What changed in this filing

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Item 1. Financial Statements

2022-05-16 compared with 2021-11-12 · 186 added, 171 removed, 192 unchanged (65% of the section changed)

2 unchanged sentences

C ONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2021

March 31, 2022

December 31, 2021

3 unchanged sentences

Accounts receivable, net

Note receivable

Employee retention credit receivable

Prepaid income taxes

2 unchanged sentences

Fixed assets, net of accumulated depreciation of $ 16,898 and $ 16,736 , respectively

Note receivable, net of current portion

Right-of-use asset

8 unchanged sentences

Total current liabilities

Long-term debt

Deferred revenue, net of current portion

3 unchanged sentences

Shareholders’ equity:

Common stock, $ 0.01 par value, 20,000,000 shares authorized;

Common stock, $ 0.01

par value, 20,000,000 shares authorized;

13,954,850 and 13,917,731 shares issued, respectively;

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Retained earnings

Accumulated other comprehensive income (loss), net of tax

Accumulated other comprehensive income, net of tax

Treasury stock, at cost, 4,044,842 shares

3 unchanged sentences

TRANSACT TECHNOLOGIES INCORPORATED

CONDE NSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

5 unchanged sentences

Operating loss

Interest and other income (expense):

Interest and other expense:

Interest, net

Gain on forgiveness of long-term debt

Income (loss) before income taxes

Loss before income taxes

Income tax benefit

Net income (loss)

Net income (loss) per common share:

Net loss per common share:

Shares used in per-share calculation:

1 unchanged sentence

TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLI DATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Net income (loss)

Foreign currency translation adjustment, net of tax

Comprehensive income (loss)

Comprehensive loss

See notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDE NSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended

(In thousands)

6 unchanged sentences

Foreign currency transaction losses

Gain on the forgiveness of long-term debt

Changes in operating assets and liabilities:

8 unchanged sentences

Proceeds from the sale of fixed assets

Collection (issuance) of note receivable

Net cash provided by (used in) investing activities

Collection of note receivable

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Revolving credit line borrowings

Revolving credit line payments

Long-term debt borrowings

Proceeds from the issuance of common stock

Payment of common stock issuance costs

Proceeds from stock option exercises

1 unchanged sentence

Payment of bank financing costs

Net cash provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

4 unchanged sentences

TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSO LIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Equity beginning balance

Balance, beginning of period

Issuance of common stock

Issuance of shares from stock awards

Balance, end of period

Balance, beginning and end of period

Additional paid-in capital

Balance, beginning of period

Issuance of common stock, net of issuance cost

Share-based compensation expense

Issuance of shares from exercise of stock options

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

Relinquishment of stock awards to pay for withholding taxes

Balance, end of period

1 unchanged sentence

Balance, beginning of period

Net income (loss)

Balance, end of period

1 unchanged sentence

Balance, beginning and end of period

Accumulated other comprehensive income (loss), net of tax

Accumulated other comprehensive income (loss)

Balance, beginning of period

3 unchanged sentences

Supplemental share information

Issuance of common stock

Issuance of shares from stock awards

4 unchanged sentences

Basis of presentation

The accompanying unaudited financial statements of TransAct Technologies Incorporated (“TransAct”, the “Company”, “we”, “us”, or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The accompanying unaudited financial statements of TransAct Technologies Incorporated

(“TransAct”, the “Company”, “we”, “us”, or “our”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) for interim financial information.

Accordingly, they do not include all of the information and footnotes required by U.S.

Accordingly, they do not include all of

the information and footnotes required by U.S.

GAAP to be included in full year financial statements.

In the opinion of management, all adjustments considered necessary for a fair statement of the results for the periods presented have been included and are of a normal recurring nature.

In the opinion of management, all adjustments considered necessary for a fair statement of the results for the periods presented have been included

and are of a normal recurring nature .

The December 31, 2021 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by U.S.

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

These interim financial

statements should be read in conjunction with the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2021 .

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

subsidiary are measured using local currency as the functional currency.

Assets and liabilities of such subsidiary have been translated at the end-of-period exchange rates, and related revenues and expenses have been translated at the exchange rate as of the date the transaction was recognized, with the resulting translation gain or loss recorded in “Accumulated other comprehensive income (loss), net of tax” in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Changes in Shareholders’ Equity.

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

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.

Assets and liabilities of

such subsidiary have been translated at the end-of-period exchange rates, and related revenues and expenses have been translated at the exchange rate as of the date the transaction was recognized, with the resulting translation gain or loss recorded in

“Accumulated other comprehensive income, net of tax” in the Condensed Consolidated Balance Sheets and “Accumulated other comprehensive income (loss)” in the Condensed Consolidated Statements of Changes in Shareholders’ Equity.

