What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-28 compared with 2022-03-24 · 422 added, 662 removed, 518 unchanged (68% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief

Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15I under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2021.

In the Amendment to our Annual Report on Form 10-K for the

year ended December 31, 2018, filed with the SEC on November 21, 2019, we disclosed that management, including our CEO and CFO, concluded that our disclosure controls and procedures were not effective as of December 31, 2018, due to material

weaknesses in our internal control over financial reporting.

As of December 31, 2021, management has completed the implementation of new controls, which are described below, to fully remediate these material weaknesses.

Upon completion of the

remediation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, our disclosure controls and procedures are effective at the reasonable assurance level.

Our management, including our CEO and CFO, has concluded that our consolidated financial statements, included in this Form 10-K, fairly

present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles, and that they can still be relied upon.

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 31, 2022.

Our management, including our CEO and CFO, has concluded that our consolidated financial statements, included in this Form 10-K, fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles, and that they can be relied upon.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule

13a-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in

accordance with authorizations of management and directors of the Company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a

material effect on the financial statements.

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Our management assessed our internal control over financial reporting as of December 31, 2022.

Our management based its assessment on

criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“2013

Our management based its assessment on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“2013 COSO”).

In the opinion of management, TransAct maintained effective internal control over financial reporting as of December 31, 2022.

A material weakness is defined in Rule 12b-2 under the Exchange Act as a deficiency, or a combination of deficiencies, in internal

control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Material Weaknesses in Internal Control Over Financial Reporting

We identified a control deficiency that constituted a material weakness in our internal control over financial reporting as of December

31, 2020, 2019 and 2018 and has been fully remediated as of December 31, 2021.

The control deficiency was that we did not design and maintain effective controls over the completeness and accuracy of information included in key spreadsheets supporting

our accounting records (the “Spreadsheet Control Weakness”).

This control deficiency constituted a material weakness, but did not result in a material

misstatement to our annual or interim consolidated financial statements.

Remediation Efforts to Address Material Weaknesses

Beginning December 31, 2019, we commenced developing and implementing a plan to enhance the design and operating effectiveness of our

internal control over financial reporting, which included taking the following steps to remediate the identified control deficiency and material weakness:

For each key spreadsheet we evaluated and determined (1) if a standard Oracle report existed containing the same information as the

spreadsheet, and if so, we utilized the standard Oracle report (without modification) instead of the spreadsheet to support our accounting records, and (2) if a standard Oracle report cannot be used, we implemented a new key control whereby an employee

performs a formal validation that the information from Oracle is completely and accurately transferred (automatically or manually) to a spreadsheet by verifying totals and other information on a test basis.

For all key spreadsheets, we have designed

and implemented a new key control to validate the completeness and accuracy of information supporting our accounting records.

During 2020 and the first quarter of 2021, we completed the evaluation process for each key spreadsheet based on the above

criteria, and during the second quarter of 2021, we completed the implementation of new key controls for all of our key spreadsheets to validate the completeness and accuracy of the information contained within and supporting each such spreadsheet.

During the second half of 2021, we completed our evaluation of the new controls for effectiveness, and the Spreadsheet Control Weakness was deemed to be remediated as of December 31, 2021.

Changes in Internal Control over Financial Reporting

Other than the changes intended to remediate the material weakness noted above, no change in our internal control over financial

reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

3 unchanged sentences

Directors, Executive Officers and Corporate Governance.

Set forth in Item 1 of this Form 10-K is certain information regarding our executive officers.

The remaining information in response

to this item will be contained in our Proxy Statement for our 2022 Annual Meeting of Stockholders (the “Proxy Statement”), as applicable, under the headings, “Delinquent Section 16(a) Reports,” “Corporate Governance,” “Proposal 1:

Directors,” “Audit Committee Report,” “Executive Compensation – Compensation Committee Report,” “Stockholder Proposals for 2023 Annual Meeting,” “Procedures for Submitted Director Nominations and Recommendations” and “Policy Regarding Stockholder

Communications with the Board of Directors,” which will be filed within 120 days after the end of the year covered by this Form 10-K and is incorporated herein by reference.

Set forth in Item 1 of this Form 10-K under the heading “Information about our Executive Officers” is certain information regarding our executive officers, and information regarding our code of ethics is set forth below.

The remaining information in response to this item is incorporated herein by reference to the disclosure that will be contained, as applicable, under the headings, “Delinquent Section 16(a) Reports,” “Corporate Governance,” “Proposal 1:

Election of Directors,” “Audit Committee Report,” “Executive Compensation – Compensation Committee Report,” and “Procedures for Submitting Director Nominations and Recommendations” in our Proxy Statement for our 2023 Annual Meeting of Stockholders (the “Proxy Statement”), which will be filed within 120 days after the end of the year covered by this Form 10-K.

Code of Ethics

We maintain a Standards of Business Conduct and Code of Ethics (“Standards of Business Conduct”) that includes our code of ethics that

is applicable to all employees, including our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller.

Our Standards of Business Conduct, which require continued observance of high ethical standards, such as honesty,

integrity and compliance with the law in the conduct of our business, are available for public access on our Internet website at https://transacttech.gcs-web.com/corporate-governance.

Any person may request a copy of our Standards of Business Conduct

free of charge by calling (203) 859-6800.

We maintain a Standards of Business Conduct and Code of Ethics (“Standards of Business Conduct”) that includes our code of ethics that is applicable to all employees, including our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller.

Our Standards of Business Conduct, which require continued observance of high ethical standards, such as honesty, integrity and compliance with the law in the conduct of our business, are available for public access on our Internet website at https://transacttech.gcs-web.com/corporate-governance.

Any person may request a copy of our Standards of Business Conduct free of charge by calling (203) 859-6800.

We will disclose on our website at https://transacttech.gcs-web.com/corporate-governance any amendment to or waiver of a provision of the Standards of Business Conduct as may be required and within the time period specified under the applicable Securities and Exchange Commission and Nasdaq rules.

Executive Compensation.

The information in response to this item will be contained in the Proxy Statement under the heading “Executive Compensation,” and is

incorporated herein by reference.

The information in response to this item will be contained in the Proxy Statement under the heading “Executive Compensation,” and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Set forth below is certain information regarding our equity compensation plans.

The remaining information in response to this item

will be contained in the Proxy Statement under the heading, “Security Ownership of Certain Beneficial Owners and Management,” and is incorporated herein by reference.

The remaining information in response to this item will be contained in the Proxy Statement under the heading, “Security Ownership of Certain Beneficial Owners and Management,” and is incorporated herein by reference.

Equity Compensation Plan Information

1 unchanged sentence

Plan category

Number of securities to be

issued upon exercise of outstanding

Number of securities

to be issued upon

exercise of outstanding

options, warrants and rights

Weighted-average exercise price

of outstanding options, warrants and rights

Number of securities remaining available for

future issuance under equity compensation plans

Weighted-average

exercise price

of outstanding

options, warrants and rights

Number of securities

remaining available for future

issuance under equity compensation plans

(excluding securities reflected in column (a))

3 unchanged sentences

In May 2014, our stockholders approved the adoption of the 2014 Equity Incentive Plan.

In May 2020, our stockholders approved an

amendment to the 2014 Equity Incentive Plan to increase the number of shares of common stock which may be subject to awards granted under the plan from 1,400,000 to its current level of 2,200,000.

The Company also maintains the 2005 Equity Incentive

In May 2020, our stockholders approved an amendment to the 2014 Equity Incentive Plan to increase the number of shares of common stock which may be subject to awards granted under the plan from 1,400,000 to its current level of 2,200,000.

The Company also maintains the 2005 Equity Incentive Plan;

however no new awards will be available for future issuance under this plan.

Both plans generally provide for awards in the form of:

(i) incentive stock options, (ii) non-qualified stock options, (iii) restricted stock, (iv) restricted stock

units (which may include performance-based vesting), (v) stock appreciation rights or (vi) limited stock appreciation rights.

(i) incentive stock options, (ii) non-qualified stock options, (iii) restricted stock, (iv) restricted stock units (which may include performance-based vesting), (v) stock appreciation rights or (vi) limited stock appreciation rights.

The Company does not have any equity plans that have not been approved by its stockholders.

Certain Relationships and Related Transactions, and Director Independence.

The information in response to this item will be contained in the Proxy Statement under the headings “Certain Relationships and Related

Transactions” and “Corporate Governance-Board Leadership Structure and Independence” and is incorporated herein by reference.

The information in response to this item will be contained in the Proxy Statement under the headings “Certain Relationships and Related Transactions” and “Corporate Governance-Board Leadership Structure and Independence” and is incorporated herein by reference.

Principal Accounting Fees and Services.

The information in response to this item will be contained in the Proxy Statement under the headings, “Policy Regarding Pre-Approval of

Services Provided by the Independent Registered Public Accounting Firm” and “Independent Registered Public Accounting Firm’s Services and Fees” and is incorporated herein by reference.

The information in response to this item will be contained in the Proxy Statement under the headings, “Policy Regarding Pre-Approval of Services Provided by the Independent Registered Public Accounting Firm” and “Independent Registered Public Accounting Firm’s Services and Fees” and is incorporated herein by reference.

Exhibits and Financial Statement Schedules.

8 unchanged sentences

Notes to Consolidated Financial Statements

All schedules are omitted because they are either inapplicable or not required, or because the information required therein is included in

the Consolidated Financial Statements and Notes thereto.

Exhibits Index

Certificate of Incorporation of TransAct Technologies Incorporated (conformed copy) (incorporated by reference to Exhibit 3(i)

of the Company’s Quarterly Report on Form 10-Q (SEC File No.

All schedules are omitted because they are either inapplicable or not required, or because the information required therein is included in the Consolidated Financial Statements and Notes thereto.

Exhibit Index

Certificate of Incorporation of TransAct Technologies Incorporated (conformed copy) (incorporated by reference to Exhibit 3.2 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

000-21121) filed with the SEC on August 18, 2022).

Certificate of Designation, Series A Preferred Stock, filed with the Secretary of State of Delaware on December 2, 1997

(incorporated by reference to Exhibit C of the Company’s Current Report on Form 8-K (SEC File No.

