What changed in this filing

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Item 1. Financial Statements

2021-08-11 compared with 2021-05-13 · 94 added, 72 removed, 245 unchanged (40% of the section changed)

2 unchanged sentences

C ONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2021

June 30, 2021

December 31, 2020

36 unchanged sentences

TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDE NSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Six Months Ended

(In thousands, except per share data)

5 unchanged sentences

Operating loss

Interest and other (expense) income:

Interest and other expense:

Interest, net

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TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLI DATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

CONDE NSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

21 unchanged sentences

Revolving credit line payments

Long-term debt borrowings

Proceeds from stock option exercises

1 unchanged sentence

Payment of bank financing costs

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

6 unchanged sentences

TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

CONDENSED CONSO LIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended

Six Months Ended

(In thousands)

7 unchanged sentences

Issuance of shares from exercise of stock options

Relinquishment of stock awards and deferred stock units to pay for withholding taxes

Relinquishment of stock awards and restricted stock units to pay for withholding taxes

Balance, end of period

4 unchanged sentences

Balance, beginning and end of period

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss), net of tax

Balance, beginning of period

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The December 31, 2020 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by U.S.

These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020.

These interim financial statements should be read in conjunction with the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2020.

The financial position and results of operations of our U.K.

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Transaction gains and losses are included in “Other, net” in the Condensed Consolidated Statements of Operations.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.

Impact of the COVID-19 Pandemic

In the first quarter of 2020, the COVID-19 pandemic and the resulting social distancing measures, including closures and restricted openings of restaurants and casinos implemented by federal, state and local authorities, negatively impacted customer demand and disrupted portions of our supply chain, including delayed product shipments from our two manufacturers located in China and Thailand.

While we began to experience a modest recovery starting in the second half of 2020 into 2021 and expect this recovery to continue during the remainder of 2021, the exact timing and pace of recovery is unknown given uncertainty surrounding responsive measures to potential future resurgences of the virus and the significant disruption that our customers have already experienced and may continue to experience.

In light of this uncertainty, we implemented a number of cost saving measures during 2020 to help mitigate the impact on our financial position and operations and continued to limit discretionary spending during the first quarter of 2021.

While we began to experience a modest recovery starting in the second half of 2020 into 2021 and expect this recovery to continue during the remainder of 2021, the exact timing and pace of recovery is unknown given uncertainty surrounding responsive measures to the spread of virus variants or any potential future resurgences of the virus and the significant disruption that our customers have already experienced and may continue to experience.

We are monitoring indicators of demand recovery, including our sales pipeline, customer orders and product shipments to ascertain an estimate of the ultimate impact of the COVID-19 pandemic on our business;

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Balance Sheet, Cash Flow and Liquidity.

In addition to the expense management actions implemented during 2020 , we have taken the following actions to increase liquidity and strengthen our financial position.

In addition to the expense management actions implemented during 2020 , we took the following actions to increase liquidity and strengthen our financial position:

Public Offering – On October 16, 2020, the Company raised net proceeds of $ 8.7 million, after deducting underwriting discounts, commissions and offering expenses, through an underwritten public offering (the “Offering”) and sold an aggregate of 1,380,000 shares of common stock.

PPP Loan – On May 1, 2020, the Company was granted a $ 2.2 million loan (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (“SBA”) established under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act), which enabled us to return employees we furloughed earlier in 2020 to full time employment and to restore certain pay cuts until the PPP Loan proceeds were exhausted.

PPP Loan – On May 1, 2020, the Company was granted a $ 2.2 million loan (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (“SBA”) established under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act"), which enabled us to return employees we furloughed earlier in 2020 to full time employment and to restore employees to full pay following certain pay cuts.

On July 8, 2021, we received notice that the PPP Loan had been forgiven as of July 1, 2021.

See Note 6 for further details regarding the PPP Loan.

New Credit Facility – On March 13, 2020, we entered into a new credit facility with Siena Lending Group LLC that provides a revolving credit line of up to $ 10.0 million, subject to a borrowing base.

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We may further modify or supplement the expense management measures we have implemented and the actions we have taken to increase liquidity as the timing and extent of customer demand recovery develops.