Transaction gains and

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

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31,

Impact of the COVID-19 Pandemic

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

While we began to experience a modest recovery starting in the second half of 2020 into 2021 and expect this recovery to continue during the remainder of 2021, the exact timing and pace of recovery is unknown given uncertainty surrounding responsive measures to 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 nine months of 2021.

In the first quarter of 2020, the COVID-19 pandemic and the resulting social distancing measures, including closures and restricted

openings of restaurants and casinos implemented by federal, state and local authorities, negatively impacted customer demand and disrupted portions of our supply chain, including delayed product shipments from our two manufacturers located in Thailand

Our inventory levels decreased significantly during 2021 due to these supply chain disruptions, and although we have been able to increase inventory levels during the first quarter of 2022, continuing delays and further disruptions have led

to an increased backlog, including increased freight costs, and have impacted our ability to deliver products to our customers on time or at all.

While we began to experience a modest recovery starting in the second half of 2020 and continuing into

2021, the recovery slowed again in the first quarter of 2022 due to a resurgence of the Omicron variant.

We again are beginning to see the recovery resume in the second quarter of 2022 which we expect to continue during the remainder of 2022, though

the exact timing and pace of recovery are unknown given uncertainty surrounding responsive measures to the spread of virus variants or any potential future resurgences of the virus and the significant disruption that our customers have already

experienced and may continue to experience.

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

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Balance Sheet, Cash Flow and Liquidity.

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

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.

We have taken the following actions to increase liquidity and strengthen our financial position in an effort to mitigate the negative impacts from the COVID-19

Public Offering – On October 16, 2020 and August 16, 2021, the Company raised net proceeds of

$ 8.7 million and $ 11.2 million ( including the exercise of the underwriters’

overallotment options on October 16, 2020 and August 20, 2021 ), respectively, after deducting underwriting discounts, commissions and offering expenses, through

underwritten public offerings in which we 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 (“CARES”)

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

See Note 5 for further details regarding the PPP Loan.

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

Employee Retention Credit – Under the provisions of the CARES Act, the Company was eligible for a refundable employee retention credit subject to certain criteria.

connection with the CARES Act, the Company recognized the employee retention credit during the fourth quarter of 2021 as a $1.5 million “Gain from employee retention credit” in the Consolidated Statement of Operations for the year ended

December 31, 2021 and recorded a $1.5 million “Employee retention credit receivable” in the Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021.

We expect to receive these funds during 2022 .

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

See Note 5 for further details regarding this facility.

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.

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

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

We are planning to implement additional expense management measures starting in the second quarter of 2022 to those implemented in 2020

and 2021, but no definitive plans are yet finalized.

In addition to the planned expense management actions, we may also further modify or supplement the actions we have taken to increase liquidity as the timing and extent of customer demand recovery

develops and supply chains normalize.

After reviewing whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations over the

12 months following the date on which the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q were issued, including consideration of the actions taken to manage expenses and liquidity, we believe that our net

cash to be provided by operations combined with our cash and cash equivalents and borrowing availability under our revolving credit facility will provide sufficient liquidity to fund our current obligations, capital spending, and working capital

requirements and to comply with the financial covenants of our credit facility over at least 12 months following the date that the Condensed Consolidated Financial Statements were issued.

Use of Assumptions and Estimates

Management’s belief that the Company will be able to fund its planned operations over the 12 months following the date on which the Condensed Consolidated Financial Statements were issued is based on assumptions which involve significant judgment and estimates of future revenues, capital expenditures and other operating costs.

Our current assumptions are that casinos and restaurants remain open and continue to gradually increase capacity limitations during 2021, but that many casinos and restaurants may delay purchases of new slot machines and our BOHA!

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

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

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

Management’s belief that the Company will be able to fund its planned operations over the 12 months following the date on which the

Condensed Consolidated Financial Statements were issued is based on assumptions which involve significant judgment and estimates of future revenues, capital expenditures and other operating costs.

Our current assumptions are that casinos and

restaurants remain open and consumer traffic continues to increase during 2022, but that casinos and restaurants may delay purchases of new slot machines and our BOHA!

products, respectively, due to labor shortages and supply issues caused by the

Based on these assumptions, we anticipate that sales in casino and gaming and food service technology may continue to be negatively impacted for the foreseeable future.

We have performed a sensitivity analysis on these assumptions to

forecast the potential impact of a slower-than-anticipated recovery and believe that we are positioned to withstand the impact of lower-than-anticipated sales and that we will be able to take additional financial and operational actions to cut costs

and/or increase liquidity, if necessary.

