What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-12 · 377 added, 387 removed, 84 unchanged (90% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q for the period ended September 30, 2021 (this “Report”), including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are not historical facts are “forward-looking statements” within the meaning of the U.S.

federal securities laws, including the Private Securities Litigation Reform Act of 1995.

Forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “project”, “plan” or “continue” or the negative thereof or other similar words.

The Company cautions readers not to place undue reliance on any such forward-looking statements, each of which involves certain risks and uncertainties, including, but not limited to, those listed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020 (our “2020 Form 10-K”), and in our other filings with the Securities and Exchange Commission (the “SEC”).

Such risks and uncertainties could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements.

Any such risks and uncertainties may also be exacerbated by the ultimate impact of the COVID-19 pandemic and the emergence of virus variants, which is unknown at this time.

In addition, statements made in this Report about the COVID-19 pandemic and the potential effects and impacts of the COVID-19 pandemic on the Company’s business, financial condition, liquidity and results of operations may constitute forward-looking statements due to factors and future developments that are uncertain, unpredictable and, in many cases, beyond our control, including the scope, duration and extent of the pandemic, actions taken by governmental authorities and businesses in response to the pandemic and any resurgences or variants, vaccination rates and the direct and indirect impact of the pandemic on our employees, customers and third parties with which we conduct business, including difficulties or delays in manufacturing or delivery of inventory or other supply chain disruptions.

Although management has taken steps to mitigate any negative effect of such risks and uncertainties, including the impact of the COVID-19 pandemic, significant unfavorable changes could severely impact the assumptions used.

Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect the impact of subsequent events or circumstances, except as required by law.

As used in this Report, unless the context otherwise requires, references to “we”, “us”, “our”, the “Company” and “TransAct” refer to the consolidated operations of TransAct Technologies Incorporated and its consolidated subsidiaries.

TransAct is a global leader in developing and selling software-driven technology and printing solutions for high-growth markets including food service technology, point of sale (“POS”) automation, casino and gaming, and oil and gas.

Our world-class products are designed from the ground up based on market and customer requirements and are sold under the BOHA!™, AccuDate™, Epic, EPICENTRAL®, Ithaca®, and Printrex® brand names.

Certain statements included in this Quarterly Report on Form 10-Q for the period ended March 31, 2022 (this

“Report”), including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are not historical facts are “forward-looking statements” within the meaning of the U.S.

securities laws, including the Private Securities Litigation Reform Act of 1995.

Forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may”, “will”, “expect”, “intend”, “estimate”, “anticipate”,

“believe”, “project”, “plan” or “continue” or the negative thereof or other similar words.

The Company cautions readers not to place undue reliance on any such forward-looking statements, each of which involves certain risks and uncertainties,

including, but not limited to, those listed in Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Form 10-K”), and in our other filings with the Securities and Exchange Commission (the “SEC”).

and uncertainties could cause actual results to differ materially from those discussed in, or implied by, the forward-looking statements.

Any such risks and uncertainties may also be exacerbated by the ultimate impact of the COVID-19 pandemic and the

emergence of virus variants, which is unknown at this time, or by the Russia-Ukraine conflict and its impact on freight costs.

In addition, statements made in this Report about the COVID-19 pandemic and the potential effects and impacts of the

COVID-19 pandemic on the Company’s business, financial condition, liquidity and results of operations may constitute forward-looking statements due to factors and future developments that are uncertain, unpredictable and, in many cases, beyond our

control, including the scope, duration and extent of the pandemic, actions taken by governmental authorities and businesses in response to the pandemic and any resurgences or variants, vaccination rates and the direct and indirect impact of the

pandemic on our employees, customers and third parties with which we conduct business, including difficulties or delays in manufacturing or delivery of inventory or other supply chain disruptions.

Although management has taken steps to mitigate the

negative effect of such risks and uncertainties, including the impact of the COVID-19 pandemic, significant unfavorable changes could severely impact the assumptions used.

Forward-looking statements speak only as of the date they are made, and we do

not undertake any obligation to update them to reflect the impact of subsequent events or circumstances, except as required by law.

As used in this Report, unless the context otherwise requires, references to “we”, “us”, “our”, the “Company” and

“TransAct” refer to the consolidated operations of TransAct Technologies Incorporated and its consolidated subsidiaries.

TransAct is a global leader in developing and selling software-driven technology and printing solutions for high-growth markets

including food service technology, point of sale (“POS”) automation and casino and gaming.

Our world-class products are designed from the ground up based on market and customer requirements and are sold under the BOHA!™, AccuDate™, Epic, EPICENTRAL®

and Ithaca® brand names.

During 2019, we launched a new line of products for the food service technology market, the BOHA!

branded suite of cloud-based applications and companion hardware solutions.

software and hardware products help restaurants, convenience stores and food service operators of all sizes automate the food production in the back-of-house operations.

Known and respected worldwide for innovative designs and real-world service reliability, our thermal printers and terminals generate top-quality labels, coupons and transaction records such as receipts, tickets and other documents, as well as printed logging and plotting of data.

We sell our technology to original equipment manufacturers (“OEMs”), value-added resellers, and select distributors, as well as directly to end-users.

software and hardware products help

restaurants, convenience stores and food service operators of all sizes automate food production in the back-of-house operations.

Known and respected worldwide for innovative designs and real-world service reliability, our thermal printers and

terminals generate top-quality labels, coupons and transaction records such as receipts, tickets and other documents.

We sell our technology to original equipment manufacturers (“OEMs”), value-added resellers, select distributors and directly to

Our product distribution spans across the Americas, Europe, the Middle East, Africa, Asia, Australia, New Zealand, the Caribbean Islands and the South Pacific.

We also offer world-class service, support, labels, spare parts, accessories and printing supplies to our growing worldwide base of products currently in use by our customers.

Through our TransAct Services Group (“TSG”), we provide a complete range of supplies and consumables used in the printing activities of customers in the restaurant and hospitality, retail, casino and gaming, government and oil and gas exploration markets.

We also offer world-class service, support, labels, spare parts, accessories and

printing supplies to our growing worldwide base of products currently in use by our customers.

Through our TransAct Services Group (“TSG”), we provide a complete range of supplies and consumables used in the printing activities of customers in the

restaurant and hospitality, retail, casino and gaming, and government markets.

Through our webstore, www.transactsupplies.com, and our direct selling team, we address the demand for these products.

We operate in one reportable segment, the design, development, and marketing of software-driven technology and printing solutions for high growth markets, and provide related services, supplies and spare parts.

Impact of the COVID-19 Pandemic

Our business trends through the first two months of 2020 were in line with internal expectations;

however, the challenges posed by the COVID-19 pandemic on the United States and global economy increased significantly as the first quarter of 2020 progressed and continued throughout the remainder of 2020 and into the first nine months of 2021.

Though we have begun to experience some recovery during the first nine months of 2021, unfortunately, the massive economic and social disruptions across the world persist due to COVID-19, including the emergence of virus variants, and the measures implemented to mitigate its spread.

The food service, casino and gaming, and oil and gas industries have been particularly affected by the pandemic, and we expect such disruptions to continue to negatively impact our overall business for the foreseeable future.

As a result of the COVID-19 pandemic and measures implemented to mitigate its spread, we experienced decreased demand for our products and lower than anticipated sales beginning in the second half of March 2020 and continuing through the first nine months of 2021, particularly in our food service technology and casino and gaming markets.

We experienced some improvement in demand during the second half of 2020 through the first nine months of 2021 compared to the second quarter of 2020, as state and local governments lifted certain measures implemented earlier in 2020 to mitigate the spread of the virus, but demand remained lower than 2019, and while we expect this improvement to continue during the remainder of 2021, the exact timing and pace of recovery is unknown.

Below is a discussion of the impact of COVID-19 that we have experienced, and that we believe will continue to experience for the foreseeable future in each of our markets.

Food service technology and POS automation .

In both our food service technology and POS automation markets, many restaurants and food service establishments that were closed during much of the second quarter of 2020 started to reopen in the third quarter of 2020 as state and local governments began to ease restrictions put in place in response to the pandemic.

Many of our customers opened under restrictions that limit them to providing drive-through, take-out or delivery service without dine-in options, as well as limiting the volume of customers and employees on site at any one time.

During the second half of 2020 and first nine months of 2021, we experienced sales improvement compared to the second quarter of 2020, as these food service customers reopened for business.

However, during the fourth quarter of 2020 and early in 2021, restaurants were again impacted by a resurgence of the pandemic.

Notwithstanding the gradual resumption of limited operations that began in the third quarter of 2020, our food service technology and POS automation customers continue to recover from the financial impact of being closed for several months and we expect new capital expenditures to be a lower priority for them in the near term, which we believe will continue to negatively impact sales of BOHA!

hardware, software and label products, as well as sales of POS printers.

