What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-13 compared with 2025-11-13 · 283 added, 494 removed, 125 unchanged (86% of the section changed)

1 unchanged sentence

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025 (this “Report”),

Certain statements included in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026 (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.

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forward-looking terminology, such as “may,” “will,” “could,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” “plan,” “predict,” “design” or “continue” or the negative thereof or other similar words.

Forward-looking statements

are subject to certain risks, uncertainties and assumptions.

In the event that one or more of such risks or uncertainties materialize, or one or more underlying assumptions prove incorrect, actual results may differ materially from those expressed

or implied by the forward-looking statements.

Forward-looking statements are

subject to certain risks, uncertainties and assumptions.

In the event that one or more of such risks or uncertainties materialize, or one or more underlying assumptions prove incorrect, actual results may differ materially from those expressed or

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;

the adverse effects of current economic conditions, including inflation and changes in interest rates, on our business,

operations, financial condition, results of operations and capital resources;

our ability to achieve the anticipated benefits of our acquisition of a licensed copy of the source code for the BOHA!

software and risks to our reputation and business relating to the source code transition;

our ability to successfully transition the BOHA!

source code to our platform and systems and, until such transition is

complete, our continued reliance on third parties to host and support our FST offerings;

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

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

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 including the potential for

new or reinstated trade measures, in addition to the 10% tariff surcharge already implemented under Section 122 of the Trade Act of 1974, following the U.S.

Supreme Court’s decision to invalidate certain previously imposed tariffs;

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;

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 , tariffs or other trade actions ;

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

trade wars, tariffs or other trade actions;

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 ability to achieve the anticipated benefits of our acquisition of a licensed copy of the source code for the BOHA!

software and risks to our reputation and business relating to the source code transition;

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

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

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

uncertainties and administrative, legal, and tax complexities associated with the process of claiming and remitting tariff

refunds to customers, which may expose us to litigation, regulatory scrutiny, and financial loss;

our dependence on significant suppliers;

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risks associated with foreign operations;

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;

political and policy uncertainties, and any adverse economic impacts resulting from such uncertainties;

our ability to protect intellectual property;

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undertake no obligation to publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other factors, except where we are expressly required to do so by applicable law.

TransAct is a global leader in developing and selling software-driven technology and printing solutions for large and emerging markets including food

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

Our world-class products are designed from the ground up based on market

and customer requirements and are sold under the BOHA!™, AccuDate™, Epic, EPICENTRAL®, and Ithaca® brand names.

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

hardware solutions and companion

branded suite of cloud-based applications.

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

Known and respected

worldwide for innovative designs and real-world service reliability, our thermal printers and terminals generate top-quality labels, coupons and transaction records such as receipts, tickets and other documents.

We sell our technology to

original equipment manufacturers (“OEMs”), value-added resellers, and select distributors, as well as 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.

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

Through our TransAct

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

Through our webstore,

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

TransAct is a leading provider of cloud-based software and integrated hardware solutions for high-growth markets including food service technology, point

of sale (“POS”) automation and casino and gaming.

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

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

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

software and hardware products help restaurants, convenience stores and food

service operators of all sizes automate the food production in the back-of-house operations.

Known and respected worldwide for innovative designs and real-world service reliability, our thermal printers and terminals generate top-quality labels,

coupons and transaction records such as receipts, tickets and other documents.

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

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

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

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

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

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

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

We operate in one reportable segment:

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

emerging markets, and the provision of related services, supplies and spare parts.

The Company’s chief operating decision maker, consisting of the Company’s Chief Executive Officer and 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 design, development,

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

The Company’s chief operating decision makers, consisting of 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

Source Code Acquisition

On August 6, 2025, the Company announced that it acquired a perpetual license to a copy of the source code for the BOHA!

that it licenses from Avery Dennison.

Under the terms of the agreement, TransAct has obtained a perpetual and royalty free license to use, host, market, sublicense, distribute, copy, and modify the code as the Company sees fit for its business

In addition to the perpetual and royalty free license, TransAct will also host the code in its own environment, which is expected to go live in early 2027.

