What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-18 · 278 added, 170 removed, 226 unchanged (66% of the section changed)

2 unchanged sentences

C ONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, as adjusted)

June 30, 2022

(unaudited, as adjusted – see Note 9)

September 30, 2022

December 31, 2021

7 unchanged sentences

Total current assets

Fixed assets, net of accumulated depreciation of $ 17,216 and $ 16,736 , respectively

Fixed assets, net of accumulated depreciation of $ 17,499

and $ 16,736 , respectively

Right-of-use asset

3 unchanged sentences

Current liabilities:

Current portion of revolving loan payable

Accounts payable

8 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;

13,956,375 and 13,917,731 shares issued, respectively;

9,910,008 and 9,872,889 shares outstanding, respectively

9,911,533 and 9,872,889 shares

outstanding, respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income, net of tax

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

Accumulated other comprehensive (loss) income, net of tax

Treasury stock, at cost, 4,044,842

Total shareholders’ equity

3 unchanged sentences

CONDE NSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, as adjusted)

(unaudited, as adjusted – see Note 9)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

4 unchanged sentences

General and administrative

Operating loss

Interest and other expense:

Operating income (loss)

Interest and other income (expense):

Interest, net

Loss before income taxes

Gain on forgiveness of long-term debt

Income (loss) before income taxes

Income tax benefit

Net loss per common share:

Net income (loss)

Net income (loss) per common share:

Shares used in per-share calculation:

1 unchanged sentence

TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLI DATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, as adjusted)

CONDENSED CONSOLI DATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, as adjusted – see Note 9)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Net income (loss)

Foreign currency translation adjustment, net of tax

Comprehensive loss

Comprehensive income (loss)

See notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDE NSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, as adjusted)

Six Months Ended

(unaudited, as adjusted – see Note 9)

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Foreign currency transaction losses

Gain on forgiveness of long-term debt

Changes in operating assets and liabilities:

11 unchanged sentences

Cash flows from financing activities:

Proceeds from the issuance of common stock

Proceeds from bank borrowings

Payment of common stock issuance costs

Proceeds from stock option exercises

1 unchanged sentence

Payment of bank financing costs

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Decrease in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental schedule of non-cash investing activities:

Capital expenditures included in accounts payable

See notes to Condensed Consolidated Financial Statements.

1 unchanged sentence

CONDENSED CONSO LIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(unaudited, as adjusted)

(unaudited, as adjusted – see Note 9)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

Equity beginning balance

Balance, beginning and end of period

Balance, beginning of period

Issuance of common stock

Balance, end of period

Additional paid-in capital

Balance, beginning of period

Issuance of common stock, net of issuance costs

Share-based compensation expense

4 unchanged sentences

Balance, beginning of period

Net income (loss)

Balance, end of period

7 unchanged sentences

Supplemental share information

Issuance of common stock

Issuance of shares from stock awards

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 (“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 (“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.

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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, 2021 .

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 the 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, 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.

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 “Accumulated other comprehensive income (loss), net of tax” 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 and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022.

The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31,

See Note 9 for a discussion of a change in accounting principle which occurred in the second quarter of 2022.

TransAct changed its method of inventory valuation from standard costing which approximates first-in first-out “FIFO” to the average costing methodology.

TransAct changed its method of inventory

valuation from standard costing which approximates first-in first-out (“FIFO”) to the average costing methodology.

All prior periods presented have been retrospectively adjusted to apply the new method of accounting.

Certain prior period amounts have been adjusted to conform with the current year presentation.

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 Thailand and China.

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 six months of 2022, continuing delays and further disruptions have led to an increased backlog and increased freight costs, which 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 through 2021, the recovery slowed again in the first quarter of 2022 due to a resurgence resulting from the Omicron variant and other variants.

We began to see a resumption of the recovery 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 we and 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;

but, the length and ultimate severity of the reduction in demand and supply chain disruptions due to the COVID-19 pandemic remains uncertain.

Impact of the COVID-19 pandemic and Global Supply Chain Disruptions

Since early 2020, the COVID-19 pandemic has continued to cause uncertainty and disruption in the global economy and financial markets, such as increased shipping and

logistics costs and supply chain disruptions.