Certificate of Designation, Series A Preferred Stock, filed with the Secretary of State of Delaware on December 2, 1997 (incorporated by reference to Exhibit C of the Company’s Current Report on Form 8-K (SEC File No.

000-21121) filed with the SEC on February 18, 1999).

Certificate of Designation, Series B Preferred Stock, filed with the Secretary of State of Delaware on April 6, 2000

(incorporated by reference to Exhibit 3.1(c) of the Company’s Quarterly Report on Form 10-Q (SEC File No.

Certificate of Designation, Series B Preferred Stock, filed with the Secretary of State of Delaware on April 6, 2000 (incorporated by reference to Exhibit 3.1(c) of the Company’s Quarterly Report on Form 10-Q (SEC File No.

000-21121) filed with the SEC on May 8, 2000).

Amended and Restated By-laws of the Company (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form

8-K (SEC File No.

000-21121) filed with the SEC on August 2, 2019).

Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form

Amended and Restated By-Laws of TransAct Technologies Incorporated.

Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1/A (No.

333-06895) filed with the SEC on August 1, 1996).

Description of Securities (incorporated by

reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K (SEC File No.

Description of Securities (incorporated by reference  

to Exhibit 4.2 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 16, 2020).

1 unchanged sentence

000-21121) filed with the SEC on June 1, 2005).

TransAct Technologies Incorporated 2014 Equity Incentive Plan, as Amended and Restated (incorporated by reference to Exhibit I

to the Definitive Proxy Statement on Schedule 14A filed with the Commission on April 23, 2020, File No.

2014 Equity Incentive Plan Time-based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 of the

Company’s Quarterly Report on Form 10-Q (SEC File No.

TransAct Technologies Incorporated 2014 Equity Incentive Plan, as Amended and Restated (incorporated by reference to Exhibit I to the Definitive Proxy Statement on Schedule 14A filed with the Commission on April 23, 2020, File No.

2014 Equity Incentive Plan Time-based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

000-21121) filed with the SEC on May 6, 2016).

2014 Equity Incentive Plan Performance-based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 of the

Company’s Quarterly Report on Form 10-Q (SEC File No.

2014 Equity Incentive Plan Performance-based Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

000-211121) filed with the SEC on August 8, 2016).

2014 Equity Incentive Plan Nonstatutory Stock Option Agreement (incorproated by reference to Exhibit 10.2 of the Company's current

Report on Form 8-K (SEC File No.

2014 Equity Incentive Plan Non-statutory Stock Option Agreement (incorporated by reference to Exhibit 10.2 of the Company’s current Report on Form 8-K (SEC File No.

000-21121) filed with the SEC on May 19, 2014).

Employment Agreement, dated July 31, 1996, by and between TransAct and Bart C.

Shuldman (incorporated by reference to Exhibit

10.20 of the Company’s Registration Statement on Form S-1/A (No.

Shuldman (incorporated by reference to Exhibit 10.20 of the Company’s Registration Statement on Form S-1/A (No.

333-06895) filed with the SEC on August 1, 1996).

Severance Agreement by and between TransAct and Steven A.

DeMartino, dated June 1, 2004 (incorporated by reference to Exhibit

10.8 of the Company’s Annual Report on Form 10-K (SEC File No.

DeMartino, dated June 1, 2004 (incorporated by reference to Exhibit 10.8 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 16, 2005).

Amendment to Employment Agreement, effective January 1, 2008, by and between TransAct and Bart C.

Shuldman (incorporated by

reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K (SEC File No.

Shuldman (incorporated by reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 16, 2009).

Amendment to Severance Agreement by and between TransAct and Steven A.

DeMartino, effective January 1, 2008 (incorporated by

reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-K (SEC File No.

DeMartino, effective January 1, 2008 (incorporated by reference to Exhibit 10.12 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 16, 2009).

Severance Agreement by and between TransAct and Andrew J.

Hoffman (as amended), effective December 23, 2008.

Hoffman (as amended), effective December 23, 2008 (incorporated by reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 24, 2022).

Second Amendment to Severance Agreement by and between TransAct and Steven A.

DeMartino, effective April 29, 2021

Lease Agreement by and between Bomax Properties and Ithaca, dated as of March 23, 1992 (incorporated by reference to Exhibit

10.14 of the Company’s Registration Statement on Form S-1 (No.

DeMartino, effective April 29, 2021 (incorporated by reference to Exhibit 10.11 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 24, 2022).

Amended and Restated Employment Agreement, dated as of December 14, 2022, by and between TransAct Technologies Incorporated and Bart C.

Shuldman (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K (SEC File No.

000-21121) filed with the SEC on December 27, 2022).

Lease Agreement by and between Bomax Properties and Ithaca, dated as of March 23, 1992 (incorporated by reference to Exhibit 10.14 of the Company’s Registration Statement on Form S-1 (No.

333-06895) filed with the SEC on June 26, 1996).

1 unchanged sentence

000-21121) filed with the SEC on March 31, 1998).

Agreement regarding the Continuation and Renewal of Lease by and between Bomax Properties, LLC and TransAct, dated July 18,

Agreement regarding the Continuation and Renewal of Lease by and between Bomax Properties, LLC and TransAct, dated July 18, 2001  

(incorporated by reference to Exhibit 10.8 of the Company’s Annual Report on Form 10-K (SEC File No.

1 unchanged sentence

Amendment No.

1 to Lease Agreement between Bomax Properties, LLC and TransAct (incorporated by reference to Exhibit 10.16 of

the Company’s Quarterly Report on Form 10-Q (SEC File No.

1 to Lease Agreement between Bomax Properties, LLC and TransAct (incorporated by reference to Exhibit 10.16 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

000-21121) filed with the SEC on May 10, 2012).

Amendment No.

2 to Lease Agreement between Bomax Properties, LLC and TransAct, dated January 14, 2016 (incorporated by

reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K (SEC File No.

2 to Lease Agreement between Bomax Properties, LLC and TransAct, dated January 14, 2016 (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 11, 2016).

Amendment No.

3 to Lease Agreement between Bomax Properties, LLC and TransAct, dated February 28, 2020 (incorporated by

reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No.

3 to Lease Agreement between Bomax Properties, LLC and TransAct, dated February 28, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No.

000-21121) filed with the SEC on March 4, 2020).

Lease Agreement by and between Las Vegas Airport Properties LLC and TransAct dated December 2, 2004 (incorporated by reference

to Exhibit 10.13 of the Company’s Annual Report on Form 10-K (SEC File No.

Lease Agreement by and between Las Vegas Airport Properties LLC and TransAct dated December 2, 2004 (incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 16, 2005).

First Amendment to Lease Agreement by and between CIP Hughes Center LLC and TransAct dated August 24, 2009 (incorporated by

reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K (SEC File No.

First Amendment to Lease Agreement by and between CIP Hughes Center LLC and TransAct dated August 24, 2009 (incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 16, 2010).

Second Amendment to Lease Agreement by and between The Realty Associates Fund IX LP and TransAct dated June 30, 2015

(incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

Second Amendment to Lease Agreement by and between The Realty Associates Fund IX LP and TransAct dated June 30, 2015 (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

000-21121) filed with the SEC on August 7, 2015).

Lease Agreement by and between 2319 Hamden Center I, L.L.C.

and TransAct dated November 27, 2006 (incorporated by reference to

Exhibit 10.14 of the Company’s Annual Report on Form 10-K (SEC File No.

and TransAct dated November 27, 2006 (incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 15, 2007).

First Amendment to Lease by and between 2319 Hamden Center I, L.L.C.

and TransAct dated January 3, 2017 (incorporated by

reference to Exhibit 10.20 of the Company’s Annual Report on Form 10-K (SEC File No.

and TransAct dated January 3, 2017 (incorporated by reference to Exhibit 10.20 of the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 16, 2017).

Second Amendment to Lease by and between 2319 Hamden Center I, L.L.C.

and TransAct Technologies dated April 30, 2021

(incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

and TransAct Technologies dated April 30, 2021 (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

000-21121) filed with the SEC on May 13, 2021).

Loan and Security Agreement, dated as of March 13, 2020, among Siena Lending Group LLC, TransAct Technologies Incorporated and

the other Loan Parties from time to time party thereto (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

Loan and Security Agreement, dated as of March 13, 2020, among Siena Lending Group LLC, TransAct Technologies Incorporated and the other Loan Parties from time to time party thereto (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q (SEC File No.

000-21121) filed with the SEC on May 22, 2020).

Amendment No.

1 To Loan and Security Agreement, dated as of July 21, 2021, among Siena Lending Group and TransAct Technologies

Incorporated (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (SEC File No.

1 To Loan and Security Agreement, dated as of July 21, 2021, among Siena Lending Group and TransAct Technologies Incorporated (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K (SEC File No.

000-21121) filed with the SEC on July 26, 2021)

Master License Agreement dated February 22, 2019 and amendments thereto (incorporated by reference to Exhibit 10.24 to the

Company’s Annual Report on Form 10-K (SEC File No.

Amendment No.

2 To Loan and Security Agreement, dated as of July 19, 2022, between Siena Lending Group LLC and TransAct Technologies Incorporated (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No.

000-21121) filed with the SEC on July 25, 2022).

Amended and Restated Fee Letter, dated as of July 19, 2022, between Siena Lending Group LLC and TransAct Technologies Incorporated (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (SEC File No.

000-21121) filed with the SEC on July 25, 2022).

Master License Agreement dated February 22, 2019 and amendments thereto (incorporated by reference to Exhibit 10.24 to the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 12, 2021).

Master Development and License Agreement dated July 20, 2018 (incorporated by reference to Exhibit 10.25 to the Company’s Annual

Report on Form 10-K (SEC File No.

Master Development and License Agreement dated July 20, 2018 (incorporated by reference to Exhibit 10.25 to the Company’s Annual Report on Form 10-K (SEC File No.

000-21121) filed with the SEC on March 12, 2021).

Cooperation Agreement, dated as of March 30, 2022, by and among TransAct Technologies Incorporated, 325 Capital Master Fund LP and Harbert Discovery Fund, L.P.

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (SEC File No.

000-21121) filed with the SEC on March 31, 2022).

