TRANSACT TECHNOLOGIES INC 10-Q

Item 1A. RISK FACTORS Information regarding risk factors appears under Part I, Item 1A, “Risk Factors,” of our 2024 Form 10-K. There have been no material changes from the risk factors previously disclosed in our 2024 Form 10-K, other than as set forth below. The risk described below and those other risks included in our 2024 Form 10-K are the currently known risks facing our Company that management deems to be material to the Company. Additional risks and uncertainties, not currently known to us or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition or future results. 22 Index We are currently dependent upon a manufacturer located in Thailand for the manufacturing and assembly of substantially all of our printers and terminals, and any further or future disruption in the businesses or operations of this manufacturer or changes to our relationship with this manufacturer/increased costs of products from this manufacturer?, including as a result of political, social or economic instability, war, trade restrictions or tariffs, severe weather, changes in climate, additional public health crises and other events out of our control, could materially adversely affect our business, financial condition and results of operations. In an effort to maximize cost savings and operational benefits, we have outsourced substantially all of the manufacturing and assembly of our printers and terminals to a contract manufacturer located in Thailand. As a result, we are dependent on this manufacturer for the manufacturing of our products, and any disruption in such manufacturing or the export of products from this manufacturer to the U.S., or the cost of such manufacturing and export, may adversely affect our business, financial condition and results of operations. Risks affecting the businesses and operations of our manufacturer in Thailand and the cost to us of the products sourced from this manufacturer include: political and regional strife; war; labor shortages; severe weather and natural disasters such as earthquakes, hurricanes, fires, and floods, whether as a result of climate change or otherwise; lengthy power outages; increased pricing, financial instability and capacity constraints of shippers; and concerns with or threats of public health crises, contagious diseases or health epidemics. We are also exposed to risks relating to the government imposition of tariffs, which may impact the cost or availability of products or components that we purchase. For example, 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 are assembled and imported from our contract manufacturer in Thailand if a reduction or resolution to the tariffs cannot be negotiated between the Thai and U.S. governments. These and future changes in tariffs and trade policies by the United States on imports from Thailand (or other countries, such as China), or retaliatory trade measures in response, may result in additional costs and pricing pressures, supply chain disruptions, volatile or unpredictable customer spending patterns and increased economic or geopolitical risk that we may not be able to offset or otherwise mitigate, any or all of which could adversely impact our business, financial condition and results of operations. In addition, the risk to our business posed by any disruption in manufacturing or impacts resulting from tariffs or trade policy uncertainty, such as price increases, is exacerbated by the concentration of substantially all of our manufacturing operations in one manufacturer located in Thailand, and there can be no assurance that we will be able to successfully mitigate any such risk by making changes to our supply chain practices, sources of supply, or manufacturing locations, or raising the prices on products subject to such tariffs and sharing these costs with our customers, which could also have significant impacts on our financial results. If the contract manufacturer is unable to manufacture our products or continue operating its facilities, as occurred in connection with the COVID-19 pandemic, or if cost increases (as a result of tariffs or otherwise) make continued reliance on the contract manufacturer impractical, we will have limited means for the final assembly of a majority of our products until we are able to secure the manufacturing capability at another facility , develop an alternative manufacturing facility or qualify and begin sourcing from an alternative contract manufacturer , which could be costly and time consuming and have a material adverse effect on our operating and financial results. We may also incur increased business continuity and reputational risks to the extent that we continue to outsource the manufacturing and assembly of our products to foreign third-party service providers. For example, outsourcing of manufacturing prevents us from exercising control over the assembly of certain of our products and related operations or processes, including the internal controls associated with operations and processes conducted and the quality of our products assembled by contract manufacturers. If we are unable to effectively manage and oversee our outsourcing strategy, we may not realize cost structure efficiencies and our operating and financial results could be materially adversely affected. Outsourcing also exposes us to increased risk of infringement or misappropriation of our intellectual property, to which our manufacturers have access. Because our manufacturer is located in Asia, there is no guarantee that our intellectual property rights will be protected or enforced to the same extent as under U.S. federal and state laws. Consequently, we may not be able to prevent third parties from developing or selling products made using our technologies. Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. Item 3. DEFAULTS UPON SENIOR SECURITIES None. Item 4. MINE SAFETY DISCLOSURES Not applicable.