However, food service providers have been and are likely to continue to be required to develop and implement new or enhanced policies and operating procedures regarding cleaning, sanitizing and social distancing to ensure the safety of their employees and customers.

Impact of COVID-19 Pandemic

During the first two months of 2020, our business trends were in line with internal expectations;

however, the challenges posed by the

COVID-19 pandemic on the United States and global economy increased significantly as the first quarter of 2020 progressed and continued throughout the remainder of 2020 and into 2021.

Though we began to experience some recovery during 2021 the

recovery slowed again in the first quarter of 2022 due to a resurgence of the Omicron variant, and unfortunately, the massive economic and social disruptions across the world persist due to COVID-19, including the emergence of virus variants, and the

measures implemented to mitigate its spread.

The food service and casino and gaming industries have been particularly affected by the pandemic, and we expect such disruptions to continue to negatively impact our overall business for the foreseeable

As a result of the COVID-19 pandemic and measures implemented to mitigate its spread, we experienced decreased demand for our products

and lower than anticipated sales beginning in the second half of March 2020 and continuing through 2021 and the first quarter of 2022, particularly in our food service technology and casino and gaming markets.

We experienced some improvement in demand

during the second half of 2020 continuing through 2021 and the first quarter of 2022 compared to the second quarter of 2020, as state and local governments lifted certain measures implemented earlier in 2020 to mitigate the spread of the virus, but

demand remained lower than 2019.

While we expect this improvement to continue during 2022 as compared to 2021, the exact timing and pace of recovery is unknown.

We have also experienced supply chain disruptions, including delayed product shipments

from our two contract manufacturers located in Thailand and China that conduct almost all of our printer and BOHA!

hardware manufacturing, due to reduced operations and part shortages at these facilities.

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.

Below is a discussion of the impact we have experienced from the COVID-19 pandemic, and that we believe will continue to experience for the foreseeable future

in each of our markets.

technology and POS automation .

In both our food service technology and POS automation markets, many restaurants and food service

establishments that were closed during much of the second quarter of 2020 started to reopen in the third quarter of 2020 as state and local governments began to ease restrictions put in place in response to the pandemic.

Many of our customers

initially opened under restrictions that limited them to providing drive-through, take-out or delivery service without dine-in options, as well as limiting the volume of customers and employees on site at any one time.

During the second half of 2020

and throughout 2021 and the first quarter of 2022, as these food service customers reopened for business, we experienced sales improvement compared to the second quarter of 2020.

Notwithstanding the gradual resumption of operations that began in the

third quarter of 2020, our food service technology customers continue to recover from the financial impact of the pandemic and we expect new capital expenditures to be a lower priority for them in the near term, which we believe will continue to

negatively impact sales of BOHA!

hardware, software and label products.

However, food service providers have been and are likely to continue to be required to develop and implement new or enhanced policies and operating procedures regarding cleaning,

sanitizing and social distancing to ensure the safety of their employees and customers.

Additionally, our markets have experienced labor shortages and inflation in their food and labor costs.

We believe that our BOHA!

hardware, software and label products could prove to be helpful to our food service customers in efficiently and effectively managing and complying with these new procedures, especially as many establishments are and will likely continue to be operating with reduced staff levels.

hardware, software and label

products could prove to be helpful to our food service customers in efficiently and effectively managing and complying with these new procedures, while also helping to overcome staffing issues and inflation, especially as many establishments are and

will likely continue to be operating with reduced staff levels due to the continuing labor shortage.

Casino and gaming .

In the casino and gaming market, most casinos and other gaming establishments were closed worldwide during most of the second quarter of 2020.

Many casinos began to reopen in late May and early June 2020, but similar to restaurants, casino openings were slow and measured, starting with reduced capacity and limited gameplay based on social distancing guidelines.

During the fourth quarter of 2020, some casinos re-closed due to a resurgence of the pandemic.

casinos began to reopen in late May and early June 2020, but similar to restaurants, casino openings were slow and measured, starting with reduced capacity and limited gameplay based on social distancing guidelines.

During the fourth quarter of 2020,

some casinos re-closed due to a resurgence of the pandemic.

However, many casinos in the U.S.

reopened during the first quarter of 2021 with limited capacity and during the second and third quarter of 2021 remained open and further expanded capacity.

We anticipate that casinos will continue to increase capacity over time, barring any new closures or reduced capacity requirements in response to any new resurgence of the pandemic, including the emergence of variants.

As casinos gradually recover from the financial impact of being closed for several months, we expect that casinos’ appetite for purchases of new slot machines may be diminished, which we believe is likely to continue to negatively impact sales of casino and gaming printers purchased by slot manufacturers for use in slot machines at casinos during 2021.

We exited the lottery market at the end of 2019 and IGT made a final purchase of our lottery printer during 2020.

Therefore, COVID-19 has not had an impact our lottery printer sales.

The oil and gas market was negatively impacted by the decline in worldwide oil prices attributable to the COVID-19 pandemic during 2020.

During the first nine months of 2021, oil and gas prices have begun to rise again resulting in slowly improving sales to our oil and gas customers.

However, due to the uncertainty of current and future market conditions, we believe sales of our Printrex oil and gas printers will continue to be negatively impacted.

We plan to exit the Printrex market at the end of 2021 and expect to have no future sales in this market beyond 2021.

Due to closures and reduced operating capacity of restaurants, retail establishments, casinos and other gaming establishments resulting from the COVID-19 pandemic, sales of spare parts, service and consumable products have declined, and we expect such sales to remain at reduced levels, due to lower usage until these markets recover.

Our gross margin has been negatively impacted and we expect our gross margin to continue to be negatively impacted while the COVID-19 pandemic and its economic effects on the markets we serve persists.

As a result of an expected significantly lower sales level as well as increased material and shipping costs resulting from worldwide supply disruptions caused by the COVID-19 pandemic, we believe our gross margin will remain lower than pre-pandemic levels due to fixed manufacturing overhead expenses (such as facility costs, depreciation, etc.) that cannot be reduced or eliminated even with the lower sales level.

We have also experienced supply chain disruptions, including delayed product shipments from our two contract manufacturers located in China and Thailand that conduct almost all of our printer and terminal manufacturing, due to reduced operations and parts shortages at these facilities.

To date, these disruptions have only minimally impacted deliveries to customers due to our high inventory levels and reduced demand for our products.

However, our inventory levels have decreased significantly during 2021 due to these supply chain disruptions and if the delays are sustained or additional disruptions from the pandemic occur, we may have insufficient inventory levels and our ability to deliver products to our customers on time or at all may be impaired.

While we began to experience a modest recovery starting in the second half of 2020 into 2021 and expect this recovery to continue during the remainder of 2021, the exact timing and pace of recovery is unknown given uncertainty surrounding responsive measures to potential future resurgences of the virus, vaccination rates, the emergence of virus variants and the significant disruption that our customers have already experienced and may continue to experience.

In light of this uncertainty, we implemented a number of cost saving measures during 2020 to help mitigate the impact on our financial position and operations and continued to limit discretionary spending during the first nine months of 2021.

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

Public Offerings – On October 16, 2020 and August 16, 2021, the Company raised net proceeds of $8.7 million and $11.3 million (including the exercise of the underwriters’ overallotment option on August 20, 2021), respectively, after deducting underwriting discounts, commissions and offering expenses, through underwritten public offerings and sold an aggregate of 1,380,000 and 842,375 shares of common stock, respectively .

PPP Loan - On May 1, 2020, the Company was granted a $2.2 million loan (the “PPP Loan”) under the Paycheck Protection Program (the “PPP”) administered by the Small Business Administration (“SBA”) established under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which enabled us to return employees we had furloughed earlier in 2020 to full time employment and to restore employees to full pay following certain pay cuts.

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

New Credit Facility - On March 13, 2020, we entered into a new credit facility with Siena Lending Group LLC (the “Siena Credit Facility”) that provides a revolving credit line of up to $10 million, subject to a borrowing base.

reopened during the first quarter of 2021 with limited capacity and continued to remain open and further expand capacity during the remainder of 2021.

anticipate that casinos world-wide will continue to increase capacity over time, barring any new closures or reduced capacity requirements in response to any new resurgence of the pandemic, including the emergence of variants.

Though sales of our

casino and gaming products increased during 2021 and the first quarter of 2022, and we expect this trend to continue for the remainder of 2022, casinos continue to recover from the financial impact of the COVID-19 pandemic, and therefore we expect that

certain casinos’ appetite for purchases of new slot machines may be diminished, which may negatively impact sales of casino and gaming printers purchased by slot manufacturers for use in slot machines at casinos during 2022.

We made a strategic decision to exit the Printrex market as of December 31, 2021 and expect to have no future sales in this market beyond 2021.

Due to closures and reduced operating capacity of restaurants, food service establishments, casinos and other gaming establishments resulting from the

COVID-19 pandemic, sales of spare parts, service and consumable products have declined, and we expect full year sales to remain at reduced levels, due to lower usage while the pandemic persists.