Subsidiaries of the Company (incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K (SEC File No.

4 unchanged sentences

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.

Section 1350 as adopted pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are

embedded within the Inline XBRL document).

Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

Inline XBRL Taxonomy Extension Schema Document.

7 unchanged sentences

Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Item (601)(b)(10) of Regulation S-K.

Furnished herewith.

These exhibits are furnished herewith.

The Exhibits required by Item 601 of Regulation S-K under the Exchange Act are included in the Exhibit Index above under a(3) of this Item 15.

3 unchanged sentences

Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to

be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TRANSACT TECHNOLOGIES INCORPORATED

Chairman of the Board and Chief Executive Officer

Chief Executive Officer

March 27, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf

of the registrant and in the capacities and on the dates indicated.

Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Chief Executive Officer and Director

March 27, 2023

4 unchanged sentences

(Principal Financial Officer)

/s/ William J.

Vice President and Chief Accounting Officer

1 unchanged sentence

(Principal Accounting Officer)

/s/ Haydee Ortiz Olinger

Chair of the Board

March 27, 2023

Haydee Ortiz Olinger

March 27, 2023

/s/ Audrey P.

March 27, 2023

/s/ Daniel M.

March 27, 2023

/s/ Randall S.

2 unchanged sentences

March 27, 2023

/s/ Haydee Olinger

March 24, 2022

Haydee Olinger

TRANSACT TECHNOLOGIES INCORPORATED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID 688 )

5 unchanged sentences

Notes to Consolidated Financial Statements

Report of Independent Registered Publi c

Accounting Firm

To the Shareholders and Board of Directors of Transact Technologies Incorporated

Report of Independent Registered Publi c Accounting Firm

To the Shareholders and Board of Directors of

TransAct Technologies Incorporated

Opinion on the Financial Statements

We have audited the

accompanying consolidated balance sheets of TransAct Technologies Incorporated and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive loss , changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the

“consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its

cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of TransAct Technologies Incorporated (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive loss, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Change in Accounting Principle

As described in Note 16 to the consolidated financial statements, effective April 1, 2022, the Company changed its method of inventory valuation from standard cost (which approximated actual cost on a “first-in, first-out” basis) to the average cost method of inventory accounting.

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

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the

Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to

obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over

financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,

whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included

evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial

statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective,

or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate

opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue recognition – Identification of Distinct Performance Obligations and Estimate of Standalone Selling Price

As described in Note 2 to the consolidated financial statements, some of the Company’s contracts with customers contain multiple

performance obligations (most commonly when contracts include a hardware product, software and extended warranties).

A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the

performance obligation is satisfied.

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer.

For a majority of the Company’s revenue, which consists of

printers, terminals, consumables, and replacement parts, the Company recognizes revenue as of a point of time;

the revenue is recognized upon shipment of the order when control of the goods is transferred to the customer and at the time the performance

obligation is fulfilled.

Performance obligations are satisfied over time if the customer receives the benefits as the Company performs work.

The Company’s cloud-based BOHA!

software, provided on a subscription basis, allows customers to use hosted

software over the contract period without taking possession of the software and is recognized ratably over the contract period.

For extended warranties, the transaction price is recognized ratably over the warranty period, using output methods, as

control of the services is transferred to the customer.

When there is more than one performance obligation in a customer arrangement, the Company typically uses the “standalone selling price” method to determine the transaction price to allocate to

each performance obligation.

In 2020, the Company launched a new service offering related to BOHA!

for one customer that bundled the BOHA!

products (cloud-based

SaaS software applications, hardware and after-market service) in one price payable monthly over a three-year period.

During the year ended December 31, 2021, the Company recognized revenue from this contract with the customer related to this service

offering in the amount of approximately $312 thousand.

Judgement was required by management to identify the performance obligations in the contract and allocate the transaction price to each performance obligation.

The principal considerations for our determination that revenue recognition, specifically related to management’s identification of

distinct performance obligations and the estimation of standalone selling prices related to this service offering, is a critical audit matter are that there was significant judgment by management in (1) the identification of distinct performance

obligations related to this service offering, specifically the determination that one distinct performance obligation existed for point in time revenue recognition and three distinct performance obligations existed for over-time revenue recognition,

(2) the estimation of the standalone selling price using market pricing conditions and other observable inputs, such as historical pricing practices, for each distinct performance obligation;

(3) the determination that a significant financing

component existed in the arrangement with the customer, therefore, requiring deferral of a portion of the point in time revenue to be recognized as interest income over the contract period;

(4) management’s election of the accounting policy expedient

to exclude sales taxes collected from customers from the transaction price in accordance with ASU 2016-12;

and (5) the identification of costs incurred to obtain the contract and management’s decision to defer such costs and recognize the expense on

a straight-line basis over the life of the contract.

This in turn led to a high degree of auditor judgment and subjectivity in performing our audit procedures, which were designed to evaluate audit evidence related to management’s identification of

distinct performance obligations within the contract with the customer related to this service offering and the judgments made by management to estimate the standalone selling prices used to allocate the transaction price to those distinct

performance obligations identified.

Due to this complexity, there was significant effort in performing our audit procedures to evaluate the reasonableness of management’s estimates used in the Company’s application of the accounting standard related

to revenue recognition for this service offering.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on

the consolidated financial statements.

These procedures included, among others, (i) evaluating the Company’s revenue recognition accounting policy resulting from its application of the accounting standard related to revenue recognition;

evaluating management’s identification of distinct performance obligations in its contract with the customer;

(iii) evaluating management’s process for estimating the standalone selling price which included testing the completeness and accuracy of

input data used and evaluating the reasonableness of significant assumptions used by management, principally observable inputs such as historical pricing practices;

and (iv) evaluation of the accuracy of management’s allocation of the transaction

price to the performance obligations contained within the related contract with the customer.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Valuation of Inventories - Change in Accounting Principle

As described in Note 16 to the consolidated financial statements, effective April 1, 2022, the Company changed its method of inventory valuation from standard costing (which approximated the “first-in, first-out” costing methodology) to the average costing methodology, and comparative financial statements of prior periods were adjusted to apply the new method retrospectively.

Management determined that this change in accounting principle was preferable because it reflects a better estimate of inventory cost.

At December 31, 2022, the Company’s inventory balance was approximately $12.0 million.

As discussed in Note 2 to the consolidated financial statements, inventories are stated at the lower of average cost or net realizable value.

The principal considerations for our determination that the Company’s change in accounting principle related to inventory valuation was a critical audit matter included the following:

(1) management identifies inventories as a critical accounting estimate, and this change in accounting principle was considered to be a significant transaction during the year;

(2) there were significant judgments made by management with respect to the change, including the explanation of why the change in accounting principle was preferable and the estimation of the retrospective adjustment to apply the new method of inventory valuation;

and (3) management’s calculation to estimate the adjustment was intricate, due to the complexities of the manual calculations involved and the magnitude of transactions flowing through the analysis.

This complexity led to a high degree of auditor effort in performing our audit procedures, which were designed to evaluate the reasonableness of management’s calculation and application of the retrospective inventory valuation adjustment.

Addressing the critical audit matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, (i) obtaining an understanding of why the Company changed its accounting principle to the average costing methodology;

(ii) evaluating management’s methodology and process for estimating the retrospective average costing adjustment;

(iii) testing management’s calculation of the retrospective adjustment, which included evaluating the completeness and accuracy of management’s input data used in the manual calculation, principally inputs such as historical purchases and sales transactions;

(iv) and evaluating the reasonableness of significant judgments used by management, principally management’s determination that one year of historical costing data was sufficient to adjust the opening balance for the retrospective adjustment.

/s/ Marcum LLP

4 unchanged sentences

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

(As adjusted, in thousands, except share data)

Current assets:

2 unchanged sentences

Employee retention credit receivable

Note receivable

Prepaid income taxes

2 unchanged sentences

Fixed assets, net

Notes receivable, net of current portion

Right-of-use asset

3 unchanged sentences

Current liabilities:

Current portion of revolving loan payable

Accounts payable

3 unchanged sentences

Total current liabilities

Long-term debt

Deferred revenue, net of current portion

2 unchanged sentences

Total liabilities

Commitments and contingencies

Commitments and contingencies (see Notes 9 and 14)

Shareholders’ equity:

2 unchanged sentences

Common stock, $ 0.01 par value, 20,000,000 authorized at December 31, 2022 and 2021 ;

13,917,731 and 12,976,227 shares

9,872,889 and 8,931,385

shares outstanding, at December 31, 2021 and 2020 , respectively

13,956,725 and 13,917,731 shares issued;

9,911,883 and 9,872,889 shares outstanding, at December 31, 2022 and 2021 , respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income (loss), net of tax

Accumulated other comprehensive (loss) income, net of tax

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

4 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

Year Ended December 31,

(As adjusted, in thousands, except per share data)

Years Ended December 31,

Cost of sales

16 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

Year Ended December 31,

(As adjusted, in thousands)

Years Ended December 31,

Foreign currency translation adjustment, net of tax

3 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands, except share data)

(As adjusted, in thousands, except share data)

Comprehensive

Income (Loss)

(Loss) Income

Balance, January 1, 2021

8 unchanged sentences

Issuance of common stock on restricted stock units

Issuance of common stock, net of issuance cost

Relinquishment of stock awards and deferred stock units to pay withholding taxes

5 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Year Ended December 31,

(As adjusted, in thousands)

Years Ended December 31,

Cash flows from operating activities:

3 unchanged sentences

Deferred income tax benefit

Loss on the sale of fixed assets

Foreign currency transaction losses (gains)

Loss on the disposal of fixed assets

Foreign currency transaction losses

Gain on forgiveness of long-term debt

10 unchanged sentences

Proceeds from the sale of fixed assets

Collection (issuance) of note receivable

Net cash provided by (used in) investing activities

Collection of note receivable

Net cash (used in) provided by investing activities

Cash flows from financing activities:

Revolving credit line borrowings

Revolving credit line payments

Long-term debt borrowings

Proceeds from bank borrowings

Proceeds from stock option exercises

5 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents

Increase in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

8 unchanged sentences

Description of business

TransAct Technologies Incorporated (together with its subsidiaries, “TransAct,” the “Company,” “we,” “us,” or “our”), which has its

headquarters in Hamden, Connecticut and its primary operating facility in Ithaca, New York, operates in one operating segment:

software-driven

technology and printing solutions for high growth markets including food service technology, casino and gaming and POS automation markets.

