What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-12 · 286 added, 489 removed, 128 unchanged (86% of the section changed)

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Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q for the period ended September 30, 2024 (this “Report”), including

without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are “forward-looking statements” within the meaning of the U.S.

federal securities laws, including the Private Securities

Litigation Reform Act of 1995.

Certain statements included in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2025 (this “Report”),

including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are “forward-looking statements” within the meaning of the U.S.

federal securities laws, including the Private

Securities Litigation Reform Act of 1995.

Forward-looking statements are any statements other than statements of historical fact.

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implied by the forward-looking statements.

Important factors and uncertainties that could cause actual

results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following:

the adverse effects of current economic conditions on our business, operations, financial condition,

results of operations and capital resources, difficulties or delays in manufacturing or delivery of inventory or other supply chain disruptions, inflationary pressures, the Russia/Ukraine and Middle East conflicts, inadequate manufacturing

capacity or a shortfall or excess of inventory as a result of difficulty in predicting manufacturing requirements due to volatile economic conditions, price increases or decreased availability of third party component parts or raw materials at

reasonable prices;

our ability to successfully develop new products that garner customer acceptance and generate sales, both domestically and internationally, in the face of substantial competition;

our reliance on an unrelated third party to

develop, maintain and host certain web-based food service application software and develop and maintain selected components of our downloadable software applications pursuant to a non-exclusive license agreement, and the risk that interruptions

in our relationship with that third party could materially impair our ability to provide services to our food service technology customers on a timely basis or at all and could require substantial expenditures to find or develop alternative

software products;

any system outages, interruptions or other disruptions to our

software applications, including as a result of unexpected errors or mistakes in connection with over-the-air updates;

our ability to

successfully grow our business in the food service technology market;

Important factors and uncertainties that could cause actual results to differ materially from those expressed or implied by the

forward-looking statements include, but are not limited to, the following:

the adverse effects of current economic conditions on our business, operations, financial condition, results of operations and capital resources;

difficulties or delays in manufacturing or delivery of inventory or other supply chain disruptions;

the Russia/Ukraine and Middle East conflicts;

inadequate manufacturing capacity or a shortfall or excess of inventory as a result of difficulty in predicting manufacturing requirements due to

volatile economic conditions;

price increases, decreased availability of third-party component parts or raw materials at reasonable prices, price wars or significant pricing

pressures affecting the Company’s products in the United States or abroad;

increased product costs or reduced customer demand for our products in the United States or abroad, including as a result of trade wars or tariffs;

our ability to successfully develop new products that garner customer acceptance and generate sales, both domestically and internationally, in the

face of substantial competition;

our reliance on an unrelated third party to develop, maintain and host certain web-based food service application software and develop and maintain

selected components of our downloadable software applications pursuant to a non-exclusive license agreement, and the risk that interruptions in our relationship with that third party could materially impair our ability to provide services to

our food service technology customers on a timely basis or at all and could require substantial expenditures to find or develop alternative software products;

any system outages, interruptions or other disruptions to our software applications, including as a result of unexpected errors or mistakes in

connection with over-the-air updates;

our ability to successfully grow our business in the food service technology market;

renewal rates for our subscription-based products;

risks associated with the pursuit of strategic initiatives and business growth;

our dependence on contract manufacturers for the assembly of a large portion of our products in

our dependence on contract manufacturers for the assembly of a large portion of our products in Asia;

our dependence on significant suppliers;

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marketplace acceptance of new products;

risks associated with foreign

risks associated with foreign operations;

price wars or other significant pricing pressures affecting the Company’s products in the United States or abroad;

the imposition of additional duties, tariffs, quotas, taxes, trade barriers, capital flow restrictions and other charges on imports and exports by the

United States or the governments of the countries in which we or our manufacturers and suppliers operate;

increased product costs or reduced customer demand for our products due to changes in U.S.

policy that may result in

trade wars or tariffs;

political and policy uncertainties in connection with the U.S.

presidential election;

policy that may result in trade wars or tariffs;

political and policy uncertainties in connection with the change in U.S.

presidential administrations;

our ability to protect intellectual property;

exchange rate fluctuations;

the availability of needed financing on acceptable terms or at

volatility of, and decreases in trading prices of our common stock and other risk factors identified and discussed in Part I, Item 1A, Risk Factors, and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results

of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Form 10-K”) and that may be detailed from time to time in the Company’s other reports filed with the Securities and Exchange Commission (the “SEC”).

the availability of needed financing on acceptable terms or at all;

volatility of, and decreases in, trading prices of our common stock;

other risk factors identified and discussed in Part I, Item 1A, Risk

Factors, and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”) and that may be detailed from

time to time in the Company’s other reports filed with the Securities and Exchange Commission (the “SEC”).

We caution readers not to place undue reliance on forward-looking statements, which speak only as of the date of this Report.

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design, development, and marketing of software-driven technology and printing solutions for high growth markets, and provide related services, supplies and spare parts.

The Company’s chief operating decision maker, who is the company’s chief

executive officer, in consultation with the company’s chief financial officer, utilizes a consolidated approach to assess the performance of, and allocate resources to, the business.

Accordingly, management has concluded that the Company consists of

a single operating segment and single reportable segment for accounting and financial reporting purposes.

The Company’s chief operating decision makers, who are the Company’s Chief

Executive Officer and the Company’s Chief Financial Officer , utilize a consolidated approach to assess the performance of, and allocate resources to, the business.

Accordingly, management has concluded that the Company consists of a single operating segment and single reportable segment for accounting and financial reporting purposes.

Solely for convenience, some of the trademarks, service marks, trade names and copyrights referred to in this Report are listed without the ©, ® and ™

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Recent Developments

The Company engaged an advisor, Roth Capital Partners, LLC (“Roth”), in the

fourth quarter of 2023 to assist in determining the best long-term strategy for its business and ensure the Company is maximizing the value of its operations for all shareholders and stakeholders.

The Company continues to actively access

strategic alternatives with the assistance of Roth while continuing to pursue its business growth and development initiatives on a parallel track.

has engaged with a number of outside parties and is in various stages of discussion with such outside parties.

The Company is committed to pursuing an optimal

outcome for all its stakeholders and maximizing shareholder value.

For information regarding the risks related to our engagement with an advisor, please see Part

I, Item 1A, Risk Factors under the sub-caption “Our success may depend in part on our ability to identify and pursue the best long-term strategy for our businesses” in our 2023 Form 10-K.

Current Business Trends

Current Business and Economic Trends

After strong demand during most of 2023 due in part to our primary competitor’s struggle to deliver products in

the face of supply chain constraints, in late 2023, we began to see indications of a temporary slowdown in demand in the casino and gaming market, as customers that had built up excess inventory due to supply chain concerns advised us that they

would temporarily reduce orders until their stock normalized.

