What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-10 · 101 added, 87 removed, 302 unchanged (38% of the section changed)

2 unchanged sentences

C ONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2023

September 30, 2023

December 31, 2022

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and $ 17,656 , respectively

Right-of-use asset, net

Right-of-use assets, net

Deferred tax assets

2 unchanged sentences

Current liabilities:

Current portion of revolving loan payable

Revolving loan payable

Accounts payable

Accrued liabilities

Lease liability

Lease liabilities

Deferred revenue

1 unchanged sentence

Deferred revenue, net of current portion

Lease liability, net of current portion

Lease liabilities, net of current portion

Other liabilities

17 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

5 unchanged sentences

Operating income (loss)

Interest and other income (expense):

Interest and other (expense) income:

Interest, net

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

5 unchanged sentences

CONDE NSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

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Employee retention credit receivable

Prepaid income taxes

Other current and long-term assets

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Cash flows from financing activities:

Proceeds from bank borrowings

Withholding taxes paid on stock issuances

Payment of bank financing costs

Net cash used in financing activities

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

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should be read in conjunction with the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”).

The results of operations for the three and six months ended June 30, 2023

The results of operations for the three and nine months ended September 30, 2023

are not necessarily indicative of the results to be expected for the full year ending December 31, 2023.

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

Impact of Global Economic Conditions, Supply Chain Disruptions and the COVID-19 Pandemic

Since early 2020 and into the first quarter of 2022, the COVID-19 pandemic caused uncertainty and disruption in the global

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to deliver products to our customers.

During 2021, we experienced significantly lower sales levels.

However, during 2022, we were 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.

At the same time, after a slowdown resulting from the Omicron and other variants of COVID-19 that began to ease in the first six months of

2022, we continued to experience demand recovery during the remainder of 2022 and into 2023.

Although we were able to increase inventory levels during 2022 and expect to continue to do so in the balance of 2023, there can be no assurance that new or

continuing 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 not be impacted by the economic effects of any future cost increases that cannot be predicted, supply chain disruptions, inflationary pressures and potential new COVID-19 variants in the markets

we serve and from which we source our supplies and parts.

After experiencing significantly lower inventory and sales levels in 2021 due to supply chain disruptions, we were able to increase our inventory levels and minimize the impact to our customers in 2022 by

successfully modifying our products that were affected by supply chain disruptions, as well as by sourcing component parts from alternate suppliers.

At the same time, after a slowdown resulting from the Omicron and other variants of COVID-19 that

began to ease in the first nine months of 2022, we continued to experience demand recovery during the remainder of 2022 and into 2023.

Although we were able to increase inventory levels during 2022 and the first nine months of 2023 and expect to

continue to do so in the balance of 2023, there can be no assurance that new or continuing 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

Further, while we have offset most of our cost increases by increasing prices of our products, there can be no guarantee that we will not be impacted by the economic effects of any future cost increases that cannot be predicted, supply chain

disruptions, inflationary pressures and potential new COVID-19 variants in the markets we serve and from which we source our supplies and parts.

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, supply chain disruptions and inflationary pressures:

Employee Retention Credit – Under the provisions of the CARES Act, the Company received 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 and recorded $ 1.5 million as

“Gain from employee retention credit” in the Consolidated Statement of Operations for the year ended December 31, 2021 and the related receivable as “Employee retention credit receivable” in the Consolidated Balance Sheet as of December 31,

2021 and 2022.

We received these funds in the first quarter of 2023.

Employee Retention Credit – The Company received a refundable employee retention credit under the CARES Act in the first quarter of 2023.

The Company previously 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 Consolidated Balance Sheets as of December 31, 2022 and December 31, 2021.

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 ,

1 unchanged sentence

See Note 5 for further details regarding this facility.

Expense Reductions – During the third quarter of 2023, we began a cost reduction initiative to reduce our overall level of operating expenses that includes reducing employee

headcount, trade show, advertising and other promotional marketing expenses, certain third party engineering resources and other expenses, and to a lesser extent, certain general and administrative expenses.

When completed in the fourth

quarter of 2023, we expect these actions will result in approximately $ 3 million of annualized savings beginning in 2024

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

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restaurants will remain open and consumer traffic will continue to remain strong during the remainder of 2023.

Though demand for our products at casinos has increased substantially in 2022 and during the first six months of 2023, 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.

Though demand for our products at casinos increased substantially in 2022 and during the first nine months of 2023, 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, should conditions warrant, we believe we will be able to take additional financial and operational actions to cut costs and/or increase liquidity.

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Significant accounting policies

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 2022 Form 10-K for the year ended December 31, 2022.

There have been no changes to our significant accounting policies since our

2022 Form 10-K for the year ended December 31, 2022.

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 2022 Form 10-K.

There have been no changes to our significant accounting policies since the 2022 Form 10-K.

Recently Adopted Accounting Pronouncement

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Three Months Ended

September 30,

(In thousands)

8 unchanged sentences

Total net sales

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

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

For the six months ended June 30, 2023 , we recognized revenue of $ 1 million related to our contract liabilities at December 31, 2022 .

For the nine months ended September 30, 2023 , we recognized revenue of $ 1.2 million related to our contract liabilities at December 31, 2022 .

Total net contract liabilities consisted of the following:

June 30, 2023

September 30, 2023

December 31, 2022

8 unchanged sentences

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

As of June 30, 2023, the aggregate amount of transaction prices allocated to remaining performance obligations was $ 15.7 million.

As of September 30, 2023, the aggregate amount of transaction prices allocated to remaining performance obligations was $ 12.0 million.