Our solutions are designed from the ground up based on market and customer requirements and are sold under the

TM , AccuDate™, Epic, Ithaca®, EPICENTRAL and Printrex® product brands.

TransAct Technologies Incorporated (together with its subsidiaries, “TransAct,” the “Company,” “we,” “us,” or “our”), which has its headquarters in Hamden, Connecticut and its primary operating facility in Ithaca, New York, operates in one operating segment:

software-driven technology and printing solutions for high growth markets including food service technology, casino and gaming and “point of sale” (“POS”) automation markets.

Our solutions are designed from the ground up based on market and customer requirements and are sold under the BOHA!

TM , AccuDate™, Epic, Ithaca®, and EPICENTRAL product brands.

We sell our products to original equipment manufacturers, value-added resellers, select distributors, and directly to end-users.

Our product distribution spans

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

TransAct also provides world-class service, spare parts, accessories and printing supplies to its growing worldwide

installed base of products.

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

TransAct also provides world-class service, spare parts, accessories and printing supplies to its growing worldwide installed base of products.

We also generate revenue from the after-market side of the business, providing printer and terminal service, consumables and spare parts in addition to revenue from our two software solutions;

(i) our line of BOHA!

software applications used to automate the back-of-house operations of restaurants, convenience stores and food service operators and (ii) the

EPICENTRAL Print System (“EPICENTRAL”), that enables casino operators to create promotional coupons and marketing messages and print them in real time at the slot machine.

Impact of the COVID-19 Pandemic

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

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

While we began to experience a modest recovery starting in the second half of 2020 into 2021 and expect this recovery to continue

during 2022, the exact timing and pace of recovery are unknown given uncertainty surrounding responsive measures to the spread of virus variants or any potential future resurgences of the virus and the significant disruption that our customers have

already experienced and may continue to experience.

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 2021.

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

however, the length

and ultimate severity of the reduction in demand due to the pandemic remains uncertain.

software applications used to automate the back-of-house operations of restaurants, convenience stores and food service operators and (ii) the EPICENTRAL Print System (“EPICENTRAL”), that enables casino operators to create promotional coupons and marketing messages and print them in real time at the slot machine.

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

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

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

During 2021, our inventory levels decreased significantly as a result of these supply chain disruptions, and we experienced significantly lower sales levels.

However, during 2022 we were able to increase our inventory levels and minimize the impact to our customers by successfully modifying our products that were affected by supply chain disruptions, as well as sourcing component parts from alternate suppliers.

Although we were able to increase inventory levels during 2022 and expect to continue to do so in 2023, there can be no assurance that new or continuing supply chain disruptions will not affect our products or that we will be able to make timely modifications to address any future supply chain issues that arise.

Further, while we have offset most of our cost increases by increasing prices of our products, there can be no guarantee that we will be able to offset any future cost increases should they arise.

After a slowdown in the first quarter of 2022 resulting from the Omicron and other variants of COVID-19, we continued to experience demand recovery during the remainder of 2022.

Based on our strong backlog position and continued market expansion, we expect this recovery to continue into 2023, though the exact timing and pace of recovery may be impacted by global economic conditions.

Balance Sheet, Cash Flow and Liquidity.

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

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

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

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

underwritten public offerings 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, which enabled us to return employees we furloughed earlier in

2020 to full time employment and to restore employees to full pay following certain pay cuts .

On July 8, 2021, we received notice that the PPP Loan

had been forgiven as of July 1, 2021.

We have taken the following actions to increase liquidity and strengthen our financial position in an effort to mitigate the negative impacts from the COVID-19 pandemic, supply chain disruptions and inflationary pressures:

Public Offering – On August 16, 2021, the Company raised net proceeds of $ 11.2 million (including the exercise of the underwriters overallotment option on August 20, 2021), after deducting underwriting discounts, commissions and offering expenses, through an underwritten public offering and sold an aggregate of 842,375 shares of common stock.

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, which enabled us to return employees we furloughed earlier in 2020 to full time employment and to restore employees to full pay following certain pay cuts.

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

See Note 8 for further details regarding the PPP Loan.

Employee Retention Credit – Under the provisions of the CARES Act, the Company is

eligible for a refundable employee retention credit subject to certain criteria.

related receivable as “Employee retention credit receivable” in the Consolidated Balance Sheets as of December 31, 2021.

We expect to receive these funds during 2022.

New Credit Facility – On March 13, 2020, we entered into a new credit facility with Siena

Lending Group LLC that provides a revolving credit line of up to $ 10.0 million, subject to a borrowing base.

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

We may further modify or supplement the expense management measures we have implemented and the actions we have taken to increase

liquidity as the timing and extent of customer demand recovery develops and supply chains normalize.

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

the 12 months following the date on which the Consolidated Financial Statements included in this Form 10-K (this “Report”) were issued, including consideration of the actions taken to manage expenses and liquidity, we believe that our net cash to be

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

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

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

In connection with the CARES Act, the Company recognized the employee retention credit during the fourth quarter of 2021 and recorded $ 1.5 million as “Gain from employee retention credit” in the Consolidated Statement of Operations for the year ended December 31, 2021 and the related receivable as “Employee retention credit receivable” in the Consolidated Balance Sheet as of December 31, 2021 and 2022.

We received these funds in the first quarter of 2023.

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 and on July 19, 2022, we entered into an amendment to extend the maturity of the facility to March 13, 2025.

See Note 8 for further details regarding this facility.

Reduced Capital Expenditures – We limited capital expenditures during 2020 and 2021 and gradually increased these expenditures during 2022 as sales improved.

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

Use of Assumptions and Estimates

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

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

Our current assumptions are that casinos and restaurants remain

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

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

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

We have performed a sensitivity analysis on these assumptions to

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

and/or increase liquidity if necessary.

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

In addition, the presentation of the accompanying audited Consolidated 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.

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

Our current assumptions are that casinos and restaurants will remain open and consumer traffic will continue to increase during the balance of 2023.

Though demand for our products at casinos has increased substantially in 2022, and we expect this trend to continue, we cannot predict the ultimate impact of the current economic environment, including inflation, rising interest rates and supply chain disruptions on our customers, which may impact sales.

We believe that we are positioned to withstand the impact of any potential economic downturn or slower than anticipated economic recovery.

However, despite our significant backlog of orders as of December 31, 2022 and increasing market share during 2022, should such conditions arise, we believe we will be able to take additional financial and operational actions to cut costs and/or increase liquidity.

In addition, the presentation of the accompanying audited Consolidated 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, 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.

results could differ from those estimates used.

Actual results could differ from those estimates used.

Smaller Reporting Company

As a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, we may choose to prepare our disclosures relying on

certain scaled disclosure requirements for smaller reporting companies in Regulation S-K and in Article 8 of Regulation S-X.

The scaled disclosure requirements for smaller reporting companies permit us (i) to include less extensive narrative disclosure than

required of other reporting companies, particularly in the description of executive compensation and (ii) to provide audited financial statements for two fiscal years, in contrast to other reporting companies, which must provide audited financial

statements for three years.

We may lose our status as a smaller reporting company on the last day of the fiscal year in which (i) our public float exceeds $250

million as of the last day of the second fiscal quarter or (ii) if we have more than $100 million in annual revenues and (a) have no public float or (b) have a public float more than $700 million.

As a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, we may choose to prepare our disclosures relying on certain scaled disclosure requirements for smaller reporting companies in Regulation S-K and in Article 8 of Regulation S-X.

The scaled disclosure requirements for smaller reporting companies permit us (i) to include less extensive narrative disclosure than required of other reporting companies, particularly in the description of executive compensation in our proxy statement and (ii) to provide audited financial statements for two fiscal years in our Form 10-K, in contrast to other reporting companies, which must provide audited financial statements for three years.

We may lose our status as a smaller reporting company on the last day of the fiscal year in which we have (i) public float of at least $250 million as of the last day of the second fiscal quarter and (ii) if we have a public float that does not exceed $700 million as of the last day of the second fiscal quarter and at least $100 million in annual revenues.

Summary of significant accounting policies

Principles of

consolidation:

The accompanying Consolidated Financial Statements include the accounts of TransAct and its wholly-owned subsidiaries, which require consolidation, after the elimination of intercompany accounts, transactions and unrealized

Principles of consolidation:

The accompanying Consolidated Financial Statements include the audited Consolidated Financial Statements of TransAct and its wholly-owned subsidiaries, which require consolidation, after the elimination of intercompany accounts, transactions and unrealized profit.

Use of estimates :

The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America

(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements

and the reported amounts of sales and expenses during the reporting period.

The preparation of Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities as of the date of the Consolidated Financial Statements and the reported amounts of sales and expenses during the reporting period.

Actual results could differ from those estimates.

Segment reporting :

We apply the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, “Segment Reporting.” We

view our operations and manage our business as one segment:

the design, development and marketing of software-driven technology and printing

solutions and providing printer and terminal related software, services, supplies and spare parts.

Factors used to identify TransAct’s single operating segment include the organizational structure of the Company and the financial information available

for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance.

We apply the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280, “Segment Reporting.” We view our operations and manage our business as one segment:

the design, development and marketing of software-driven technology and printing solutions and providing printer and terminal related software, services, supplies and spare parts.

Factors used to identify TransAct’s single operating segment include the organizational structure of the Company and the financial information available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance.

Cash and cash equivalents :

We consider all highly liquid investments with a maturity date of three months or less at date of purchase to be cash equivalents.

Allowance for

doubtful accounts :

Allowance for doubtful accounts :

We establish an allowance for doubtful accounts to ensure trade receivables are valued appropriately.

We maintain an

allowance for doubtful accounts based on a variety of factors, including the length of time receivables are past due, significant one-time events and historical experience.

We record a specific allowance for individual accounts when we become aware of

a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position.

If circumstances related to customers change, we further adjust estimates

of the recoverability of receivables.