After reviewing whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations over the 12 months following the date on which the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q (this “Report”) were issued, including consideration of the actions taken to manage expenses and liquidity, we believe that our net cash to be provided by operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility will provide sufficient liquidity to fund our current obligations, capital spending, and working capital requirements and to comply with the financial covenants of our credit facility over at least 12 months following the date that the Condensed Consolidated Financial Statements were issued.

After reviewing whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations over the 12 months following the date on which the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q were issued, including consideration of the actions taken to manage expenses and liquidity, we believe that our net cash to be provided by operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility will provide sufficient liquidity to fund our current obligations, capital spending, and working capital requirements and to comply with the financial covenants of our credit facility over at least 12 months following the date that the Condensed Consolidated Financial Statements were issued.

Use of Assumptions and Estimates

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products, respectively, as their businesses gradually return to pre-pandemic levels of capacity and operations.

Based on these assumptions, we anticipate that sales in casino and gaming and food service technology will continue to be negatively through at least 2021.

Based on these assumptions, we anticipate that sales in casino and gaming and food service technology will continue to be negatively impacted through at least 2021.

We have performed a sensitivity analysis on these assumptions to forecast the potential impact of a slower-than-anticipated recovery and believe that we are positioned to withstand the impact of lower-than-anticipated sales and that we will be able to take additional financial and operational actions to cut costs and/or increase liquidity, if necessary.

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Disaggregation of revenue

The following table disaggregates our revenue by market-type, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

The following tables disaggregates our revenue by market-type, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Sales and usage-based taxes are excluded from revenues.

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Total net sales

Six Months Ended

(In thousands)

United States

International

United States

International

Food service technology

POS automation

Casino and gaming

TransAct Services Group

Total net sales

Contract balances

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Customer prepayments are reported as “Accrued liabilities” in current liabilities in the Condensed Consolidated Balance Sheets and represent customer payments made in advance of performance obligations in instances where credit has not been extended and are recognized as revenue when the performance obligation is complete.

Deferred revenue is reported separately in current liabilities and non-current liabilities and consists of our extended warranty contracts, technical support for our food service technology terminals, EPICENTRAL™ maintenance contracts and testing service contracts and prepaid software subscriptions for our BOHA!

Deferred revenue is reported separately in current liabilities and non-current liabilities and consists of our extended warranty contracts, technical support for our food service technology terminals, EPICENTRAL® maintenance contracts and prepaid software subscriptions for our BOHA!

software applications, and is recognized as revenue as (or when) we perform under the contract.

For the three months ended March 31, 2021, we recognized revenue of $ 0.4 million related to our contract assets at December 31, 2020 .

For the six months ended June 30, 2021, we recognized revenue of $ 0.5 million related to our contract liabilities at December 31, 2020 .

Total net contract (liabilities) assets consisted of the following:

March 31, 2021

June 30, 2021

December 31, 2020

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Remaining performance obligations represent the transaction price of firm orders for which a good or service has not been delivered to our customer.

As of March 31, 2021, the aggregate amount of transaction prices allocated to remaining performance obligations was $ 3.3 million.

The Company expects to recognize revenue on $ 2.7 million of its remaining performance obligations within the next 12 months following March 31, 2021, $ 0.4 million within the next 24 months and the balance of these remaining performance obligations recognized within the next 36 months.

As of June 30, 2021, the aggregate amount of transaction prices allocated to remaining performance obligations was $ 5.0 million.

The Company expects to recognize revenue on $ 4.4 million of its remaining performance obligations within the next 12 months following June 30, 2021, $ 0.4 million within the next 24 months and the balance of these remaining performance obligations recognized within the next 36 months.

Note receivable

The note receivable balance relates to loans given to a third-party software developer for whom we license our food service technology software with an interest rate of 4.5 % , which was originally due in April 2020.

The note receivable balance relates to loans given to a third-party software developer from whom we license our food service technology software with an interest rate of 4.5 % , which were originally due in April 2020.

In March 2021, we received payment in the amount of $ 1.6 million representing the remaining principal balance and interest due from the third-party.