This slowdown impacted our results in the fourth quarter of 2023 and the first nine months of 2024 .

the third quarter of 2024, we believe all customers, with the exception of one large customer, were able to sell through their on-hand inventory and resumed ordering again.

As a result, we expect this trend to continue to impact results

at least through the end of 2024 until this one remaining customer is able to sell their on-hand inventory.

Further, our primary competitor in the casino and

gaming market has resumed supplying product and continued to increase volume at what we believe is their full capacity, which has resulted in downward pricing pressure in that market and could exacerbate the demand slowdown, which has negatively

impacted our worldwide casino and gaming sales.

In addition, during 2023, we experienced cost increases as a result of supply chain constraints , most of which we have been able to offset by increasing prices of our products.

However, there can be no guarantee that we will be able to increase prices sufficiently to offset

any future such cost increases that cannot be predicted, and we may be further impacted by supply chain disruptions, inflationary pressures and other global economic conditions that may affect the markets we serve and from which we source our

supplies and parts.

temporarily reduce orders until their stock normalized.

This slowdown impacted our results in the fourth quarter of 2023 and during the year ended December 31,

As of March 31, 2025, we believe all significant domestic customers have been able to sell through their on-hand inventory and have resumed ordering again.

As a result, we expect to continue to see a return to more normalized casino and gaming

sales levels in 2025.

However, c asino and gaming sales levels during 2025 may

be impacted by an increase in advance orders from customers seeking to avoid potential price increases from the recent tariff actions discussed below, which could result in decreased demand in future periods.

The Company is currently evaluating the

potential impact of this trend.

Since February 2025, the U.S.

government has issued several executive orders imposing tariffs on imports from most countries with which the U.S.

We are currently dependent upon a manufacturer located in Thailand for the manufacturing and assembly of substantially all of our printers and terminals.

On April 2, 2025, the U.S.

government imposed a baseline 10% tariff on goods imported from

Thailand, effective April 5, 2025.

In addition, the U.S.

government announced a 36% reciprocal tariff on goods imported from Thailand that was intended to replace the baseline tariff on April 9, 2025, but was subsequently suspended until July 2025.

These tariffs may impact certain goods that our assembled and imported into the U.S.

from our manufacturer in Thailand if a reduction or resolution cannot be negotiated between the Thai and the U.S governments.

The majority of raw components used in

the manufacturing and assembly of our printers and terminals are sourced locally in Thailand, and to a lesser extent, from other countries in the region, including China.

As a result, we currently have a limited ability to mitigate the potential impact

of tariffs on goods sold into the U.S.

through alternative sourcing or manufacturing.

We currently plan to mitigate any potential tariffs by raising prices to customers, but there can be no assurance that we will be able to pass on all tariff costs to

customers via price increases.

While tariffs did not materially impact our results for the first quarter of 2025, we continue to monitor the ongoing implications of tariffs and anticipated

increases in tariffs and counter-tariffs.

Given the continued lack of clarity, it is uncertain whether other countries will continue to seek negotiations or retaliate as future developments occur, or whether the U.S.

government will increase, eliminate

or expand tariffs, reconsider or adjust tariffs based upon negotiations, or grant further exemptions.

The continued effects of any global tariffs may potentially increase the likelihood of a recession, create a significant reduction in consumer confidence and

customer demand, increase inflation or impact credit markets and interest rates.

Any of these resulting effects could materially and adversely affect our business, financial condition and results of operations.

For information regarding the risks

related to our manufacturer in Thailand and global economic conditions, please see Part II, Item 1A, “Risk Factors,” of this Form 10-Q.

Strategic Review Process

For information regarding the risks related to the strategic review process, please see Part I, Item 1A, “Risk Factors” under the sub-caption “Our success

may depend in part on our ability to identify and pursue the best long-term strategy for our businesses” in our 2024 Form 10-K.

Balance Sheet, Cash Flow and Liquidity

the third quarter of 2023, we began a cost reduction initiative to reduce our overall level of operating expenses that included reducing employee headcount, trade show, advertising and other promotional marketing expenses, certain third-party

engineering resources and other expenses, and to a lesser extent, certain general and administrative expenses.

We began experiencing the full impact of these

actions in the first quarter of 2024 and expect they will result in approximately $3 million of annualized savings during 2024 compared to the 2023 levels,

partially offset by typical annual inflationary and cost of living increases in operating expenses.

We also began an additional cost reduction initiative in the second quarter of 2024 focused largely on further reducing employee headcount and other external third-party

Savings from this initiative were realized beginning in the third quarter of 2024 are expected to be approximately $2 million on an annualized basis.

Notwithstanding the foregoing, there is no assurance that the cost-cutting efforts we

have taken to bring expenses in line with our revenue and mitigate the impact of global economic conditions such as inflation and conditions in our markets will be sufficient or adequate, and we may be required to take additional measures, as the

ultimate extent of the effects of these risks on the Company, our financial condition, results of operations, liquidity, and cash flows are uncertain and are dependent on evolving developments which cannot be predicted at this time.

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

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

We began experiencing the full impact of

these actions in the first quarter of 2024 and such actions resulted in approximately $3 million of annualized savings during 2024 and we expect similar savings to be achieved in 2025 compared to the 2024 levels, partially offset by typical annual

inflationary and cost of living increases in operating expenses.

We also began an additional cost reduction initiative in the second quarter of 2024 focused largely on further reducing employee headcount and other

external third-party resources.

Savings from this initiative were realized beginning in the third quarter of 2024 and are expected to be approximately $2 million on

an annualized basis.

Notwithstanding the foregoing, there is no assurance that the cost-cutting efforts we have taken to bring expenses in line with our revenue and mitigate the impact of global economic conditions such as inflation, tariffs and

conditions in our markets will be sufficient or adequate, and we may be required to take additional measures, as the ultimate extent of the effects of these risks on the Company, our financial condition, results of operations, liquidity, and cash

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

Critical Accounting Estimates

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

The presentation of these financial statements requires us to make estimates and judgments that affect the reported amounts

of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities.

Our critical accounting estimates include those related to revenue recognition, accounts receivable, inventory obsolescence, goodwill and

intangible assets, the valuation of deferred tax assets and liabilities and share-based compensation.

The presentation of these financial statements requires us to make estimates and judgments that affect the reported amounts of

assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities.

Our critical accounting estimates include those related to revenue recognition, accounts receivable, inventory obsolescence, goodwill and intangible

assets, the valuation of deferred tax assets and liabilities and share-based compensation.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

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

There have been no

material changes in our critical accounting estimates from the information presented in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” since the filing of the 2024 Form 10-K.

Results of Operations:

Three months ended September 30, 2024 compared to three months ended September 30, 2023

Three months ended March 31, 2025 compared to three months ended March 31, 2024

Net sales, which

include printer, terminal and software sales, as well as sales of replacement parts, consumables (including labels) and maintenance and repair services, by market for the three months ended September 30, 2024 and 2023 were as follows (in thousands,

except percentages):

include printer, terminal and software sales, as well as sales of replacement parts, consumables (including labels) and maintenance and repair services, by market for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except

percentages):

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Food service technology (“FST”)

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terminals to international destinations.

