1 unchanged sentence
Forward Looking Statements
−Removed: Certain statements included in this Quarterly Report on Form 10-Q for the period ended June 30, 2021 (this “Report”), including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are not historical facts are “forward-looking statements” within the meaning of the U.S.
+Added: Certain statements included in this Quarterly Report on Form 10-Q for the period ended September 30, 2021 (this “Report”), including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are not historical facts are “forward-looking statements” within the meaning of the U.S.
federal securities laws, including the Private Securities Litigation Reform Act of 1995.
2 unchanged sentences
Such risks and uncertainties could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements.
−Removed: Any such risks and uncertainties may also be exacerbated by the ultimate impact of the COVID-19 pandemic, which is unknown at this time.
−Removed: In addition, statements made in this Report about the COVID-19 pandemic and the potential effects and impacts of the COVID-19 pandemic on the Company’s business, financial condition, liquidity and results of operations may constitute forward-looking statements due to factors and future developments that are uncertain, unpredictable and, in many cases, beyond our control, including the scope, duration and extent of the pandemic, actions taken by governmental authorities and businesses in response to the pandemic and any resurgences or variants, vaccination rates and the direct and indirect impact of the pandemic on our employees, customers and third parties with which we conduct business.
+Added: Any such risks and uncertainties may also be exacerbated by the ultimate impact of the COVID-19 pandemic and the emergence of virus variants, which is unknown at this time.
+Added: In addition, statements made in this Report about the COVID-19 pandemic and the potential effects and impacts of the COVID-19 pandemic on the Company’s business, financial condition, liquidity and results of operations may constitute forward-looking statements due to factors and future developments that are uncertain, unpredictable and, in many cases, beyond our control, including the scope, duration and extent of the pandemic, actions taken by governmental authorities and businesses in response to the pandemic and any resurgences or variants, vaccination rates and the direct and indirect impact of the pandemic on our employees, customers and third parties with which we conduct business, including difficulties or delays in manufacturing or delivery of inventory or other supply chain disruptions.
Although management has taken steps to mitigate any negative effect of such risks and uncertainties, including the impact of the COVID-19 pandemic, significant unfavorable changes could severely impact the assumptions used.
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Our business trends through the first two months of 2020 were in line with internal expectations;
−Removed: however, the challenges posed by the COVID-19 pandemic on the United States and global economy increased significantly as the first quarter of 2020 progressed and continued throughout the remainder of 2020 and into the first six months of 2021.
−Removed: Though we have begun to see some recovery in the first half of 2021, unfortunately, the massive economic and social disruptions across the world persist due to COVID-19, including the emergence of virus variants, and the measures implemented to mitigate its spread.
+Added: however, the challenges posed by the COVID-19 pandemic on the United States and global economy increased significantly as the first quarter of 2020 progressed and continued throughout the remainder of 2020 and into the first nine months of 2021.
+Added: Though we have begun to experience some recovery during the first nine months of 2021, unfortunately, the massive economic and social disruptions across the world persist due to COVID-19, including the emergence of virus variants, and the measures implemented to mitigate its spread.
The food service, casino and gaming, and oil and gas industries have been particularly affected by the pandemic, and we expect such disruptions to continue to negatively impact our overall business for the foreseeable future.
−Removed: As a result of the COVID-19 pandemic and measures implemented to mitigate its spread, we experienced decreased demand for our products and lower than anticipated sales beginning in the second half of March 2020 and continuing through the first six months of 2021, particularly in our food service technology and casino and gaming markets.
−Removed: We experienced some improvement in demand during the second half of 2020 through the first six months of 2021 compared to the second quarter of 2020, as state and local governments lifted certain measures implemented earlier in 2020 to mitigate the spread of the virus, but demand remained lower than 2019, and while we expect this improvement to continue during the remainder of 2021, the exact timing and pace of recovery is unknown.
+Added: As a result of the COVID-19 pandemic and measures implemented to mitigate its spread, we experienced decreased demand for our products and lower than anticipated sales beginning in the second half of March 2020 and continuing through the first nine months of 2021, particularly in our food service technology and casino and gaming markets.
+Added: We experienced some improvement in demand during the second half of 2020 through the first nine months of 2021 compared to the second quarter of 2020, as state and local governments lifted certain measures implemented earlier in 2020 to mitigate the spread of the virus, but demand remained lower than 2019, and while we expect this improvement to continue during the remainder of 2021, the exact timing and pace of recovery is unknown.
Below is a discussion of the impact of COVID-19 that we have experienced, and that we believe will continue to experience for the foreseeable future in each of our markets.
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In both our food service technology and POS automation markets, many restaurants and food service establishments that were closed during much of the second quarter of 2020 started to reopen in the third quarter of 2020 as state and local governments began to ease restrictions put in place in response to the pandemic.
−Removed: Many of our customers have opened under restrictions that limit them to providing drive through, take-out or delivery service without dine-in options, as well as limiting the volume of customers and employees on site at any one time.
−Removed: During the second half of 2020 and first six months of 2021, we experienced sales improvement compared to the second quarter of 2020, as these food service customers reopened for business.
+Added: Many of our customers opened under restrictions that limit them to providing drive-through, take-out or delivery service without dine-in options, as well as limiting the volume of customers and employees on site at any one time.
+Added: During the second half of 2020 and first nine months of 2021, we experienced sales improvement compared to the second quarter of 2020, as these food service customers reopened for business.
However, during the fourth quarter of 2020 and early in 2021, restaurants were again impacted by a resurgence of the pandemic.
9 unchanged sentences
However, many casinos in the U.S.
−Removed: reopened during the first quarter of 2021 with limited capacity and during the second quarter of 2021 remained open and further expanded capacity.
+Added: reopened during the first quarter of 2021 with limited capacity and during the second and third quarter of 2021 remained open and further expanded capacity.
We anticipate that casinos will continue to increase capacity over time, barring any new closures or reduced capacity requirements in response to any new resurgence of the pandemic, including the emergence of variants.
−Removed: As casinos gradually recover from the financial impact of being closed for several months, we expect that casinos’ appetite for purchases of new slot machines will be diminished, which we believe is likely to continue to negatively impact sales of casino and gaming printers purchased by slot manufacturers for use in slot machines at casinos during 2021.
+Added: As casinos gradually recover from the financial impact of being closed for several months, we expect that casinos’ appetite for purchases of new slot machines may be diminished, which we believe is likely to continue to negatively impact sales of casino and gaming printers purchased by slot manufacturers for use in slot machines at casinos during 2021.
We exited the lottery market at the end of 2019 and IGT made a final purchase of our lottery printer during 2020.
Therefore, COVID-19 has not had an impact our lottery printer sales.
−Removed: The oil and gas market has been negatively impacted by the decline in worldwide oil prices attributable to the COVID-19 pandemic during 2020.
−Removed: During the first half of 2021, oil and gas prices have begun to rise again resulting in slowly improving sales to our oil and gas customers.
−Removed: However, due to the uncertainty of current and future market conditions, we believe sales of our Printrex oil and gas printers will continue to be negatively impacted until oil and gas prices recover.
+Added: The oil and gas market was negatively impacted by the decline in worldwide oil prices attributable to the COVID-19 pandemic during 2020.
+Added: During the first nine months of 2021, oil and gas prices have begun to rise again resulting in slowly improving sales to our oil and gas customers.
+Added: However, due to the uncertainty of current and future market conditions, we believe sales of our Printrex oil and gas printers will continue to be negatively impacted.
+Added: We plan to exit the Printrex market at the end of 2021 and expect to have no future sales in this market beyond 2021.
Due to closures and reduced operating capacity of restaurants, retail establishments, casinos and other gaming establishments resulting from the COVID-19 pandemic, sales of spare parts, service and consumable products have declined, and we expect such sales to remain at reduced levels, due to lower usage until these markets recover.