Our gross margin has been negatively impacted, and we expect our gross margin to continue to be negatively impacted, while the COVID-19

pandemic and its economic effects on the markets we serve persists.

As a result of the COVID-19 pandemic, we have experienced (1) lower sales levels compared to pre-pandemic levels, (2) increased material and shipping costs resulting from worldwide

supply disruptions and (3) increased product, contract manufacturing and labor costs resulting from inflation.

Though we have implemented price increases during the first and second quarters of 2022 on all our products (except our FST products) to

help mitigate the product cost increases, we believe our gross margin will remain lower than pre-pandemic levels due to fixed manufacturing overhead expenses (such as facility costs, depreciation, etc.) that cannot be reduced or eliminated, even with

the lower sales level.

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 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

is unknown given uncertainty surrounding responsive measures to potential future resurgences of the virus, vaccination rates, the emergence of virus variants and the significant disruption that our customers and suppliers have already experienced and

may continue to experience.

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 – O n 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 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 (“CARES”) Act.

On July 8, 2021, we

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

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 .

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

Since the onset of the pandemic, our top priority has been to ensure the health and safety of our employees while continuing to provide our customers with high-quality, personalized service.

Since the onset of the pandemic, our top priority has been the health and safety of our employees while continuing to provide our

customers with high-quality, personalized service.

On March 20, 2020, we instituted work-from-home practices for the majority of our employees to reduce the spread of COVID-19 and to comply with government mandates.

Because most of our employees already had laptop computers with remote access into our IT systems, we experienced only minor reductions in productivity and minimal costs related to the implementation of our work-from-home practices.

In addition, even with the move to a work-from-home environment, our internal control structure remained operational and unchanged.

As of October 4, 2021 all of our employees were fully vaccinated against COVID-19 and, as a result, we implemented a return-to-work plan, reopening all of our facilities and ending our work-from-home practices.

Because most of our employees

already had laptop computers with remote access into our IT systems, we experienced only minor reductions in productivity and minimal costs related to the implementation of our work-from-home practices.

In addition, even with the move to a

work-from-home environment, our internal control structure remained operational and unchanged.

As of October 4, 2021, all of our employees were fully vaccinated against COVID-19 and, as a result, we implemented a return-to-work

plan, reopening all of our facilities and ending our work-from-home practices.

Our distribution centers, deemed an essential service, remained operational throughout the pandemic.

During 2020, we implemented new COVID-19 policies, most of which were still in place during the first nine months of 2021, to specifically address health and safety guidelines for employees to adhere to and follow when at work.

These policies are based on the COVID-19 safety guidelines recommended by the Centers for Disease Control and Prevention and implement the following operations procedures:

staggered shifts and a rotational or flexible work schedule to minimize the number of employees at any particular facility at a single time;

mandated use of protective equipment, such as masks and gloves, when in common areas, which is provided to employees;

spaced seating in workspaces such as manufacturing cells, lunch/break rooms, conference rooms and other common areas to comply with social distancing guidelines ;

employees who (i) show symptoms of COVID-19 or (ii) have been exposed to someone who shows symptoms or has tested positive for COVID-19 are prohibited from reporting to work for 10 days;

prior to October 4, 2021, visitors were prohibited from entering all facilities;

cleaning and disinfecting protocols at all facilities.

We have evaluated the recoverability of the assets on our unaudited condensed consolidated balance sheet as of September 30, 2021 in accordance with relevant authoritative accounting literature.

We considered the disruptions caused by the COVID-19 pandemic, including lower than previously forecasted sales and customer demand and macroeconomic factors potentially impacting accounts receivable, inventory, investments, intangible assets, goodwill and other assets and liabilities.

Where forward-looking estimates are required, we made a good-faith estimate based on information available as of the balance sheet date.

We have continued to monitor for indicators of impairment through the date of this Report and reflected accordingly in the accompanying condensed consolidated financial statements.

Notwithstanding the foregoing, there is no assurance that the actions we have taken in response to the pandemic are sufficient or adequate, and we may be required to take additional preventive or responsive measures, as the ultimate extent of the effects of the COVID-19 pandemic on the Company, our financial condition, results of operations, liquidity, and cash flows are uncertain and are dependent on evolving developments which cannot be predicted at this time.

See Part I, Item 1A, Risk Factors, of Form 10-K for the year ended December 31, 2020 for further discussion of risks related to COVID-19.

During 2020, we implemented new COVID-19 policies, most of which were

still in place prior to ending our work-from-home practices, to specifically address health and safety guidelines for employees to adhere to and follow when at work.

These policies were based on the COVID-19 safety guidelines recommended by the

Centers for Disease Control and Prevention.

We have evaluated the recoverability of the assets on our

unaudited Condensed Consolidated Balance Sheet as of March 31, 2022 i n accordance with relevant authoritative accounting literature.

We considered the disruptions caused by the COVID-19 pandemic, including lower than previously forecasted

sales and customer demand and macroeconomic factors potentially impacting accounts receivable, inventory, investments, intangible assets, goodwill and other assets and liabilities.

Where forward-looking estimates are required, we made a good-faith

estimate based on information available as of the balance sheet date.

We have continued to monitor for indicators of impairment through the date of this Report and reflected any impairments accordingly in the accompanying Condensed Consolidated

Financial Statements.

Notwithstanding the foregoing, there is no assurance that the actions we have taken in response to the pandemic are sufficient or

adequate, and we may be required to take additional preventive or responsive measures, as the ultimate extent of the effects of the COVID-19 pandemic on the Company, our financial condition, results of operations, liquidity, and cash flows are

uncertain and are dependent on evolving developments which cannot be predicted at this time.

See Part I, Item 1A, “Risk Factors”, of our 2021 Form 10-K for further discussion of risks related to COVID-19.

Critical Accounting Judgments and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America.

The presentation of these 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.

Our discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial

Statements, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America.

The presentation of these 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.

There have been no material changes in our critical accounting judgements and estimates from the information presented in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition

and Results of Operations,” in our 2021 Form 10-K.

Results of Operations:

Three months ended September 30, 2021 compared to the three months ended September 30, 2020

Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables and maintenance and repair services, by market for the three months ended September 30, 2021 and 2020 were as follows:

Three months ended March 31, 2022 compared to three months ended March 31, 2021

Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables (including labels) and maintenance and repair services, by market for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

1 unchanged sentence

(In thousands, except percentages)

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

Food service technology (“FST”)

2 unchanged sentences

International *

International sales do not include sales of printers and terminals made to domestic distributors or other domestic customers that may, in turn, ship those printers and terminals to international destinations.

Net sales for the third quarter of 2021 increased $3.3 million, or 46%, from the same period in 2020.

Printer, terminal and other hardware sales volume increased 91% year-over-year to approximately 22,000 units for the third quarter of 2021 due to volume increases in all our markets except our lottery market.

The increase was driven primarily by a 111% increase in unit volume from the casino and gaming market and, to a lesser extent, a 64% increase in the POS automation market and a 74% increase in the FST market.

The average selling price of our printers, terminals and other hardware decreased 3% for the third quarter of 2021 compared to the third quarter of 2020, primarily due to a higher level of POS automation printer sales, which sell at a lower price than our other products.

Additionally, sales of our software, labels and other recurring revenue from our FST market increased $0.4 million, or 28%, in the third quarter of 2021 compared to the third quarter of 2020.

International sales for the third quarter of 2021 increased $0.9 million, or 85%, from the same period in 2020, primarily due to a 202% increase in sales in the international casino and gaming market.

Food service technology.

International sales do not include sales of printers and terminals made to domestic distributors or other domestic customers who may, in turn, ship those printers and

terminals to international destinations.

Net sales for the first quarter of 2022 increased $1.4

million, or 17%, compared to the first quarter of 2021.

Printer, terminal and other hardware unit sales volume increased 25% to approximately 23,000 units, due primarily to a sales volume increase in the casino and gaming market of 61%.

volume increase was partially offset by a decrease in FST hardware volume of 64% in the first quarter of 2022 compared to the first quarter of 2021.

selling price of our printers, terminals and other hardware decreased 7% during the first quarter of 2022 compared to the first quarter of 2021 primarily due to a lower level of FST hardware sales, which sell at higher prices than our other products.

In addition to the sales volume increases, FST software, labels and other recurring revenue increased $0.4 million, or 30%, in the first quarter of 2022 compared to the first quarter of 2021.

International sales for the first quarter of 2022 increased $1.3 million, or 99%, from the same period in 2021 primarily due to

increased sales in the international casino and gaming market, and to a lesser extent, increased sales in the international TSG market.

Our primary offering in the food service technology market is our BOHA!

ecosystem, which combines our latest generation terminal/workstation, cloud-based software applications and related hardware into a unique solution to automate back-of-house operations in restaurants, convenience stores and food service operations.

ecosystem, which combines our latest generation terminal/workstation, cloud-based software applications and related hardware into a unique solution to

automate back-of-house operations in restaurants, convenience stores and food service operations.