Net sales for the third quarter of 2024 decreased $6.3 million, or 37%,

compared to the third quarter of 2023.

Printer, terminal and other hardware unit sales volume decreased 38% to approximately 21,000 units, due primarily to a 50% unit sales volume decrease in the casino and gaming market and a 15% unit sales volume decline in the POS automation market, partially offset by a 69% unit sales volume increase in FST hardware.

For more information about the

sales volume changes described above, please refer to the results of operations for each of our markets discussed further below.

The average selling price of our printers, terminals and other hardware was down 3% in the third quarter of 2024

compared to the third quarter of 2023 due to increased competition , primarily in the POS automation market.

FST software, labels and other recurring revenue

decreased $ 257 thousand , or 8%, in the third quarter of 2024 compared to the third quarter of 2023.

International sales for the third quarter of 2024 decreased $1.8 million, or 44%, from the same period in 2023 due primarily to lower sales in

our casino and gaming market.

Net sales for the first quarter of 2025 increased $2.4 million, or 22%, compared

to the first quarter of 2024.

Printer, terminal and other hardware unit sales volume increased 28% to approximately 24,700 units, due primarily to a 25% unit sales volume increase in the casino and gaming market and a 143 % unit sales volume increase in FST hardware.

For more information about the sales volume changes described above, please refer to the results of operations for each of our markets

discussed further below.

The average selling price of our printers, terminals and other hardware was up 5% in the first quarter of 2025 compared to the first quarter of 2024.

FST software, labels and other recurring revenue increased $250 thousand,

or 10%, in the first quarter of 2025 compared to the first quarter of 2024.

International sales for the first quarter of 2025 decreased $615 thousand, or 21%, from the same period in 2024 due primarily to lower sales in our casino

and gaming market.

Food service technology (“FST”) .

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in the FST market is our line of BOHA!

products, which can combine our latest generation terminal and workstation, which include one or two printers, with our BOHA!

product suite combines our latest generation terminal or workstation, which include one or two printers, with our BOHA!

labeling, timers, and media software.

In addition, customers may individually

purchase cloud-based software applications that connect to an application on a separate mobile device into a solution to automate back-of-house operations in restaurants, convenience stores and food service operations.

The additional software

offering of BOHA!

consists of a variety of individually purchased software-as-a-service (“SaaS”)-based applications for both Android and iOS operating systems, including applications for temperature monitoring, temperature taking and checklists and

In addition, customers may

individually purchase cloud-based software applications that connect to an application on a separate mobile device into a solution to automate back-of-house operations in restaurants, convenience stores and food service operations.

The additional

software offering of BOHA!

checklists and task lists.

These applications are sold separately, and customers purchase the applications they need for their back-of-house operations.

Customers may also purchase associated hardware, such as tablets, temperature sensors and gateways.

Terminal and newly launched Terminal 2 combine an operating system and hardware components in a device that includes a touchscreen and one or two thermal print

mechanisms that print easy-to-read food rotation labels, grab-and-go labels, and nutritional labels for prepared foods, and “enjoy by” date labels.

Terminal and the more recently launched Terminal 2 combine an operating system and hardware components in a single touchscreen device with one or two thermal

print mechanisms that print easy-to-read food rotation labels, grab-and-go labels, and nutritional labels for prepared foods, and “enjoy by” date labels.

WorkStation uses an iPad or Android tablet instead of an integrated touchscreen.

Terminal, Terminal 2 and WorkStation are equipped with the TransAct Enterprise Management System to ensure that only approved touchscreen functions are available on the touchscreen device and to allow over-the-air updates to the operating system.

helps food service establishments and restaurants (including fine dining, casual dining, fast casual and quick-service restaurants (“QSRs”), convenience stores, hospitality establishments and contract food service providers) effectively

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

Terminal, Terminal 2 and WorkStation are equipped with the TransAct Enterprise Management System to ensure that only approved touchscreen functions are available on the device and to allow over-the-air updates to the operating system.

food service establishments and restaurants (including fine dining, casual dining, fast casual and quick-service restaurants (“QSRs”), convenience stores, hospitality establishments and contract food service providers) effectively manage food safety

and grab-and-go initiatives, as well as automate and manage back-of-house operations.

Recurring revenue from BOHA!

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

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

Sales of our worldwide FST products for the three months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages):

is generated by software sales, including software subscriptions that are typically charged to customers annually on a per-application

basis, as well as sales of labels, extended warranty and service contracts, and technical support services.

Sales of our worldwide FST products for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

International

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Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

Software, labels and other recurring revenue

The increase in food service technology sales in the third quarter of

2024 compared to the third quarter of 2023 was primarily driven by an increase in international hardware sales.

Hardware sales were strong in the third quarter of 2024, up 30% compared to the third quarter of 2023, due to sales of

our newly launched BOHA!

Terminal 2 (that replaces our BOHA!

Terminal 1) to a large international QSR.

Hardware sales were partially offset by a 96% decrease in sales of our AccuDate 9700 terminals which we discontinued at the end of 2023 and

81% lower sales of our legacy BOHA!

Despite the loss of a significant customer (explained further below), FST software, labels and other

recurring revenue only decreased 8% compared to the prior year period due to increased

label sales to several of our larger existing customers.

The increase in food service technology sales in the first quarter of 2025

compared to the first quarter of 2024 was primarily driven by an increase in domestic hardware sales.

Hardware sales were strong in the first quarter of 2025, up 152% compared to the first quarter of 2024, due to sales of our BOHA!

2 to a large convenience store (replacing our BOHA!

Terminal 1), a large international QSR (replacing our AccuDate 9700) and a new sushi customer win .

Despite the loss of a significant customer (explained further below), FST software, labels and other recurring revenue increased 10% compared to the prior year period due

to label sales to our new sushi customer as well as higher sales to several of

our larger existing customers.

During the second quarter of 2024, a significant customer notified us that it would be terminating service, including its BOHA!

software subscriptions

and label sales, for its existing installed base of BOHA!

software subscriptions and

label sales, for its existing installed base of BOHA!

terminals by the middle of July 2024.

Total sales to this customer (including hardware, software, labels and other recurring revenue) were approximately $4.0 million in 2023.

have any hardware sales , and minimal label and software sales, to this customer in the third quarter of 2024, but we expect to continue to service a small percentage of ongoing units and may have some additional sales to this

customer in the future.

Despite the loss of this customer, we expect overall FST revenue for the remainder of 2024 to be relatively consistent with the comparable period of 2023, as we expect revenue from new customers, including those from our

newly announced international QSR customer, to largely offset sales from this lost customer.