Our gross margin has been negatively impacted and we expect our gross margin to continue to be negatively impacted while the COVID-19 pandemic and its economic effects on the markets we serve persists.
−Removed: As a result of an expected significantly lower sales level, we believe our gross margin will remain lower than pre-pandemic levels due to fixed manufacturing overhead expenses (such as facility costs, depreciation, etc.) that cannot be reduced or eliminated even with the lower sales level.
+Added: As a result of an expected significantly lower sales level as well as increased material and shipping costs resulting from worldwide supply disruptions caused by the COVID-19 pandemic, we believe our gross margin will remain lower than pre-pandemic levels due to fixed manufacturing overhead expenses (such as facility costs, depreciation, etc.) that cannot be reduced or eliminated even with the lower sales level.
We have also experienced supply chain disruptions, including delayed product shipments from our two contract manufacturers located in China and Thailand that conduct almost all of our printer and terminal manufacturing, due to reduced operations and parts shortages at these facilities.
To date, these disruptions have only minimally impacted deliveries to customers due to our high inventory levels and reduced demand for our products.
−Removed: However, if the delays are sustained or additional disruptions from the pandemic occur, we may have insufficient inventory levels and our ability to deliver products to our customers on time or at all may be impaired.
+Added: However, our inventory levels have decreased significantly during 2021 due to these supply chain disruptions and if the delays are sustained or additional disruptions from the pandemic occur, we may have insufficient inventory levels and our ability to deliver products to our customers on time or at all may be impaired.
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, vaccination rates, the emergence of virus variants and the significant disruption that our customers have already experienced and may continue to experience.
−Removed: 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.
+Added: 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 nine months of 2021.
In addition to the expense management actions implemented during 2020, we took the following actions to increase liquidity and strengthen our financial position:
−Removed: 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.
+Added: 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 had 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 .
−Removed: New Credit Facility - On March 13, 2020, we also entered into a new credit facility with Siena Lending Group LLC (the “Siena Credit Facility”) that provides a revolving credit line of up to $10 million, subject to a borrowing base.
−Removed: Reduced Capital Expenditures - We limited capital expenditures during 2020.
+Added: New Credit Facility - On March 13, 2020, we entered into a new credit facility with Siena Lending Group LLC (the “Siena Credit Facility”) that provides a revolving credit line of up to $10 million, subject to a borrowing base.
+Added: Reduced Capital Expenditures - We limited capital expenditures during 2020 and gradually increased expenses during 2021 as our sales improved.
Since the onset of the pandemic, our top priority has been to ensure the health and safety of our employees while continuing to provide our customers with high-quality, personalized service.
On March 20, 2020, we instituted work-from-home practices for the majority of our employees to reduce the spread of COVID-19 and to comply with government mandates.
−Removed: Because most of our employees already had laptop computers with remote access into our IT systems, we have experienced only minor reductions in productivity and minimal costs related to the implementation of our work-from-home practices.
−Removed: In addition, even with the move to a work-from-home environment, our existing internal control structure remained operational and unchanged.
−Removed: With a majority of our employees now fully vaccinated against COVID-19, we are beginning to prepare a return-to-work plan that we expect to implement in the second half of 2021.
−Removed: Our distribution centers, deemed an essential service, have remained operational throughout the pandemic.
−Removed: During 2020, we implemented a new COVID-19 policy, which was still in place during the first six months of 2021, to specifically address health and safety guidelines for employees to adhere to and follow when at work or returning to work.
−Removed: This policy is based on the COVID-19 safety guidelines recommended by the Centers for Disease Control and Prevention and implements the following operations procedures:
+Added: Because most of our employees already had laptop computers with remote access into our IT systems, we experienced only minor reductions in productivity and minimal costs related to the implementation of our work-from-home practices.
+Added: In addition, even with the move to a work-from-home environment, our internal control structure remained operational and unchanged.
+Added: As of October 4, 2021 all of our employees were fully vaccinated against COVID-19 and, as a result, we implemented a return-to-work plan, reopening all of our facilities and ending our work-from-home practices.
+Added: Our distribution centers, deemed an essential service, remained operational throughout the pandemic.
+Added: During 2020, we implemented new COVID-19 policies, most of which were still in place during the first nine months of 2021, to specifically address health and safety guidelines for employees to adhere to and follow when at work.
+Added: These policies are based on the COVID-19 safety guidelines recommended by the Centers for Disease Control and Prevention and implement the following operations procedures:
staggered shifts and a rotational or flexible work schedule to minimize the number of employees at any particular facility at a single time;
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employees who (i) show symptoms of COVID-19 or (ii) have been exposed to someone who shows symptoms or has tested positive for COVID-19 are prohibited from reporting to work for 10 days;
−Removed: visitors are prohibited from entering all facilities;
+Added: prior to October 4, 2021, visitors were prohibited from entering all facilities;
cleaning and disinfecting protocols at all facilities.
−Removed: We have evaluated the recoverability of the assets on our unaudited condensed consolidated balance sheet as of June 30, 2021 in accordance with relevant authoritative accounting literature.
+Added: We have evaluated the recoverability of the assets on our unaudited condensed consolidated balance sheet as of September 30, 2021 in accordance with relevant authoritative accounting literature.
We considered the disruptions caused by the COVID-19 pandemic, including lower than previously forecasted sales and customer demand and macroeconomic factors potentially impacting accounts receivable, inventory, investments, intangible assets, goodwill and other assets and liabilities.
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Results of Operations:
−Removed: Three months ended June 30, 2021 compared to the three months ended June 30, 2020
−Removed: Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables and maintenance and repair services, by market for the three months ended June 30, 2021 and 2020 were as follows:
+Added: Three months ended September 30, 2021 compared to the three months ended September 30, 2020
+Added: Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables and maintenance and repair services, by market for the three months ended September 30, 2021 and 2020 were as follows:
Three Months Ended
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(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
Food service technology (“FST”)
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International sales do not include sales of printers and terminals made to domestic distributors or other domestic customers that may, in turn, ship those printers and terminals to international destinations.
−Removed: Net sales for the second quarter of 2021 increased $4 million, or 76%, from the same period in 2020.
−Removed: Printer, terminal and other hardware sales volume increased 93% year-over-year to approximately 20,000 units for the second quarter of 2021 due to volume increases in all our markets except our lottery market.
+Added: Net sales for the third quarter of 2021 increased $3.3 million, or 46%, from the same period in 2020.
+Added: Printer, terminal and other hardware sales volume increased 91% year-over-year to approximately 22,000 units for the third quarter of 2021 due to volume increases in all our markets except our lottery market.
The increase was driven primarily by a 111% increase in unit volume from the casino and gaming market and, to a lesser extent, a 64% increase in the POS automation market and a 74% increase in the FST market.
−Removed: The average selling price of our printers, terminals and other hardware decreased 4% for the second quarter of 2021 compared to the second quarter of 2020, primarily due to a higher level of POS automation printer sales, which sell at a lower price than our other products.
−Removed: Additionally, sales of our software, labels and other recurring revenue from our FST market increased $1.4 million, or 214%, in the second quarter of 2021 compared to the second quarter of 2020.
−Removed: International sales for the second quarter of 2021 increased $0.7 million, or 100%, from the same period in 2020, primarily due to a 164% increase in sales in the international casino and gaming market.
+Added: The average selling price of our printers, terminals and other hardware decreased 3% for the third quarter of 2021 compared to the third quarter of 2020, primarily due to a higher level of POS automation printer sales, which sell at a lower price than our other products.
+Added: Additionally, sales of our software, labels and other recurring revenue from our FST market increased $0.4 million, or 28%, in the third quarter of 2021 compared to the third quarter of 2020.
+Added: International sales for the third quarter of 2021 increased $0.9 million, or 85%, from the same period in 2020, primarily due to a 202% increase in sales in the international casino and gaming market.
Food service technology.