We have also been impacted by global supply chain issues and inflationary pressures, which have increased our costs and, in some instances, slowed our ability to deliver products to customers.

2021, our inventory levels decreased significantly as a result of these supply chain disruptions and we experienced significantly lower sales levels because of the global economic slowdown.

However, during the first nine months of 2022, we have been

able to increase our inventory levels and minimize the impact to our customers by successfully modifying our products that were affected by supply chain disruptions as well as sourcing component parts from alternate suppliers.

This strategy allowed us

to meet expanding customer demands and significantly grow our sales after the first quarter of 2022 as the pandemic eased.

Although we have been able to increase inventory levels during the first nine months of 2022, there can be no assurance that new

supply chain disruptions will not affect our products or that we will be able to make timely modifications to address any future supply chain issues that arise.

Further, while we have offset most of our cost increases by increasing prices of our

products, there can be no guarantee that we will be able to offset any future cost increases should they arise.

After a slowdown in the first quarter of 2022 resulting from the Omicron and other variants of COVID-19, we have continued to experience

demand recovery in the second and third quarters of 2022.

We expect this recovery to continue during the remainder of 2022.

Balance Sheet, Cash Flow and Liquidity.

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 pandemic:

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”) Act.

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 pandemic, supply chain disruptions and inflationary pressures:

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.

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

In 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 June 30, 2022 and December 31, 2021.

We expect to receive these funds during 2022 .

In 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 September 30, 2022 and December 31,

We expect to receive these funds within the next twelve months.

Credit Facility – On March 13, 2020, we entered into a new credit facility with Siena Lending Group LLC (the “Lender”) that provides a revolving credit line of up to $ 10.0 million, subject to a borrowing base, and on July 19, 2022, we entered into an amendment to extend the maturity of the facility to March 13,

See Note 5 and Note 10 for further details regarding this facility.

See Note 5 for further details regarding this facility.

Reduced Capital Expenditures – We limited capital expenditures during 2020 and 2021 and are gradually increasing expenditures during 2022 as sales improve.

We continue to implement additional expense management measures as circumstances warrant.

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 issuance date of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q, 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 such issuance date.

After reviewing whether conditions and/or events raise substantial doubt about our ability to meet future financial obligations over the 12 months

following the issuance date of the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q (this “Form 10-Q”), 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 such issuance date.

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

products, respectively, due to labor shortages, supply issues and inflation caused by the COVID-19 pandemic.

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, 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.

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, inflation, rising interest rates, capital expenditures and other operating costs.

Our current assumptions are that casinos and

restaurants will remain open and consumer traffic will continue to increase during the balance of 2022.

Though demand for our products at casinos has increased substantially in 2022, and we expect this trend to continue, we cannot predict the ultimate

impact of the current economic environment, including inflation, rising interest rates and supply chain disruptions on our customers, which may impact sales.

We believe that we are positioned to withstand the impact of any potential economic downturn

or slower than anticipated economic recovery.

However, despite our recent large backlog of orders and increasing market share, should such conditions arise, we believe we will be able to take additional financial and operational actions to cut costs

and/or increase liquidity.

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.

For a discussion of our significant accounting policies, see Note 2, Summary of

Significant Accounting Policies within Part II, Item 8, “Financial Statements and Supplementary Data” in the Annual Report on Form 10-K for the year ended December 31, 2021.

Other than as described in Note 9 of this Form 10Q, there have been

no changes to our significant accounting policies since our Annual Report on Form 10K for the year ended December 31, 2021.

We account for revenue in accordance with ASC Topic 606:

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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 tables disaggregate our revenue by market type, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are

affected by economic factors.

Sales and usage-based taxes are excluded from revenues.

Three Months Ended

September 30,

(In thousands)

8 unchanged sentences

Total net sales

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

11 unchanged sentences

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 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, net”

and “Other assets” in 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 is complete.

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

subscriptions for our BOHA!

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

For the six months ended June 30, 2022 , we recognized revenue of $ 0.6 million related to our contract liabilities at December 31, 2021 .