Prior to the payment being received, notes receivable were stated at unpaid principal balances and interest income was recognized on the accrual method.

For the three months ended March 31, 2021 and 2020, we recorded $ 17 thousand and $ 13 thousand of interest income, respectively.

Interest income for the three months ended June 30, 2020 was $ 18 thousand.

There was no interest income for the three months ended June 30, 2021.

For the six months ended June 30, 2021 and 2020, we recorded $ 17 thousand and $ 31 thousand of interest income, respectively.

The components of inventories were:

March 31, 2021

June 30, 2021

December 31, 2020

3 unchanged sentences

Accrued product warranty liability

We generally provide warranties on our products for up to 24 months and record the estimated cost of such product warranties at the time the sale is recorded.

We generally provide hardware warranties on our products for up to 24 months and record the estimated cost of such product warranties at the time the sale is recorded.

Estimated warranty costs are based upon actual past experience of product repairs and the related estimated cost of labor and material to make the necessary repairs.

The following table summarizes the activity recorded in the accrued product warranty liability during the three months ended March 31, 2021 and 2020:

Three Months Ended

The following table summarizes the activity recorded in the accrued product warranty liability during the six months ended June 30, 2021 and 2020:

Six Months Ended

(In thousands)

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Balance, end of period

As of March 31, 2021, $ 98 thousand of the accrued product warranty liability was classified as current in “Accrued liabilities” in the Condensed Consolidated Balance Sheets and the remaining $ 18 thousand was classified as non-current in “Other liabilities”.

As of June 30, 2021, $ 87 thousand of the accrued product warranty liability was classified as current in “Accrued liabilities” in the Condensed Consolidated Balance Sheets and the remaining $ 27 thousand was classified as non-current in “Other liabilities”.

On March 13, 2020, we entered into a new credit facility (the “Siena Credit Facility”) with Siena Lending Group LLC.

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The total deferred financing costs related to expenses incurred to complete the Siena Credit Facility was $ 245 thousand, which were reported as “Other current assets” in current assets and “Other assets” in non-current assets in the Condensed Consolidated Balance Sheets.

We also pay a fee of 0.50 % on unused borrowings under the facility.

Borrowings under the facility are secured by a lien on substantially all the assets of the Company.

The Siena Credit Facility imposes a minimum EBITDA financial covenant on the Company and borrowings are subject to a borrowing base based on (i) 85 % of eligible accounts receivable plus the lesser of (a) $ 5.0 million and (b) 50 % of eligible raw material and 60 % of finished goods inventory.

As of March 31, 2021, we had $ 3.6 million of borrowing capacity available under the Siena Credit Facility.

The agreement governing the Siena Credit Facility provides for the parties to update the financial covenant for periods ending after March 31, 2021 based on updated financial projections of the Company.

The Company does not anticipate a material change in the financial covenant, nor does it anticipate any other material change in the terms or covenants pertaining to its current credit facilities.

We were in compliance with all financial covenants of the Siena Credit Facility at March 31, 2021.

We also pay a fee of 0.50 % on unused borrowings under the Siena Credit Facility.

Borrowings under the Siena Credit Facility are secured by a lien on substantially all the assets of the Company.

The Siena Credit Facility imposes a financial covenant on the Company and borrowings are subject to a borrowing base based on (i) 85 % of eligible accounts receivable plus the lesser of (a) $ 5.0 million and (b) 50 % of eligible raw material and 60 % of finished goods inventory.

The three month period from April 1, 2020 to June 30, 2020 was the first period we were subject to the financial covenant which required the Company to maintain a minimum EBITDA and continued through the 12-month period from April 1, 2020 to March 31, 2021.

On July 21, 2021, the Company entered into an amendment (the “Credit Facility Amendment”) to the Siena Credit Facility.

The Credit Facility Amendment changed the financial covenant under the Siena Credit Facility from a minimum EBITDA covenant to an excess availability covenant requiring that the Company maintain excess availability of at least $750,000 under the Siena Credit Facility, tested as of the end of each calendar month, beginning with the calendar month ending July 31, 2021.