Total sales to this customer (including hardware, software, labels and other recurring revenue) were approximately $ 900 thousand in 202 4 and approximately $300 thousand in the first quarter of 2024 (largely software and labels) .

We had minimal sales to this customer in the first quarter of 2025 as we continue to

service a small percentage of ongoing units.

Despite the loss of this customer, we expect overall FST revenue for the remainder of 2025 to be higher than the comparable period of 2024.

We expect FST revenue to be higher in 2025 than in 2024 as we continue to

focus on growing our installed base of terminals and the related recurring revenue (primarily the sale of BOHA!

labels and subscription software revenue from our

labeling software application).

POS automation:

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Our POS printer is used primarily by

McDonald’s, and to a lesser extent, other QSRs either at the checkout counter, grill station or within self-service kiosks to print receipts for consumers or print

on linerless labels.

In the POS automation market, we primarily sell our products through a network of domestic and international distributors and resellers.

Sales of our worldwide POS automation products for the three months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages):

McDonald’s, and to a lesser extent, other QSRs either at the checkout counter, grill station or within self-service kiosks to print receipts for consumers or print on linerless labels.

In the POS automation market, we primarily sell our products

through a network of domestic and international distributors and resellers.

Sales of our worldwide POS automation products for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

International

The decrease in POS automation sales in the third quarter of 2024 compared to the third quarter of 2023 was driven by a 27% decrease in domestic sales largely due to

unusually high sales during 2023, as we increased production and began to fulfill our large backlog of sales orders following supply chain slowdowns in 2022.

During the third quarter of 2024, we experienced renewed competitive pressure that has

resulted in a return to a more normalized level of sales as well as a reduction in our average selling prices.

We expect POS automation sales to continue to be lower during the remainder of 2024 compared to the same period 2023 as our competitors have resumed

volume shipments and we therefore anticipate our sales volume and average selling price to remain at levels relatively consistent with the third quarter of 2024.

The modest 5% decline in POS automation sales in the first quarter of

2025 compared to the first quarter of 2024 was largely due to competitive pressure that has resulted in a return to a more normalized level of sales as well as a reduction in our average selling prices.

We expect POS automation sales to be lower in 2025 than in 2024 as we expect to

continue to experience competitive pressure in this market.

Casino and gaming .

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

gaming venues worldwide.

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

Terminals and kiosks for sports betting at non-casino gaming and sports betting establishments.

In addition, casino and gaming market revenue includes sales of the EPICENTRAL print system, our software solution , currently sold both directly and through certain casino system providers on a subscription basis, that enables casino operators to create promotional coupons and marketing messages and

to print them in real time at the slot machine .

Sales of our worldwide casino and

gaming products for the three months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages):

Revenue from this market also includes sales of thermal roll-fed printers used in the

international off-premise gaming market in gaming machines such as Amusement with Prizes, Skills with Prizes and Fixed Odds Betting Terminals and kiosks for sports betting at non-casino gaming and sports betting establishments.

casino and gaming market revenue includes sales of the EPICENTRAL print system, our software solution, currently sold both directly and through certain casino system providers on a subscription basis, that enables casino operators to create

promotional coupons and marketing messages and to print them in real time at the slot machine .

Sales of our worldwide casino and gaming products for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

International

Domestic sales of our casino and gaming products for the third quarter of

2024 declined by $2.7 million, or 49%, compared to the third quarter of 2023.

Sales during the third quarter of 2023 were unusually high due to our largest competitor’s inability to supply product due to the supply chain issues.

addition, one of our larger customers continues to hold higher than normal

levels of inventory of our product accumulated as a hedge during the worldwide supply chain crisis during 2022 and 2023.

As a result, this customer has not ordered any

product through the first nine months of 2024 and we expect this to continue at least through the end of 2024 until they are able to sell through their

on-hand inventory.

We also believe our sales were negatively impacted by softness in overall demand in the industry which we expect to continue for the remainder of 2024.

We expect a normalized competitive environment to continue going forward as our largest competitor has resumed volume shipments and our customers begin to return to

more normalized buying levels .

Our international casino and gaming sales were down 51% during the third quarter of 2024 compared to the third quarter of 2023.

Like our domestic

customers, our international customers also began to slow their order rates in the first half of 2024 due to higher-than-normal inventory levels and in response to softness in overall demand in the industry.

This slowdown continued into the third quarter of 2024 and we expect this to continue to have an impact our international sales at least through the end of 2024.

Domestic sales of our casino and gaming products for the first quarter of 2025

increased by $1.6 million, or 49%, compared to the first quarter of 2024.

Sales during the first quarter of 2024 were negatively impacted as many of our customers had accumulated higher-than-normal levels of inventory of our product as a hedge

during the worldwide supply chain crisis during 2022 and 2023.

As a result, during 2024, we experienced a significant slowdown in their order and shipment rates as they worked through this excess inventory.

Sales increased during the first quarter

of 2025 compared to the first quarter of 2024 as most of our major casino and gaming customers worked through their on-hand inventory and began to order at normalized levels again.

In addition, sales in the first quarter of 2025 benefitted from

sales of our casino printer to a new OEM customer for the use in charitable gaming establishments.

We expect this new OEM customer to continue to contribute to sales

for the remainder of 2025.

As a result of these factors, we expect our domestic casino and gaming sales to be significantly higher in 2025 compared to 2024.

Our international casino and gaming sales were down 23% during the first quarter of 2025 compared to the first quarter of 2024 , largely due to a large European OEM still working down an overstock of their on-hand inventory .

We expect our

international sales to continue to be negatively impacted until this customer resumes ordering which is expected in the second half of 2025.

TransAct Services Group (“TSG”):

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

Sales in our worldwide TSG market for the three months ended September 30, 2024 and 2023 were

as follows (in thousands, except percentages):

Sales in our worldwide TSG market for the three months ended March 31, 2025 and 2024 were as follows (in thousands, except percentages):

Three Months Ended

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

International

The decrease in both domestic and international revenue from the TSG during the third quarter of 2024 as compared to the third quarter of 2023 was due largely to 72%

lower sales of legacy replacement parts for lottery printers, and to a much lesser extent, lower legacy consumables sales and service revenue.

We expect TSG sales to continue to be significantly lower in 2024

compared to 2023 as we experienced an unusually high level of sales of legacy lottery printer replacement parts due to a customer’s last buy in 2023 .

We therefore do not expect any future sales of these spare parts beyond 2023.

The decrease in both domestic and international revenue from TSG during the first quarter of 2025 as compared to the first quarter of 2024 was due largely to

lower sales of legacy replacement parts for lottery printers, as well as lower legacy consumables sales and service revenue.

We expect TSG sales to be somewhat lower in 2025 compared to 2024 as we expect to cease selling all of our remaining legacy consumable products by the end of 2025.