Total consideration for the acquisition was $2.55 million, plus professional

services fees of approximately $1.0 million for transition services to be provided by Avery Dennison.

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 during the year ended December 31, 2024.

As of September 30, 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 have seen a return to more normalized casino and gaming sales levels during the first nine months of 2025.

However, we continue to monitor the potential impact of macroeconomic

factors as well as any price increases resulting from recent tariff actions on casino and gaming sales levels .

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

Global macroeconomic conditions have impacted, and continue to impact, aspects of the Company’s operations and overall financial performance during the

quarters ended March 31, 2026 and 2025.

These macroeconomic conditions include, among others, changing levels of demand in the casino and gaming market, supply chain constraints, geopolitical conflicts, inflationary pressures, high interest rates,

and changes in global trade policies including higher tariffs in the U.S.

and other countries.

These macroeconomic trends could continue to impact our business, including potential impacts to overall financial performance during the remainder of

We currently do not expect any significant impact to our capital and financial resources from these macroeconomic conditions, including to our overall liquidity position based on our available cash and cash equivalents and our access to

credit facilities.

We are currently dependent upon a manufacturer located in

Thailand for the manufacturing and assembly of substantially all of our printers and terminals.

During 2025, the U.S.

government has announced a variety of trade-related actions, including the imposition of tariffs on imports from several countries, including Thailand.

government announced a variety of trade-related actions, including the imposition of tariffs on imports from several countries,

including Thailand.

In response, many countries announced their own retaliatory tariffs.

Certain tariffs were paused for a period of time but have not been withdrawn, while others have been revised.

On July 30, 2025, the U.S.

After a number of announcements imposing and revising tariffs applicable to goods imported from Thailand over the course of the year, on July 30, 2025, the

government announced that an agreement was made with Thailand to establish a U.S.

tariff of 19% on goods

imported from Thailand, effective August 7, 2025.

On October 26, 2025, the U.S.

government and Thai government issued a joint statement announcing a Framework for an

Agreement on Reciprocal Trade, pursuant to which, among other things, the U.S.

has agreed to maintain a tariff of 19% on goods imported from Thailand, as set forth in Executive Order 14257 issued April 2, 2025, as amended, with certain products

eventually to be identified for a 0% tariff rate.

These tariffs impact certain goods that are assembled and imported into the United States from our manufacturer in Thailand.

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 expected impact of tariffs on goods sold into the United States through alternative sourcing or manufacturing.

We currently mitigate these 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 net income for the third quarter of 2025 and the first nine months of 2025, we expect the 19% tariff will impact our financial results going forward.

There can be no assurance that future price increases and other mitigation efforts will be successful in offsetting future tariffs.

In addition, it is uncertain whether other

countries will continue to seek further negotiations or retaliate as future developments occur, or whether the U.S.

government will reconsider or adjust tariffs based upon continued future negotiations, or grant further exemptions , and what types of products will be eligible for such exemptions, if granted.

The Company continues to monitor the rapidly evolving and uncertain tariff and global

trade environment and the potential impacts to its Consolidated Financial Statements.

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.

tariff of 19% on goods imported from Thailand effective August 7, 2025.

On February 20, 2026, the U.S.

Supreme Court issued a ruling in Learning Resources, Inc.

Trump , holding that the International Emergency

Economic Powers Act (“IEEPA”) does not provide the executive branch with the authority to impose certain tariffs.

This ruling invalidated certain tariffs previously paid by the Company on goods imported from Thailand.

Following this decision, the

presidential administration implemented a tariff surcharge under Section 122 of the Trade Act of 1974, establishing a minimum 10% duty on imports, subject to certain exemptions.

These tariffs may impact certain goods that are 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.

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.

is currently evaluating the impact of these additional tariffs but does not expect them to have a material adverse effect on its operations or financial condition.