The software component of BOHA!

consists of a suite of software-as-a-service (“SaaS”)-based applications for both Android and iOS, including applications for temperature monitoring of food and equipment, timers, food safety labeling, media libraries, checklists and task lists, and equipment service management.

These applications are combined into a single platform with the associated hardware, which includes the BOHA!

consists of a suite of software-as-a-service (“SaaS”)-based applications for both Android and iOS operating systems,

including applications for temperature monitoring of food and equipment, timers, food safety labeling, media libraries, checklists and task lists, and equipment service management.

These applications can be combined into a single platform with the

associated hardware, which includes the BOHA!

terminal/workstation, handheld devices, tablets, temperature probes and temperature sensors.

terminal combines the software and hardware components in a device that includes an operating system, touchscreen and one or two thermal print mechanisms that print easy-to-read food rotation labels, grab-and-go labels for prepared foods, and “enjoy by” date labels.

workstation uses an iPad instead of an integrated touchscreen.

terminal combines the software and hardware components in a device that includes an operating system,

touchscreen and one or two thermal print mechanisms that print easy-to-read food rotation labels, grab-and-go labels for prepared foods, and “enjoy by” date labels.

workstation uses an iPad or Android tablet instead of an integrated

Both the BOHA!

terminal and workstation are equipped with the TransAct Enterprise Management System to ensure that only approved applications and functions are available on the device and allows over-the-air updates to the applications and operating system.

helps food service establishments and restaurants (including fine dining, casual dining, fast casual and quick-serve restaurants, convenience stores, hospitality establishments and contract food service providers) effectively manage food safety and grab-and-go initiatives, as well as automate and manage back-of-house operations.

terminal and BOHA!

workstation are equipped with the TransAct Enterprise Management System to ensure that only approved applications and functions are available on the device and allows over-the-air updates to the

applications and operating system.

providers) effectively manage food safety and grab-and-go initiatives, as well as automate and manage back-of-house operations.

Recurring revenue from BOHA!

is generated by software sales, including software subscriptions that are typically charged to customers annually on a per-application basis, as well as sales of labels, extended warranty and service contracts, and technical support services.

Sales of our worldwide food service technology products for the three months ended September 30, 2021 and 2020 were as follows :

is generated by software sales, including software subscriptions that are typically charged to

customers annually on a per-application basis, as well as sales of labels, extended warranty and service contracts, and technical support services.

Sales of our worldwide

food service technology products for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

1 unchanged sentence

(In thousands, except percentages)

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

International

2 unchanged sentences

(In thousands, except percentages)

September 30, 2021

September 30, 2020

Software, labels and other recurring revenue

The increase in food service technology sales for the third quarter of 2021 compared to the third quarter of 2020 was driven by an increase in sales of both hardware and BOHA!

March 31, 2022

March 31, 2021

Software, labels and other recurring revenue

Hardware sales increased 64% in the third quarter of 2021 compared to 2020 due largely to sales of BOHA!

terminals to an existing national convenience store customer and sales of our AccuDate 9700 terminal to McDonald's.

Sales of BOHA!

software recognized on a SaaS subscription basis, labels and other recurring revenue increased by 28%, primarily due to increased label sales and software sales, compared to the prior year period due to the growth of the installed base of our BOHA!

The decrease in food service technology sales for the first

quarter of 2022 compared to the first quarter of 2021 was driven by a decrease in sales of hardware.

Hardware sales decreased 64% in the first quarter of 2022 compared to 2021 due largely to lower sales to a national convenience store

customer and an initial sale to a new national travel center customer completed in the first quarter of 2021 that did not reoccur in 2022.

The decrease in hardware sales was partially offset by increased sales of BOHA!

software recognized on a SaaS

subscription basis, labels and other recurring revenue, which increased by 30%, primarily due to increased label sales and, to a lesser extent, increased software sales, compared to the prior year period due to the growth of the installed base of our

terminals and workstations.

POS automation:

Revenue from the POS automation market includes sales of thermal printers used primarily by quick serve restaurants located either at the checkout counter or within self-service kiosks to print receipts for consumers or print on linerless labels.

Sales of our worldwide POS automation products for the three months ended September 30, 2021 and 2020 were as follows :

from the POS automation market includes sales of thermal printers used primarily by McDonald’s, and to a lesser extent, other quick serve restaurants either at the checkout counter or within self-service kiosks to print receipts for consumers or print

on linerless labels.

Sales of our worldwide POS automation products for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

1 unchanged sentence

(In thousands, except percentages)

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

International

The increase in POS automation product revenue for the third quarter of 2021 compared to the third quarter of 2020 was driven by a 60% increase in sales of our Ithaca® 9000 printer, primarily to McDonald’s, as POS automation sales improved during the third quarter of 2021 as business began to return to pre-pandemic normalcy compared to the significant negative impact the COVID-19 pandemic had on sales during the third quarter of 2020.

The increase in POS automation sales during the first quarter of 2022 compared to the first quarter of 2021 was driven by a 12% increase

in domestic sales of our Ithaca® 9000 printer, primarily to McDonald’s, as POS automation sales continue to improve in 2022 compared to the negative impact that the COVID-19 pandemic had on POS automation sales during the first three months of 2021.

We expect sales of POS automation printers to be significantly higher in the second half of 2022 compared to the first quarter of 2022 based on the backlog of orders we have received for McDonald’s.

Casino and gaming:

Revenue from the casino and gaming market includes sales of thermal ticket printers used in slot machines, video lottery terminals, and other gaming machines that print tickets or receipts instead of issuing coins at casinos and racetracks and other gaming venues worldwide.

Revenue from this market also includes sales of thermal roll-fed printers used in the international off-premise gaming market in gaming machines such as Amusement with Prizes, Skills with Prizes and Fixed Odds Betting Terminals at non-casino gaming and sports betting establishments.

from the casino and gaming market includes sales of thermal ticket printers used in slot machines, video lottery terminals, and other gaming machines that print tickets or receipts instead of issuing coins at casinos and racetracks and other gaming

venues worldwide.

non-casino gaming and sports betting establishments.

Revenue from this market also includes royalties related to our patented casino and gaming technology.

In addition, casino and gaming market revenue includes sales of the EPICENTRAL® print system, our software solution (including annual software maintenance), that enables casino operators to create promotional coupons and marketing messages and to print them in real time at the slot machine.

Sales of our worldwide casino and gaming products for the three months ended September 30, 2021 and 2020 were as follows :

In addition, casino and gaming market revenue includes sales of the EPICENTRAL print system,

our software solution (including annual software maintenance), that enables casino operators to create promotional coupons and marketing messages and to print them in real time at the slot machine.

Sales of our worldwide casino and gaming products for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

1 unchanged sentence

(In thousands, except percentages)

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

International

The increase in domestic sales of our casino and gaming products for the third quarter of 2021 compared to the third quarter of 2020 was primarily due to a 75% increase in domestic sales of our thermal casino printers, as we continue to experience continued recovery compared to the third quarter of 2020 when the casino and gaming market was negatively impacted by the COVID-19 pandemic.

In addition to the year-over-year growth, the domestic casino and gaming market sales increased 9% in the third quarter of 2021 compared to the second quarter of 2021.

Similar to the domestic sales increase, international sales of our casino and gaming products increased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to a 256% increase in sales of our thermal casino printers.

Though sales in Asia remain weak, we experienced a sales recovery primarily in Europe during the third quarter of 2021 compared to the third quarter of 2020 when the international casino and gaming market was negatively impacted by the COVID-19 pandemic .

In addition to the year-over-year growth, international casino sales in the third quarter of 2021 increased 34% compared to the second quarter of 2021.

Printrex branded printers are sold into markets that include wide format, desktop and rack mounted and vehicle mounted black/white thermal printers used by customers to log and plot oil field, seismic and down hole well drilling data in the oil and gas exploration industry.

Sales of our worldwide Printrex printers for the three months ended September 30, 2021 and 2020 were as follows :

The increase in domestic sales of our casino and gaming products for the first quarter of 2022 compared to the first quarter of 2021 was primarily due to a 43% increase in domestic sales of our thermal casino printers, driven by higher sales to OEMs as the market continued to recover from the

negative impact of the COVID-19 pandemic.

The increase in international casino and gaming sales during the first quarter of 2022 compared to the first quarter of 2021 was due to

a 71% increase in sales of our thermal casino printers and a 397% increase in international sales of our off-premise gaming printers.

These increases are attributable to the recovery of the international markets after significant negative impacts from

the COVID-19 pandemic.

The international casino and gaming market recovered at a slower pace during 2021 compared to the domestic casino and gaming market.

P rintrex branded printers were sold into markets that include wide format, desktop and rack-mounted and vehicle-mounted black/white thermal printers

used by customers to log and plot oil field, seismic and down hole well drilling data in the oil and gas exploration industry.