Gross Profit.

information for the three months ended September 30, 2024 and 2023 is summarized

below (in thousands, except percentages):

Three Months Ended September 30,

information for the three months ended March 31, 2025 and 2024 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2025

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

products and royalty payments to third

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

In the third quarter of 2024, gross profit decreased $3.7 million,

or 41%, and gross margin declined 380 basis points to 48% due primarily to a 37% decline in overall sales, including a 50% decline in sales of higher margin casino and gaming printers.

We expect this trend in gross margin to continue for the

remainder of 2024 due to the expected continued softness in the casino and gaming market.

As a result, we expect gross margin for the remainder of 2024 to remain in the mid-40% to high-40% range.

Operating Expenses - Engineering, Design and Product Development.

Engineering, design and

product development expense information for the three months ended September 30,

2024 and 2023 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

products and royalty payments to third parties,

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

In the first quarter of 2025, gross profit increased $735 thousand, or 13%, and

gross margin declined 390 basis points to 49% due largely to higher sales of BOHA!

hardware products which carry lower average margins than our casino and gaming products, and to a lesser extent, increased overhead costs, inflation and lower prices

on our POS automation printer due to increased competitive pressure.

We expect gross margin for 2025 to continue to be in the mid-to high-40% range.

Operating Expenses - Engineering, Design

and Product Development.

Engineering, design and product development expense information for the three months ended March 31, 2025 and 2024 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2025

Total Sales - 2024

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

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

service technology software products).

Engineering, design and product development expenses decreased $869 thousand, or 35%, for the third quarter of 2024 compared to

the third quarter of 2023 due to cost reduction initiatives taken during the latter part of 2023, and again in the second quarter of 2024, including a reduction of contracted software development expenses in the second quarter of 2024.

result of these initiatives as discussed above under the heading “Current Business Trends,” we expect that engineering expenses will continue to be lower for the remainder of 2024 compared to 2023.

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

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

technology software products).

Engineering, design and product development expenses decreased $331 thousand, or 17%, for the first quarter of 2025 compared to the first

quarter of 2024 due to cost reduction initiatives taken during the latter part of 2023, and again in the second quarter of 2024, including a reduction of contracted software development expenses.

Operating Expenses - Selling and Marketing.

Selling and marketing information for the three months ended September 30, 2024 and

2023 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Selling and marketing expense information for the three months ended March 31, 2025 and 2024 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2025

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

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

Selling and marketing expenses decreased by $517 thousand, or 22%, in the third quarter of 2024 compared to the third quarter of 2023 due largely to cost reduction initiatives including reduced headcount, trade show and

other marketing expenses.

Though we expect to continue to realize cost savings as a result of these initiatives as discussed above under the heading “Current Business Trends,” we expect selling and marketing expenses for the remainder of

2024 to be relatively consistent compared to 2023 due to incremental costs we expect to incur related to a program to continue to improve our go-to-market strategy during the fourth quarter 2024.

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

marketing expenses and outsourced go-to-market consulting services .

marketing expenses remained relatively flat in the first quarter of 2025 compared to the first quarter of 2024 due largely to typical inflationary and cost of living increases as well incremental costs we incurred related to programs to further

improve and refine our go-to-market strategy offset by cost reduction initiatives including reduced headcount, trade show and other marketing expenses taken during the latter part of 2023 and the second quarter of 2024.

Operating Expenses - General and

Administrative .

General and administrative information for the three months ended September 30, 2024 and 2023 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Total Sales - 2024

Total Sales – 2023

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

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

related to being a publicly traded company.

General and administrative expenses decreased $275 thousand, or 10%, during the third quarter of 2024 compared to the

third quarter of 2023.

This decrease was due to lower bad debt and incentive compensation expenses in the third quarter of 2024 compared to the same period in 2023, and from the impact of cost reduction initiatives taken during the latter

part of 2023 and the second quarter of 2024.

We expect general and administrative expenses to continue to be lower for the remainder of 2024 compared to 2023.

Operating (Loss) Income.

(loss) income for the three months ended September 30, 2024 and 2023 is summarized

below (in thousands, except percentages):

Three Months Ended September 30,

Total Sales – 2024

Total Sales – 2023

Our operating income decreased $2.0 million, or 170%, in the third quarter of 2024 compared to the third quarter of 2023 due largely to a 37% decline

in sales and a resulting $3.7 million decrease in gross profit (including a 380 basis point decline in gross margin).

This was partially offset by a reduction in operating expenses of $1.7 million, or 22%, primarily due to cost reduction efforts

commenced in the latter part of 2023 and the second quarter of 2024.

Interest, net.

We recorded net interest income of $42 thousand in the third quarter of 2024 compared to $73 thousand of net interest expense in the third quarter of 2023.

For both periods, we incurred

interest expense on the minimum $2.3 million of borrowings pursuant to the terms of the July 2022 amendment of our credit facility – see Note 5, Borrowings, to the accompanying condensed consolidated financial statements.

third quarter of 2024, we earned more interest income than in the third quarter of 2023 due to higher levels of invested cash on hand.

Other, net primarily includes foreign exchange gains and losses by our UK subsidiary.

During the third quarter of 2024 we recognized $96 thousand of foreign exchange gains compared to a $43

thousand foreign exchange loss in the third quarter of 2023.

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

fluctuation in exchange rates of the euro and pound sterling against the U.S.

Income Taxes.

We recorded an income tax

benefit in the third quarter of 2024 of $148 thousand at an effective tax rate of (21.2%), compared to an income tax expense during the third quarter of 2023 of $169 thousand at an effective tax rate of 15.7%.

Net (Loss) Income .

We reported a net loss for the third quarter of 2024 of ($0.6) million, or ($0.06) per diluted share, compared to net income of $0.9 million, or $0.09 per diluted share, for the

third quarter of 2023.

Results of Operations:

Nine Months Ended September 30, 2024 compared to nine months ended September 30, 2023

Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables and maintenance and repair services, by market for the nine months

ended September 30, 2024 and 2023 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2024

September 30, 2023

POS automation

Casino and gaming

International *

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

and terminals to international destinations.

Net sales for the first nine months of 2024 decreased $26.2 million, or 44%,

from the same period in 2023.

Printer, terminal and other hardware sales unit volume decreased by 51% to approximately 62,000 units for the first nine months of 2024 driven primarily by a 57% decrease in units within our casino and gaming market,

and to a much lesser extent, a 33% decline in units from our POS automation market.

For more information about the sales volume decreases described above, please refer to the discussion below of the results of operations for each of our

The average selling price of our printers, terminals and other hardware remained relatively flat for the first nine months of 2024 compared to the first nine

months of 2023.

FST software, labels and other recurring revenue increased $112 thousand, or 1%, in the first nine months of 2024 compared to the first nine months of 2023.

International sales for the first nine months of 2024 decreased $3.9 million, or 33%, from the same period in 2023 due primarily to a 39 % decrease in the international casino and gaming market.