Since we generally have been able to pass on all tariff costs to our customers, they did not materially impact our results for the first

quarter of 2026.

Following the February 2026 U.S.

Supreme Court ruling regarding IEEPA tariffs, the Company has initiated a process to claim refunds of approximately $0.5 million in previously paid duties.

In line with its commitment to customer

transparency, the Company also intends to reimburse certain customers for tariff costs previously passed through via pricing adjustments, subject to applicable law and any further legal or regulatory developments.

We continue to monitor the ongoing

implications of tariffs and potential 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

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.

information regarding the risks related to our manufacturer in Thailand and global economic conditions, please see Part II, Item 1A, “Risk Factors,” of this Report.

Balance Sheet, Cash Flow and Liquidity

We began a cost reduction initiative in the second quarter of 2024 focused largely on 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.

We expect these savings to continue to be realized in

However, we expect these operating expense savings in 2025 will be more than offset by typical annual inflationary and cost of living increases as

well as higher incentive and share -based compensation expected from improved results compared to 2024.

Our cash flow and liquidity also benefited during the

first nine months of 2025 from a successful inventory reduction initiative which reduced our inventory levels by approximately $4.4 million from December 31, 2024 to

September 30, 2025.

We do not expect any further reduction in our inventory level for the fourth quarter of 2025.

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.

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.

Critical Accounting Estimates

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

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

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

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

Our 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.

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.

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

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

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

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

Our 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.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” since the filing of the 2025 Form 10-K.

Results of Operations:

Three months ended September 30, 2025 compared to three months ended September 30, 2024

Three months ended March 31, 2026 compared to three months ended March 31, 2025

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, 2025 and 2024 were as follows (in thousands,

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, 2026 and 2025 were as follows (in thousands,

except percentages):

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Three Months Ended

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

POS automation

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International *

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

and terminals to international destinations.

Net sales for the third quarter of 2025 increased $2.3 million, or 21%,

compared to the third quarter of 2024.

Printer, terminal and other hardware unit sales volume increased 18% to approximately 24,300 units, due primarily to a 60% unit sales volume increase in the casino and gaming market, offset by a 29 % unit sales volume decrease in FST hardware and a 65% decrease in unit sales volume in the POS automation market.

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

terminals to international destinations.

Net sales for the first quarter of 2026 increased $1.4 million, or 10%,

compared to the first quarter of 2025.

Printer, terminal and other hardware unit sales volume increased 9% to approximately 26,900 units, due primarily to a 16% unit sales volume increase in the casino and gaming market, partially offset

by a 37 % unit sales volume decrease in FST hardware (FST has a smaller base).

Unit sales volume changes in TSG and POS automation were not material.

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 9% in the third

quarter of 2025 compared to the third quarter of 2024, due to normal inflationary increases and increased costs resulting from U.S.

tariffs imposed on our products assembled in Thailand, which have been passed on to our customers.

FST software,

labels and other recurring revenue increased $382 thousand, or 13%, in the third quarter of 2025 compared to the third quarter of 2024.

International sales for the third quarter of 2025 increased $467 thousand, or 21%, from the same period in 2024 due primarily to increased sales in our

The average selling price of our printers, terminals and other hardware was down 1% in the first

quarter of 2026 compared to the first quarter of 2025.

FST software, labels and other recurring revenue increased $0.7 million, or 26%, in the first quarter of 2026 compared to the first quarter of 2025 due primarily to increased label sales.

International sales for the first quarter of 2026 increased $692 thousand, or 30%, from the same period in 2025 due primarily to increased sales in our

casino and gaming market.

Food service technology .

Our primary offering

in the FST market is our line of BOHA!

solution combines our latest generation terminal or workstation, which includes one or two printers,

with our BOHA!

Our primary offering in the FST market is our

line of BOHA!

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

labeling, timers, and media software.

In addition, customers may individually purchase cloud-based software applications for our Terminal or WorkStation.