Sales of our worldwide Printrex printers for

the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

1 unchanged sentence

(In thousands, except percentages)

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

International

The increase in sales of Printrex printers for the third quarter of 2021 compared to the third quarter of 2020 resulted from higher international sales in the oil and gas market which was negatively impacted during the third quarter of 2020 by the decline in worldwide oil prices attributable to the COVID-19 pandemic.

Though our overall Printrex sales increased in the third quarter of 2021 and we continue to fulfill orders from existing customers, we are no longer focused on this market.

We plan to exit this market at the end of the year and expect no future Printrex sales beyond 2021.

Revenue generated by TSG includes sales of consumable products (POS receipt paper, inkjet cartridges, ribbons and other printing supplies for legacy products), replacement parts, maintenance and repair services, refurbished printers, and shipping and handling charges.

Sales in our worldwide TSG market for the three months ended September 30, 2021 and 2020 were as follows :

During 2021, we decided to exit the Printrex business and in the fourth quarter of 2021 fulfilled last buy orders to our legacy

We expect no future Printrex sales as we have shifted our focus away from this market and towards our higher value, technology-enabled food service technology terminals and casino and gaming products.

generated by TSG includes sales of consumable products (POS receipt paper, inkjet cartridges, ribbons and other printing supplies for legacy products), replacement parts and accessories, maintenance and repair services, and shipping and handling

Sales in our worldwide TSG market for the three months ended March 31, 2022 and 2021 were as

Three Months Ended

1 unchanged sentence

(In thousands, except percentages)

September 30, 2021

September 30, 2020

International

Domestic revenue from TSG for the third quarter of 2021 decreased slightly by 3% compared to the third quarter of 2020.

The decrease was primarily due to a 57% decrease in service sales largely related to a service contract with a legacy banking customer that is expected to end in the first half of 2022 and a 55% decline from lower consumable sales resulting from decreased legacy POS printer paper sales.

These decreases were partially offset by a 13% increase from higher lottery printer spare part sales to IGT, which can vary significantly from quarter to quarter.

We expect TSG sales to decrease in 2021 compared to 2020 due to lower expected sales of legacy lottery printer spare parts to IGT and lower service sales related to the banking service contract noted above.

Internationally, TSG revenue decreased in the third quarter of 2021 compared to the third quarter of 2020, primarily due to an 83% decrease in service sales to international customers.

Gross Profit.

Gross profit for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Total Sales - 2021

Total Sales - 2020

Gross profit is measured as revenue less cost of sales, which includes primarily the cost of all raw materials and component parts, direct labor, manufacturing overhead expenses, cost of finished products purchased directly from our contract manufacturers, expenses associated with installations and support of our EPICENTRAL® print system and BOHA!

ecosystem and royalty payments to third parties, including to the third-party licensor of our food service technology software products.

For the third quarter of 2021, gross profit increased $1.0 million, or 29%, due largely to a sales increase of 46% for the third quarter of 2021 compared to the third quarter of 2020.

During the third quarter of 2021, our gross margin decreased 530 basis points, to 40.6%, compared to 45.9% for the third quarter of 2020.

The decrease in gross margin resulted largely from lower margin on our BOHA!

hardware sales in the third quarter of 2021 compared to the third quarter of 2020, as we have reduced prices to accelerate the growth of our BOHA!

installed base, as well as higher material and shipping costs resulting from worldwide supply disruptions caused by the COVID-19 pandemic.

Operating Expenses - Engineering, Design and Product Development.

Engineering, design and product development expense for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Total Sales - 2021

Total Sales - 2020

Engineering, design and product development expenses primarily include salary and payroll related expenses for our hardware and software engineering staff, depreciation and design expenses (including prototype printer expenses, outside design, development and testing services, supplies and contract software development expenses including those to the third-party licensor of our food service technology software products).

Such expenses increased $0.4 million, or 30%, for the third quarter of 2021 compared to the third quarter of 2020, as we gradually return to more normalized pre-COVID spending levels and continue development of our food service technology products.

We expect engineering, design and product development expense to increase for the full year 2021 compared to the full year 2020 due to the accelerated investments planned in our food service technology products.

Operating Expenses - Selling and Marketing.

Selling and marketing expense for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Total Sales - 2021

Total Sales - 2020

Selling and marketing expenses primarily include salaries and payroll related expenses for our sales and marketing staff, sales commissions, travel expenses, expenses associated with the lease of sales offices, advertising, trade show expenses, public relations, e-commerce and other promotional marketing expenses.

Such expenses increased $0.6 million, or 51%, for the third quarter of 2021 compared to the third quarter of 2020, primarily due to increased marketing programs and new sales staff to support our BOHA!

products, as well as higher sales commissions and travel expenses.

Our level of spending was unusually low during the third quarter of 2020, as we continued a number of significant cost saving measures that were implemented during the second quarter of 2020 in response to the COVID-19 pandemic.

We expect selling and marketing expenses to continue to increase for the remainder 2021, as we return to more normalized pre-COVID-19 spending levels, as well as continue the strategic investments in our food service technology sales and marketing groups including expanding our staff and the resumption and expansion of print advertising and marketing promotions started in second quarter of 2021.

Operating Expenses - General and Administrative .

General and administrative expense for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Total Sales - 2021

Total Sales - 2020

General and administrative expenses primarily include salaries, incentive compensation, and other payroll related expenses for our executive, accounting, human resources, business development and information technology staff, expenses for our corporate headquarters, professional and legal expenses, information technology expenses, and other expenses related to being a publicly-traded company.

General and administrative expenses remained relatively consistent, increasing 1%, for the third quarter of 2021 compared to the third quarter of 2020 as higher recruiting fees and employee compensation were almost entirely offset by lower severance expense which was higher in the 2020 period due to cost saving initiatives completed during the third quarter of 2020.

We expect general and administrative expenses to increase for the full year 2021 as we gradually return to more normalized pre-COVID-19 spending levels.

Operating Loss.

Operating loss for the three months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Total Sales - 2021

Total Sales - 2020

Our operating loss increased $0.1 million, or 9%, for the third quarter of 2021 compared to the third quarter of 2020 as increased sales of 46% were almost entirely offset by a decrease in our gross margin of 530 basis points and an increase in operating expenses of $1.1 million during the third quarter of 2021 compared to the third quarter of 2020.

Interest, net.

We recorded net interest expense of $29 thousand for the third quarter of 2021 compared to net interest expense of $19 thousand for the third quarter of 2020.

The increase in net interest expense was primarily due to lower interest income earned from the note receivable to a third-party software developer that was collected in March 2021.

We expect interest expense to increase for the full year 2021 compared to the full year 2020 due to the full year impact of unused borrowing fees incurred from the Siena Credit Facility that was entered into on March 13, 2020 and lower interest income due to the collection of the note receivable during the first quarter of 2021.

We recorded other expense of $69 thousand for the third quarter of 2021 compared to other income of $116 thousand for the third quarter of 2020, primarily due to foreign exchange losses recorded by our U.K.

subsidiary in the third quarter of 2021 compared to foreign exchange gains recorded in the third quarter of 2020.

Going forward, we may continue to experience more foreign exchange gains or losses depending on the level of sales to European customers through our U.K.

subsidiary and the fluctuation in exchange rates of the Euro and Pound Sterling against the U.S.

Dollar, which may be impacted by volatility in global economic conditions due to the COVID-19 pandemic.

Gain on Forgiveness of Long-Term Debt.

We recorded a $2.2 million gain in the third quarter of 2021 resulting from the forgiveness of the PPP Loan in July 2021.

Income Taxes.

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%.

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 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.

Net Income (Loss) .

We reported net income for the third quarter of 2021 of $0.9 million, or $0.09 per diluted share, compared to a net loss of $0.9 million, or $0.11 per diluted share, for the third quarter of 2020.

Results of Operations:

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020

Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables and maintenance and repair services, by market for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

(In thousands, except percentages)

September 30, 2021

September 30, 2020

POS automation

Casino and gaming

International *

Net sales for the first nine months of 2021 increased $5.4 million, or 24%, from the same period in 2020.

Printer, terminal and other hardware sales volume increased by 28% to approximately 59,000 units for the first nine months of 2021 driven by volume increases in all our markets except our lottery market.

The primary volume increases were a 28% increase in unit volume from the casino and gaming market and, to a lesser extent, a 32% unit volume increase in our POS automation market and a 108% increase in unit volume from the FST market.

The average selling price of our printers, terminals and other hardware increased 1% for the first nine months of 2021 compared to the first nine months of 2020.

Additionally, sales of our software, labels and other recurring revenue from our FST market increased $2.4 million, or 85%, in the first nine months of 2021 compared to the first nine months of 2020.

International sales for the first nine months of 2021 increased by less than 1% compared to the first nine months of 2020, due to a 137% increase in the international Printrex market and a 3% increase in the international casino and gaming market which were mostly offset by a 39% decrease in the international TSG market.