Total net contract liabilities consisted of the following:

June 30, 2022

For the nine months ended September 30, 2022 , we recognized revenue of $ 0.8 million related to our contract liabilities at December 31, 2021 .

contract liabilities consisted of the following:

September 30, 2022

December 31, 2021

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

As of June 30, 2022, the aggregate amount of transaction prices allocated to remaining performance obligations was $ 19.5 million.

The Company expects to recognize revenue of $ 18.8 million of its remaining performance obligations within the next 12 months following June 30, 2022, $ 0.6 million within the next 24 months following June 30, 2022 and the balance of these remaining performance obligations recognized within the next 36 months following June 30, 2022.

September 30, 2022, the aggregate amount of transaction prices allocated to remaining performance obligations was $ 19.0 million.

The Company expects to recognize revenue of $ 18.5

million of its remaining performance obligations within the next 12 months following September 30, 2022, $ 0.4 million within the next 24 months following September 30, 2022 and the balance of these remaining performance obligations within the next 36 months following September 30, 2022.

The components of inventories were:

June 30, 2022

September 30, 2022

December 31, 2021

5 unchanged sentences

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 six months ended June 30, 2022 and 2021:

Six Months Ended

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, 2022 and 2021:

Nine Months Ended

September 30,

(In thousands)

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Balance, end of period

As of June 30, 2022, $ 63 thousand of the accrued product warranty liability was classified as current in “Accrued liabilities” in the Condensed Consolidated Balance Sheets and the remaining $ 17 thousand was classified as non-current in “Other liabilities”.

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

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.

As of September 30, 2022, $ 57 thousand of the accrued product warranty liability was classified as current in “Accrued liabilities” in the Condensed Consolidated Balance Sheet and the

remaining $ 20 thousand was classified as non-current in “Other liabilities”.

Credit Facility

On March 13, 2020, we entered into a credit facility (the “Siena Credit Facility”) with the Lender and terminated our credit facility with TD Bank, N.A.

The Siena Credit

Facility provides for a revolving credit line of up to $ 10.0 million and was originally scheduled to expire 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 %.

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.

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.

From July 31, 2021 to June 30, 2022, we have been in compliance with our excess availability covenant.

As of June 30, 2022, we had no outstanding borrowings under the Siena Credit Facility and $ 4.5 million of borrowing capacity available under the Siena Credit Facility, excluding the excess availability covenant.

This agreement was further amended in the third quarter of 2022 – see Note 10.

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.

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

of finished goods inventory and restricts, among other things, our ability to incur additional indebtedness and create other liens.

The three-month period from April 1, 2020 to June 30, 2020 was the first period we were subject to the original

financial covenant, which required the Company to maintain a minimum EBITDA and continued through the 12-month period from April 1, 2020 to March 31, 2021.

On July 21, 2021, the Company entered into an amendment (“Siena Credit Facility Amendment No.

1”) to the Siena Credit Facility.

Siena Credit Facility Amendment No.

1 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.

From July 31, 2021 to September 30, 2022, we remained in compliance with our excess availability covenant.

September 30, 2022, we had $ 2.3

million of outstanding borrowings under the Siena Credit Facility and $ 2.5 million of net borrowing capacity available under the Siena Credit

On July 19, 2022, the Company and the Lender entered into Amendment No.

2 (“Siena Credit Facility Amendment No.

2”) to the Siena Credit Facility, as amended by Siena

Credit Facility Amendment No.

Also on July 19, 2022, the Company and the Lender entered into an Amended and Restated Fee Letter (the “Amended Fee Letter”) in connection with the Siena Credit Facility Amendment No.

The Siena Credit Facility

Amendment No.

2 did not modify the aggregate amount of the revolving commitment or the interest rate applicable to the loans .

The changes to the Siena Credit Facility provided for in Siena Credit Facility Amendment No.