These actions may include additional expense reductions and capital raising activities.

In addition, the presentation of the accompanying unaudited financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities.

Our estimates include those related to revenue recognition, inventory obsolescence, the valuation of deferred tax assets and liabilities, depreciable lives of equipment, warranty obligations, and contingent liabilities.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

In addition, the presentation of the accompanying unaudited financial statements requires us to make estimates and judgments that

affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities.

Our estimates include those related to revenue recognition, accounts receivable, inventory obsolescence, goodwill and

intangible assets, the valuation of deferred tax assets and liabilities, depreciable lives of equipment, warranty obligations, share-based compensation and contingent liabilities.

We base our estimates on historical experience and on various other

assumptions that we believe to be reasonable under the circumstances.

Actual results could differ from those estimates used.

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Disaggregation of revenue

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.

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

affected by economic factors.

Sales and usage-based taxes are excluded from revenues.

Three Months Ended

September 30,

(In thousands)

8 unchanged sentences

Total net sales

Nine Months Ended

September 30,

(In thousands)

United States

International

United States

International

Food service technology

POS automation

Casino and gaming

TransAct Services Group

Total net sales

Contract balances

Contract assets consist of unbilled receivables.

Pursuant to the over-time revenue recognition model, revenue may be recognized prior to the customer being invoiced.

Pursuant to the over-time revenue recognition model, revenue may be recognized prior

to the customer being invoiced.

An unbilled receivable is recorded to reflect revenue that is recognized when such revenue exceeds the amount invoiced to the customer.

Unbilled receivables are separated into current and non-current assets and included within “Accounts receivable” and “Other non-current assets” in the Condensed Consolidated Balance Sheets.

Unbilled receivables are separated into current and non-current assets and included

within “Accounts receivable” and “Other non-current assets” in the Condensed Consolidated Balance Sheets.

Contract liabilities consist of customer pre-payments and deferred revenue.

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

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

Customer prepayments are reported as “Accrued liabilities”

in current liabilities in the Condensed Consolidated Balance Sheets and represent customer payments made in advance of performance obligations in instances where credit has not been extended and are recognized as revenue when the performance obligation

prepaid software subscriptions for our BOHA!

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

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:

September 30, 2021

For the three months ended March 31, 2022 , we recognized revenue of $ 0.4 million related to our contract liabilities at December 31, 2021 .

Total net contract

liabilities consisted of the following:

March 31, 2022

December 31, 2021

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Deferred revenue, non-current

Total net contract (liabilities) assets

Total net contract liabilities

Remaining performance obligations

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 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

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

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

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

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.

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

our customer.

As of March 31, 2022, the aggregate amount of transaction prices allocated to remaining performance obligations was $ 13.6 million.

The Company expects to recognize revenue of $ 13.2

million of its remaining performance obligations within the next 12 months following March 31, 2022, $ 0.3 million within the next 24 months and the balance of these remaining

performance obligations recognized within the next 36 months .

The components of inventories were:

September 30, 2021

March 31, 2022

December 31, 2021

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Raw materials and purchased component parts

Work-in-process

Finished goods

Accrued product warranty liability

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

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

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

Nine Months Ended

September 30,

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

Estimated warranty costs are based upon actual past experience of product

repairs and the related estimated cost of labor and material to make the necessary repairs.

The following table summarizes the activity recorded in the accrued product warranty liability during the three months ended March 31, 2022 and 2021:

Three Months Ended

(In thousands)

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Balance, end of period

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.

The Siena Credit Facility provides for a revolving credit line of up to $ 10.0 million expiring on March 13, 2023 .

As of March 31, 2022, $ 72 thousand of the accrued product warranty liability was classified as current in “Accrued liabilities” in the Condensed Consolidated Balance Sheets and

the remaining $ 18 thousand was classified as non-current in “Other liabilities”.

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

The Siena Credit

Facility provides for a revolving credit line of up to $ 10.0 million expiring on March 13, 2023 .

Borrowings under the Siena Credit Facility bear a floating rate of interest equal to the greatest of (i) the prime rate plus 1.75 %, (ii) the federal funds rate plus 2.25 %, and (iii) 6.50 %.

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

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

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

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

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

We also pay a

fee of 0.50 % on unused borrowings under the Siena Credit Facility.

Borrowings under the Siena Credit Facility are secured by a lien on

substantially all the assets of the Company.

The Siena Credit Facility imposes a financial covenant on the Company and borrowings are subject to a borrowing base based on (i) 85 % of eligible accounts receivable plus the lesser of (a) $ 5.0

million and (b) 50 % of eligible raw material and 60 %

of finished goods inventory.

from April 1, 2020 to March 31, 2021.