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is generated by software sales, including software subscriptions that are typically charged to customers annually on a per-application basis, as well as sales of labels, extended warranty and service contracts, and technical support services.
−Removed: Sales of our worldwide food service technology products for the three months ended June 30, 2021 and 2020 were as follows :
+Added: Sales of our worldwide food service technology products for the three months ended September 30, 2021 and 2020 were as follows :
Three Months Ended
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(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
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(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
Software, labels and other recurring revenue
−Removed: The increase in food service technology sales for the second quarter of 2021 compared to the second quarter of 2020 was driven by an increase in sales of both hardware and BOHA!
+Added: The increase in food service technology sales for the third quarter of 2021 compared to the third quarter of 2020 was driven by an increase in sales of both hardware and BOHA!
software, labels and other recurring revenue.
−Removed: Hardware sales increased 85% in the second quarter of 2021 compared to 2020 due largely to sales to an existing national convenience store customer and continued sales to a national travel center customer that started implementing BOHA!
−Removed: in the first quarter of 2021.
+Added: Hardware sales increased 64% in the third quarter of 2021 compared to 2020 due largely to sales of BOHA!
+Added: terminals to an existing national convenience store customer and sales of our AccuDate 9700 terminal to McDonald's.
Sales of BOHA!
−Removed: software recognized on a SaaS subscription basis, labels and other recurring revenue increased by 214%, primarily due to increased label sales and, to a lesser extent, increased software sales, compared to the prior year period due to the growth of the installed base of our BOHA!
+Added: software recognized on a SaaS subscription basis, labels and other recurring revenue increased by 28%, primarily due to increased label sales and software sales, compared to the prior year period due to the growth of the installed base of our BOHA!
terminals and workstations.
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Revenue from the POS automation market includes sales of thermal printers used primarily by quick serve restaurants located either at the checkout counter or within self-service kiosks to print receipts for consumers or print on linerless labels.
−Removed: Sales of our worldwide POS automation products for the three months ended June 30, 2021 and 2020 were as follows :
+Added: Sales of our worldwide POS automation products for the three months ended September 30, 2021 and 2020 were as follows :
Three Months Ended
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(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: The increase in POS automation product revenue for the second quarter of 2021 compared to the second quarter of 2020 was driven by a 161% increase in sales of our Ithaca® 9000 printer, primarily to McDonald’s, as POS automation sales improved during the second quarter of 2021 compared to the significant negative impact the COVID-19 pandemic had on sales during the second quarter of 2020.
+Added: The increase in POS automation product revenue for the third quarter of 2021 compared to the third quarter of 2020 was driven by a 60% increase in sales of our Ithaca® 9000 printer, primarily to McDonald’s, as POS automation sales improved during the third quarter of 2021 as business began to return to pre-pandemic normalcy compared to the significant negative impact the COVID-19 pandemic had on sales during the third quarter of 2020.
Casino and gaming.
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In addition, casino and gaming market revenue includes sales of the EPICENTRAL® print system, our software solution (including annual software maintenance), that enables casino operators to create promotional coupons and marketing messages and to print them in real time at the slot machine.
−Removed: Sales of our worldwide casino and gaming products for the three months ended June 30, 2021 and 2020 were as follows :
−Removed: Three Months Ended
−Removed: Three Months Ended
−Removed: (In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
−Removed: International
−Removed: The increase in domestic sales of our casino and gaming products for the second quarter of 2021 compared to the second quarter of 2020 was primarily due to a 168% increase in domestic sales of our thermal casino printers, as we have experienced some recovery compared to the second quarter of 2020 when the casino and gaming market was most severely impacted by the COVID-19 pandemic.
−Removed: We continue to experience recovery in the domestic casino and gaming market during the first half of 2021 as sales have increased 24% in the second quarter of 2021 compared to the first quarter of 2021.
−Removed: Similar to the domestic sales increase, international sales of our casino and gaming products increased in the second quarter of 2021 compared to the second quarter of 2020, primarily due to a 205% increase in sales of our thermal casino printers due to the sales recovery experienced in the second quarter of 2021 compared to the second quarter of 2020 when the casino and gaming market was most severely impacted by the COVID-19 pandemic .
−Removed: We continued to experience some recovery from the negative impact of the COVID-19 pandemic as international casino sales in the second quarter of 2021 increased 14% compared to the first quarter of 2021.
−Removed: Revenue from the lottery market includes sales of thermal on-line and other lottery printers to International Game Technology and its subsidiaries (“IGT”) for various lottery applications.
−Removed: Sales of our worldwide lottery printers for the three months ended June 30, 2021 and 2020 were as follows:
+Added: Sales of our worldwide casino and gaming products for the three months ended September 30, 2021 and 2020 were as follows :
Three Months Ended
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(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: On December 31, 2019, we allowed our non-exclusive agreement to provide lottery terminal printers to IGT to expire as we have decided to exit the lottery market and shift our focus towards our higher-value, technology enabled food service technology and casino and gaming products.
−Removed: As a result, IGT made a final purchase of our lottery printers during the second quarter of 2020 and we do not expect any further lottery printer sales in the future.
+Added: The increase in domestic sales of our casino and gaming products for the third quarter of 2021 compared to the third quarter of 2020 was primarily due to a 75% increase in domestic sales of our thermal casino printers, as we continue to experience continued recovery compared to the third quarter of 2020 when the casino and gaming market was negatively impacted by the COVID-19 pandemic.
+Added: In addition to the year-over-year growth, the domestic casino and gaming market sales increased 9% in the third quarter of 2021 compared to the second quarter of 2021.
+Added: Similar to the domestic sales increase, international sales of our casino and gaming products increased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to a 256% increase in sales of our thermal casino printers.
+Added: Though sales in Asia remain weak, we experienced a sales recovery primarily in Europe during the third quarter of 2021 compared to the third quarter of 2020 when the international casino and gaming market was negatively impacted by the COVID-19 pandemic .
+Added: In addition to the year-over-year growth, international casino sales in the third quarter of 2021 increased 34% compared to the second quarter of 2021.
Printrex branded printers are sold into markets that include wide format, desktop and rack mounted and vehicle mounted black/white thermal printers used by customers to log and plot oil field, seismic and down hole well drilling data in the oil and gas exploration industry.
−Removed: It also includes high-speed color inkjet desktop printers used to print logs at the data centers of the oil and gas field service companies.
−Removed: Sales of our worldwide Printrex printers for the three months ended June 30, 2021 and 2020 were as follows :
+Added: Sales of our worldwide Printrex printers for the three months ended September 30, 2021 and 2020 were as follows :
Three Months Ended
1 unchanged sentence
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: The increase in sales of Printrex printers for the second quarter of 2021 compared to the second quarter of 2020 resulted from higher domestic and international sales in the oil and gas market which was negatively impacted during the second quarter of 2020 by the decline in worldwide oil prices attributable to the COVID-19 pandemic.
−Removed: Though our overall Printrex sales increased in the second quarter of 2021 and we continue to fulfill orders from existing customers, we are no longer focused on this market and expect sales to decline over time.
+Added: The increase in sales of Printrex printers for the third quarter of 2021 compared to the third quarter of 2020 resulted from higher international sales in the oil and gas market which was negatively impacted during the third quarter of 2020 by the decline in worldwide oil prices attributable to the COVID-19 pandemic.
+Added: Though our overall Printrex sales increased in the third quarter of 2021 and we continue to fulfill orders from existing customers, we are no longer focused on this market.
+Added: We plan to exit this market at the end of the year and expect no future Printrex sales beyond 2021.
Revenue generated by TSG includes sales of consumable products (POS receipt paper, inkjet cartridges, ribbons and other printing supplies for legacy products), replacement parts, maintenance and repair services, refurbished printers, and shipping and handling charges.