2 include, among other things, the following:

(i) The extension of the maturity date from March 13, 2023 to March 13, 2025;

(ii) The termination of the existing blocked account control agreement and entry into a new “springing” deposit account control agreement, permitting

the Company to direct the use of funds in its deposit account until such time as (a) the sum of excess availability under Siena Credit Facility (as amended) and unrestricted cash is less than $ 5 million for 3 consecutive business days or (b) an event of default occurs and is

In addition, the Amended Fee Letter requires the Company, while it retains the ability to direct the use of funds in the deposit account, to maintain outstanding

borrowings of at least $ 2,250,000 in principal amount.

If the Company does not have the ability to direct the use of funds in the deposit

account, then the Amended Fee Letter requires the Company to pay interest on at least $ 2,250,000 principal amount of loans, whether or not such

amount of loans is actually outstanding.

On May 1, 2020, the Company was granted the PPP Loan from Berkshire Bank in the aggregate

amount of $ 2.2 million, pursuant to the PPP.

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

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.

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

The 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.

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

The 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

The following table sets forth the reconciliation of basic weighted average shares outstanding and diluted weighted average shares outstanding:

The following table sets forth the reconciliation of basic weighted average shares outstanding and diluted weighted average shares outstanding (as adjusted, See Note 9):

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

Net income (loss)

Weighted average common shares outstanding

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Weighted average common and common equivalent shares outstanding

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 June 30, 2022 and 2021 , there were 1.5 million and 0.3 million, respectively, of potentially dilutive shares consisting of stock awards that were excluded from the calculation of earnings per diluted share.

For the six months ended June 30, 2022 and 2021 , there were 1.2 million and 0.7 million, respectively, of potentially dilutive shares consisting of stock awards that were excluded from the calculation of earnings per diluted share.

In periods for which a net loss is reported, such as the three and six months ended June 30, 2022 and 2021, basic and diluted net loss per common share are calculated using the same method.

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, 2022 and 2021 , there were 0.3 million and 0.3 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, 2022 and 2021 , there were 1.6 million and 0.4 million, respectively, of potentially dilutive shares consisting of stock awards that were excluded from the

calculation of earnings per diluted share.

In periods for which a net loss is reported, such as the nine months ended September 30, 2022 and 2021, basic and

diluted net loss per common share are calculated using the same method.

For the three months ended September 30, 2022, the d ilutive effect of outstanding options

and restricted stock units, as determined by the treasury stock method, was less than one thousand shares and thus did not impact the

rounded shares presented above.

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.

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

Our leases are included in

“Right-of-use-assets” and “Lease liabilities” in our Condensed Consolidated Balance Sheets.

Our leases have remaining lease terms of two 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 .

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

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

On April 30, 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 modification resulted in reducing the right-of-use-asset and lease liability by $ 0.3 million .

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 .

On April 26, 2022, we entered into an amendment to modify the expiration date of our lease on our Las Vegas, Nevada facility.

The lease was set to expire on November 1, 2022 and the amendment extended the lease term to November 30, 2025.

The lease was set to expire on November 1,

2022 and the amendment extended the lease term to November 30, 2025.

The lease amendment resulted in an increase to the right-of-use-asset and lease liability of $ 0.8 million .

The lease amendment modified the base rent and extended the lease term from October 31, 2022 to November 30, 2025.

Operating lease expense for the three months ended June 30, 2022 and 2021 was $ 250 thousand and $ 239 thousand, respectively, and is reported as “Cost of sales”, “Engineering, design and product development expense”, “Selling and marketing expense”, and “General and administrative expense” in the Condensed Consolidated Statements of Operations.

Operating lease expense for the six months ended June 30, 2022 and 2021 was $ 487 thousand and $ 482 thousand, respectively.

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

The lease amendment modified the base rent and extended the lease term from October 31, 2022 to

November 30, 2025.

Operating lease expense for the three months ended September 30, 2022

and 2021 was $ 261 thousand and $ 235 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, 2022 and 2021 was $ 748

thousand and $ 717 thousand, respectively.