We maintain an allowance for doubtful accounts based on a variety of factors, including the length of time receivables are past due, significant one-time events and historical experience.

We record a specific allowance for individual accounts when we become aware of a customer’s inability to meet its financial obligations, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position.

If circumstances related to customers change, we further adjust estimates of the recoverability of receivables.

The following table summarizes the activity recorded in the valuation account for accounts receivable:

Year Ended December 31,

Years Ended December 31 ,

(In thousands)

2 unchanged sentences

Balance, end of period

Inventories are

stated at the lower of cost (principally standard cost, which approximates actual cost on a first-in, first-out basis) or net realizable value.

We review net realizable value based on estimated selling prices in the ordinary course of business less

estimated costs of completions, disposal and transportation, historical usage and estimates of future demand.

Based on these reviews, inventory write-downs are recorded, as necessary, to reflect estimated obsolescence, excess quantities and net

realizable value.

Inventories are stated at the lower of average cost or net realizable value.

We review net realizable value based on estimated selling prices in the ordinary course of business less estimated costs of completions, disposal and transportation, historical usage and estimates of future demand.

Based on these reviews, inventory write-downs are recorded, as necessary, to reflect estimated obsolescence, excess quantities and net realizable value.

Effective April 1, 2022, TransAct changed its method of inventory valuation from standard costing which approximated the “first-in, first-out” (“FIFO”) costing methodology to the average costing methodology.

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

See Note 16 for a discussion of the change in accounting principle during the second quarter of 2022.

Fixed assets:

Fixed assets are

stated at cost.

Fixed assets are stated at cost.

Depreciation is recorded using the straight-line method over the estimated useful lives.

3 unchanged sentences

and computer software and equipment is three years to seven years .

improvements are amortized over the shorter of the term of the lease or the useful life of the asset.

Leasehold improvements are amortized over the shorter of the term of the lease or the useful life of the asset.

Costs related to repairs and maintenance are expensed as incurred.

The costs of sold or retired assets are removed from the related asset and

accumulated depreciation accounts and any gain or loss is recognized.

The costs of sold or retired assets are removed from the related asset and accumulated depreciation accounts and any gain or loss is recognized.

Depreciation expense was $ 1.1 million and $ 0.7 million in 2022 and 2021, respectively.

We account for leases in accordance with ASC 842, “Leases” (“ASC 842”), which requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on

the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification determines whether lease expense is recognized based on an effective interest method for finance leases or on a straight-line basis over the

term of the lease for operating leases.

We account for leases in accordance with ASC 842, “Leases” (“ASC 842”), which requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification determines whether lease expense is recognized based on an effective interest method for finance leases or on a straight-line basis over the term of the lease for operating leases.

A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

Leases with a term of 12 months or less are

accounted for based on existing guidance for operating leases.

Leases with a term of 12 months or less are accounted for based on existing guidance for operating leases.

If risks and rewards are conveyed without the transfer of control, the lease is treated as financing.

If the lessor does not convey risks and rewards or control, the lease is treated as

If the lessor does not convey risks and rewards or control, the lease is treated as operating.

We have elected certain practical expedients available under ASC 842 upon adoption.

We have applied the practical expedient for

short-term leases.

We have applied the practical expedient for short-term leases.

We have lease agreements that include lease and non-lease components, and we have not elected the practical expedients to combine these components for any of our leases.

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

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

We determine if an arrangement contains a lease at inception.

Our leases are included in “Right-of-use asset” and “Lease liability” in our Consolidated Balance Sheets.

Right of use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to

make lease payments arising from the lease.

Right of use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Lease right of use assets and liabilities are recognized at the commencement date of the lease based on the present value of lease payments over the lease term.

On February 28, 2020, we entered into an

amendment to extend the lease on our facility in Ithaca, New York, which resulted in recording an additional right-of-use-asset and lease liability of $ 1.5

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

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

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

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

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

The lease amendment modified the base rent.

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

The lease, which

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

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

The lease amendment modified the expiration date to October 31, 2025.

1 unchanged sentence

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

As most of our leases do not provide an implicit rate, the

Company determines its incremental borrowing rate by using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.

lease right of use asset excludes lease incentives.

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

The exercise of lease renewal options is at our sole discretion and our lease right of use assets and liabilities reflect only

the options we are reasonably certain that we will exercise.

As most of our leases do not provide an implicit rate, the Company determines its incremental borrowing rate by using the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment.

Our lease right of use asset excludes lease incentives.

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

The exercise of lease renewal options is at our sole discretion and our lease right of use assets and liabilities reflect only the options we are reasonably certain that we will exercise.

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

Intangible assets :

We acquire businesses in purchase

transactions that result in the recognition of goodwill and intangible assets.

Goodwill and intangible assets :

We acquire businesses in purchase transactions that result in the recognition of goodwill and intangible assets.

The determination of the value of intangible assets requires management to make estimates and assumptions.

In accordance with ASC 350-20 “Goodwill,” acquired goodwill is

not amortized but is subject to impairment testing at least annually and when an event occurs or circumstances change that indicate it is more likely than not an impairment exists.

We perform a fair value-based impairment test to the

carrying value of goodwill and indefinite-lived intangible assets on an annual basis (as of December 31) and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis.

The Company utilizes the

option to first assess qualitative factors to determine whether it is necessary to perform the Step 1 quantitative goodwill impairment test in accordance with the applicable accounting standards.

Under the qualitative assessment, management considers

relevant events and circumstances including but not limited to macroeconomic conditions, industry and market considerations, Company performance and events directly affecting the Company.

If the Company determines that the Step 1 quantitative

impairment test is required, management estimates the fair value of the reporting unit primarily using the income approach, which reflects management’s cash flow projections, and also evaluates the fair value using the market approach.

In accordance with ASC 350-20 “Goodwill,” acquired goodwill is not amortized but is subject to impairment testing at least annually and when an event occurs or circumstances change that indicate it is more likely than not an impairment exists.

We perform a fair value-based impairment test to the carrying value of goodwill and indefinite-lived intangible assets on an annual basis and, if certain events or circumstances indicate that an impairment loss may have been incurred, on an interim basis.

The Company utilizes the option to first assess qualitative factors to determine whether it is necessary to perform the Step 1 quantitative goodwill impairment test in accordance with the applicable accounting standards.

Under the qualitative assessment, management considers relevant events and circumstances including but not limited to macroeconomic conditions, industry and market considerations, Company performance and events directly affecting the Company.

If the Company determines that the Step 1 quantitative impairment test is required, management estimates the fair value of the reporting unit primarily using the income approach, which reflects management’s cash flow projections, and also evaluates the fair value using the market approach.

Factors considered that may trigger an interim period impairment review of either acquired goodwill or intangible assets are:

significant underperformance relative to expected

historical or projected future operating results;

significant underperformance relative to expected historical or projected future operating results;

significant changes in the manner of use of acquired assets or the strategy for the overall business;

significant negative industry or economic trends;

and significant decline in market capitalization

relative to net book value.

and significant decline in market capitalization relative to net book value.

Finite lived intangible assets are amortized and are tested for impairment when appropriate.

As of December 31, 2022, we have determined that no goodwill or intangible asset impairment has occurred and the fair value of goodwill was substantially higher than our carrying value based on our assessment as of December 31, 2022 when our annual review for impairment was performed.

Revenue recognition:

We account for revenue in accordance with ASC Topic 606:

Revenue from Contracts with Customers.

In accordance with ASC 606, a performance obligation is a promise in a contract with a customer to transfer a distinct good or

service to the customer.

Some of our contracts with customers contain a single performance obligation, while other contracts contain multiple performance obligations (most commonly when contracts include a hardware product, software and extended

In accordance with ASC 606, a performance obligation is a promise in a contract with a customer to transfer a distinct good or service to the customer.

A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring

services to the customer.

the transaction price utilizing either the “expected value” method or the “most likely amount” method depending on the nature of the variable consideration.

Variable consideration is included in the transaction price if, in the Company’s judgment, it

is probable that a significant future reversal of cumulative revenue under the contract will not occur.

For a majority of our revenue, which consists of printers, terminals, consumables, and replacement parts, the Company recognizes

revenue as of a point of time.

The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer.

To the extent the transaction price includes variable consideration, such as price protection, reserves for returns and other allowances, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the “expected value” method or the “most likely amount” method depending on the nature of the variable consideration.

Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

For a majority of our revenue, which consists of printers, terminals, consumables, and replacement parts, the Company recognizes revenue as of a point of time.

The transaction price is recognized upon shipment of the order when control of the goods is transferred to the customer and at the time the performance obligation is fulfilled.

We also sell a software solution in our

casino and gaming market, EPICENTRAL, that enables casino operators to create promotional coupons and marketing messages and to print them in real time at the slot machine.

EPICENTRAL is primarily comprised of both a software component, which is

licensed to the customer, and a hardware component.

We also sell a software solution in our casino and gaming market, EPICENTRAL, that enables casino operators to create promotional coupons and marketing messages and to print them in real time at the slot machine.

EPICENTRAL is primarily comprised of both a software component, which is licensed to the customer, and a hardware component.

EPICENTRAL software and hardware are integrated to deliver the system’s full functionality.

The transaction prices from EPICENTRAL software license and hardware are recognized upon installation and

formal acceptance by the customer when control of the license is transferred to the customer.

For out-of-warranty repairs, the transaction price is recognized after the repair work is completed and the printer or terminal is returned to the customer,

as control of the product is transferred to the customer and our performance obligation is completed.

Performance obligations are satisfied over time if the customer receives the benefits as we perform work, if the customer controls the

asset as it is being produced, or if the product being produced for the customer has no alternative use and we have a contractual right to payment.

The transaction prices from EPICENTRAL software license and hardware are recognized upon installation and formal acceptance by the customer when control of the license is transferred to the customer.

For out-of-warranty repairs, the transaction price is recognized after the repair work is completed and the printer or terminal is returned to the customer, as control of the product is transferred to the customer and our performance obligation is completed.

Performance obligations are satisfied over time if the customer receives the benefits as we perform work, if the customer controls the asset as it is being produced, or if the product being produced for the customer has no alternative use and we have a contractual right to payment.