Food service technology.

Sales of our worldwide food service technology products for the nine months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2024

September 30, 2023

International

Nine Months Ended

September 30, 2024

September 30, 2023

Software, labels and other recurring revenue

The increase in food service technology sales of $205 thousand, or 2%, in the first nine months of 2024 compared to the first nine months of 2023 was

driven by a 1% increase in sales of BOHA!

software, labels and other recurring revenue, as well as a 3% increase in sales of FST hardware.

Despite the loss of a significant customer (explained further below), FST software, labels and recurring revenue increased slightly compared to the prior year period as sales to the lost customer were more than offset by increased software sales due principally to the growth of the installed base of our BOHA!

terminals and workstations (excluding those from the lost customer) as well as higher label sales to several of our larger existing customers (excluding those from the lost customer).

Hardware sales were impacted by a 95% decrease in sales of our

AccuDate 9700 terminals which we discontinued at the end of 2023 and 72% lower sales of our legacy BOHA!

Terminal 1 (including those from a lost customer explained further below).

These decreases were offset by strong sales of our newly

launched BOHA!

Terminal 2 (that replaced our BOHA!

Terminal 1) to a large international QSR customer as well as increased sales of Workstations.

During the second quarter of 2024, a significant customer notified us that they would be terminating service, including its BOHA!

subscriptions and label sales, for its existing installed base of BOHA terminals by the middle of July 2024.

Total sales to this customer (including hardware, software, labels and other recurring revenue) were approximately $4.0 million in

We did not have any hardware sales , and minimal label and software sales, to this customer in the third quarter of 2024, but we expect to continue to

service a small percentage of ongoing units and may have some additional

sales to this customer in the future.

Despite the loss of this customer, we expect FST revenue for the remainder of 2024 to be relatively consistent with the comparable period 2023, as we expect revenues from new customers, including those

from our newly announced international QSR customer, to largely offset those from this lost customer.

POS automation.

Sales of our worldwide POS automation products for the nine months ended September 30,

2024 and 2023 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2024

September 30, 2023

International

Sales of POS automation printers decreased $2.4 million, or 45%, for the first nine months

of 2024 compared to the first nine months of 2023, largely due to unusually high sales during 2023, as we increased production and began to fulfill our large backlog of sales orders following supply chain slowdowns in 2022.

During the first

nine months of 2024, we experienced renewed competitive pressure that has resulted in a return to a more normalized level of sales as well as a reduction in our average selling prices.

We expect POS automation sales to continue to be lower during the

remainder of 2024 compared to the same period 2023 as our competitors have resumed volume shipments and we therefore anticipate our sales volume and average

selling price to remain at levels relatively consistent with the third quarter

Casino and gaming.

Sales of our worldwide casino and gaming products for the nine months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2024

September 30, 2023

International

Domestic sales of our casino and gaming products declined by $17.3 million, or 65%, for the first nine months of 2024 compared to the first nine months of

Sales during the first nine months of 2023 were unusually high due to our largest competitor’s inability to supply product due to the supply chain issues.

In addition, entering 2024, many of our customers built up higher than normal levels of inventory of our product accumulated as a hedge during the worldwide supply chain crisis during 2022 and 2023.

As a result, during the first nine months of 2024, we experienced a significant slowdown in their order and shipment rates .

the end of the third quarter 2023, we believe all significant customers have resumed buying (though not all at normalized levels yet), with the exception of one larger customer.

This customer has not ordered any product through the first nine

months of 2024 and we expect this to continue at least through the end of 2024 until they are able to sell through their on-hand inventory.

We also believe our sales in the third quarter of 2024 were negatively impacted by softness in overall demand in the industry which we expect to continue for the remainder of 2024.

We expect a normalized competitive environment to continue going

forward as our largest competitor has resumed volume shipments and our customers begin to return to more normalized buying levels.

International sales of our casino and gaming products decreased by $4.1

million, or 39%, in the first nine months of 2024 compared to the first nine months of 2023.

Similar to our domestic customers, our international customers also began to slow their order rates in the first half of 2024 due to higher-than-normal inventory levels and in response to softness in overall demand in the

This slowdown continued into the third quarter of 2024 and we expect this to continue to impact our international sales at least through the end

Sales in our worldwide TSG market for the nine months ended September 30, 2024 and 2023 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2024

September 30, 2023

International

The decrease in domestic TSG revenue of $2.5 million, or 53%, for the first nine months of 2024 as compared to the first nine months of 2023 was due

largely to 67% lower sales of legacy replacement parts for lottery printers, and to a much lesser extent, lower legacy consumables sales (POS paper and ribbons) and service revenue.

Internationally, TSG revenue decreased $90 thousand, or 14%, for the first nine months of 2024 compared to the first nine months of 2023, primarily due to

a 18% decrease in sales of replacement parts to international casino and gaming customers.

We expect TSG sales to continue to be significantly lower in 2024

compared to 2023 as we experienced an unusually high level of sales of legacy lottery printer replacement parts due to a customer’s last buy in 2023 .

We therefore do not expect any future sales of these spare parts beyond 2023.

Gross Profit.

Gross profit for the nine

months ended September 30, 2024 and 2023 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Total Sales - 2024

Total Sales – 2023

For the first nine months of 2024, gross profit decreased $15.1 million, or 47%.

Gross margin also decreased 280 basis points to 51% in the first nine

months of 2024 compared to 54% in the first nine months of 2023.

Both gross profit and gross margin declined primarily due to a 44% decline in overall sales including a

58% decline in sales of higher margin casino and gaming printers.

We expect this downward trend in gross margin to continue for the remainder of 2024 due to the expected continued softness in the casino and gaming market.

As a result, we expect

gross margin for the remainder of 2024 to be in the mid-40% to high-40% range.

Operating Expenses - Engineering, Design and

Product Development.

Engineering, design and product development expense for the nine months ended September 30, 2024 and 2023 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Total Sales - 2024

Total Sales - 2023

Engineering, design and product development expenses decreased $1.9 million, or 26%, during the first nine months of 2024 compared to first nine months

of 2023 due to cost reduction initiatives taken during the latter part of 2023, and again in the second quarter of 2024, including a reduction of contracted software

development expenses .

As a result of these initiatives , we expect that engineering expenses will continue to be lower for the remainder of 2024 compared to 2023.

Operating Expenses - Selling and Marketing.

Selling and marketing expense for the nine months ended September 30, 2024 and 2023 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Total Sales - 2024

Total Sales - 2023

Selling and marketing expenses decreased $1.7 million, or 21%, for the first nine months of 2024 compared to the first nine months of 2023 due largely

to cost reduction initiatives, including reduced headcount, trade show and other marketing expenses.