These applications can be integrated with separate mobile devices into a solution to automate back-of-house operations in restaurants, convenience

stores and food service operations.

In addition, customers may individually purchase

cloud-based software applications for our terminal or workstation.

These applications can be integrated with separate mobile devices to create a solution to automate back-of-house operations in restaurants, convenience stores and food service

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 task lists.

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 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 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, 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 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.

Customers may also purchase associated hardware, such as tablets,

temperature sensors and gateways.

Terminal 2 and the newly launched Terminal 2 LTE 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 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.

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 solutions for the three months

ended September 30, 2025 and 2024 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, 2026 and 2025 were as follows (in thousands, except percentages):

Three Months Ended

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

International

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Three Months Ended

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

Software, labels and other recurring revenue

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

compared to the third quarter of 2024 was primarily driven by an increase of label sales of $0.4 million, or 18 % combined with an increase in hardware sales of

Hardware sales were strong in the third quarter of 2025, up 10% compared to the third quarter of 2024 due largely to higher sales of our new BOHA!

Terminal 2 to two large existing customers (BOHA!

Terminal 2 sales were up 49% in the third quarter of 2025 compared to the third quarter of 2024), partially offset by lower sales of BOHA!

Terminal 1, WorkStations and other BOHA!

software, labels and other recurring revenue increased 13% compared to the prior year period due primarily to higher label sales to three existing customers.

We expect total FST revenue for the fourth quarter of 2025 to be higher than the equivalent period of 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).

The decrease in food service technology sales in the first quarter of 2026 compared

to the first quarter of 2025 was driven by a decrease in domestic hardware sales.

Hardware sales were particularly strong in the first quarter of 2025 due to replacement sales of our BOHA!

Terminal 2 to a large convenience store

(replacing our BOHA!

Terminal 1) and a large international QSR (replacing our AccuDate 9700), as well as a new sushi customer, that did not repeat in the first quarter of 2026.

FST software, labels and other recurring revenue increased 26% for

the first quarter of 2026 compared to the prior year period due largely to stronger label sales to our new sushi customer and large convenience store described above.

Although FST revenues were lower in the first quarter of 2026 compared to the

first quarter of 2025, we expect FST revenue to be higher in 2026 than in 2025 for the remainder of the year as we continue to focus on growing our installed base of terminals and the related recurring software revenue (including the sale of BOHA!

labels and other recurring revenue).

POS automation:

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Our POS printer is used primarily by

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

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, 2025 and 2024 were as follows (in thousands, except percentages):

through a network of domestic distributors and resellers.

Sales of our POS automation products for the three months ended March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Three Months Ended

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

International

The 65% decline in POS automation sales in the third quarter of 2025 compared to the third quarter of 2024 was largely due to competitive pressure that

has resulted in a decreased level of sales as well as a reduction in our average selling prices.

We expect POS automation sales for the fourth quarter of 2025 to

remain at approximately the same level as the third quarter of 2025 as we expect to continue to experience competitive pressure in this market.

Sales were consistent in the first quarter of 2026 compared to the first quarter of 2025 as we believe sales have normalized at a new, lower level due to

competitive pressures that resulted in a decreased level of sales and a reduction in average selling prices in 2025 compared to prior periods.

We expect POS automation sales for the remainder of 2026 to be comparable to our sales in 2025.

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, charitable

gaming establishments 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, 2025 and 2024 were as follows (in thousands, except percentages):

establishments 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 March 31, 2026 and 2025 were as

follows (in thousands, except percentages):

Three Months Ended

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

International

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

2025 increased by $2.1 million, or 78%, compared to the third quarter of 2024.

Sales for the third 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 third quarter of 2025 compared to the third quarter of 2024 as most of our major casino and gaming customers had worked through their on-hand inventory by the first quarter of 2025 and were ordering at normalized levels in the third quarter of 2025.

