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FONT-SIZE: 10pt">&#160;</font> </td> <td valign="bottom" width="9%" style="BORDER-BOTTOM: black 2px solid; TEXT-ALIGN: right"> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">(826)</font> </td> </tr> <tr style="background-color: #CCEEFF;"> <td align="left" valign="bottom" width="88%" style="PADDING-BOTTOM: 4px"> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">Balance at September 30, 2014</font> </div> </td> <td align="right" valign="bottom" width="1%" style="PADDING-BOTTOM: 4px"> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">&#160;</font> </td> <td valign="bottom" width="1%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: left"> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">$</font> </td> <td valign="bottom" width="9%" style="BORDER-BOTTOM: black 4px double; TEXT-ALIGN: right"> <font style="DISPLAY: inline; FONT-FAMILY: times new roman; FONT-SIZE: 10pt">30,897</font> </td> </tr> </table> 56000 -3000 1912000 <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">7. Income taxes</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We recorded an income tax provision for the third quarter of 2014 of $4,000 at an effective tax rate of 7.4%, compared to an income tax provision during the third quarter of 2013 of $434,000 at an effective tax rate of 23.0%.&#160;&#160;Our effective tax rate for the third quarter of 2014 was unusually low due to the near breakeven level of pretax income.&#160;&#160;<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman">For the nine months ended September 30, 2014, we recorded an income tax provision of $365,000 at an effective tax rate of 37.1%, compared to an income tax provision during the nine months ended September 30, 2013 of $1,300,000 at an effective tax rate of 25.4%.&#160;&#160;</font>Our effective tax rate for the first nine months of 2013 was unusually low because it includes the benefit from both the 2012 and 2013 federal research and development (&#8220;R&amp;D&#8221;) credit as this credit was not renewed until January 2, 2013 as a component of the American Taxpayer Relief Act of 2012 (the &#8220;Act&#8221;). The effective tax rate for both the three and nine months period ended September 30, 2014 does not include any benefit from the 2014 R&amp;D credit as this credit expired at the end of 2013.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">We are subject to U.S. federal income tax as well as income tax of certain state and foreign jurisdictions.&#160;&#160;We have substantially concluded with the applicable tax authorities all U.S. federal income tax, state and local, and foreign tax matters through 2010.&#160;&#160;During 2008, a limited scope examination of our 2005 and 2006 federal tax returns was completed and during 2013, an examination of our 2010 federal return was completed.&#160;&#160;However, our federal tax returns for the years 2011 through 2013 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.&#160;&#160;No state or foreign tax jurisdiction income tax returns are currently under examination. As of September 30, 2014, we had $114,000 of total gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods.</font> </div><br/> 4000 0.074 434000 0.230 365000 0.371 1300000 0.254 114000 <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">8. Commitments and contingencies</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On June 8, 2012, Avery Dennison Corporation (&#8220;AD&#8221;) filed a civil complaint against the Company and a former employee of the Company and of AD, in the Court of Common Pleas (the &#8220;Court&#8221;) in Lake County, Ohio.&#160; The complaint alleges that this former employee and the Company misappropriated unspecified trade secrets and confidential information related to the design of our food safety terminals from AD.&#160; The complaint requests a preliminary and permanent injunction against the Company from manufacturing and selling our Ithaca&#174; 9700 and 9800 food safety terminals.&#160; On July 16, 2012, the Company filed its answer, affirmative defenses and counterclaims, seeking all available damages including legal fees.&#160; A hearing on the plaintiff's motion for preliminary injunction took place in August 2012, and in November 2012, the Court denied this request. AD filed an appeal of the Court&#8217;s ruling to the Eleventh Appellate District, which heard oral arguments on the appeal on July 16, 2013.&#160;&#160;On July 23, 2013, AD requested that the Eleventh Appellate District enjoin the Company&#8217;s further sale and marketing of the food safety terminals, pending the appeals court's decision. On July 29, 2013, TransAct opposed this request. On October 15, 2013, the Eleventh District Court of Appeals affirmed the lower court&#8217;s decision in the Company&#8217;s favor and denied AD&#8217;s further request of an injunction pending the Court of Appeal&#8217;s decision.&#160;&#160;On October 24, 2013, AD filed a motion seeking that the Court of Appeals reconsider its decision.&#160;&#160;On April 16, 2014, the Court of Appeals denied AD&#8217;s motion to reconsider its decision.&#160;&#160;On July 28, 2014, AD filed a motion requesting leave from the Court to file an amended complaint and indicating that it has elected to pursue only its claim for damages, dropping its claim for injunctive relief.&#160;&#160;A trial is scheduled to begin on April 21, 2015.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold">Resource Sufficiency</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On June 8, 2012, Avery Dennison Corporation (&#8220;AD&#8221;) filed a civil complaint against the Company and a former employee of the Company and of AD, in the Court of Common Pleas (the &#8220;Court&#8221;) in Lake County, Ohio.&#160; The complaint alleges that this former employee and the Company misappropriated unspecified trade secrets and confidential information related to the design of our food safety terminals from AD.&#160; The complaint requests a preliminary and permanent injunction against the Company from manufacturing and selling our Ithaca&#174; 9700 and 9800 food safety terminals.&#160; On July 16, 2012, the Company filed its answer, affirmative defenses and counterclaims, seeking all available damages including legal fees.&#160; A hearing on the plaintiff's motion for preliminary injunction took place in August 2012, and in November 2012, the Court denied this request. AD filed an appeal of the Court&#8217;s ruling to the Eleventh Appellate District, which heard oral arguments on the appeal on July 16, 2013.&#160;&#160;On July 23, 2013, AD requested that the Eleventh Appellate District enjoin the Company&#8217;s further sale and marketing of the food safety terminals, pending the appeals court's decision. On July 29, 2013, TransAct opposed this request. On October 15, 2013, the Eleventh District Court of Appeals affirmed the lower court&#8217;s decision in the Company&#8217;s favor and denied AD&#8217;s further request for an injunction pending the Court of Appeal&#8217;s decision.&#160;&#160;On October 24, 2013, AD filed a motion seeking that the Court of Appeals reconsider its decision.<font style="DISPLAY: inline; FONT-FAMILY: Times New Roman">&#160;&#160;On April 16, 2014, the Court of Appeals denied AD&#8217;s motion to reconsider its decision.</font>On July 28, 2014, AD filed a motion requesting leave from the Court to file an amended complaint and indicating that it has elected to pursue only its claim for damages, dropping its claim for injunctive relief.&#160;&#160;A trial is scheduled to begin on April 21, 2015.</font> </div><br/>