As of June 30, 2021, we had $ 4.7 million of borrowing capacity available under the Siena Credit Facility.

On May 1, 2020 (the “Loan Date”), the Company was granted the PPP Loan from Berkshire Bank in the aggregate amount of $ 2.2 million, pursuant to the PPP.

The PPP Loan, which is evidenced by a Note dated the Loan Date issued by the Company (the “Note”) in favor of Berkshire Bank, as lender (the “PPP Lender”), matures May 1, 2022 and bears interest at a fixed rate of 1.0 % per annum, accruing from the Loan Date and payable monthly.

No payments were due on the PPP Loan for six months from the date of first disbursement, and if a loan forgiveness application is submitted to the SBA within 10 months after the end of the covered period, no payments are due until the date on which the SBA remits the loan forgiveness amount to the PPP Lender (or notifies the PPP Lender that no loan forgiveness is allowed), but interest continues to accrue during the deferment period.

If no loan forgiveness is allowed, the Company will be required to pay the PPP Lender equal monthly payments of principal and interest based on the principal amount outstanding on the PPP Loan, plus interest outstanding at the end of the deferment period, and taking into account any reductions in the principal amount due to forgiveness, if any.

The Note is unsecured and guaranteed by the SBA.

The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

The Note provides for customary defaults, including failure to make payment when due or to fulfill the Company’s obligations under the Note or related documents, reorganizations, mergers, consolidations or other changes to the Company’s business structure, and certain defaults on other indebtedness, bankruptcy events, adverse changes in financial condition or civil or criminal actions.

The PPP Loan may be accelerated upon the occurrence of a default.

Under the terms of the PPP, the PPP Loan may be forgiven to the extent that funds from the PPP Loan are used for payroll costs and costs to continue group health care benefits, as well as for interest on mortgage obligations incurred before February 15, 2020, rent under lease agreements in effect before February 15, 2020, utilities for which service began before February 15, 2020, and interest on debt obligations incurred before February 15, 2020 (collectively, “qualifying expenses”), subject to conditions and limitations provided in the CARES Act.

At least 60% (as amended) of the proceeds from the PPP Loan must be used for eligible payroll costs for the PPP Loan to be forgiven.

The Company has maximized the use of PPP Loan proceeds for qualifying expenses and intends to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act, as amended by the Paycheck Protection Flexibility Act of 2020.

Whether forgiveness will be granted and in what amount is subject to an application to, and approval by, the SBA and may also be subject to further requirements in any regulations and guidelines the SBA may adopt.

The PPP Loan is classified as “Long-term debt” in the Condensed Consolidated Balance Sheet until the forgiveness determination has been made by the SBA.

In the event that no portion of the PPP Loan is forgiven by the SBA, $ 2.0 million in principal and interest of the $ 2.2 million PPP Loan would be due within the next twelve months as of March 31, 2021 .

Under the terms of the PPP, the PPP Loan would be forgiven to the extent that funds from the PPP Loan were used for payroll costs and costs to continue group health care benefits, as well as for interest on mortgage obligations incurred before February 15, 2020, rent under lease agreements in effect before February 15, 2020, utilities for which service began before February 15, 2020, and interest on debt obligations incurred before February 15, 2020, subject to conditions and limitations provided in the CARES Act.

At least 60% (under the PPP terms, as amended) of the proceeds from the PPP Loan needed to have been used for eligible payroll costs for the PPP Loan to be forgiven.

The Company submitted its PPP Loan forgiveness application in May 2021 to the SBA through Berkshire Bank and submitted the related loan necessity questionnaire in June 2021.

On July 8, 2021, the Company received notifications from Berkshire Bank and the SBA that its PPP Loan (including all interest accrued thereon) of $ 2.2 million had been fully forgiven by the SBA and that the forgiveness payment date was July 1, 2021.

The PPP Loan, which was evidenced by a Note dated the Loan Date issued by the Company (the “Note”) in favor of Berkshire Bank, as lender (the “PPP Lender”), was scheduled to mature on May 1, 2022 and had a fixed interest rate of 1.0 % per annum, accruing from the Loan Date and payable monthly.