In addition, sales in the third quarter

of 2025 benefitted from sales of our casino printer to a new customer ($2.3 million) compared to no sales to this customer in the third quarter of 2024.

believe this customer is now in an overstock position awaiting jurisdictional approvals to install new gaming machines.

As a result, we do not expect a significant level of sales to this customer in the fourth quarter of 2025, but

do expect this new customer to resume purchasing again in 2026.

In addition, our

domestic OEM customers have indicated slowing demand in the fourth quarter of 2025.

As a result of these factors, we expect our domestic casino and gaming sales to be lower in the fourth quarter of 2025 compared to the third quarter

Our international casino and gaming sales were up 26% in the third quarter of 2025 compared to the third quarter of 2024 as most of our international

casino and gaming customers had worked through their on-hand inventory and were

ordering at normalized levels in the third quarter of 2025 .

TransAct Services Group:

generated by TSG includes sales of POS receipt paper 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, 2025 and 2024 were as follows (in thousands, except percentages):

Domestic sales of our casino and gaming products for the first quarter of 2026 increased

by $1.0 million, or 20% compared to the first quarter of 2025.

Sales during the first quarter of 2025 started to recover from a significant 2024 slowdown in order and shipment rates as our customers worked through their excess inventory that

had accumulated as a hedge during the worldwide supply chain crisis of 2022 and 2023.

Sales in the first quarter of 2026 were strong as our major casino and gaming customers had fully worked through their on-hand inventory and began to order at

higher demand levels again.

As a result of these factors, including higher expected demand, we expect our domestic casino and gaming sales to be higher in 2026 compared to 2025.

Our international casino and gaming sales were up 35% during the first quarter of 2026 compared to the first quarter of 2025, due to increased demand across multiple

customers in both Europe and Australia.

We expect our international sales to continue to be higher in 2026 compared to 2025.

Revenue generated by TSG includes

sales of consumable products (POS receipt paper 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 March 31, 2026 and 2025 were as follows (in thousands, except percentages):

Three Months Ended

September 30, 2025

September 30, 2024

March 31, 2026

March 31, 2025

International

The decrease in domestic revenue from TSG of $0.1 million for the

third quarter of 2025 as compared to the third quarter of 2024 was due largely to lower sales of legacy spare parts and accessories for lottery printers (down $133

thousand in the third quarter of 2025 compared to the third quarter of 2024), partially offset by increased shipping revenues (up $67 thousand in the third quarter of 2025 compared to the third quarter of 2024).

An increase in sales of

spare parts and accessories to international customers drove the modest increase of $26 thousand of international sales for the third quarter of 2025 as compared

to the third quarter of 2024.

We expect TSG sales to be somewhat lower for the fourth quarter of

2025 compared to the same period in 2024 as we expect to cease selling all our remaining legacy consumable products by the end of 2025.

The decrease in domestic revenue from TSG during the first quarter of 2026 as compared to the first quarter of 2025 was due largely to lower sales of

replacement parts, as well as lower legacy consumables sales and service revenue.

We expect TSG sales to be somewhat lower in 2026 compared to 2025 as we ceased selling all our remaining legacy consumable products at the end of 2025.

Gross Profit.

information for the three months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

information for the three months ended March 31, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2026

Total Sales - 2025

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

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

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

overhead expenses (including tariffs), 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 (prior to the purchase of a perpetual license to a copy of the BOHA!

code in August 2025).

In the third quarter of 2025, gross profit increased $1.3 million, or 25% on 21% higher overall sales, and gross margin improved 170 basis

points to 50% due largely to higher overall sales as well as higher sales of casino and gaming products which carry higher average margins than our other products.

We expect gross margin for the fourth quarter 2025 to continue to

be in the mid-to high- 40% range.

parties, including to the former third-party licensor of our food service technology software products (during 2025).

In the first quarter of 2026, gross profit

increased $894 thousand, or 14%, and gross margin increased 160 basis points to 50% due primarily to a 10% increase in overall sales, including a 24% increase in sales in our casino and gaming market which carry higher average margins than our

other markets.