The Company expects to recognize revenue of $ 11.7

million of its remaining performance obligations within the next 12 months following June 30, 2023, $ 0.2 million within the next 24 months following June 30, 2023 and

the balance of these remaining performance obligations recognized within the next 36 months following June 30, 2023.

million of its remaining performance obligations within the next 12 months following September 30, 2023, $ 0.2 million within the next 24 months following September 30, 2023

and the balance of these remaining performance obligations recognized within the next 36 months following September 30, 2023.

The components of inventories were:

June 30, 2023

September 30, 2023

December 31, 2022

14 unchanged sentences

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

The Siena Credit Facility imposes a financial covenant on the Company and borrowings are subject to a borrowing base based on 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 agreement governing the Siena Credit Facility restricts, among other things, our ability to incur additional indebtedness and create other liens.

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

On July 21, 2021, the Company

entered into an amendment (“Siena Credit Facility Amendment No.

1”) to the Loan and Security Agreement governing 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 ended July 31, 2021.

From July 31, 2021 through June 30, 2023, we remained in compliance with our excess availability covenant.

As of June 30, 2023, we had $ 2.3 million of outstanding borrowings under the Siena Credit Facility and $ 5.6 million of net borrowing capacity available under the Siena Credit Facility.

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 ended July 31, 2021.

From July 31, 2021 through September 30, 2023, we remained in compliance with our excess availability covenant.

As of September 30, 2023,

we had $ 2.3 million of outstanding borrowings under the Siena Credit Facility and $ 6.8 million of net borrowing capacity available under the Siena Credit Facility.

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

2 (“Siena Credit Facility Amendment No.

2”) to the Loan and Security Agreement governing 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.

2”) to the Loan and Security Agreement governing 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 Siena Credit Facility Amendment No.

Siena Credit Facility Amendment No.

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(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 the 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 continuing.

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

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Section 7.1(m) of the

Loan and Security Agreement governing the Siena Credit Facility required that any successor to Mr.

Shuldman be reasonably acceptable to the Lender, and this amendment confirmed that Mr.

Dillon is an acceptable successor to Mr.

Shuldman and applied

the same requirement to any future successor to Mr.

Loan and Security Agreement governing the Siena Credit Facility required that any successor to the Company’s former Chief Executive Officer be reasonably acceptable to the Lender, and this amendment confirmed that John Dillon, the Company’s current

Chief Executive Officer, is an acceptable successor and applied the same requirement to any future successor to Mr.

Earnings per share

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands, except per share data)

7 unchanged sentences

of diluted earnings would be anti-dilutive.

For the three and six months ended June 30, 2022, there were 1.5 million and 1.2 million, 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 and six months ended June 30, 2022, basic and

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

For the nine months ended September 30, 2022, there were 1.6 million of potentially dilutive shares consisting of stock awards that were excluded from the calculation of earnings per diluted share.

in periods when a net loss is reported, such as the nine months September 30, 2022, basic and diluted net loss per common share are calculated using the same method.

We account for leases in accordance with ASC Topic 842:

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

Operating lease expense for the six months ended June 30, 2023

Operating lease expense for the nine months ended September 30, 2023

and 2022 was $ 742

3 unchanged sentences

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, 2023 and December 31, 2022:

June 30, 2023

The following summarizes additional information related to our leases as of September 30, 2023 and December 31, 2022:

September 30, 2023

December 31, 2022

1 unchanged sentence

Weighted average discount rate

The maturity of the Company’s operating lease liabilities as of June 30, 2023 and December 31, 2022 were as follows (in thousands):

June 30, 2023

The maturity of the Company’s operating lease liabilities as of September 30, 2023 and December 31, 2022 were as follows (in thousands):

September 30, 2023

December 31, 2022

2 unchanged sentences

Total lease liabilities

We recorde d income tax expense in the second

We recorde d income tax expense in the third

quarter of 2023 of $ 169

thousand at an effective tax rate of 33.8 % compared to an income tax benefit in the second quarter of 2022 of $ 870 thousand at an effective tax rate of ( 26.8 %).

For the six months ended June 30, 2023,

we recorded income tax expense of $ 1.0 million at an effective tax rate of 20.7 % , compared to an income tax benefit for the six months ended June 30, 2022 of $ 2.2 million at an effective tax rate of ( 24.9 %) .

thousand at an effective tax rate of 15.7 % compared to an income tax benefit in the third quarter of 2022 of $ 62 thousand at an effective tax rate of ( 13.3 %).

For the nine months ended September 30, 2023, we recorded income tax expense of $ 1.2 million at an effective tax rate of 19.8 % , compared to an income tax benefit for the nine months ended September 30, 2022 of $ 2.3 million at an effective tax rate of ( 27.0 %) .

We are subject to U.S.

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

federal income tax, as well as income

tax in certain U.S.

state and foreign jurisdictions.

We have substantially concluded all U.S.

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

However, our federal tax returns for the years 2019 through 2022 remain open to examination.

state and foreign tax jurisdiction tax years remain

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

The Company maintains a valuation allowance against certain deferred tax assets where realization is

federal, state and local income tax, and foreign tax regulatory examination matters through 2019.

However, our federal tax returns for the years 2020

through 2022 remain open to examination.

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

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 Condensed Consolidated Financial Statements

were available to be issued.

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

In the fourth quarter of 2023, we completed an asset sale of our Printrex product line (essentially inventory on-hand) and plan to record a resulting

non-operating gain of approximately $ 0.4 million in the fourth quarter of 2023.

Prior to this sale, the last TransAct sales of Printrex

products occurred in 2021.

The Company has evaluated all other 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 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