Though we expect to continue to realize cost savings as a

result of these initiatives and additional cost-cutting initiatives taken in the second quarter of 2024, we expect selling and marketing expenses for the remainder of 2024 to be relatively consistent compared to 2023 due to incremental costs we expect to incur related to a program to continue to improve our go-to-market

strategy during the fourth quarter 2024.

Operating Expenses - General and Administrative .

General and administrative expense for the nine months ended September 30, 2024 and 2023 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

General and administrative information for the three months ended March 31, 2025 and 2024 is summarized below (in

thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2025

Total Sales – 2024

General and administrative expenses decreased $2.7 million, or 25%, for the first nine months of 2024 compared to the first nine months of 2023.

The decline was largely due to a severance charge of $1.5 million incurred during the second quarter of 2023 in connection with the resignation of TransAct’s former Chief Executive Officer in

In addition, we incurred lower legal fees, bad debt and incentive compensation expense in the third quarter of 2024 compared to the third quarter of 2023, and we benefited from cost reduction initiatives taken during the latter part

of 2023 and in the second quarter of 2024.

As a result of these initiatives, we expect general and administrative expenses to continue to be lower for the remainder of 2024 compared to 2023.

Operating (Loss) Income.

General and administrative expenses primarily include salaries, incentive and

share-based compensation, and other payroll-related expenses for our executive, accounting, human resources, corporate development and information technology staff, expenses for our corporate headquarters, professional and legal expenses,

information technology expenses, board of director expenses and other expenses related to being a publicly traded company.

General and administrative expenses decreased

$222 thousand, or 8%, during the first quarter of 2025 compared to the first quarter of 2024.

This decrease was driven largely by the impact of cost reduction initiatives taken during the latter part of 2023 and the second quarter of 2024 as well as lower depreciation and incentive compensation expense in the first quarter of 2025 compared to the same period in 2024.

Operating Loss.

income for the nine months ended September 30, 2024 and 2023 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Operating loss for

the three months ended March 31, 2025 and 2024 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales – 2025

Total Sales – 2024

Our operating income decreased $8.8 million, or 141%, for the first nine months of 2024 compared to the first nine months of 2023 due largely to a 44%

decline in sales and a resulting $15.

1 million decrease in gross profit (including a 280 basis point decline in gross margin).

This was partially offset by a

reduction in operating expenses of $6.3 million, or 24%, primarily due to cost reduction efforts commenced in the latter part of 2023 and the second quarter of 2024 as well as a $1.5 million severance charge incurred during the second quarter of

2023 in connection with the resignation of TransAct’s former Chief Executive Officer in April 2023.

Our operating loss decreased $1.3 million, or 99%, in the first quarter of 2025 compared to the first quarter of 2024 due largely to a 22% increase in sales

and a resulting $735 thousand increase in gross profit (despite a 390 basis point decline in gross margin).

Furthermore there was a reduction in operating expenses of $551 thousand, or 8%, primarily due to cost reduction efforts commenced in the

latter part of 2023 and the second quarter of 2024.

Interest, net.

We recorded net interest income of $116

thousand for the first nine months of 2024 compared to net interest expense of $207 thousand for the first nine months of 2023.

For both periods, we incurred interest

expense on the minimum $2.3 million of borrowings pursuant to the terms of the July 2022 amendment of our credit facility – see Note 5, Borrowings, to the accompanying condensed consolidated financial statements for more information

regarding the Company’s credit facility.

During the first nine months of 2024, we earned more interest income than in the first nine months of 2023 due to higher levels of invested cash on hand.

We recorded net interest income of $22 thousand in the first quarter of 2025 compared to $48 thousand in the first quarter of 2024.

Following the November 2024 amendment of

the Siena Credit Facility, we were required to maintain outstanding borrowings of at least $3 million in principal amount, an increase from $2.25 million prior to the amendment, which resulted in higher interest expense in the first quarter of

In addition, we earned less interest income in the first quarter of 2025 than in the first quarter of 2024 due to the impact of lower interest rates on invested cash on hand.

Other, net primarily includes foreign exchange gains and losses by our UK subsidiary.

During the first nine months of 2024 we recognized $43 thousand of foreign exchange gains compared to a $22

thousand foreign exchange loss in the first nine months of 2023.

During the first quarter of 2025 we recognized $63 thousand of foreign exchange gains compared to a $60

thousand foreign exchange loss in the first quarter of 2024.

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

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Income Taxes.

We recorded an income tax

benefit in the first nine months of 2024 of $511 thousand at an effective tax rate of (21.1%), compared to an income tax expense during the first nine months of 2023 of $1.2 million at an effective tax rate of 19.8%.

Net (Loss) Income .

We reported a net loss for the first nine months of 2024 of ($1.9) million, or ($0.19) per diluted share, compared to net income of $4.8 million, or $0.48 per diluted share, for

the first nine months of 2023.

We recorded an

income tax expense in the first quarter of 2025 of $51 thousand at an effective tax rate of 72.9 %, compared to an income tax benefit during the first quarter of 2024

of $277 thousand at an effective tax rate of (21.1%).

The effective rate for the first quarter of 2025 was unusually high due to (1) a

near-breakeven level of pre-tax earnings of $70 thousand and (2) t ax expense only included taxes associated with earnings in the United Kingdom and minimum

required state taxes in the United States.

In the fourth quarter of 2024, the Company recognized a $7.3 million charge to income tax expense to record a valuation allowance on the full value of its U .

federal net deferred tax

The need for this valuation allowance has been assessed as of March 31, 2025 and management continues to believe this valuation allowance is appropriate.

Liquidity and Capital Resources

In the first nine months of 2024, our cash and cash equivalents balance decreased $1.0 million from December 31, 2023.

We ended the third quarter of

2024 with $11.3 million in cash and cash equivalents, of which $0.1 million was held by our UK subsidiary.

In the first three months of 2025, our cash and cash equivalents balance decreased $216 thousand , or 2%, from December 31, 2024.

We ended the first quarter of 2025 with $14.2 million in cash and cash equivalents, of which $0.2 million was held by our UK subsidiary.

Operating activities :

The following significant factors

affected our cash used in operating activities of $0.5 million for the first nine months of 2024 as compared to cash provided by operating activities of $4.6 million for the first nine months of 2023:

During the first nine months of 2024:

We reported a net loss of $1.9 million.

The following significant

factors affected our cash used in operating activities of $161 thousand for the first three months of 2025 as compared to cash used in operating activities of $1.5 million for the first three months of 2024:

During the first three months of 2025:

We reported net income of $19 thousand.

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

Accounts receivable decreased $2.5 million due to the continued collections of sales combined with the slowdown in sales as discussed in the

Results of Operations above.

Inventories decreased $1.0 million consistent with the slowdown in sales as discussed in the Results of Operations above.

Accounts payable decreased $1.2 million due to the slowdown in inventory purchases associated with the slowdown in sales as discussed in the

Results of Operations above.