Food service technology.

Sales of our worldwide food service technology products for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

(In thousands, except percentages)

September 30, 2021

September 30, 2020

International

Nine Months Ended

(In thousands, except percentages)

September 30, 2021

September 30, 2020

Software, labels and other recurring revenue

The increase in food service technology sales in the first nine months of 2021 compared to the first nine months of 2020 was driven by an increase in sales of both hardware and BOHA!

software, labels and other recurring revenue.

Hardware sales increased 84% in the first nine months of 2021 compared to the first nine months of 2020 due largely to sales to an existing national convenience store customer and a new national travel center customer as well as higher sales of our AccuDate 9700 terminal to McDonald’s.

Sales of BOHA!

software recognized on a SaaS subscription basis, labels and other recurring revenue increased by 85%, primarily due to increased label sales and, to a lesser extent, increased software sales, compared to the prior year period due principally to the growth of the installed base of our BOHA!

terminals and workstations.

POS automation.

Sales of our worldwide POS automation products for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

(In thousands, except percentages)

September 30, 2021

September 30, 2020

International

The increase in POS automation product revenue for the first nine months of 2021 compared to the first nine months of 2020 was driven by a 30% increase in sales of our Ithaca® 9000 printer, primarily to McDonald’s, as POS automation sales began to improve in the first nine months of 2021 compared to the significant negative impact of the COVID-19 pandemic on POS automation sales during the second and third quarter of 2020.

Casino and gaming.

Sales of our worldwide casino and gaming products for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

(In thousands, except percentages)

September 30, 2021

September 30, 2020

International

The increase in domestic sales of our casino and gaming products for the first nine months of 2021 compared to the first nine months of 2020 was primarily due to a 42% increase in domestic sales of our thermal casino printers, as we have experienced some recovery during the first nine months of 2021 compared to the first nine months of 2020, and particularly the second quarter of 2020, when the casino and gaming market was most severely impacted by the COVID-19 pandemic.

International sales of our casino and gaming products increased in the first nine months of 2021 compared to the first nine months of 2020, primarily due to a 5% increase in sales of our thermal casino printers as we experienced modest recovery during the first nine months of 2021 after the significant negative impact of the COVID-19 pandemic on the international casino and gaming industry, which is recovering at a slower pace than the domestic casino and gaming market.

Sales of our worldwide lottery printers for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

(In thousands, except percentages)

September 30, 2021

September 30, 2020

International

On December 31, 2019, we allowed our non-exclusive agreement to provide lottery terminal printers to IGT to expire as we decided to exit the lottery market and shift our focus towards our higher-value, technology enabled food service technology and casino and gaming products.

As a result, IGT made a final purchase of our lottery printers during the second quarter of 2020 and we do not expect any further lottery printer sales in the future.

S ales of our worldwide Printrex printers for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

(In thousands, except percentages)

September 30, 2021

September 30, 2020

International

The increase in sales of Printrex printers for the first nine months of 2021 compared to the first nine months of 2020 resulted from increased international sales in the oil and gas market.

This increase was partially offset by a decrease in domestic Printrex printer sales during the first nine months of 2021 compared to the first nine months of 2020.

Though our overall Printrex sales increased in the third quarter of 2021 and we continue to fulfill orders from existing customers, we are no longer focused on this market.

We plan to exit this market at the end of the year and expect no future Printrex sales beyond 2021.

Sales in our worldwide TSG market for the nine months ended September 30, 2021 and 2020 were as follows:

Nine Months Ended

(In thousands, except percentages)

September 30, 2021

September 30, 2020

March 31, 2022

March 31, 2021

International

The decrease in domestic revenue from TSG for the first nine months of 2021 as compared to the first nine months of 2020 was due primarily to lower service revenue, lower sales of replacement parts, and consumable products.

Service revenue declined 42%, primarily related to a service contract with a legacy banking customer that is expected to end in the first half of 2022.

The decrease in domestic revenue from TSG during the first quarter of 2022 as compared to the first quarter of 2021 was due to lower

sales of legacy replacement parts, service revenue, and consumable products.

Replacement part sales decreased 14% primarily from lower lottery printer spare part sales to IGT, which can vary significantly from quarter to quarter.

Consumable sales declined 28%, due primarily to lower sales of HP inkjet cartridges used in our banking printers, as we exited the banking market at the end of 2018.

Internationally, TSG revenue decreased for the first nine months of 2021 compared to the first nine months of 2020, primarily due to a 28% decrease in sales of replacement parts and accessories to international casino and gaming customers and, to a lesser extent, a 71% decrease in international consumable sales and 50% lower service revenue due to the negative impact from the COVID-19 pandemic.

Service revenue

declined 24%, primarily related to declining revenue from a service contract with a legacy banking customer that is expected to expire during 2022.

Consumable sales declined 23%, due to decreased sales of consumable products for our legacy products on

which we are no longer focusing.

Internationally, TSG revenue increased in the first quarter of 2022 compared to the first quarter of 2021 primarily due to a 576%

increase in sales of replacement parts, as we made a sale of obsolete electronic components to international customers.

Gross Profit.

Gross profit for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Gross profit information for the three months ended March 31, 2022 and 2021 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2022

Total Sales - 2021

Gross profit increased $0.3 million, or 3%, for the first nine months of 2021 compared to the first nine months of 2020, primarily due to the 24% sales increase, which was largely offset by a decrease in gross margin of 790 basis points during the first nine months of 2021 compared the first nine months of 2020.

Gross margin decreased to 38.3% compared to 46.2% for the first nine months of 2021 compared to the first nine months of 2020.

The decrease in gross margin resulted largely from lower margin on our BOHA!

hardware sales during the first nine months of 2021 compared to the nine months of 2020, as we have reduced prices to accelerate the growth of our BOHA!

installed base, as well as higher material and shipping costs resulting from worldwide supply disruptions caused by the COVID-19 pandemic.

Operating Expenses - Engineering, Design and Product Development.

Engineering, design and product development expense for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Gross profit is measured as revenue less cost of sales, which includes primarily the cost of all raw materials and component parts,

direct labor, manufacturing overhead expenses, cost of finished products purchased directly from our contract manufacturers, expenses associated with installations and support of our EPICENTRAL print system and BOHA!

ecosystem and royalty payments to

third parties, including to the third-party licensor of our food service technology software products.

For the first quarter of 2022, gross profit decreased $0.2 million, or

6%, due primarily to increased product and shipping costs related to world-wide supply chain shortages and disruptions offsetting a sales increase of $1.4 million.

Additionally, our gross margin decreased 750 basis points to 30.9% for the first

quarter of 2022 compared to 38.4% for the first quarter of 2021 due to the increased product and shipping costs noted above.

We expect our gross margin to continue to be negatively impacted by higher product and shipping costs throughout 2022, but

this impact should be mitigated by price increases instituted during the first quarter of 2022 that will be fully realized beginning in the second quarter of 2022.

Operating Expenses -

Engineering, Design and Product Development.

Engineering, design and product development information for the three months ended March 31, 2022

and 2021 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2022

Total Sales - 2021

Engineering, design and product development expenses increased $1.3 million, or 31%, during the first nine months of 2021 compared to first nine months of 2020, as we gradually return to more normalized pre-COVID spending levels and continued development for our food service technology products.

Operating Expenses - Selling and Marketing.

Selling and marketing expense for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Engineering, design and product development expenses primarily include salary and payroll-related expenses for our hardware and software

engineering staff, depreciation and design expenses (including prototype printer expenses, outside design, development and testing services, supplies and contract software development expenses including those to the third-party licensor of our food

service technology software products).

Engineering, design and product development expenses increased $0.5 million, or 27%, for the first quarter of 2022 compared to the

first quarter of 2021, primarily due to the hiring of additional software developers during the second half of 2021 and first quarter of 2022 for the continued development of our food service technology products.

We expect engineering,

design and product development expenses to continue to increase in 2022 compared to 2021 due to continued planned investments in our food service technology products.

Operating Expenses -

Selling and Marketing.

Selling and marketing information for the three months ended March 31, 2022 and 2021 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2022

Total Sales - 2021

Selling and marketing expenses increased $0.2 million, or 5%, for the first nine months of 2021 compared to the first nine months of 2020 primarily due to returning to more normalized pre-COVID-19 levels of sales and marketing expense during the first nine months of 2021 compared to reduced costs during the first nine months of 2020 due to cost saving measures implemented during the second and third quarters of 2020.

Operating Expenses - General and Administrative .

General and administrative expense for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Selling and marketing expenses primarily include salaries and payroll-related expenses for our sales, marketing and customer success

staff, sales commissions, travel expenses, expenses associated with the lease of sales offices, advertising, trade show expenses, public relations, e-commerce and other promotional marketing expenses.