−Removed: Sales in our worldwide TSG market for the three months ended June 30, 2021 and 2020 were as follows :
+Added: Sales in our worldwide TSG market for the three months ended September 30, 2021 and 2020 were as follows :
Three Months Ended
1 unchanged sentence
( In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: Domestic revenue from TSG for the second quarter of 2021 decreased slightly by 2% compared to the second quarter of 2020.
−Removed: The decrease was primarily due to a 27% decrease in service sales primarily related to a service contract with a banking customer that is expected to end in 2021 and a 12% decline from lower lottery printer spare part sales to IGT, which can vary significantly from quarter to quarter.
−Removed: These decreases were partially offset by a 78% increase in consumable sales resulting from higher sales of legacy POS paper when compared to the second quarter of 2020 when many of these customers were negatively impacted by the COVID-19 pandemic.
+Added: Domestic revenue from TSG for the third quarter of 2021 decreased slightly by 3% compared to the third quarter of 2020.
+Added: The decrease was primarily due to a 57% decrease in service sales largely related to a service contract with a legacy banking customer that is expected to end in the first half of 2022 and a 55% decline from lower consumable sales resulting from decreased legacy POS printer paper sales.
+Added: These decreases were partially offset by a 13% increase from higher lottery printer spare part sales to IGT, which can vary significantly from quarter to quarter.
We expect TSG sales to decrease in 2021 compared to 2020 due to lower expected sales of legacy lottery printer spare parts to IGT and lower service sales related to the banking service contract noted above.
−Removed: Internationally, TSG revenue increased in the second quarter of 2021 compared to the second quarter of 2020, primarily due to a 35% increase in sales of replacement parts and accessories to international casino and gaming customers.
+Added: Internationally, TSG revenue decreased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to an 83% decrease in service sales to international customers.
Gross Profit.
−Removed: Gross profit for the three months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Three Months Ended June 30,
+Added: Gross profit for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Three Months Ended September 30,
Total Sales - 2021
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ecosystem and royalty payments to third parties, including to the third-party licensor of our food service technology software products.
−Removed: For the second quarter of 2021, gross profit increased $1.0 million, or 45%, due largely to a sales increase of 76% for the second quarter in 2021 compared to the second quarter of 2020.
−Removed: Additionally, our gross margin decreased 760 basis points, to 35.7%, for the second quarter of 2021 compared to 43.3% for the second quarter of 2020.
+Added: For the third quarter of 2021, gross profit increased $1.0 million, or 29%, due largely to a sales increase of 46% for the third quarter of 2021 compared to the third quarter of 2020.
+Added: During the third quarter of 2021, our gross margin decreased 530 basis points, to 40.6%, compared to 45.9% for the third quarter of 2020.
The decrease in gross margin resulted largely from lower margin on our BOHA!
−Removed: hardware sales in the second quarter of 2021 compared to the second quarter of 2020, as we have reduced prices to accelerate the growth of our BOHA!
−Removed: installed base.
+Added: hardware sales in the third quarter of 2021 compared to the third quarter of 2020, as we have reduced prices to accelerate the growth of our BOHA!
+Added: installed base, as well as higher material and shipping costs resulting from worldwide supply disruptions caused by the COVID-19 pandemic.
Operating Expenses - Engineering, Design and Product Development.
−Removed: Engineering, design and product development expense for the three months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Three Months Ended June 30,
+Added: Engineering, design and product development expense for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Three Months Ended September 30,
Total Sales - 2021
1 unchanged sentence
Engineering, design and product development expenses primarily include salary and payroll related expenses for our hardware and software engineering staff, depreciation and design expenses (including prototype printer expenses, outside design, development and testing services, supplies and contract software development expenses including those to the third-party licensor of our food service technology software products).
−Removed: Such expenses increased $0.4 million, or 32% for the second quarter of 2021 compared to the second quarter of 2020, as we gradually return to more normalized pre-COVID spending levels and continue development of our food service technology products.
+Added: Such expenses increased $0.4 million, or 30%, for the third quarter of 2021 compared to the third quarter of 2020, as we gradually return to more normalized pre-COVID spending levels and continue development of our food service technology products.
We expect engineering, design and product development expense to increase for the full year 2021 compared to the full year 2020 due to the accelerated investments planned in our food service technology products.
Operating Expenses - Selling and Marketing.
−Removed: Selling and marketing expense for the three months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Three Months Ended June 30,
+Added: Selling and marketing expense for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Three Months Ended September 30,
Total Sales - 2021
1 unchanged sentence
Selling and marketing expenses primarily include salaries and payroll related expenses for our sales and marketing staff, sales commissions, travel expenses, expenses associated with the lease of sales offices, advertising, trade show expenses, public relations, e-commerce and other promotional marketing expenses.
−Removed: Such expenses increased $0.3 million, or 25%, for the second quarter of 2021 compared to the second quarter of 2020, primarily due to increased travel expense, marketing programs and new sales staff.
−Removed: Our level of spending was unusually low during the second quarter of 2020, as we implemented a number of significant cost saving measures in response to the COVID-19 pandemic.
−Removed: We expect selling and marketing expenses to continue to increase for the full year 2021, as we gradually return to more normalized pre-COVID-19 spending levels, as well as make substantial strategic investments in our food service technology sales and marketing groups including resumed and expanded print advertising and marketing promotions that were deferred from 2020 due to the pandemic.
+Added: Such expenses increased $0.6 million, or 51%, for the third quarter of 2021 compared to the third quarter of 2020, primarily due to increased marketing programs and new sales staff to support our BOHA!
+Added: products, as well as higher sales commissions and travel expenses.
+Added: Our level of spending was unusually low during the third quarter of 2020, as we continued a number of significant cost saving measures that were implemented during the second quarter of 2020 in response to the COVID-19 pandemic.
+Added: We expect selling and marketing expenses to continue to increase for the remainder 2021, as we return to more normalized pre-COVID-19 spending levels, as well as continue the strategic investments in our food service technology sales and marketing groups including expanding our staff and the resumption and expansion of print advertising and marketing promotions started in second quarter of 2021.
Operating Expenses - General and Administrative .
−Removed: General and administrative expense for the three months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Three Months Ended June 30,
+Added: General and administrative expense for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Three Months Ended September 30,
Total Sales - 2021
1 unchanged sentence
General and administrative expenses primarily include salaries, incentive compensation, and other payroll related expenses for our executive, accounting, human resources, business development and information technology staff, expenses for our corporate headquarters, professional and legal expenses, information technology expenses, and other expenses related to being a publicly-traded company.
−Removed: General and administrative expenses increased $0.3 million, or 12%, for the second quarter of 2021 compared to the second quarter of 2020 due to higher recruiting fees and employee compensation, as well as higher consulting fees related to a planned implementation of a new ERP system to be completed in 2022.
−Removed: These increases were partially offset by lower legal and professional fees during the second quarter of 2021 compared to the second quarter of 2020.
−Removed: We expect general and administrative expenses to continue to increase in 2021 as we gradually return to more normalized pre-COVID-19 spending levels.
+Added: General and administrative expenses remained relatively consistent, increasing 1%, for the third quarter of 2021 compared to the third quarter of 2020 as higher recruiting fees and employee compensation were almost entirely offset by lower severance expense which was higher in the 2020 period due to cost saving initiatives completed during the third quarter of 2020.
+Added: We expect general and administrative expenses to increase for the full year 2021 as we gradually return to more normalized pre-COVID-19 spending levels.
Operating Loss.
−Removed: Operating loss for the three months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Three Months Ended June 30,
+Added: Operating loss for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Three Months Ended September 30,
Total Sales - 2021
Total Sales - 2020
−Removed: Our operating loss increased less than 1% for the second quarter of 2021 compared to the second quarter of 2020 as increased sales of 76% were almost entirely offset by a decrease in our gross margin of 760 basis points and an increase in operating expenses of $1.1 million during the second quarter of 2021 compared to the second quarter of 2020.