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

The Credit Facility Amendment changed the financial covenant under the Siena Credit Facility from a minimum EBITDA covenant to an excess availability covenant requiring that the Company maintain excess availability of at least $ 750 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.

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

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

The 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.

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.

the first quarter of 2022, we have been in compliance with our excess availability covenant, and as of March 31, 2022, we had no outstanding borrowings under the Siena Credit Facility and $ 3.5

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.

Under the terms of the PPP, the PPP Loan would be forgiven to the extent that funds from the PPP Loan were used for payroll costs and costs to continue group health care benefits, as well as for

interest on mortgage obligations incurred before February 15, 2020, rent under lease agreements in effect before February 15, 2020, utilities for which service began before February 15, 2020, and interest on debt obligations incurred before February

15, 2020, subject to conditions and limitations provided in the CARES Act.

At least 60% (under the PPP terms, as amended) of the proceeds from the PPP Loan were required to be 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 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.

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 forgiveness of the PPP Loan was reported as “Gain on forgiveness of long-term debt” in the Consolidated Statement of Operations during the year ended December 31, 2021.

Earnings per share

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

Net income (loss)

Weighted average common shares outstanding

Dilutive effect of outstanding options and restricted stock units as determined by the treasury stock method

Dilutive effect of outstanding options and restricted stock units as determined by

the treasury stock method

Weighted average common and common equivalent shares outstanding

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 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

On January 23, 2020, our Board of Directors announced the cessation of our quarterly cash dividend on the Company’s common stock.

The final dividend payment was made in December 2019.

Net 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 March 31, 2022 and 2021, there were 943 thousand and 705 thousand, respectively, of potentially dilutive shares consisting of stock awards that were excluded from the calculation of earnings per diluted share.

Furthermore, in

periods when a net loss is reported, such as the three months ended March 31, 2022 and 2021, basic and diluted net loss per common share are calculated using the same method.

We account for leases in accordance with ASC Topic 842:

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

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

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

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

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

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

The lease, which was last amended on January 14, 2016, was scheduled to expire on May 31, 2021.

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

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

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

Our leases with options to extend provide for

extensions of two to five years with

the ability to terminate the lease within one year .

2021, we entered into an amendment to modify the expiration date of our lease on our Hamden, Connecticut facility.

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

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

The lease amendment modified

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

October 31, 2025.

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

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

Operating lease expense for the three months ended 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.

Operating lease expense for the three months ended March 31, 2022 and 2021 was $ 237 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 expenses include short-term lease costs, which were immaterial during the periods

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

Nine Months Ended

September 30,

Three Months Ended

Operating cash outflows from leases

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

September 30, 2021

The following summarizes additional information related to our leases as of March 31, 2022 and December 31, 2021:

March 31, 2022

December 31, 2021

1 unchanged sentence

Weighted average discount rate

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

The maturity of the Company’s operating lease liabilities as of March 31, 2022 and December 31, 2021 were as follows (in thousands):

March 31, 2022

December 31, 2021

2 unchanged sentences

Total lease liabilities

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 carried back to tax years that had a federal statutory tax rate of 34 % compared to 21 % in 2020.

We recorded an income tax benefit for the first quarter of 2022 of $ 1.3 million at an effective tax rate of 23.9 %, compared to an income tax benefit during the first quarter of 2021 of $ 0.6 million at an effective tax rate of 20.1 %.

The effective tax rate for the first quarter of 2022 is higher than the effective tax rate for the first quarter of 2021 as we are estimating an increase in the R&D

credit in 2022 compared to 2021 due to expected investment spending for our BOHA!

We are subject to U.S.

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

states and foreign jurisdictions.

We have substantially concluded all U.S.

state and foreign jurisdictions.

We have substantially

concluded all U.S.

federal, state and local income tax, and foreign tax regulatory examination matters through 2017.

However, our federal tax returns for the years 2018 through 2020 remain open to examination.

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 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 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.

state and foreign tax

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

As of March 31, 2022, we

had $ 144 thousand of total gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any

future periods.

We expect that $ 28 thousand of the $ 144

thousand of unrecognized tax benefits will reverse in 2022 upon the expiration of the statute of limitations.

We recognize interest and penalties related to uncertain

tax positions in the income tax provision reported as “Deferred tax assets” in the Condensed Consolidated Balance Sheet.

As of March 31, 2022 , we had $ 24 thousand of accrued interest and penalties related to uncertain tax positions.

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

Subsequent events

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

The Company has evaluated all events or transactions that occurred up to the date the Condensed 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 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