For our separately priced extended warranty, BOHA!

cloud-based software applications, technical support

for our food service technology terminals and maintenance agreements (including free one-year maintenance received by customers upon completion

of EPICENTRAL installation) revenue is recognized over time as the customer receives the benefit.

The transaction price from the maintenance services is recognized ratably over time, using output methods, as control of the services is transferred to

the customer.

cloud-based software applications, technical support for our food service technology terminals and maintenance agreements (including free one-year maintenance received by customers upon completion of EPICENTRAL installation) revenue is recognized over time as the customer receives the benefit.

The transaction price from the maintenance services is recognized ratably over time, using output methods, as control of the services is transferred to the customer.

Our cloud-based BOHA!

1 unchanged sentence

For extended warranties, the transaction price is recognized ratably over the warranty period, using output methods, as control of the services is transferred to the customer.

When there is more than one performance obligation in a customer arrangement, the Company typically uses the “standalone selling price”

method to determine the transaction price to allocate to each performance obligation.

When there is more than one performance obligation in a customer arrangement, the Company typically uses the “standalone selling price” method to determine the transaction price to allocate to each performance obligation.

The Company sells the performance obligations separately and has established standalone selling prices for its products and services.

In the case of an overall price

discount, the discount is applied to each performance obligation proportionately based on standalone selling price.

To determine the standalone selling price for initial EPICENTRAL installations, the Company uses the adjusted market assessment

For contracts with terms of less than 12 months, the Company expenses sales commissions as they are incurred, since the expected

amortization period of the cost to obtain a contract is less than 12 months.

In the case of an overall price discount, the discount is applied to each performance obligation proportionately based on standalone selling price.

To determine the standalone selling price for initial EPICENTRAL installations, the Company uses the adjusted market assessment approach.

For contracts with terms of less than 12 months, the Company expenses sales commissions as they are incurred, since the expected amortization period of the cost to obtain a contract is less than 12 months.

Disaggregation of revenue

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

our revenue and cash flows are affected by economic factors.

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

Sales and usage-based taxes are excluded from revenues.

19 unchanged sentences

Contract assets consist of unbilled receivables.

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

to the customer being invoiced.

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

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

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

within “Accounts Receivable” and “Other Non-Current Assets” on the Consolidated Balance Sheets.

Unbilled receivables are separated into current and non-current assets and included within “Accounts Receivable, net” and “Other Assets” on the Consolidated Balance Sheets.

We first recorded contract assets during 2020 upon the start of a long-term BOHA!

Contract liabilities consist of customer prepayments and deferred revenue.

Customer prepayments are reported as “Accrued Liabilities”

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

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

prepaid software subscriptions for our BOHA!

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

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

The increase in current and non-current deferred revenue in 2021 compared to 2020 was primarily due to

increased BOHA!

software subscriptions and increased extended warranty contracts on our BOHA!

hardware products.

During the year ended December 31, 2021,

we recognized revenue of $ 0.7 million related to our contract liabilities as of December 31, 2020.

During the year ended December 31, 2022, we recognized revenue of $ 1.1 million related to our contract liabilities as of December 31, 2021.

Net contract (liabilities) assets consist of the following:

7 unchanged sentences

Remaining performance obligations

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

our customer.

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

As of December 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 29.0 million.

The Company expects to recognize revenue on $ 10.1

million of our remaining performance obligations within the next 12 months and $ 0.4 million within the next 24 months.

Concentration of credit

The Company expects to recognize revenue on $ 28.7 million of its remaining performance obligations within the next 12 months following December 31, 2022, $ 0.2 million within the next 24 months following December 31, 2022 and the balance of these remaining performance obligations within the next 36 months following December 31, 2022.

Concentration of credit risk:

Financial instruments that potentially expose us to concentrations of credit risk are limited to cash and cash equivalents held by our banks in excess of insured limits and accounts receivable.

Accounts receivable from customers representing 10% or more of total accounts receivable were as follows:

Accounts receivable from customers representing 10% or more of total accounts receivable, net were as follows:

Chain Link Services

1 unchanged sentence

NCR Corporation

The Bright Group

Sales to customers representing 10% or more of total net sales were as follows:

We generally warrant our

products for up to 24 months and record the estimated cost of such product warranties at the time the sale is recorded.

Estimated warranty

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

The following table summarizes the activity recorded in the accrued product warranty liability:

(In thousands)

Balance, beginning of period

Warranties issued

Warranty settlements

Balance, end of period

$ 79 thousand and $ 112 thousand of the accrued product warranty liability was classified as current in Accrued liabilities at December 31, 2021 and 2020, respectively.

The remaining

$ 22 thousand and $ 28 thousand of the

accrued product warranty liability as of December 31, 2021 and 2020, respectively, was classified as long-term in Other liabilities.

design and product development:

Engineering, design and product development expenses include expenses incurred in connection with specialized engineering and design to introduce new products and to customize existing products, and are expensed

as a component of operating expenses as incurred.

Engineering, design and product development:

We recorded $ 8.6 million and $ 7.5 million of research and development expenses in 2022 and 2021, respectively.

Costs incurred in the engineering, design and product development of a computer software product are charged to expense until

technological feasibility has been established, at which point all material software costs are capitalized within Intangible assets in our Consolidated Balance Sheet until the product is available for general release to customers.

While judgment is

required in determining when technological feasibility of a product is established, we have determined that it is reached after all high-risk development issues have been documented in a formal detailed plan design.

The amortization of these costs

have been included in cost of sales over the estimated life of the product.

Costs incurred in the engineering, design and product development of a computer software product are charged to expense until technological feasibility has been established, at which point all material software costs are capitalized within Intangible assets in our Consolidated Balance Sheet until the product is available for general release to customers.

While judgment is required in determining when technological feasibility of a product is established, we have determined that it is reached after all high-risk development issues have been documented in a formal detailed plan design.

The amortization of these costs has been included in cost of sales over the estimated life of the product.

During 2019, we contracted several third-parties to develop software for our food service technology products, the cost for which we capitalized.

Unamortized development

costs for such software were $ 396 thousand as of December 31, 2021.

The total amount charged to cost of sales for capitalized software development costs was $ 154

thousand and $ 153 thousand in 2021

and 2020, respectively.

Advertising costs are

expensed as incurred.

Unamortized development costs for such software was $ 242 thousand and $ 396 thousand as of December 31, 2022 and 2021, respectively.

The total amount charged to cost of sales for capitalized software development costs was $ 154 thousand in both 2022 and 2021.

Advertising costs are expensed as incurred.

Advertising expenses, which are included in selling and marketing expense on the accompanying Consolidated Statements of Operations for 2022 and 2021 totaled $ 3.1 million and $ 1.8 million, respectively.

These expenses include items such as

consulting and professional services, tradeshows, and print advertising.

These expenses include items such as consulting, professional services, tradeshows, and print advertising.

Income taxes:

The income tax

amounts reflected in the accompanying Consolidated Financial Statements are accounted for under the liability method in accordance with ASC 740, “Income Taxes” (“ASC 740”).

Deferred tax assets and liabilities are recognized for the estimated future

tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are

measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

We assess the likelihood that net deferred tax assets will be realized from future taxable income, and to the extent

that we believe that realization is not likely, we establish a valuation allowance.

The income tax amounts reflected in the accompanying Consolidated Financial Statements are accounted for under the liability method in accordance with ASC 740, “Income Taxes” (“ASC 740”).

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

We assess the likelihood that net deferred tax assets will be realized from future taxable income, and to the extent that we believe that realization is not likely, we establish a valuation allowance.

In accordance with ASC 740, we identified, evaluated and measured the amount of benefits to be recognized for our tax return positions.

Foreign currency

Foreign currency translation:

The financial position and results of operations of our foreign subsidiary in the UK are measured using local currency as the functional currency.

Assets and liabilities of such subsidiary have been translated into U.S.

at the year-end exchange rate, related sales and expenses have been translated at the exchange rate as of the date the transaction was recognized, and shareholders’ equity has been translated at historical exchange rates.

The resulting translation

gains or losses, net of tax, are recorded in shareholders’ equity as a cumulative translation adjustment, which is a component of accumulated other comprehensive income and loss.

Foreign currency transaction gains and losses, including those related

to intercompany balances, are recognized in Other, net on the Consolidated Statements of Operations.

dollars at the year-end exchange rate, related sales and expenses have been translated at the weighted average rate for the period, and shareholders’ equity has been translated at historical exchange rates.

The resulting translation gains or losses, net of tax, are recorded in shareholders’ equity as a cumulative translation adjustment, which is a component of accumulated other comprehensive income and loss.

Foreign currency transaction gains and losses, including those related to intercompany balances, are recognized in Other, net on the Consolidated Statements of Operations.

Share-based payments:

At December 31, 2021, we have share-based

employee compensation plans, which are described more fully in Note 10 - Stock incentive plans.

We account for those plans under the recognition and measurement principles of ASC 718, “Compensation – Stock Compensation.” Share-based compensation

expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period.

At December 31, 2022, we have share-based employee compensation plans, which are described more fully in Note 9 - Stock incentive plans.

We account for those plans under the recognition and measurement principles of ASC 718, “Compensation – Stock Compensation.” Share-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the employee’s requisite service period.

We use the Black-Scholes option-pricing model to calculate the fair value of share-based awards.

The key assumptions for this

valuation method include the expected term of the option, stock price volatility, risk-free interest rate, dividend yield, market price of our underlying stock and exercise price.

Many of these assumptions require judgment and are highly sensitive in

the determination of compensation expense.

The key assumptions for this valuation method include the expected term of the option, stock price volatility, risk-free interest rate, dividend yield, market price of our underlying stock and exercise price.

Many of these assumptions require judgment and are highly sensitive in the determination of compensation expense.

Forfeitures are recognized as they occur.

We report net income or loss per share in accordance with ASC 260, “Earnings per Share (EPS).” Under this guidance, basic EPS, which excludes dilution, is computed by dividing income or loss available to common shareholders by the

weighted average number of common shares outstanding for the period.

Net loss per share:

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

includes in-the-money stock options using the treasury stock method.