No payments were due on the PPP Loan for six months from the date of first disbursement, and because a loan forgiveness application was submitted to the SBA within 10 months after the end of the covered period, no payments were due until the date on which the SBA remitted the loan forgiveness amount to the PPP Lender and interest that accrued during the deferment period was included in the forgiveness amount.

The Note was unsecured and guaranteed by the SBA.

The PPP Loan is classified as “Long-term debt” in the Condensed Consolidated Balance Sheet.

The forgiveness of the PPP loan will be recognized under “Interest and other expense” section in the Condensed Consolidated Statement of Operations during the quarter ending September 30, 2021.

Earnings per share

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands, except per share data)

4 unchanged sentences

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options and restricted stock units, when the average market price of the common stock is lower than the exercise price of the related stock award during the period, as the inclusion of these stock awards in the computation of diluted earnings would be anti-dilutive.

For the three months ended March 31, 2021 and 2020, there were 705 thousand and 708 thousand, respectively, of potentially dilutive shares consisting of stock awards that were excluded from the calculation of earnings per diluted share.

Regarding the three months ended March 31, 2021 and 2020, when a net loss is reported, basic and diluted net loss per common share are calculated using the same method.

For the three months ended June 30, 2021 and 2020 , there were 0.3 million and 1.4 million, respectively, of potentially dilutive shares consisting of stock awards that were excluded from the calculation of earnings per diluted share.

For the six months ended June 30, 2021 and 2020 , there were 0.7 million and 1.3 million, respectively, of potentially dilutive shares consisting of stock awards that were excluded from the calculation of earnings per diluted share.

Regarding the three and six months ended June 30, 2021 and 2020, when a net loss is reported, basic and diluted net loss per common share are calculated using the same method.

Shareholders’ equity

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We account for leases in accordance with ASC Topic 842:

We enter into lease agreements for the use of real estate space and certain other equipment under operating leases and we have no financing leases.

We enter into lease agreements for the use of real estate space and certain equipment under operating leases and we have no financing leases.

Our leases are included in “Right-of-use-assets” and “Lease liabilities” in our Condensed Consolidated Balance Sheet.

Our leases have remaining lease terms of one year to six years , some of which include options to extend.

The majority of our leases with options to extend provide for extensions of up to five years with the ability to terminate the lease within one year .

Our leases have remaining lease terms of one year to five years , some of which include options to extend.

Our leases with options to extend provide for extensions of two to five years with the ability to terminate the lease within one year .

On February 28, 2020, we entered into an amendment to extend the lease on our facility in Ithaca, New York, which resulted in recording an additional right-of-use-asset and lease liability of $ 1.5 million .

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The lease amendment provided for an extension of the lease for four additional years from June 1, 2021 to May 31, 2025.

On April 30, 2021, we entered into an amendment to modify the expiration date of our lease on our Hamden, CT facility.

The lease, which was last amended on January 3, 2017, was scheduled to expire on April 30, 2027.

The lease amendment modified the expiration date to October 31, 2023 with an option to extend the lease for an additional two-year period extending the expiration date to October 31, 2025.

The modification resulted in reducing the right-of-use-asset and lease liability by $0.3 million .

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

Operating lease expense for the three months ended March 31, 2021 and 2020 was $ 243 thousand and $ 251 thousand, respectively, and is reported as “Cost of sales”, “Engineering, design and product development expense”, “Selling and marketing expense”, and “General and administrative expense” in the Condensed Consolidated Statements of Operations.

Operating lease expense for the three months ended June 30, 2021 and 2020 was $ 239 thousand and $ 241 thousand, respectively, and is reported as “Cost of sales”, “Engineering, design and product development expense”, “Selling and marketing expense”, and “General and administrative expense” in the Condensed Consolidated Statements of Operations.

Operating lease expense for the six months ended June 30, 2021 and 2020 was $ 482 thousand and $ 492 thousand, respectively.

Operating lease expenses include short-term lease costs, which were immaterial during the periods presented.