+Added: Our operating loss increased $0.1 million, or 9%, for the third quarter of 2021 compared to the third quarter of 2020 as increased sales of 46% were almost entirely offset by a decrease in our gross margin of 530 basis points and an increase in operating expenses of $1.1 million during the third quarter of 2021 compared to the third quarter of 2020.
Interest, net.
−Removed: We recorded net interest expense of $29 thousand for the second quarter of 2021 compared to net interest expense of $25 thousand for the second quarter of 2020.
−Removed: The increase in net interest expense was primarily due to lower interest income earned on our cash balances during the second quarter of 2021 compared to the second quarter of 2020.
−Removed: We expect interest expense to increase for the full year 2021 compared to the full year 2020 due to the full year impact of unused borrowing fees incurred from the Siena Credit Facility and lower interest income due to the collection of the note receivable in the first quarter of 2021.
−Removed: We recorded other expense of $17 thousand for the second quarter of 2021 compared to other expense of $11 thousand for the second quarter of 2020, primarily due to foreign exchange losses recorded by our U.K.
+Added: We recorded net interest expense of $29 thousand for the third quarter of 2021 compared to net interest expense of $19 thousand for the third quarter of 2020.
+Added: The increase in net interest expense was primarily due to lower interest income earned from the note receivable to a third-party software developer that was collected in March 2021.
+Added: We expect interest expense to increase for the full year 2021 compared to the full year 2020 due to the full year impact of unused borrowing fees incurred from the Siena Credit Facility that was entered into on March 13, 2020 and lower interest income due to the collection of the note receivable during the first quarter of 2021.
+Added: We recorded other expense of $69 thousand for the third quarter of 2021 compared to other income of $116 thousand for the third quarter of 2020, primarily due to foreign exchange losses recorded by our U.K.
+Added: subsidiary in the third quarter of 2021 compared to foreign exchange gains recorded in the third quarter of 2020.
Going forward, we may continue to experience more foreign exchange gains or losses depending on the level of sales to European customers through our U.K.
1 unchanged sentence
Dollar, which may be impacted by volatility in global economic conditions due to the COVID-19 pandemic.
+Added: Gain on Forgiveness of Long-Term Debt.
+Added: We recorded a $2.2 million gain in the third quarter of 2021 resulting from the forgiveness of the PPP Loan in July 2021.
Income Taxes.
−Removed: 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 during the second quarter of 2020 of $921 thousand at an effective tax rate of 33.2%.
−Removed: The effective tax rate for the second quarter of 2020 was higher than the comparable 2021 period as it included the impact of our net operating loss (“NOL”) that we incurred during 2020 and will carry back to prior years.
+Added: 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%.
+Added: 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.
+Added: The effective tax rate for the third quarter 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.
−Removed: 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.
−Removed: We reported a net loss for the second quarter of 2021 of $2.1 million, or $0.24 per diluted share, compared to net loss of $1.9 million, or $0.25 per diluted share, for the second quarter of 2020.
+Added: 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.
+Added: Net Income (Loss) .
+Added: We reported net income for the third quarter of 2021 of $0.9 million, or $0.09 per diluted share, compared to a net loss of $0.9 million, or $0.11 per diluted share, for the third quarter of 2020.
Results of Operations:
−Removed: Six months ended June 30, 2021 compared to six months ended June 30, 2020
−Removed: Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables and maintenance and repair services, by market for the six months ended June 30, 2021 and 2020 were as follows:
−Removed: Six Months Ended
−Removed: Six Months Ended
+Added: Nine months ended September 30, 2021 compared to nine months ended September 30, 2020
+Added: Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables and maintenance and repair services, by market for the nine months ended September 30, 2021 and 2020 were as follows:
+Added: Nine Months Ended
+Added: Nine Months Ended
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
POS automation
2 unchanged sentences
International sales do not include sales of printers and terminals made to domestic distributors or other domestic customers that may, in turn, ship those printers and terminals to international destinations.
−Removed: Net sales for the first six months of 2021 increased $2.1 million, or 14%, from the same period in 2020.
−Removed: Printer, terminal and other hardware sales volume increased by 8% to approximately 38,000 units for the first six months of 2021 driven by volume increases in all our markets except our lottery market.
−Removed: The primary volume increases were a 129% increase in unit volume from the FST market and a 20% unit volume increase in our POS automation market.
−Removed: The average selling price of our printers, terminals and other hardware increased 2% for the first six months of 2021 compared to the first six months of 2020, primarily due to a higher level of sales of FST hardware, which sell at higher prices than our other products.
−Removed: Additionally, sales of our software, labels and other recurring revenue from our FST market increased $2.0 million, or 157%, in the first six months of 2021 compared to the first six months of 2020.
−Removed: International sales decreased $0.8 million, or 24%, primarily driven by a 30% decrease in international casino and gaming sales.
+Added: Net sales for the first nine months of 2021 increased $5.4 million, or 24%, from the same period in 2020.
+Added: Printer, terminal and other hardware sales volume increased by 28% to approximately 59,000 units for the first nine months of 2021 driven by volume increases in all our markets except our lottery market.
+Added: The primary volume increases were a 28% increase in unit volume from the casino and gaming market and, to a lesser extent, a 32% unit volume increase in our POS automation market and a 108% increase in unit volume from the FST market.
+Added: The average selling price of our printers, terminals and other hardware increased 1% for the first nine months of 2021 compared to the first nine months of 2020.
+Added: Additionally, sales of our software, labels and other recurring revenue from our FST market increased $2.4 million, or 85%, in the first nine months of 2021 compared to the first nine months of 2020.
+Added: International sales for the first nine months of 2021 increased by less than 1% compared to the first nine months of 2020, due to a 137% increase in the international Printrex market and a 3% increase in the international casino and gaming market which were mostly offset by a 39% decrease in the international TSG market.
Food service technology.
−Removed: Sales of our worldwide food service technology products for the six months ended June 30, 2021 and 2020 were as follows:
−Removed: Six Months Ended
−Removed: Six Months Ended
+Added: Sales of our worldwide food service technology products for the nine months ended September 30, 2021 and 2020 were as follows:
+Added: Nine Months Ended
+Added: Nine Months Ended
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: Six Months Ended
−Removed: Six Months Ended
+Added: Nine Months Ended
+Added: Nine Months Ended
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
Software, labels and other recurring revenue
−Removed: The increase in food service technology sales in the first half of 2021 compared to the first half of 2020 was driven by an increase in sales of both hardware and BOHA!
+Added: The increase in food service technology sales in the first nine months of 2021 compared to the first nine months of 2020 was driven by an increase in sales of both hardware and BOHA!
software, labels and other recurring revenue.
−Removed: Hardware sales increased 96% in the first half of 2021 compared to the first half of 2020 due largely to sales to an existing national convenience store customer and a new national travel center customer.
+Added: Hardware sales increased 84% in the first nine months of 2021 compared to the first nine months of 2020 due largely to sales to an existing national convenience store customer and a new national travel center customer as well as higher sales of our AccuDate 9700 terminal to McDonald’s.
Sales of BOHA!
2 unchanged sentences
POS automation.
−Removed: Sales of our worldwide POS automation products for the six months ended June 30, 2021 and 2020 were as follows:
−Removed: Six Months Ended
−Removed: Six Months Ended
+Added: Sales of our worldwide POS automation products for the nine months ended September 30, 2021 and 2020 were as follows:
+Added: Nine Months Ended
+Added: Nine Months Ended
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: The increase in POS automation product revenue for the first half of 2021 compared to the first half of 2020 was driven by a 19% increase in sales of our Ithaca® 9000 printer, primarily to McDonald’s, as POS automation sales began to improve in the first half of 2021 compared to the significant negative impact of the COVID-19 pandemic on POS automation sales during the second quarter 2020.
+Added: The increase in POS automation product revenue for the first nine months of 2021 compared to the first nine months of 2020 was driven by a 30% increase in sales of our Ithaca® 9000 printer, primarily to McDonald’s, as POS automation sales began to improve in the first nine months of 2021 compared to the significant negative impact of the COVID-19 pandemic on POS automation sales during the second and third quarter of 2020.