During a loss period, the assumed exercise of in-the-money stock options has an anti-dilutive effect, and therefore, these instruments are excluded from the computation of diluted

Diluted EPS includes in-the-money stock options using the treasury stock method.

During a loss period, the assumed exercise of in-the-money stock options has an anti-dilutive effect, and therefore, these instruments are excluded from the computation of diluted EPS.

See Note 11 - Earnings per share.

Note receivable

The note receivable balance relates to loans given to a

third-party software developer from whom we license our food service technology software with an interest rate of 4.5 % , which were originally due in April 2020.

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

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

Interest income for 2021 and 2020 was $ 17 thousand and $ 67 thousand, respectively.

Change in accounting principle:

See Note 16 for a discussion of a change in accounting principle which occurred in the second quarter of 2022.

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

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

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

Reclassifications:

Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year.

The components of inventories are:

3 unchanged sentences

Finished goods

see Note 16, Change in Accounting Principle

Fixed assets, net

13 unchanged sentences

Purchased technology

Customer relationships

Covenant not to compete

Amortization expense was $ 186

thousand and $ 234 thousand in 2021

and 2020, respectively.

Amortization expense was $ 155 thousand and $ 186 thousand in 2022 and 2021, respectively.

Amortization expense for each of the next five years ending December 31 is expected to be as follows:

$ 155 thousand in 2022;

$ 154 thousand in 2023;

$ 88 thousand in 2024;

$ 154 thousand in 2023 and $ 88 thousand in 2024;

and none thereafter.

5 unchanged sentences

Retirement savings plan

We maintain a 401(k) plan under which all full-time employees are eligible to participate at the beginning of the month immediately

following their date of hire.

We maintain a 401(k) plan under which all full-time employees are eligible to participate at the beginning of the month immediately following their date of hire.

We match employees’ contributions at a rate of 50 % of employees’ contributions up to the first 6 % of the employees’ compensation contributed to the 401(k) plan.

Our matching contributions were $ 355 thousand and $ 312 thousand in 2022 and 2021, respectively.

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

The Siena Credit

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

Credit Facility

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

The Siena Credit Facility provides for a revolving credit line of up to $ 10.0 million and was originally scheduled to expire on March 13, 2023.

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

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

We also pay a

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

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

substantially all the assets of the Company.

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

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

of finished goods inventory.

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

from April 1, 2020 to March 31, 2021.

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.

We have been in compliance with our excess availability covenant each month since July 31, 2021, and as of

December 31, 2021 and 2020, we had no

outstanding borrowings under the Siena Credit Facility and $ 5.1 million of borrowing capacity available under the Siena Credit Facility as of

December 31, 2021.

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

Under the terms of the PPP, the PPP Loan may be forgiven to the extent that funds from the PPP Loan were used for payroll

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

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

At least 60% (under the PPP terms, as amended) of the proceeds from the PPP Loan needed to have been used

for eligible payroll costs for the PPP Loan to be forgiven.

The PPP Loan, which was evidenced by a Note dated the Loan

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

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.

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 accrued during the deferment period was included in the forgiveness amount.

The Note was unsecured and guaranteed by the SBA.

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

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

The Siena Credit Facility imposes a financial covenant on the Company and borrowings are subject to a borrowing base based on (i) 85 % of eligible accounts receivable plus the lesser of (a) $ 5.0 million and (b) 50 % of eligible raw material and 60 % of finished goods inventory and restricts, among other things, our ability to incur additional indebtedness and create other liens.

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

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

1”) to the Siena Credit Facility.

Siena Credit Facility Amendment No.

1 changed the financial covenant under the Siena Credit Facility from a minimum EBITDA covenant to an excess availability covenant requiring that the Company maintain excess availability of at least $ 750 thousand under the Siena Credit Facility, tested as of the end of each calendar month, beginning with the calendar month ending July 31, 2021.

From July 31, 2021 through December 31, 2022, we remained in compliance with our excess availability covenant.

As of December 31, 2022, we had $ 2.3 million of outstanding borrowings under the Siena Credit Facility and $ 3.9 million of net borrowing capacity available under the Siena Credit Facility.

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

2 (“Siena Credit Facility Amendment No.

2”) to the Siena Credit Facility, as amended by Siena Credit Facility Amendment No.

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

The Siena Credit Facility Amendment No.

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

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

2 include, among other things, the following:

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

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

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

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

On May 1, 2020, the Company was granted the PPP Loan from Berkshire Bank in the aggregate amount of $ 2.2 million, pursuant to the PPP.

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

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

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

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

Stock incentive plans

Stock incentive

We currently have two

Stock incentive plans .

We currently have two stock incentive plans:

the 2005 Equity Incentive Plan and the 2014 Equity Incentive Plan, which provide for awards to executives, key employees, directors and consultants.

The plans generally provide for awards in the form of:

(i) incentive stock

options, (ii) non-qualified stock options, (iii) restricted stock, (iv) restricted stock units (which may include performance-based vesting), (v) stock appreciation rights or (vi) limited stock appreciation rights.

Awards granted under these plans

have exercise prices equal to 100 % of the fair market value of the common stock at the date of grant.

Awards granted have a ten-year term and generally vest over a two-year

to five-year period, unless automatically accelerated for certain defined events.

As of May 2014, no new awards may be made under the 2005

Equity Incentive Plan.

Under our 2014 Equity Incentive Plan, as amended in May 2020, we are authorized to grant awards of up to 2,200,000

shares of TransAct common stock.

Awards granted under these plans have exercise prices equal to 100 % of the fair market value of the common stock at the date of grant.

Awards granted have a ten-year term and generally vest over a two-year to four-year period, unless automatically accelerated for certain defined events.

As of May 2014, no new awards may be made under the 2005 Equity Incentive Plan.

Under our 2014 Equity Incentive Plan, as amended in May 2020, we are authorized to grant awards of up to 2,200,000 shares of TransAct common stock.

At December 31, 2022, 347,652 shares of common stock remained available for issuance under the 2014 Equity Incentive Plan.

Under the assumptions indicated below, the weighted-average per share fair value of stock option grants for 2022 and 2021 was $ 4.39 and $ 5.41 , respectively.

We also issued

restricted stock units for certain executives and directors that vest over a specified period of time, and in some instances require achieving certain performance metrics.

We also issued restricted stock units for certain executives and directors that vest over a specified period of time, and in some instances require achieving certain performance metrics.

The weighted-average per share fair value of these restricted stock units was $ 8.43 and $ 10.27 in 2022 and 2021, respectively.

The table below indicates the key assumptions used in the option valuation calculations for options granted in 2021 and 2020 and a discussion of our

methodology for developing each of the assumptions used in the valuation model:

The table below indicates the key assumptions (on a weighted-average basis) used in the option valuation calculations for options granted in 2022 and 2021 and a discussion of our methodology for developing each of the assumptions used in the valuation model:

Year Ended December 31,

Expected option term (in years)

2 unchanged sentences

Dividend yield

Expected Option

Term - This is the weighted average period of time over which the options granted are expected to remain outstanding giving consideration to our historical exercise patterns.

Expected Option Term - This is the weighted average period of time over which the options granted are expected to remain outstanding giving consideration to our historical exercise patterns.

Options granted have a maximum term of ten years and an increase in the expected term will increase compensation expense.

Expected Volatility

– The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period approximately equal to the expected option term of the grant.

An increase in the expected

volatility factor will increase compensation expense.

Risk-Free Interest

Rate - This is the U.S.

Expected Volatility – The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period approximately equal to the expected option term of the grant.

An increase in the expected volatility factor will increase compensation expense.

Risk-Free Interest Rate - This is the U.S.

Treasury rate in effect at the time of grant having a term approximately equal to the expected term of the option.

An increase in the risk-free interest rate will increase compensation expense.

Dividend Yield

–The dividend yield is calculated by dividing the annual dividend declared per common share by the weighted average market value of our common stock on the date of grant.

Dividend Yield –The dividend yield is calculated by dividing the annual dividend declared per common share by the weighted average market value of our common stock on the date of grant.

An increase in the dividend yield will decrease compensation expense.

For 2021 and 2020, we recorded $ 1.2 million and $ 0.9 million of share-based compensation expense, respectively, included primarily in general and administrative expense in our Consolidated Statements of

We also recorded income tax benefits of $ 265 thousand and $ 193 thousand in 2021 and 2020, respectively, related to such share-based compensation.

At December 31, 2021,

these benefits are recorded as a deferred tax asset in the Consolidated Balance Sheets.

For both 2022 and 2021, we recorded $ 1.2 million of share-based compensation expense included primarily in general and administrative expense in our Consolidated Statements of Operations.

We also recorded income tax benefits of $ 0.3 million in both 2022 and 2021, related to such share-based compensation.

At December 31, 2022, these benefits are recorded as a deferred tax asset in the Consolidated Balance Sheets.

Equity award activity in the 2005 Equity Incentive Plan and the 2014 Equity Incentive Plan is summarized below:

9 unchanged sentences

weighted average grant stock price per share

The following summarizes information about equity awards outstanding that are vested and expect to vest and equity awards that are exercisable at

December 31, 2021:

The following summarizes information about equity awards outstanding that are vested and expect to vest and equity awards that are exercisable at December 31, 2022:

Equity Awards Vested and Expected to Vest

11 unchanged sentences

Shares that are issued upon exercise of employee stock awards are newly issued shares and not issued from treasury stock.

December 31, 2021, unrecognized compensation cost related to non-vested equity awards granted under our stock incentive plans is approximately

$ 2.1 million, which is expected to be recognized over a weighted average period of 2.4 years.

The total fair value of awards vested was $ 1.7 million during both the years ended December 31, 2021 and 2020.

The total intrinsic value (which is the amount by which the stock price exceeded the exercise price on the date of exercise) of stock options

exercised during the years ended December 31, 2021 and 2020 was $ 268 thousand and $ 174 thousand, respectively, and cash received from option exercises

was $ 436 thousand and $ 375 thousand in

2021 and 2020, respectively.

As of December 31, 2022, unrecognized compensation cost related to non-vested equity awards granted under our stock incentive plans is approximately $ 2.1 million, which is expected to be recognized over a weighted average period of 2.6 years.