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):

Six Months Ended

Nine Months Ended

September 30,

Operating cash outflows from leases

The following summarizes additional information related to our leases as of June 30, 2022 and December 31, 2021:

June 30, 2022

The following summarizes additional information related to our leases as of September 30, 2022 and December 31, 2021:

September 30, 2022

December 31, 2021

1 unchanged sentence

Weighted average discount rate

The maturity of the Company’s operating lease liabilities as of June 30, 2022 and December 31, 2021 were as follows (in thousands):

June 30, 2022

The maturity of the Company’s operating lease liabilities as of September 30, 2022

and December 31, 2021 were as follows (in thousands):

September 30, 2022

December 31, 2021

2 unchanged sentences

Total lease liabilities

We recorded an income tax benefit for the second quarter of 2022 of $ 870 thousand at an effective tax rate of ( 26.8 %), compared to an income tax benefit for the second quarter of 2021 of $ 664 thousand at an effective tax rate of ( 24.6 %).

For the six months ended June 30, 2022, we recorded an income tax benefit of $ 2.2 million at an effective tax rate of ( 24.9 %), compared to an income tax benefit for the six months ended June 30, 2021 of $ 1.2 million at an effective tax rate of ( 22.4 %).

We recorded an income tax benefit for the third

quarter of 2022 of $ 62 thousand at

an effective tax rate of ( 13.3 %), compared to an income tax benefit for the third quarter of 2021 of $ 442 thousand at an effective tax rate of ( 96.3 %).

For the nine months ended September 30, 2022, we

recorded an income tax benefit of $ 2.3 million at an effective tax rate of ( 27.0 %), compared to an income tax benefit for the nine months ended September 30, 2021 of $ 1.6 million at an

effective tax rate of ( 33.6 %).

We are subject to U.S.

1 unchanged sentence

states and foreign jurisdictions.

We have substantially concluded all U.S.

We have substantially concluded all

federal, state and local income tax, and foreign tax regulatory examination matters through 2018.

However, our federal tax returns for the years 2018 through 2021 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 June 30, 2022, we had $ 144 thousand of total gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.

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 June 30, 2022, we had $ 29 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.

However, our federal tax returns from 2019 through 2021 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, 2022 , we had $ 116 thousand of total gross unrecognized tax benefits that, if recognized, would favorably affect the effective

income tax rate in future periods.

For the third quarter of 2022, we recognized $ 28 thousand of previously unrecognized tax benefits

as the statute of limitations on the use of our 2018 research and development credit expired during the third quarter of 2022.

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

As of September 30, 2022, we had $ 20 thousand of accrued interest and penalties related to

uncertain tax positions.

Management evaluates all jurisdictions based on historical pre-tax earnings and taxable income to determine the need for valuation allowances on a quarterly basis.

three months ended September 30, 2022 benefitted from the remeasurement of our deferred tax asset valuation allowance associated with our operations in the United Kingdom.

Based on this analysis, we currently have no valuation allowances recorded for

any jurisdiction.

Change in accounting principle

Effective April 1, 2022, TransAct changed its method of inventory valuation from standard costing which approximates FIFO to the average costing methodology.

We believe this methodology is preferable because it reflects a better measurement estimate of inventory cost as we do not typically perform intensive manufacturing of our finished products which are therefore better measured under average cost.

In addition, our business is projected to include an increasing sales volume of software going forward, which better aligns with average costing.

this methodology is preferable because it reflects a better estimate of inventory cost as we do not typically perform intensive manufacturing of our finished products, which are therefore better measured under average cost.

In addition, our business

is projected to include an increasing sales volume of software going forward, which better aligns with average costing.

Comparative financial statements of prior periods have been adjusted to apply the new method retrospectively.

Tax effects are calculated at the Company’s marginal tax rate, or the tax impact of incremental income changes rather than the average tax rate applied to our total net loss before income taxes.

The following financial statement line items for the periods presented were impacted by the change in accounting principle.

The effect of the changes made to the Company’s Condensed Consolidated Balance Sheets follows:

Tax effects are

calculated at the Company’s marginal tax rate, or the tax impact of incremental income changes rather than the average tax rate applied to our total net loss before income taxes.

The following financial statement line items for the periods presented

were impacted by the change in accounting principle.

The effect of the changes made to the Company’s Condensed Consolidated Balance Sheets for the periods presented are as

December 31, 2021

2 unchanged sentences

The ending balance in retained earnings as of December 31, 2020 was adjusted from $ 19,718 to $ 19,607 .