Casino and gaming.
−Removed: Sales of our worldwide casino and gaming products for the six months ended June 30, 2021 and 2020 were as follows:
−Removed: Six Months Ended
−Removed: Six Months Ended
+Added: Sales of our worldwide casino and gaming products for the nine months ended September 30, 2021 and 2020 were as follows:
+Added: Nine Months Ended
+Added: Nine Months Ended
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: The increase in domestic sales of our casino and gaming products for the first six months of 2021 compared to the first six months of 2020 was primarily due to a 28% increase in domestic sales of our thermal casino printers, as we have experienced some recovery during the first six months of 2021 compared to the first six months of 2020, and particularly the second quarter of 2020, when the casino and gaming market was most severely impacted by the COVID-19 pandemic.
−Removed: International sales of our casino and gaming products decreased in the first six months of 2021 compared to the first six months of 2020, primarily due to a 31% decrease in sales of our thermal casino printers and a 21% decrease in international sales of our off-premise gaming printers due to the continued negative impact of the COVID-19 pandemic on the international casino and gaming industry which is recovering at a slower pace than the domestic casino and gaming market.
−Removed: Sales of our worldwide lottery printers for the six months ended June 30, 2021 and 2020 were as follows:
−Removed: Six Months Ended
−Removed: Six Months Ended
+Added: The increase in domestic sales of our casino and gaming products for the first nine months of 2021 compared to the first nine months of 2020 was primarily due to a 42% increase in domestic sales of our thermal casino printers, as we have experienced some recovery during the first nine months of 2021 compared to the first nine months of 2020, and particularly the second quarter of 2020, when the casino and gaming market was most severely impacted by the COVID-19 pandemic.
+Added: International sales of our casino and gaming products increased in the first nine months of 2021 compared to the first nine months of 2020, primarily due to a 5% increase in sales of our thermal casino printers as we experienced modest recovery during the first nine months of 2021 after the significant negative impact of the COVID-19 pandemic on the international casino and gaming industry, which is recovering at a slower pace than the domestic casino and gaming market.
+Added: Sales of our worldwide lottery printers for the nine months ended September 30, 2021 and 2020 were as follows:
+Added: Nine Months Ended
+Added: Nine Months Ended
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: On December 31, 2019, we allowed our non-exclusive agreement to provide lottery terminal printers to IGT to expire as we have decided to exit the lottery market and shift our focus towards our higher-value, technology enabled food service technology and casino and gaming products.
+Added: On December 31, 2019, we allowed our non-exclusive agreement to provide lottery terminal printers to IGT to expire as we decided to exit the lottery market and shift our focus towards our higher-value, technology enabled food service technology and casino and gaming products.
As a result, IGT made a final purchase of our lottery printers during the second quarter of 2020 and we do not expect any further lottery printer sales in the future.
−Removed: S ales of our worldwide Printrex printers for the six months ended June 30, 2021 and 2020 were as follows:
−Removed: Six Months Ended
−Removed: Six Months Ended
+Added: S ales of our worldwide Printrex printers for the nine months ended September 30, 2021 and 2020 were as follows:
+Added: Nine Months Ended
+Added: Nine Months Ended
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: The increase in sales of Printrex printers for the first half of 2021 compared to the first half of 2020 resulted primarily from increased international sales in the oil and gas market.
−Removed: This increase was partially offset by a decrease in domestic Printrex printer sales during the first half of 2021 compared to the first half of 2020.
−Removed: Though our overall Printrex sales increased and we continue to fulfill orders from existing customers, we are no longer focused on this market and expect sales to decline over time.
−Removed: Sales in our worldwide TSG market for the six months ended June 30, 2021 and 2020 were as follows:
−Removed: Six Months Ended
−Removed: Six Months Ended
+Added: The increase in sales of Printrex printers for the first nine months of 2021 compared to the first nine months of 2020 resulted from increased international sales in the oil and gas market.
+Added: This increase was partially offset by a decrease in domestic Printrex printer sales during the first nine months of 2021 compared to the first nine months of 2020.
+Added: Though our overall Printrex sales increased in the third quarter of 2021 and we continue to fulfill orders from existing customers, we are no longer focused on this market.
+Added: We plan to exit this market at the end of the year and expect no future Printrex sales beyond 2021.
+Added: Sales in our worldwide TSG market for the nine months ended September 30, 2021 and 2020 were as follows:
+Added: Nine Months Ended
+Added: Nine Months Ended
(In thousands, except percentages)
−Removed: June 30, 2021
−Removed: June 30, 2020
+Added: September 30, 2021
+Added: September 30, 2020
International
−Removed: The decrease in domestic revenue from TSG for the first six months of 2021 as compared to the first six months of 2020 was due primarily to lower sales of replacement parts, consumable products and service revenue.
+Added: The decrease in domestic revenue from TSG for the first nine months of 2021 as compared to the first nine months of 2020 was due primarily to lower service revenue, lower sales of replacement parts, and consumable products.
+Added: Service revenue declined 42%, primarily related to a service contract with a legacy banking customer that is expected to end in the first half of 2022.
Replacement part sales decreased 8% primarily from lower lottery printer spare part sales to IGT, which can vary significantly from quarter to quarter.
Consumable sales declined 28%, due primarily to lower sales of HP inkjet cartridges used in our banking printers, as we exited the banking market at the end of 2018.
−Removed: Service revenue declined 36%, primarily related to a service contract with a banking customer that is expected to end later in 2021.
−Removed: Internationally, TSG revenue decreased for the first six months of 2021 compared to the first six months of 2020, primarily due to a 33% decrease in sales of replacement parts and accessories to international casino and gaming customers and a 79% decrease in international consumable sales due to the negative impact from the COVID-19 pandemic.
+Added: Internationally, TSG revenue decreased for the first nine months of 2021 compared to the first nine months of 2020, primarily due to a 28% decrease in sales of replacement parts and accessories to international casino and gaming customers and, to a lesser extent, a 71% decrease in international consumable sales and 50% lower service revenue due to the negative impact from the COVID-19 pandemic.
Gross Profit.
−Removed: Gross profit for the six months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Six Months Ended June 30,
+Added: Gross profit for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Nine Months Ended September 30,
Total Sales - 2021
Total Sales - 2020
−Removed: Gross profit decreased $0.7 million, or 10%, for the first six months of 2021 compared to the first six months of 2020, primarily due to a decrease in gross margin of 940 basis points, to 37.0% for the first six months of 2021 compared to 46.4% for the first six months of 2020.
+Added: Gross profit increased $0.3 million, or 3%, for the first nine months of 2021 compared to the first nine months of 2020, primarily due to the 24% sales increase, which was largely offset by a decrease in gross margin of 790 basis points during the first nine months of 2021 compared the first nine months of 2020.
+Added: Gross margin decreased to 38.3% compared to 46.2% for the first nine months of 2021 compared to the first nine months of 2020.
The decrease in gross margin resulted largely from lower margin on our BOHA!
−Removed: hardware sales during the first six months of 2021 compared to the six months of 2020 as we have reduced prices to accelerate the growth of our BOHA!
−Removed: installed base.
+Added: hardware sales during the first nine months of 2021 compared to the nine months of 2020, as we have reduced prices to accelerate the growth of our BOHA!
+Added: installed base, as well as higher material and shipping costs resulting from worldwide supply disruptions caused by the COVID-19 pandemic.
Operating Expenses - Engineering, Design and Product Development.
−Removed: Engineering, design and product development expense for the six months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Six Months Ended June 30,
+Added: Engineering, design and product development expense for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Nine Months Ended September 30,
Total Sales - 2021
Total Sales - 2020
−Removed: Engineering, design and product development expenses increased $0.9 million, or 31%, during the first six months of 2021 compared to first six months of 2020, as we gradually return to more normalized pre-COVID spending levels and continue development for our food service technology products.
