, there was an no asset or liability, and, as of April 29, 2023, there was an asset and liability of $ 0 and $ 579 , respectively, representing the fair value of foreign currency exchange forward contracts, which were determined using level 2 inputs from a third-party bank.

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.

22 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.

Thereafter $ 100

Related Party

The Company's Board of Directors has adopted a written policy and procedures with respect to related party transactions, which the Audit Committee oversees.

Under the policy, a "related party transaction" is generally defined as a transaction, arrangement, or relationship in which the Company was, is or will be a participant;

the amount involved exceeds $ 120 ;

and in which any "related person" had, has or will have a direct or indirect material interest.

The policy generally defines a "related person" as a Director, executive officer or beneficial owner of more than five percent of any class of our voting securities and any immediate family member of any of the foregoing persons.

The Audit Committee reviews and, if appropriate, approves related party transactions, including certain transactions which are deemed to be pre-approved under the policy.

On an annual basis, the Audit Committee reviews any previously approved related party transaction that is ongoing.

As reported in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the section entitled “Liquidity and Capital Resources” of our Annual Report on Form 10-K for the fiscal year ended April 29, 2023, effective on May 11, 2023, the Company entered into the Securities Purchase Agreement with Alta Fox Opportunities Fund, LP, as the holder (the "Holder") of the Convertible Note.

Under the Securities Purchase Agreement, the Company sold and issued to the Holder the Convertible Note in exchange for the payment by the Holder to the Company of $ 25,000 .

As of May 11, 2023, and based on Amendment No.

2 to the Schedule 13D filed by the Holder and its affiliates named therein on May 15, 2023 with the SEC, the Holder and its affiliates beneficially owned 4,768 shares of common stock of the Company, representing 9.99 percent of the Company’s common stock, causing the Holder to be a “related party” of the Company under the Company’s written policy and procedures and the applicable definitions under the Securities Act of 1933.

The Securities Purchase Agreement, the Convertible Note, the Pledge and Security Agreement dated as of May 11, 2023 by and between the Holder and the Company, and the Registration Rights Agreement were approved in advance of their execution by the Company’s Strategy and Financing Review Committee, the members of which include all members of the Company’s Audit Committee.

Since May 11, 2023, the largest aggregate amount outstanding under the Convertible Note was $ 25,563 , consisting of $ 25,000 of principal and $ 563 of interest.

During fiscal 2024, we have made interest payments of $ 1,688 under the Convertible Note.

The description of the Securities Purchase Agreement, the Convertible Note, the Pledge and Security Agreement, and the Registration Rights Agreement dated as of May 11, 2023 by and between the Holder and the Company and their respective terms set forth in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the section entitled “Liquidity and Capital Resources” of the Company's Annual Report on Form 10-K for the fiscal year ended April 29, 2023 is hereby incorporated by reference into this Report.

In addition, the Company is a party to the Standstill and Voting Agreement dated as of March 19, 2023 with Alta Fox Management, LLC and Connor Haley (the “Standstill Agreement”), who are affiliates of the Holder.

The Standstill Agreement is filed as Exhibit 10.13 to this Form 10-K.

As described in Amendment No.

3 (“Amendment No.

3”) to the Schedule 13D filed with the SEC by the Holder and its affiliates named therein on June 9, 2023, and based on other information provided by the Holder, the following persons may be deemed to be beneficial owners of the shares of the Company’s common stock beneficially owned by the Holder:

Alta Fox GenPar, LP, as the general partner of Alta Fox Opportunities Fund, LP;

Alta Fox Equity, LLC, as the general partner of Alta Fox GenPar, LP;

Alta Fox Capital Management, LLC, as the investment manager of Alta Fox Opportunities Fund, LP;

Connor Haley, as the sole owner, member and manager of each of Alta Fox Capital Management, LLC and Alta Fox Equity LLC.

On June 7, 2023, the Company received from the Holder a written notice of a decrease in the “Percentage Cap” (as such term is defined in the Convertible Note) from 9.99 percent to 4.99 percent, which decrease became effective immediately upon the Company’s receipt of such written notice.

The Percentage Cap generally represents the maximum percentage of shares of the Company’s common stock the Holder may own.

In Amendment No.

3, the Holder and its affiliates identified in Amendment No.

3 owned 2,293 shares of common stock on June 9, 2023, representing 4.99 percent of the common stock of the Company, meaning the Holder and its affiliates are no longer “related parties” of the Company under the Company’s written policy and procedures and the applicable definitions under the Securities Act of 1933.

During fiscal 2024, the Company and the South Dakota Board of Regents entered into contracts for video display systems for Dakota State University.

The amount of the contracts was $ 1,178 A member of the Company's Board of Directors is the President of Dakota State University.

Nature of Business and Summary of Significant Accounting Policies" of the Notes to our Consolidated Financial Statements included in this Form 10-K for further details of related party transactions with our investments in the Affiliate Notes issued by our affiliates.

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