Selling and marketing expenses increased by $1.2 million, or 86%, for the first quarter of 2022 compared to the first quarter of 2021 due primarily to investment spending for our food service technology sales and marketing

During the first quarter of 2022, we initiated BOHA!

market studies, increased marketing programs and hired additional employees in our BOHA!

sales and marketing groups.

In addition to these investments, we experienced higher sales

commissions, travel expenses and tradeshow expense, as travel begins to return to pre-COVID-19 levels, compared to the lower levels of spending in the first quarter of 2021 resulting from the negative impacts of COVID-19.

We expect selling

and marketing expenses to increase in 2022 compared to 2021, as we plan to continue to make substantial strategic investments in our food service technology sales and attend more trade shows in 2022 compared to 2021.

Operating Expenses -

General and Administrative .

General and administrative information for the three months ended March 31, 2022 and 2021 is summarized below (in thousands, except

percentages):

Three Months Ended March 31,

Total Sales - 2022

Total Sales - 2021

General and administrative expenses increased $0.3 million, or 4%, for the first nine months of 2021 compared to first nine months of 2020 due to higher recruiting fees and employee compensation, as well as higher consulting fees related to a planned implementation of a new ERP system expected to be completed in 2022.

These increases were partially offset by lower legal and professional fees and lower severance expense during the first nine months of 2021 compared to the first nine months of 2020.

General and administrative expenses primarily include salaries, incentive compensation, and other payroll-related expenses for our

executive, accounting, human resources, business development and information technology staff, expenses for our corporate headquarters, professional and legal expenses, information technology expenses, board of director expenses and other expenses

related to being a publicly traded company.

General and administrative expenses increased $0.6 million, or 23%, during the first quarter of 2022 compared to the first

quarter of 2021.

The increase is primarily due to higher compensation expense for existing employees, higher recruiting fees related to BOHA!

engineering and sales and marketing staff hired during the first quarter of 2022 and expenses related to

the implementation of a new ERP system that was completed in April 2022 and legal fees related to a shareholder matter that was resolved on March 30, 2022 when we entered into a Cooperation Agreement with two shareholders.

Operating Loss.

Operating loss for the nine months ended September 30, 2021 and 2020 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Operating loss information for the three months ended March 31, 2022 and 2021 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2022

Total Sales - 2021

Our operating loss increased $1.5 million, or 27%, for the first nine months of 2021 compared to the first nine months of 2020 on 24% higher sales due to a decrease in our gross margin of 790 basis points and an increase in operating expenses of $1.8 million during the first nine months of 2021 compared to the first nine months of 2020.

Interest, net.

We recorded net interest expense of $71 thousand for the first nine months of 2021 compared to net interest expense of $41 thousand for the first nine months of 2020.

The increase in net interest expense was primarily due to lower interest income earned from the note receivable to a third-party software developer that was collected in March 2021 and a full nine months of unused borrowing fees under the Siena Credit Facility that was entered into on March 13, 2020.

We recorded other expense of $169 thousand for the first nine months of 2021 compared to other expense of $60 thousand for the first nine months of 2020 primarily due to foreign exchange losses recorded by our U.K.

Gain on Forgiveness of Long-Term Debt.

We recorded a $2.2 million gain in the third quarter of 2021 resulting from the forgiveness of the PPP Loan in July 2021.

Our operating loss increased $2.5 million, or 94%, in the first quarter of 2022 compared to the first quarter of 2021 due to the

decrease in our gross margin of 750 basis points and the 40% increase in operating expenses, largely for BOHA!

investment spending, during the first quarter of 2022 compared to the first quarter of 2021.

recorded net interest expense of $64 thousand for the first quarter of 2022 compared to $13 thousand for the first quarter of 2021.

The increase in interest expense was primarily due to losses reported in our short-term investment accounts during the

first quarter of 2022.

The first quarter of 2021 included interest income earned from a note receivable to a third-party software developer that was collected in March 2021.

We recorded other expense of $35 thousand for the first quarter of 2022 compared to other expense of $83 thousand for the first quarter of 2021 primarily due to foreign

exchange losses recorded by our UK subsidiary.

Going forward, we may continue to experience more foreign exchange gains or losses depending on the level of sales to European customers through our UK subsidiary and the fluctuation in exchange rates of

the Euro and Pound Sterling against the U.S.

Dollar, which may be impacted by volatility in global economic conditions due to the COVID-19 pandemic.

Income Taxes.

We recorded an income tax benefit for the first nine months of 2021 of $1.7 million at an effective tax rate of 33.0%, compared to an income tax benefit for the first nine months of 2020 of $1.9 million at an effective tax rate of 33.9%.

The tax benefit recorded for the nine months ended September 30, 2021 was unusually high as it included the recognition of the gain on the forgiveness of the PPP Loan which is not taxable.

The effective tax rate for the first nine months of 2020 included the impact of our NOL that we incurred during 2020 and was carried back to prior years.

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 reported a net loss for the first nine months of 2021 of $3.4 million, or $0.37 per diluted share, compared to a net loss of $3.7 million, or $0.49 per diluted share, for the first nine months of 2020.

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 reported a net loss for the first quarter of 2022 of $4.0 million, or $0.41 per diluted share, compared to a net loss of $2.2 million, or $0.25 per

diluted share, for the first quarter of 2021.

Liquidity and Capital Resources

For the first nine months of 2021, our cash and cash equivalents balance increased $8.3 million, or 80%, from December 31, 2020 due primarily to financing activities providing $11.5 million of cash largely from the completion of an underwritten public offering during the third quarter of 2021.

We ended the third quarter of 2021 with $18.7 million in cash and cash equivalents, of which $1 million was held by our U.K.

subsidiary, and no outstanding borrowings.

For the first three months of 2022,

our cash and cash equivalents balance decreased $7.5 million, or 38%, from December 31, 2021.

We ended the first quarter of 2022 with $12.0 million in cash and cash equivalents, of which $2.6 million was held by our U.K.

Operating activities :

The following significant factors affected our cash used in operating activities of $3.9 million for the first nine months of 2021 as compared to cash used in operating activities of $4.2 million for the first nine months of 2020:

During the first nine months of 2021:

following significant factors affected our cash used in operating activities of $6.8 million for the first three months of 2022 as compared to cash used in operating activities of $3.1 million for the first three months of 2021:

During the first three

months of 2022:

We reported a net loss of $4.0 million.

We recorded depreciation and amortization of $0.2 million, and share-based compensation expense of $0.3 million.

We recorded a gain of $2.2 million for the forgiveness of the PPP loan.

Accounts receivable increased $3.1 million, or 93%, primarily due to increased sales volume during the third quarter of 2021 .

Inventories decreased $4.9 million, or 44%, due to the utilization of inventory on hand to fulfill sales and significantly reduced inventory purchases resulting from the supply chain disruptions caused by the COVID-19 pandemic .

Other current and long-term assets increased $0.2 million, or 15%, due to primarily to prepaid expenses related to tradeshows that will be held in the fourth quarter of 2021 .

Accounts payable decreased $0.2 million, or 14%, d ue primarily to a decrease in inventory purchases made during the third quarter of 2021 .

Accrued liabilities and other liabilities increased slightly by $0.1 million, or 2%, due primarily to increased deferred revenue .

During the first nine months of 2020:

Accounts receivable decreased $0.7 million, or 9%, primarily due to a decrease in sales in the first quarter of 2022 compared to the fourth quarter of 2021.

Inventory increased $1.3 million, or 17%, due to the strategic purchase of additional

inventory to mitigate supply chain constraints .

Other current and long-term assets increased $0.8 million, or 68%, due primarily to customer cash deposits made during the last week of March 2022 that were automatically

swept from our bank account by Siena pursuant to an arrangement made under our credit facility.

These funds are typically redeposited to our bank account before each quarter but were not returned until April 1, 2022.

Accounts payable decreased $0.4 million, or 9%, due primarily to the payment of inventory purchases made during the fourth quarter of 2021.

Accrued liabilities and other liabilities decreased $0.3 million, or 3%, due primarily to the payment of 2021 annual bonuses in March 2022, somewhat offset by higher

accrued legal expenses and accrued salaries.

During the first three

months of 2021:

We reported a net loss of $2.2 million.

We recorded depreciation and amortization of $0.2 million, and share-based compensation expense of $0.3 million.

Accounts receivable decreased $1.4 million, or 22%, primarily due to lower sales volume during the third quarter of 2020 .

Inventories increased $0.4 million, or 4%, primarily due to the build up of inventory from non-cancellable purchase orders that were placed before the onset of the COVID-19 pandemic.

Accounts payable decreased $0.7 million, or 23%, primarily due to inventory purchases made towards the end of the fourth quarter of 2019 that were subsequently paid in the first quarter of 2020.

Accrued liabilities and other liabilities decreased $0.5 million, or 7%, primarily due to lower deferred revenue .

Accounts receivable increased $1.3 million, or 40%, primarily due to increased sales volume late in the first quarter of 2021.