+Added: Engineering, design and product development expenses increased $1.3 million, or 31%, during the first nine months of 2021 compared to first nine months of 2020, as we gradually return to more normalized pre-COVID spending levels and continued development for our food service technology products.
Operating Expenses - Selling and Marketing.
−Removed: Selling and marketing expense for the six months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Six Months Ended June 30,
+Added: Selling and marketing expense for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Nine Months Ended September 30,
Total Sales - 2021
Total Sales - 2020
−Removed: Selling and marketing expenses decreased $0.4 million, or 12%, for the first six months of 2021 compared to the first six months of 2020 primarily due to lower expenses from travel, trade shows and marketing programs in the first six months of 2021.
−Removed: The first quarter of 2020 reflected pre-COVID-19 levels of sales and marketing expenses before costs saving measures were implemented once we were impacted by the pandemic late in the first quarter of 2020.
+Added: Selling and marketing expenses increased $0.2 million, or 5%, for the first nine months of 2021 compared to the first nine months of 2020 primarily due to returning to more normalized pre-COVID-19 levels of sales and marketing expense during the first nine months of 2021 compared to reduced costs during the first nine months of 2020 due to cost saving measures implemented during the second and third quarters of 2020.
Operating Expenses - General and Administrative .
−Removed: General and administrative expense for the six months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Six Months Ended June 30,
+Added: General and administrative expense for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Nine Months Ended September 30,
Total Sales - 2021
Total Sales - 2020
−Removed: General and administrative expenses increased $0.3 million, or 5%, for the first half of 2021 compared to first half of 2020 due to higher recruiting fees and employee compensation, as well as higher consulting fees related to a planned implementation of a new ERP system to be completed in 2022.
−Removed: These increases were partially offset by lower legal and professional fees during the first six months of 2021 compared to the first six months of 2020.
+Added: General and administrative expenses increased $0.3 million, or 4%, for the first nine months of 2021 compared to first nine months of 2020 due to higher recruiting fees and employee compensation, as well as higher consulting fees related to a planned implementation of a new ERP system expected to be completed in 2022.
+Added: These increases were partially offset by lower legal and professional fees and lower severance expense during the first nine months of 2021 compared to the first nine months of 2020.
Operating Loss.
−Removed: Operating loss for the six months ended June 30, 2021 and 2020 is summarized below (in thousands, except percentages):
−Removed: Six Months Ended June 30,
+Added: Operating loss for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):
+Added: Nine Months Ended September 30,
Total Sales - 2021
Total Sales - 2020
−Removed: Our operating loss increased $1.4 million, or 34%, for the first six months of 2021 compared to the first six months of 2020 on 14% higher sales due to a decrease in our gross margin of 940 basis points and an increase in operating expenses of $0.7 million during the first six months of 2021 compared to the first six months of 2020.
+Added: Our operating loss increased $1.5 million, or 27%, for the first nine months of 2021 compared to the first nine months of 2020 on 24% higher sales due to a decrease in our gross margin of 790 basis points and an increase in operating expenses of $1.8 million during the first nine months of 2021 compared to the first nine months of 2020.
Interest, net.
−Removed: We recorded net interest expense of $42 thousand for the first six months of 2021 compared to net interest expense of $22 thousand for the first six months of 2020.
−Removed: The increase in net interest expense was primarily due to a full six months of unused borrowing fees under the Siena Credit Facility that was entered into on March 13, 2020.
−Removed: We recorded other expense of $100 thousand for the first six months of 2021 compared to other expense of $176 thousand for the first six months of 2020 primarily due to foreign exchange losses recorded by our U.K.
+Added: We recorded net interest expense of $71 thousand for the first nine months of 2021 compared to net interest expense of $41 thousand for the first nine months of 2020.
+Added: The increase in net interest expense was primarily due to lower interest income earned from the note receivable to a third-party software developer that was collected in March 2021 and a full nine months of unused borrowing fees under the Siena Credit Facility that was entered into on March 13, 2020.
+Added: We recorded other expense of $169 thousand for the first nine months of 2021 compared to other expense of $60 thousand for the first nine months of 2020 primarily due to foreign exchange losses recorded by our U.K.
+Added: Gain on Forgiveness of Long-Term Debt.
+Added: We recorded a $2.2 million gain in the third quarter of 2021 resulting from the forgiveness of the PPP Loan in July 2021.
Income Taxes.
−Removed: We recorded an income tax benefit for the first six months of 2021 of $1.2 million at an effective tax rate of 22.3%, compared to an income tax benefit during the first six months of 2020 of $1.4 million at an effective tax rate of 32.8%.
−Removed: The effective tax rate for the first six months of 2020 was higher than the comparable 2021 period as it included the impact of our NOL that we incurred during 2020 and will carry back to prior years.
+Added: We recorded an income tax benefit for the first nine months of 2021 of $1.7 million at an effective tax rate of 33.0%, compared to an income tax benefit for the first nine months of 2020 of $1.9 million at an effective tax rate of 33.9%.
+Added: The tax benefit recorded for the nine months ended September 30, 2021 was unusually high as it included the recognition of the gain on the forgiveness of the PPP Loan which is not taxable.
+Added: The effective tax rate for the first nine months of 2020 included the impact of our 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.
−Removed: 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.
−Removed: We reported a net loss for the first six months of 2021 of $4.3 million, or $0.48 per diluted share, compared to net loss of $2.8 million, or $0.38 per diluted share, for the first six months of 2020.
+Added: 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.
+Added: We reported a net loss for the first nine months of 2021 of $3.4 million, or $0.37 per diluted share, compared to a net loss of $3.7 million, or $0.49 per diluted share, for the first nine months of 2020.
Liquidity and Capital Resources
−Removed: For the first six months of 2021, our cash and cash equivalents balance decreased $2.4 million, or 23%, from December 31, 2020.
−Removed: We ended the second quarter of 2021 with $8.0 million in cash and cash equivalents, of which $0.3 million was held by our U.K.
−Removed: subsidiary, and outstanding borrowings of $2.2 million under the PPP Loan.
+Added: For the first nine months of 2021, our cash and cash equivalents balance increased $8.3 million, or 80%, from December 31, 2020 due primarily to financing activities providing $11.5 million of cash largely from the completion of an underwritten public offering during the third quarter of 2021.
+Added: We ended the third quarter of 2021 with $18.7 million in cash and cash equivalents, of which $1 million was held by our U.K.
+Added: subsidiary, and no outstanding borrowings.
Operating activities :
−Removed: The following significant factors affected our cash used in operating activities of $3.9 million for the first six months of 2021 as compared to cash used in operating activities of $2.3 million for the first six months of 2020:
−Removed: During the first six months of 2021:
+Added: The following significant factors affected our cash used in operating activities of $3.9 million for the first nine months of 2021 as compared to cash used in operating activities of $4.2 million for the first nine months of 2020:
+Added: During the first nine months of 2021:
We reported a net loss of $3.4 million.
We recorded depreciation and amortization of $0.7 million and share-based compensation expense of $1.0 million.
−Removed: Accounts receivable increased $2.4 million, or 70%, primarily due to increased sales volume during the second quarter of 2021 .
−Removed: Inventories decreased $2.6 million, or 23%, due to the utilization of inventory on hand to fulfill sales .
−Removed: Accounts payable increased $1.0 million, or 60%, d ue primarily to the timing of payments during the second quarter of 2021 .
−Removed: Accrued liabilities and other liabilities decreased $0.9 million, or 11%, due primarily to the payment of 2020 annual bonuses in March 2021 .
−Removed: During the first six months of 2020:
+Added: We recorded a gain of $2.2 million for the forgiveness of the PPP loan.
+Added: Accounts receivable increased $3.1 million, or 93%, primarily due to increased sales volume during the third quarter of 2021 .
+Added: Inventories decreased $4.9 million, or 44%, due to the utilization of inventory on hand to fulfill sales and significantly reduced inventory purchases resulting from the supply chain disruptions caused by the COVID-19 pandemic .
+Added: Other current and long-term assets increased $0.2 million, or 15%, due to primarily to prepaid expenses related to tradeshows that will be held in the fourth quarter of 2021 .
+Added: Accounts payable decreased $0.2 million, or 14%, d ue primarily to a decrease in inventory purchases made during the third quarter of 2021 .
+Added: Accrued liabilities and other liabilities increased slightly by $0.1 million, or 2%, due primarily to increased deferred revenue .
+Added: During the first nine months of 2020:
We reported a net loss of $3.7 million.
We recorded depreciation and amortization of $0.8 million, and share-based compensation expense of $0.6 million .
−Removed: Accounts receivable decreased $3.1 million, or 48%, due primarily to lower sales volume during the second quarter of 2020 .
−Removed: Inventories decreased by less than 1% due primarily to the utilization of inventory on hand to fulfill sales and delaying inventory purchases to the second half of 2020.
−Removed: Accounts payable decreased $1.7 million, or 56%, due primarily to inventory purchases made towards the end of the fourth quarter of 2019 that were subsequently paid in the first quarter of 2020 and delaying inventory purchases to the second half of 2020 to improve our liquidity.
−Removed: Accrued liabilities and other liabilities decreased $0.7 million, or 10%, due primarily to the payment of 2019 annual bonuses in March 2020 .
+Added: Accounts receivable decreased $1.4 million, or 22%, primarily due to lower sales volume during the third quarter of 2020 .
+Added: Inventories increased $0.4 million, or 4%, primarily due to the build up of inventory from non-cancellable purchase orders that were placed before the onset of the COVID-19 pandemic.
+Added: Accounts payable decreased $0.7 million, or 23%, primarily due to inventory purchases made towards the end of the fourth quarter of 2019 that were subsequently paid in the first quarter of 2020.
+Added: Accrued liabilities and other liabilities decreased $0.5 million, or 7%, primarily due to lower deferred revenue .
Investing activities:
−Removed: Our capital expenditures were $0.2 million for the first six months of 2021 compared to $0.5 million for the first six months of 2020.
−Removed: Expenditures in 2021 were primarily for computer and networking equipment and new product tooling equipment.
+Added: Our capital expenditures were $0.8 million for the first nine months of 2021 compared to $0.6 million for the first nine months of 2020.
+Added: Expenditures in 2021 were primarily related to the implementation of a new ERP system expected to be completed in the first quarter of 2022, computer and networking equipment and new product tooling equipment.
Expenditures in 2020 were primarily for new product tooling equipment, leasehold improvements at our Las Vegas facility and computer and networking equipment.
−Removed: Investing activities also provided $1.6 million for the first six months of 2021 upon the collection of the remaining $1.6 million note receivable balance from an unaffiliated third-party during the first quarter of 2021, compared to $0.6 million of cash used in investing activities during the first six months of 2020, for a loan to the same unaffiliated third-party.
−Removed: Capital expenditures and additions to capitalized software for 2021 are expected to be approximately $1.2 million, primarily for new product tooling, new computer software and computer and networking equipment to support our food service technology market and to a lesser extent, new product tooling.
+Added: Investing activities also provided $1.6 million for the first nine months of 2021 upon the collection of the remaining $1.6 million note receivable balance from an unaffiliated third party during the first quarter of 2021, compared to $0.6 million of cash used in investing activities during the first nine months of 2020, for the issuance of a loan to the same unaffiliated third party.
+Added: Capital expenditures for 2021 are expected to be approximately $1.2 million, primarily for product tooling, a new ERP system, new computer software and computer and networking equipment to support our food service technology market and to a lesser extent, new product tooling.
Financing activities:
−Removed: Financing activities provided $0.1 million of cash for the first six months of 2021 from proceeds from stock option exercises of $0.3 million, partially offset by $0.1 million for the payment of withholding taxes on stock issued from our stock compensation plans and $31 thousand on the final payment of financing costs associated with our Siena Credit Facility.
−Removed: During the first six months of 2020, financing activities provided $2.3 million of cash primarily from the $2.2 million in funds received from the PPP Loan and proceeds of $0.4 million from stock option exercises, partially offset by the payment of financing costs associated with signing our Siena Credit Facility.
−Removed: Additionally, during the first six months of 2020, we borrowed and subsequently repaid $2.8 million from our Siena Credit Facility.
+Added: Financing activities provided $11.5 million of cash for the first nine months of 2021 primarily from the completion of an underwritten public offering which raised net proceeds of $11.3 million, after deducting cash outflows from underwriting discounts and commissions and offering expenses and, to a lesser extent, proceeds of $0.3 million from stock option exercises.
+Added: These increases were partially offset by $0.1 million for the payment of withholding taxes on stock issued from our stock compensation plans and $31 thousand on the final payment of financing costs associated with our Siena Credit Facility.
+Added: During the first nine months of 2020, financing activities provided $2.2 million of cash primarily from the $2.2 million in funds received from the PPP Loan and proceeds of $0.4 million from stock option exercises, partially offset by the payment of financing costs associated with signing our Siena Credit Facility.
+Added: Additionally, during the first nine months of 2020, we borrowed and subsequently repaid $2.8 million from our Siena Credit Facility.
Credit Facility and Borrowings
9 unchanged sentences
On July 21, 2021, the Company entered into an amendment (the “Credit Facility Amendment”) to the Siena Credit Facility.
−Removed: 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.
−Removed: As of June 30, 2021, we had no outstanding borrowings under the Siena Credit Facility and $4.7 million of available borrowing capacity under the Siena Credit Facility.
+Added: 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.
+Added: During the third quarter of 2021, we have been in compliance with our excess availability covenant.
+Added: As of September 30, 2021, we had no outstanding borrowings under the Siena Credit Facility and $4.2 million of available borrowing capacity 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 which is administered by the SBA and was established under Division A, Title I of the CARES Act, enacted March 27, 2020.
−Removed: 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 payments under lease agreements in effect before February 15, 2020, utilized 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.
+Added: 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 payments 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 of the PPP Loan needed to have been used for eligible payroll costs for the PPP Loan to be forgiven.
−Removed: 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.
−Removed: On July 8, 2021, the Company received notifications from Berkshire Bank and the SBA that its PPP loan (including all interest accrued thereon) 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 a 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.
+Added: 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.
+Added: 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.
+Added: 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.
−Removed: The PPP Loan is classified as “Long-term debt” in the Condensed Consolidated Balance Sheet.
−Removed: 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.
+Added: 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.
Shareholder Dividend Payments
5 unchanged sentences
The Company does not currently anticipate requiring any additional credit facilities within the next twelve months beyond our Siena Credit Facility which is discussed above.
−Removed: We believe that our cash and cash equivalents on hand, our expected cash flows generated from operating activities and borrowings available under our Siena Credit Facility will provide sufficient resources to meet our working capital needs, finance our capital expenditures and meet our liquidity requirements through at least the next twelve months.
+Added: We believe that our cash and cash equivalents on hand, our expected cash flows generated from operating activities, the proceeds raised through the underwritten public offerings during August 2021, and borrowings available under our Siena Credit Facility will provide sufficient resources to meet our working capital needs, finance our capital expenditures and meet our liquidity requirements through at least the next twelve months.
Notwithstanding this belief, the duration and extent of the pandemic remain uncertain and its ultimate impact is unknown.
2 unchanged sentences
Off-Balance Sheet Arrangements
−Removed: As of June 30, 2021, we had no off-balance sheet arrangements that have had or that we expect would be reasonably likely to have a future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
+Added: As of September 30, 2021, we had no off-balance sheet arrangements that have had or that we expect would be reasonably likely to have a future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
1 unchanged sentence
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.