The total fair value of awards vested was $ 1.6 million and $ 1.7 million during the years ended December 31, 2022 and 2021, respectively.

The total intrinsic value (which is the amount by which the stock price exceeded the exercise price on the date of exercise) of stock options exercised during the years ended December 31, 2022 and 2021 was $ 40 thousand and $ 268 thousand, respectively, and cash received from option exercises was zero and $ 436 thousand in 2022 and 2021, respectively.

17,500 and 97,000 stock options were exercised during the year ended December 31, 2022 and 2021, respectively.

We recorded a realized tax provision in 2021 and 2020 from

equity-based awards of $ 35 thousand and $ 14

thousand, respectively, related to options exercised.

We recorded a realized tax provision in 2022 and 2021 from equity-based awards of $ 13 thousand and $ 35 thousand, respectively, related to options exercised.

The components of the income tax benefit are as follows:

2 unchanged sentences

Our effective tax rates were ( 24.9 % ) and ( 33.6 % ) for 2022 and 2021 , respectively.

The tax benefit recorded for 2021 included the recognition of the gain on the forgiveness of the PPP Loan which is not taxable.

The effective tax rate for 2020 included the impact of the net operating

loss (“NOL”) that we carried back to prior years.

The CARES Act 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 a NOL for

2020 which was carried back to tax years that had a federal statutory tax rate of 34 % compared to 21 % in 2020 and resulted in a tax refund of $2.2 million that was received in October 2021 causing a significant reduction in prepaid income taxes at December 31, 2021 compared to

December 31, 2020.

At December 31, 2021, we

have $ 2.0 million of federal net operating loss carryforwards and $ 78 thousand of state net operating loss carryforwards, $ 901 thousand in R&D credit

carryforwards, and no state tax credit carryforwards.

Foreign loss before taxes was $ 404 thousand and $ 468 thousand in 2021 and 2020, respectively.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated

Financial Statements.

The tax benefit recorded for 2022 includes the recognition of stock option cancellations for which no benefit was realized and the benefit recorded for 2021 included the recognition of the gain on the forgiveness of the PPP Loan which was not taxable .

At December 31, 2022, we have $ 10.9 million of federal net operating loss carryforwards (with an unlimited carryforward), $ 0.2 million of tax-effected state net operating loss carryforwards (which have varying lives), $ 1.2 million in R&D credit carryforwards (which generally have a twenty year life), and no state tax credit carryforwards.

Foreign income (loss) before taxes was $ 24 thousand and ($ 404 ) thousand in 2022 and 2021, respectively.

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements.

Our deferred tax assets and liabilities were comprised of the following:

3 unchanged sentences

Foreign net operating losses

State net operating losses

Capitalized R&D expenses

Inventory reserves

11 unchanged sentences

Total net deferred tax assets

As of December 31, 2021, a valuation allowance

of $ 733 thousand has been established for foreign net operating loss carryforwards that are not expected to be used.

The following table

summarizes the activity recorded in the valuation allowance on the deferred tax assets:

As of December 31, 2022 and 2021, we had a $ 656 thousand and $ 733 thousand, respectively, of valuation allowances on our net operating loss carryforwards.

The following table summarizes the activity recorded in the valuation allowance on the deferred tax assets:

Year Ended December 31,

1 unchanged sentence

Balance, beginning of period

Subtractions released to income tax provisions

Additions charged to income tax provision

7 unchanged sentences

State income taxes, net of federal income taxes

corporate tax rate change

Business meals and entertainment

4 unchanged sentences

Effective tax rate

We had $ 144 thousand and $ 121 thousand of total gross unrecognized tax benefits at December 31, 2021

and 2020, respectively that, if recognized, would favorably affect the effective income tax rate in any future periods.

We are not aware of

any events that could occur within the next twelve months that could cause a significant change in the total amount of unrecognized tax benefits.

A tabular reconciliation of the gross amounts of unrecognized tax benefits at the beginning and end of

the year is as follows:

We had $ 142 thousand and $ 144 thousand of total gross unrecognized tax benefits at December 31, 2022 and 2021, respectively that, if recognized, would favorably affect the effective income tax rate in any future periods.

We are not aware of any events that could occur within the next twelve months that could cause a significant change in the total amount of unrecognized tax benefits.

A tabular reconciliation of the gross amounts of unrecognized tax benefits at the beginning and end of the year is as follows:

(In thousands)

3 unchanged sentences

Balance, end of period

We expect $ 28 thousand of

the $ 144 thousand of unrecognized tax benefits will reverse in 2022 upon the expiration of the statute of limitations.

We expect $ 28 thousand of the $ 142 thousand of unrecognized tax benefits will reverse in 2023 upon the expiration of the statute of limitations.

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

We have accrued interest and

penalties related to uncertain tax positions of $ 20 thousand and $ 19 thousand as of December 31, 2021 and 2020, respectively.

We have accrued interest and penalties related to uncertain tax positions of $ 34 thousand and $ 20 thousand as of December 31, 2022 and 2021, respectively.

We are subject to U.S.

federal income tax as well as income tax of certain state and foreign jurisdictions.

We have substantially

concluded all U.S.

We have substantially concluded all U.S.

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

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

Various state and foreign tax jurisdiction tax years remain open

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

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

Earnings per share

Earnings per share was computed as follows (in thousands, except per share amounts):

Year Ended December 31,

Years Ended December 31,

Weighted average common shares outstanding

Dilutive effect of outstanding equity awards as determined by the treasury stock

Dilutive effect of outstanding equity awards as determined by the treasury stock method

Weighted average common and common equivalent shares outstanding

Net loss per common share:

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options,

restricted stock units and performance stock awards, when the average market price of the common stock is lower than the exercise price of the related stock award during the period.

These outstanding stock awards are not included in the computation of

diluted earnings per share because the effect would be anti-dilutive.

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options, restricted stock units and performance stock awards, when the average market price of the common stock is lower than the exercise price of the related stock award during the period.

These outstanding stock awards are not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

Furthermore, in periods when a net loss is reported, such as 2022 and 2021, basic and diluted net loss per common share are calculated using the same method.

Anti-dilutive stock

awards excluded from the computation of earnings per dilutive share were 391,000 and 1,284,000 at December 31, 2021 and 2020, respectively.

Anti-dilutive stock awards excluded from the computation of earnings per dilutive share were 1,463,000 and 391,000 at December 31, 2022 and 2021, respectively.

Stock repurchase program

We use the cost method to account for treasury stock purchases, under which the price paid for the stock is charged to the treasury

stock account.

We use the cost method to account for treasury stock purchases, under which the price paid for the stock is charged to the treasury stock account.

Repurchases of our common stock are accounted for as of the settlement date.

During 2021 and 2020, we did no t repurchase any shares of

our common stock.

From January 1, 2005 through December 31, 2019, we repurchased a total of 4,044,842 shares of common stock for $ 32.1 million, at an average price of $ 7.94 per

During 2022 and 2021, we did no t repurchase any shares of our common stock.

From January 1, 2005 through December 31, 2019, we repurchased a total of 4,044,842 shares of common stock for $ 32.1 million, at an average price of $ 7.94 per share.

Geographic area information

Information regarding our operations by geographic area is contained in the following table.

These amounts in the geographic area table are

based on the location of the customer and asset.

Year Ended December 31,

These amounts in the geographic area table are based on the location of the customer and asset.

Years Ended December 31,

(In thousands)

4 unchanged sentences

International

Sales to international customers were 18 %

and 19 % of total sales in 2021 and

2020, respectively.

Sales to Europe represented 53 %

and 45 %, sales to the Pacific Rim (which includes Australia and Asia) represented 35 % and 45 %, and sales to Canada represented 11 % and 8 % of total international sales in 2021 and 2020, respectively.

International

long-lived assets consist of net fixed assets located at our foreign subsidiary in the UK as well as our contract manufacturers in China, Thailand, Malaysia and Mexico.

Operating lease expense was $ 1.0 million for both years ended December 31, 2021 and 2020 and is reported as “Cost of sales,” “Engineering, design and product development expense,” “Selling and

marketing expense,” and “General and administrative expense” in the Consolidated Statements of Operations.

Operating costs include short-term lease costs, which were

immaterial during the period.

Sales to international customers were 24 % and 18 % of total sales in 2022 and 2021, respectively.

Sales to Europe represented 68 % and 53 %, sales to the Pacific Rim (which includes Australia and Asia) represented 28 % and 35 %, and sales to Canada represented 4 % and 11 % of total international sales in 2022 and 2021, respectively.

International long-lived assets consist of net fixed assets located at our foreign subsidiary in the UK, as well as our contract manufacturer in Thailand.

Operating lease expense was $ 1.0 million for both years ended December 31, 2022 and 2021 and is reported as “Cost of sales,” “Engineering, design and product development expense,” “Selling and marketing expense,” and “General and administrative expense” in the Consolidated Statements of Operations.

Operating costs include short-term lease costs, which were immaterial during the period.

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

Year Ended December 31,

Years Ended December 31,

Operating cash outflows from leases

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

Year Ended December 31,

The following summarizes additional information related to our leases:

Years Ended December 31,

Weighted average remaining lease term (in years)

Weighted average discount rate

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

The maturity of the Company’s operating lease liabilities are as follows (in thousands):

December 31, 2022

8 unchanged sentences

Net (loss) income per common share:

Net (loss) income

Net (loss) income per common share:

Change in accounting principle

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

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

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

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

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

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

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

December 31, 2021

Deferred tax assets

Retained earnings

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

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

Three months ended December 31, 2021

Year ended December 31, 2021

Cost of sales

Operating loss

Loss before income taxes

Income tax benefit

Net loss per common share:

Shares used in per-share calculation:

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

Three months ended December 31, 2021

Year ended December 31, 2021

Comprehensive loss

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

Year ended December 31, 2021

Deferred income tax benefit

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

Three months ended December 31, 2021

Year ended December 31, 2021

Equity beginning balance

Retained earnings - beginning of period

Retained earnings - end of period

Equity ending balance

Subsequent events

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

Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

In the first quarter of 2023, we collected the $ 1.5 million employee retention credit receivable from the U.S.

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

Based upon this review, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures