What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-12 compared with 2021-08-11 · 78 added, 54 removed, 285 unchanged (32% of the section changed)

2 unchanged sentences

C ONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2021

September 30, 2021

December 31, 2020

38 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

5 unchanged sentences

Operating loss

Interest and other expense:

Interest and other income (expense):

Interest, net

Loss before income taxes

Gain on forgiveness of long-term debt

Income (loss) before income taxes

Income tax benefit

Net loss per common share:

Net income (loss)

Net income (loss) per common share:

Shares used in per-share calculation:

1 unchanged sentence

TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLI DATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLI DATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Net income (loss)

Foreign currency translation adjustment, net of tax

Comprehensive loss

Comprehensive income (loss)

See notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDE NSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Foreign currency transaction losses

Gain on the forgiveness of long-term debt

Changes in operating assets and liabilities:

14 unchanged sentences

Long-term debt borrowings

Proceeds from the issuance of common stock

Payment of common stock issuance costs

Proceeds from stock option exercises

3 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents

Decrease in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

1 unchanged sentence

Balance, beginning of period

Issuance of common stock

Issuance of shares from stock awards

2 unchanged sentences

Balance, beginning of period

Issuance of common stock, net of issuance cost

Share-based compensation expense

4 unchanged sentences

Balance, beginning of period

Net income (loss)

Balance, end of period

7 unchanged sentences

Supplemental share information

Issuance of common stock

Issuance of shares from stock awards

15 unchanged sentences

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

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.

The results of operations for the three and nine months ended September 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

1 unchanged sentence

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.

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 half of 2021.

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;

2 unchanged sentences

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.

Public Offerings – On October 16, 2020 and August 16, 2021, the Company raised net proceeds of $ 8.7 million and $11.3 million (including the exercise of the underwriters overallotment option on August 20, 2021), respectively, after deducting underwriting discounts, commissions and offering expenses, through underwritten public offerings and sold an aggregate of 1,380,000 and 842,375 shares of common stock, respectively.

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.

3 unchanged sentences

See Note 6 for further details regarding this facility.

Reduced Capital Expenditures – We limited capital expenditures during 2020.

Reduced Capital Expenditures – We limited capital expenditures during 2020 and gradually increased expenses during 2021 as our sale improved.

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.

14 unchanged sentences

Disaggregation of revenue

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.

The following tables disaggregate 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.

Three Months Ended

September 30,

(In thousands)

8 unchanged sentences

Total net sales

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

17 unchanged sentences

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

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

For the nine months ended September 30, 2021 , we recognized revenue of $ 0.6 million related to our contract liabilities at December 31, 2020 .

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

June 30, 2021

September 30, 2021

December 31, 2020

8 unchanged sentences

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 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.

As of September 30, 2021, the aggregate amount of transaction prices allocated to remaining performance obligations was $ 4.6 million.

The Company expects to recognize revenue on $ 4.1 million of its remaining performance obligations within the next 12 months following September 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

2 unchanged sentences

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

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.

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

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

For the nine months ended September 30, 2021 and 2020 , we recorded $ 17 thousand and $ 49 thousand of interest income, respectively.

The components of inventories were:

June 30, 2021

September 30, 2021

December 31, 2020

5 unchanged sentences

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 six months ended June 30, 2021 and 2020:

Six Months Ended

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

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Balance, end of period

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”.

As of September 30, 2021, $ 88 thousand of the accrued product warranty liability was classified as current in “Accrued liabilities” in the Condensed Consolidated Balance Sheets and the remaining $ 21 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.

7 unchanged sentences

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.

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 thousand under the Siena Credit Facility, tested as of the end of each calendar month, beginning with the calendar month ending July 31, 2021.

During the third quarter of 2021, we have been in compliance with our excess availability covenant, and as of September 30, 2021, we had no outstanding borrowings under the Siena Credit Facility and $ 4.2 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.

1 unchanged sentence

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 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.

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.

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.

The forgiveness of the PPP Loan was reported as “Gain on forgiveness on long-term debt” 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

Nine Months Ended

September 30,

(In thousands, except per share data)

Net income (loss)

Weighted average common shares outstanding

1 unchanged sentence

Weighted average common and common equivalent shares outstanding

Net loss per common share:

Net income (loss) per common share:

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 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.

For the three months ended September 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 nine months ended September 30, 2021 and 2020 , there were 0.4 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.

Regarding the three months ended September, 31, 2020 and the nine months ended September 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

14 unchanged sentences

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

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 expense for the three months ended September 30, 2021 and 2020 was $ 235 thousand and $ 243 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 nine months ended September 30, 2021 and 2020 was $ 717 thousand and $ 735 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):

Six Months Ended

Nine Months Ended

September 30,

Operating cash outflows from leases

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

June 30, 2021

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

September 30, 2021

December 31, 2020

1 unchanged sentence

Weighted average discount rate

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

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

September 30, 2021

December 31, 2020

2 unchanged sentences

Total lease liabilities

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.

We recorded an income tax benefit for the third quarter of 2021 of $ 439 thousand at an effective tax rate of - 93.2 % , compared to an income tax benefit for the third quarter of 2020 of $ 515 thousand at an effective tax rate of 37.3 % .

For the nine months ended September 30, 2021 , we recorded an income tax benefit of $ 1.7 million at an effective tax rate of 33.0 % , compared to an income tax benefit for the nine months ended September 30, 2020 of $ 1.9 million at an effective tax rate of 33.9 % .

A tax benefit was recorded for the third quarter of 2021 on pre-tax income due to recognition of the gain on the forgiveness of the PPP Loan which is not taxable.

The effective tax rate for the third quarter of 2020 and first nine months of 2020 included the impact of our net operating loss (“NOL”) that we incurred during 2020 and was carried 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.

We generated an NOL in 2020, which we will carry back to tax years that had a federal statutory tax rate of 34 % compared to 21 % in 2020.

We generated an NOL in 2020, which we carried back to tax years that had a federal statutory tax rate of 34 % compared to 21 % in 2020.

We are subject to U.S.

5 unchanged sentences

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.

As of September 30, 2021, we had $ 97 thousand of total gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods.

For the third quarter of 2021, we recognized $ 24 thousand of previously unrecognized tax benefits as the statute of limitations on the use of our 2017 research and development credit expired during the third quarter of 2021.

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.

As of September 30, 2021, we had $ 17 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 likely.

Subsequent events

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.

Based upon this review, the Company did not identify any additional subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.

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