This was partially offset by increased overhead costs and general inflation.

We expect gross margin for 2026 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 September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Engineering, design and product development expense information for the three months ended March 31, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2026

Total Sales - 2025

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

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 former third-party licensor of our food

service technology software products).

Engineering, design and product development expenses increased $16 thousand, or 1%, for the third quarter of 2025 compared to

the third quarter of 2024 due to higher incentive compensation as a result of improved financial results in 2025 compared to 2024, largely offset by a reduction of contracted software development expenses.

Engineering, design and product development expenses decreased $255 thousand, or 16%, for the first quarter of 2026 compared to

the first quarter of 2025 due largely to the capitalization of certain internal labor costs associated with development activities related to the 2025 acquisition from Avery Dennison Corporation of a perpetual license to a copy of the source code

for the BOHA!

TransAct is capitalizing certain internal and external labor related to this project.

Operating Expenses - Selling and

Selling and marketing expense information for the three months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Selling and marketing expense information for the three months ended March 31, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales - 2026

Total Sales - 2025

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, other promotional marketing expenses and outsourced go-to-market consulting services.

Selling and marketing expenses increased $211 thousand, or 11%, in the third quarter of 2025 compared to the third quarter of 2024 due largely to higher sales commissions

and incentive compensation on higher sales (particularly casino and gaming sales which were up 58%) and to a lesser extent, higher costs related to programs to further improve the Company’s go-to-market strategy.

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, other promotional marketing expenses and outsourced go-to-market consulting services.

Selling and marketing expenses increased $112 thousand, or 5%, in the first quarter of 2026 compared to the first quarter of 2025 due to higher costs related to programs to further improve the

Company’s go-to-market strategy, including the hire of additional sales, marketing and sales support staff, as well as higher sales commissions due to increased sales in 2026 compared to 2025.

Operating Expenses - General and

Administrative .

General and administrative expense information for the three months ended September 30, 2025 and 2024 is summarized below (in

General and administrative information for the three months ended March 31, 2026 and 2025 is summarized below (in

thousands, except percentages):

Three Months Ended September 30,

Three Months Ended March 31,

Total Sales - 2026

Total Sales – 2025

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 increased $251 thousand, or 10%, for the third quarter of 2025 compared to the

third quarter of 2024.

This increase was driven largely by higher incentive and share-based compensation expense due to improved financial results as well as estimated better performance against targets in 2025 compared to 2024.

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

Officer, Chief Financial Officer, 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 increased $251 thousand, or 10%, during the first quarter

of 2026 compared to the first quarter of 2025.

This increase was driven largely by increased share-based compensation expense due to the timing of awards, recruiting fees for the hire of additional sales and marketing staff, and other fees and

taxes in the first quarter of 2026 compared to the same period in 2025.

Operating Income (Loss).

Operating income (loss) for the three months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Three Months Ended September 30,

Total Sales – 2025

Total Sales – 2024

We had operating income of $14 thousand in the third quarter of 2025 compared to an operating loss of $837 thousand in the third quarter of 2024 due

largely to a 21% increase in sales and a resulting $1.3 million increase in gross profit, partially offset by an increase in operating expenses of $478 thousand, or 8%, as discussed above.

Interest, net.

We recorded net interest income of $61 thousand in the third quarter of 2025 compared to $42 thousand in the third quarter of 2024.

We earned more interest income on

increased levels of invested cash in the third quarter of 2025 compared to the third quarter of 2024.

We maintained the required minimum outstanding borrowings under our credit facility of $3 million and $2.25 million during the third

quarter of 2025 and 2024, respectively.

See Note 5, Borrowings to the accompanying condensed consolidated financial statements for more information regarding the Company’s credit facility.

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

For the third quarter of 2025 we recognized $35 thousand of foreign exchange

losses compared to $96 thousand foreign exchange gains for the third 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 fluctuation in exchange rates of the euro and pound sterling against the U.S.