Accrued and other liabilities decreased $1.2 million due in part to a reduction in planned 2024 bonuses.

During the first nine months of 2023:

We reported net income of $4.8 million.

Accounts receivable increased $2.5 million due to the increase in sales as discussed in our Results of Operations above.

Inventories decreased $1.8 million as we work down our elevated inventory levels on hand.

During the first three months of 2024:

We reported a net loss of $1.0 million.

We recorded depreciation and amortization of $0.4 million and share-based compensation expense of $0.3 million.

Inventories increased $5.6 million consistent with overall increases in sales in 2023 compared to 2022 and the planned launch of several new

product models the second half of 2023.

Accounts receivable decreased $1.8 million due to stronger collections of sales.

Employee retention credit receivable decreased $1.5 million due to the collection of this receivable in the first quarter of 2023.

Accounts payable decreased $1.2 million in 2023 due largely to the timing of vendor payments.

Accrued and other liabilities increased $1.3 million due largely to accrued

severance i n connection with the resignation of TransAct’s former Chief Executive Officer in April 2023.

Inventories increased $1.4 million consistent with the slowdown in sales as discussed in our Results of Operations above.

Accounts receivable decreased $2.0 million due to the continued collections of sales combined with the slowdown in sales as discussed in our Results of Operations above.

Accrued and other liabilities decreased $1.0 million due largely to the payout of 2023 bonuses in the first quarter of 2024.

Investing activities:

Our capital expenditures were

thousand for the first nine months of 2024 compared to $788 thousand for the first nine months of 2023.

$10 thousand for the first three months of 2025 compared to $106 thousand for the first three months of 2024.

Expenditures for both periods were primarily for computer and networking equipment and new tooling equipment.

Financing activities:

Financing activities used $71 thousand

of cash during the first nine months of 2024 compared to a use of $86 thousand in cash during the first nine months of 2023.

Financing activities used $50

thousand of cash during the first three months of 2025 compared to $71 thousand in cash used during the first three months of 2024.

These amounts relate to cash used to pay withholding taxes on stock issued from our stock compensation plans.

Resource Sufficiency

We have been impacted by global supply chain issues, increased shipping costs, increased interest rates and inflationary pressures.

Our operating

results and operating cash flow improved significantly during 2023 due largely to certain competitors’ inability to supply products in both the POS automation and casino and gaming markets, but these competitors have returned to market, resulting

in increased competitive pressure.

Certain large customers also began to slow their order rates for the first half of 2024 due to higher-than-normal inventory

levels , though most have resume buying again with the exception of one large customer.

We expect this to continue to negatively impact our sales through at least

the end of 2024.

Given the continued uncertainty related to the demand slowdown, including the loss of a major customer described above, we continue to monitor our cash generation, usage and preservation including the management of working

capital to generate cash.

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

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

Notwithstanding this belief, the

duration and extent of current global economic pressures and conditions in our markets remain uncertain and their ultimate impact is unknown.

Credit Facility and Borrowings

On March 13, 2020, we entered into the Loan and Security Agreement governing the Siena Credit Facility with Siena Lending Group LLC (the “Lender”).

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, prior to being extended, as discussed below.

Borrowings under the Siena Credit Facility bear a floating rate

of interest equal to the greatest of (i) the prime rate plus 1.75%, (ii) the federal funds rate plus 2.25%, and (iii) 6.50%.

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

which were reported as “Other 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.

Borrowings under the Siena Credit Facility are subject to a borrowing base based on 85% of eligible accounts receivable plus the lesser of (a) $5.0 million and (b) 50% of

eligible raw material and 60% of finished goods inventory.

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

create other liens.

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 ended July 31, 2021.

From July 31, 2021 through September 30, 2024, we remained in compliance with our excess availability covenant.

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 Siena Credit Facility Amendment No.

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 included, 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 the Siena Credit Facility as amended and unrestricted cash is less than $5

million for 3 consecutive business days or (b) an event of default occurs and is continuing .

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.

As stated above, we continue to monitor our cash generation, usage and preservation including the management of working capital to generate cash and continue to

evaluate any alternative sources of funding as necessary, including the possible extension of our line of credit under the Siena Credit Facility.

On May 1, 2023, the Company and the Lender agreed to a letter amendment to the Loan and Security Agreement governing the Siena Credit Facility.

Prior to such

amendment, section 7.1(m) of the Loan and Security Agreement governing the Siena Credit Facility required that any successor to the Company’s former Chief Executive Officer be reasonably acceptable to the Lender.

This amendment confirmed that Mr.

Dillon, the Company’s current Chief Executive Officer, is an acceptable successor and applied the same requirement to any future successor to Mr.

Dillon as Chief Executive Officer.

As of September 30, 2024, we had $2.3 million of outstanding borrowings under the Siena Credit Facility and $4.2 million of net borrowing capacity available under the

Competitors that were unable to supply products in 2023 due to supply chain constraints have returned to the market, resulting in increased competitive pressure.

Certain large customers began to slow their order rates in the first half of 2024 due to higher-than-normal inventory levels, though most have resumed

buying again.

As a result, following an increase in casino and gaming sales in 2023 and then a fall-off in 2024 as customers worked through inventory on hand, we expect to see more normalized sales in casino and gaming in 2025.

Given the continued

uncertainty related to tariffs and general economic conditions, we continue to monitor our cash generation, usage and preservation including the management of working capital to generate cash.

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

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

Notwithstanding this belief, the duration and extent of current

global economic pressures and conditions in our markets remain uncertain and their ultimate impact is unknown.

Credit Facility

We are party to a Loan and Security Agreement, dated as of March 13, 2020 (as amended, the “Loan Agreement”), with Siena Lending Group LLC (the “Lender”)

that provides for a revolving credit line of up to $10.0 million, subject to a borrowing base based on 85% of eligible accounts receivable plus the lesser of (a) $5.0 million and (b) 50% of eligible raw material and 60% of finished goods inventory (the

“Siena Credit Facility”).

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%.

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 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 and restricts, among other things, our ability to incur additional indebtedness and create other liens.

W e have remained in compliance with our excess availability covenant

through March 31, 2025 .

The Company is required to either maintain outstanding borrowings under the Siena Credit Facility of at least $3.0 million in principal amount, or during any

period during which the Lender has control of the Company’s deposit account in accordance with the Loan Agreement, to pay interest on at least $3.0 million principal amount of loans, whether or not such amount of loans is actually outstanding.

maturity date of the Siena Credit Facility is March 31, 2027.

As of March 31, 2025, we had $3.0 million of outstanding borrowings under the Siena Credit Facility at an interest rate of 9.25%.

We had $3.3 million of net

borrowing capacity available under the Siena Credit Facility at March 31, 2025.

As stated above, we continue to monitor our cash generation, usage and preservation including the management of working capital to generate cash and continue

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What changed 10-Q

Item 2. Management’s Discussion and Analysis