Inventory decreased $1.3 million, or 11%, due to the utilization of inventory on hand to fulfill sales in response to the pandemic.

Other current and long-term assets increased $0.1 million, or 7%, due largely to advance payments made in the first quarter of 2021 for our annual ERP software

Accounts payable increased $0.2 million, or 13%, due primarily to the timing of payments during the first quarter of 2021.

Accrued liabilities and other liabilities decreased $1.0 million, or 13%, due primarily to the payment of 2020 annual bonuses in March 2021.

Investing activities:

Our capital expenditures were $0.8 million for the first nine months of 2021 compared to $0.6 million for the first nine months of 2020.

Expenditures in 2021 were primarily related to the implementation of a new ERP system expected to be completed in the first quarter of 2022, computer and networking equipment and new product tooling equipment.

Expenditures in 2020 were primarily for new product tooling equipment, leasehold improvements at our Las Vegas facility and computer and networking equipment.

Investing activities also provided $1.6 million for the first nine months of 2021 upon the collection of the remaining $1.6 million note receivable balance from an unaffiliated third party during the first quarter of 2021, compared to $0.6 million of cash used in investing activities during the first nine months of 2020, for the issuance of a loan to the same unaffiliated third party.

Capital expenditures for 2021 are expected to be approximately $1.2 million, primarily for product tooling, a new ERP system, new computer software and computer and networking equipment to support our food service technology market and to a lesser extent, new product tooling.

capital expenditures were $496 thousand for the first three months 2022 compared to $68 thousand for the first quarter of 2021.

Expenditures in 2022 were primarily related to implementation costs of a new ERP system that was completed in April 2022

and computer and networking equipment.

Expenditures in 2021 were for computer and networking equipment and new product tooling equipment.

In the first quarter of 2021, investing activities also provided $1.6 million from the collection of the

remaining $1.6 million note receivable balance from an unaffiliated third-party.

Financing activities:

Financing activities provided $11.5 million of cash for the first nine months of 2021 primarily from the completion of an underwritten public offering which raised net proceeds of $11.3 million, after deducting cash outflows from underwriting discounts and commissions and offering expenses and, to a lesser extent, proceeds of $0.3 million from stock option exercises.

These increases were partially offset by $0.1 million for the payment of withholding taxes on stock issued from our stock compensation plans and $31 thousand on the final payment of financing costs associated with our Siena Credit Facility.

During the first nine months of 2020, financing activities provided $2.2 million of cash primarily from the $2.2 million in funds received from the PPP Loan and proceeds of $0.4 million from stock option exercises, partially offset by the payment of financing costs associated with signing our Siena Credit Facility.

Additionally, during the first nine months of 2020, we borrowed and subsequently repaid $2.8 million from our Siena Credit Facility.

activities used $119 thousand of cash during the first three months of 2022 to pay for withholding taxes on stock issued from our stock compensation plans.

During the first three months of 2021, financing activities used $15 thousand of cash to pay

$75 thousand for withholding taxes on stock issued from our stock compensation plans and $31 thousand on the final payment of financing costs associated with our Siena Credit Facility, partially offset by proceeds of $91 thousand from stock option

Credit Facility and Borrowings

On March 13, 2020, we entered into the Siena Credit Facility with Siena Lending Group LLC 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 expiring on March 13, 2023.

On March 13, 2020, we entered into the Siena Credit Facility with Siena Lending Group LLC, which provides for a revolving credit line

of up to $10 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 were $245 thousand.

deferred financing costs related to expenses incurred to complete the Siena Credit Facility were $245 thousand.

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.

Borrowings under the Siena Credit Facility 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 Siena Credit Facility imposes a financial covenant on the Company and restricts, among other things, our ability to incur additional indebtedness and the creation of other liens.

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.

Borrowings under the Siena Credit Facility are secured by

a lien on substantially all the assets of the Company.

Borrowings under the Siena Credit Facility are subject to a borrowing base based on (i) 85% of eligible accounts receivable plus the lesser of (a) $5 million and (b) 50% of eligible raw material

and 60% of finished goods inventory.

The Siena Credit Facility imposes a financial covenant on the Company and restricts, among other things, our ability to incur

additional indebtedness and the creation of other liens.

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.

During the third quarter of 2021, we have been in compliance with our excess availability covenant.

As of September 30, 2021, we had no outstanding borrowings under the Siena Credit Facility and $4.2 million of available borrowing capacity under the Siena Credit Facility.

On May 1, 2020 (the “Loan Date”), the Company was granted the PPP Loan from Berkshire Bank in the aggregate amount of $2.2 million, pursuant to the PPP which is administered by the SBA and was established under Division A, Title I of the CARES Act, enacted March 27, 2020.

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

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

The PPP Loan, which was evidenced by a Note dated the Loan Date issued by the Company (the “Note”) in favor of Berkshire Bank as a lender, was scheduled to mature on May 1, 2022 and had a fixed interest rate of 1.0% per annum, accruing from the Loan Date and payable monthly.

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.

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 March 31, 2022, we have been in compliance with our excess availability covenant.

As of March 31, 2022, we had no outstanding borrowings under the Siena Credit

Facility and $3.5 million of available borrowing capacity under the Siena Credit Facility.

On May 1, 2020 (the “Loan Date”), the Company was granted the PPP Loan with Berkshire Bank in the aggregate amount of $2.2 million,

pursuant to the PPP which is administered by the SBA and was established under Division A, Title I of the CARES Act, enacted March 27, 2020.

Under the terms of the PPP, the PPP Loan would be forgiven to the extent that funds from the PPP Loan were

used for payroll costs and costs to continue group health care benefits, as well as for interest on mortgage obligations incurred before February 15, 2020, rent payments under lease agreements in effect before February 15, 2020, utilities for which

service began before February 15, 2020 and interest on debt obligations incurred before February 15, 2020, subject to conditions and limitations provided in the CARES Act.

At least 60% (under the PPP terms, as amended) of the proceeds of the PPP Loan

needed to have been used for eligible payroll costs for the PPP Loan to be forgiven.

The PPP Loan, which was evidenced by a Note dated the Loan Date issued by the Company in favor of

Berkshire Bank as a lender, was scheduled to mature on May 1, 2022 and had a fixed interest rate of 1.0% per annum, accruing from the Loan Date and payable monthly.

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.

Shareholder Dividend Payments

In 2012, our Board of Directors initiated a quarterly cash dividend program that was subject to the Board’s approval each quarter.

On January 23, 2020, our Board of Directors announced the cessation of our quarterly cash dividend on the Company’s common stock to accelerate the investment in sales and marketing, continued product development and infrastructure of the BOHA!

The final dividend payment was made in December 2019.

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

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 ending December 31, 2021.

Resource Sufficiency

Given the unprecedented uncertainty related to the impact of the COVID-19 pandemic on the food service and casino industries, the Company is closely monitoring its cash generation, usage and preservation including the management of working capital to generate cash.

The Company does not currently anticipate requiring any additional credit facilities within the next twelve months beyond our Siena Credit Facility which is discussed above.

We believe that our cash and cash equivalents on hand, our expected cash flows generated from operating activities, the proceeds raised through the underwritten public offerings during August 2021, and borrowings available under our Siena Credit Facility will provide sufficient resources to meet our working capital needs, finance our capital expenditures and meet our liquidity requirements through at least the next twelve months.

Notwithstanding this belief, the duration and extent of the pandemic remain uncertain and its ultimate impact is unknown.

As a result, we continue to evaluate several different strategies to enhance our liquidity position as a result of the significant financial and operational impacts due to the COVID-19 pandemic.

These strategies may include, but are not limited to, seeking to raise additional capital through an equity or debt financing and applying for additional relief through other programs established under the CARES Act.

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no off-balance sheet arrangements that have had or that we expect would be reasonably likely to have a future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Given the unprecedented uncertainty related to the impact of the COVID-19 pandemic on the food service and casino industries, the

Company is closely monitoring its cash generation, usage and preservation including the management of working capital to generate cash.

We believe that our cash and cash equivalents on hand, our expected cash flows generated from operating activities, and borrowings

available under our Siena Credit Facility will provide sufficient resources to meet our working capital needs, finance our capital expenditures and meet our liquidity requirements through at least the next twelve months.

Notwithstanding this belief,

the duration and extent of the pandemic remains uncertain and its ultimate impact is unknown.

Further, availability under the Siena Credit Facility depends in part on inventory levels, which have been impacted and are expected to continue to be

impacted by supply chain disruptions due to the COVID-19 pandemic.

As a result, we continue to evaluate several different strategies to enhance our liquidity position as a result of the significant financial and operational impacts due to the COVID-19

These strategies may include, but are not limited to, seeking to raise additional capital through an equity or debt financing.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

TransAct is a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, and is not required to provide information under this item.

TransAct is a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, and is not required to provide information under

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 2. Management’s Discussion and Analysis