The effect of the changes made to the Company’s Condensed Consolidated Statements of Operations follows:

Three months ended March 31, 2022

Three months ended June 30, 2021

Cost of sales

Operating loss

Loss before income taxes

Income tax benefit

Net loss per common share:

Shares used in per-share calculation:

Six months ended June 30, 2021

The effect of the changes made to the Company’s Condensed Consolidated Statements of Operations for the periods presented are as follows:

Three months ended September 30, 2021

Nine months ended September 30, 2021

Cost of sales

Operating loss

Loss before income taxes

Income (loss) before income taxes

Income tax benefit

Net loss per common share:

Net income (loss)

Net income (loss) per common share:

Shares used in per-share calculation:

The effect of the changes made to the Company’s Condensed Consolidated Statements of Comprehensive Loss follows:

Three months ended March 31, 2022

Three months ended June 30, 2021

Comprehensive loss

Six months ended June 30, 2021

Comprehensive loss

The effect of the changes made to the Company’s Condensed Consolidated Statements of Cash Flows follows:

Three months ended March 31, 2022

Six months ended June 30, 2021

The effect of the changes made to the Company’s Condensed Consolidated Statements of Comprehensive Income (loss) for the periods presented are as follows:

Three months ended September 30, 2021

Nine months ended September 30, 2021

Net income (loss)

Comprehensive income (loss)

The effect of the changes made to the Company’s Condensed Consolidated Statements of Cash Flows for the periods presented are as follows:

Nine months ended September 30, 2021

Deferred income taxes

The effect of the changes made to the Company’s Condensed Consolidated Statements of Changes in Shareholders’ Equity follows:

Three months ended March 31, 2022

Three months ended June 30, 2021

Equity beginning balance

Retained earnings -- beginning of period

Retained earnings -- end of period

Equity ending balance

Six months ended June 30, 2021

The effect of the changes made to the Company’s Condensed Consolidated Statements of Changes in Shareholders’ Equity for the periods presented are as follows:

Three months ended September 30, 2021

Nine months ended September 30, 2021

Equity beginning balance

Retained earnings -- beginning of period

Net income (loss)

Retained earnings -- end of period

2 unchanged sentences

The Company has evaluated all events or transactions that occurred up to the date the Condensed Consolidated Financial Statements were issued.

Based upon this review, other than the below, the Company did not identify any other additional subsequent events that would have required adjustment or disclosure in the Condensed Consolidated Financial Statements.

On July 19, 2022, the Company and the Lender entered into Amendment No.

2 (the “Credit Facility Amendment No.

2”) to the Loan and Security Agreement, dated as of March 13, 2020, between the Lender and the Company, as amended by Amendment No.

1, dated as of July 21, 2021, between the Lender and the Company.

Also on July 19, 2022, the Company and the Lender entered into an Amended and Restated Fee Letter (the “Amended Fee Letter”) in connection with the Credit Facility Amendment No.

The Credit Facility Amendment No.

2 did not modify the aggregate amount of the revolving commitment or the interest rate applicable to the loans.

The changes to the Siena Credit Facility provided for in the Credit Facility Amendment No.

2 include, among other things, the following:

The extension of the maturity date from March 13, 2023 to March 13, 2025;

The termination of the existing blocked account control agreement and entry into a new “springing” deposit account control agreement, permitting the Company to direct the use of funds in its deposit account until such time as (a) the sum of excess availability under Siena Credit Facility (as amended by the Credit Facility Amendment) and unrestricted cash is less than $ 5 million for 3 consecutive business days or (b) an event of default occurs and is continuing.

In addition, the Amended Fee Letter requires the Company, while it retains the ability to direct the use of funds in the deposit account, to maintain outstanding borrowings of at least $ 2,250,000 in principal amount.

If the Company does not have the ability to direct the use of funds in the deposit account, then the Amended Fee Letter requires the Company to pay interest on at least $ 2,250,000 principal amount of loans, whether or not such amount of loans is actually outstanding.

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 other additional subsequent events that would have required adjustment or disclosure in the Condensed Consolidated Financial Statements.

Based upon this review, the

Company did not identify 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