The following information represents supplemental disclosure for the statement of cash flows related to operating leases (in thousands):

Three Months Ended

Six Months Ended

Operating cash outflows from leases

The following summarizes additional information related to our leases as of March 31, 2021 and December 31, 2020:

March 31, 2021

The following summarizes additional information related to our leases as of June 30, 2021 and December 31, 2020:

June 30, 2021

December 31, 2020

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Weighted average discount rate

The maturity of the Company’s operating lease liabilities as of March 31, 2021 and December 31, 2020 were as follows (in thousands):

March 31, 2021

The maturity of the Company’s operating lease liabilities as of June 30, 2021 and December 31, 2020 were as follows (in thousands):

June 30, 2021

December 31, 2020

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Total lease liabilities

We recorded an income tax benefit for the first quarter of 2021 of $ 556 thousand at an effective tax rate of 20.1 %, compared to an income tax benefit during the first quarter of 2020 of $ 465 thousand at an effective tax rate of 31.9 %.

The effective tax rate for the first quarter of 2020 was higher as it included the impact of our net operating loss (“NOL”) that we incurred during 2020 and will carry back to prior years.

We recorded an income tax benefit for the second quarter of 2021 of $ 687 thousand at an effective tax rate of 24.5 % , compared to an income tax benefit for the second quarter of 2020 of $ 921 thousand at an effective tax rate of 33.2 % .

For the six months ended June 30, 2021 , we recorded an income tax benefit of $ 1.2 million at an effective tax rate of 22.3 % , compared to an income tax benefit for the six months ended June 30, 2020 of $ 1.4 million at an effective tax rate of 32.8 % .

The effective tax rate for the second quarter and first six months of 2020 was higher than the comparable 2021 periods as it included the impact of our net operating loss (“NOL”) that we incurred during 2020 and will carry back to prior years.

The CARES Act enacted on March 27, 2020 permits NOLs incurred in 2018, 2019 and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

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federal income tax, as well as income tax in certain U.S.

state and foreign jurisdictions.

states and foreign jurisdictions.

We have substantially concluded all U.S.

1 unchanged sentence

However, our federal tax returns for the years 2017 through 2019 remain open to examination.

state and foreign tax jurisdiction tax years remain open to examination as well, but we believe that any additional assessment would be immaterial to the Condensed Consolidated Financial Statements.

As of March 31, 2021, we had $ 121 thousand of total gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.

We expect that $ 24 thousand of the $ 121 thousand of unrecognized tax benefits will reverse in 2021 upon the expiration of the statute of limitations.

We recognize interest and penalties related to uncertain tax positions in the income tax provision reported as “Deferred tax assets” in the Condensed Consolidated Balance Sheet.

As of March 31, 2021 , we had $ 21 thousand of accrued interest and penalties related to uncertain tax positions.

Various state and foreign tax jurisdiction tax years remain open to examination as well, though we believe that any additional assessment would be immaterial to the Condensed Consolidated Financial Statements.

As of June 30, 2021, we had $ 121 thousand of total gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.

We expect $ 24 thousand of the $ 121 thousand of unrecognized tax benefits will reverse in the third quarter of 2021 upon the expiration of the applicable statute of limitations.

We recognize interest and penalties related to uncertain tax positions in the income tax provision.

As of June 30, 2021, we had $ 25 thousand of accrued interest and penalties related to uncertain tax positions.

The Company maintains a valuation allowance against certain deferred tax assets where realization is not certain.

Subsequent events

On April 30, 2021, we entered into an agreement to modify the term of the lease on our facility in Hamden, CT.

The lease, which was last amended on January 3, 2017, was scheduled to expire on April 30, 2027.

The lease amendment modified the expiration date to October 31, 2023 with an option to extend the lease for an additional two year period extending the expiration date to October 31, 2025.

The Company has evaluated all events or transactions that occurred up to the date the consolidated financial statements were available to be issued.

Based upon this review, the Company did not identify any additional subsequent events that would have required adjustment or disclosure in the consolidated financial statements, other than receiving notifications from Berkshire Bank and the SBA regarding forgiveness of the PPP Loan on July 8, 2021, and the Credit Facility Amendment to the Siena Credit Facility signed on July 21, 2021, both of which are disclosed in Note 6.

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-Q

Item 1. Financial Statements