Income Taxes.

We recorded income

tax expense in the third quarter of 2025 of $25 thousand at an effective tax rate of 62.5% compared to an income tax benefit in the third quarter of 2024 of $148 thousand at an effective tax rate of (21.2%).

The effective tax rate for the third

quarter of 2025 was unusually high due to (1) a near-breakeven level of pre-tax income of $40 thousand and (2) tax expense only included taxes associated with

earnings in the United Kingdom and minimum required state taxes in the United States.

As previously discussed in Note 9, Income Taxes , to the accompanying condensed consolidated financial statements , we provided

for a full valuation allowance against our U.S.

deferred taxes in the fourth quarter of 2024 and continue to believe this allowance is required as of September 30, 2025.

As such, the Company has not recorded any U.S.

federal tax benefits

associated with income recorded in the third quarter of 2025.

Net Income (Loss) .

As a result of the above, we reported net income in the third quarter of 2025 of $15 thousand, or $ 0.00 per diluted share, compared to a net loss of ($0.6) million, or $(0.06) per diluted share for the third quarter

Results of Operations:

Nine Months Ended September 30, 2025 compared to the nine months ended September 30, 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 nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2025

September 30, 2024

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 2025 increased $6.9 million, or

21%, from the same period in 2024.

Printer, terminal and other hardware sales unit volume increased by 22% to approximately 75,000 units for the first nine months of 2025 driven by a 40% increase in units sold within our casino and gaming

market and a 27% increase in units sold within our FST market, offset by a 44% decrease in unit sales volume in the POS automation market .

For more information

about the sales volume increases described above, please refer to the discussion below of the results of operations for each of our markets.

The average selling price of our printers, terminals and other hardware was up 6% in the first

nine months of 2025 compared to the first nine months of 2024, due in part to increased costs resulting from U.S.

tariffs imposed on our products assembled in Thailand, which have been passed on to our customers.

FST software, labels and other recurring revenue increased $0.8 million, or 10%, in the first nine months of 2025 compared to the first nine months of 2024.

International sales for the first nine months of 2025 decreased $0.6 million, or 8%, from the same period in 2024 due primarily to a 9% decrease in sales

within the international casino and gaming market.

Food service technology.

Sales of our worldwide FST products for the nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2025

September 30, 2024

International

Nine Months Ended

September 30, 2025

September 30, 2024

Software, labels and other recurring revenue

The increase in FST sales of $2.7 million, or 23%, in the first nine

months of 2025 compared to the first nine months of 2024 was primarily driven by a 51% increase in hardware sales.

Hardware sales were strong in the first nine months of 2025 compared to the first nine months of 2024 due largely to

higher sales of WorkStations (up $185 thousand in the first nine months of 2025 compared to the first nine months of 2024) to a new sushi customer won in the

first quarter of 2025 as well as sales of our new BOHA!

Terminal 2 (replacing our BOHA!

Terminal 1) to two large existing customers .

Terminal 2 sales were up $2.

1 million in the first nine months of 2025 compared to the first nine months of 2024.

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 substantially of its installed base of BOHA!

the middle of July 2024.

Total sales to this customer (including software, labels and other recurring revenue) were approximately $660 thousand in the first nine months of 2024.

We had a de minimis amount of sales to this customer in the first

nine months of 2025.

Despite the loss of this customer , FST labels and other recurring revenue increased 10% in the first nine months of 2025 compared to the prior year period due primarily to label sales to our new sushi customer.

We expect total FST revenue for the fourth quarter of 2025 to be higher than the comparable period of 2024.

POS automation.

Sales of our worldwide POS automation products for the nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2025

September 30, 2024

International

Sales of POS automation printers decreased $1.3 million, or 46%, for the first nine months of 2025 compared to the first nine months of 2024.

to experience competitive pressure that has resulted in a lower level of sales as well as a reduction in our average selling prices.

We expect POS automation sales for the fourth quarter of 2025 to

remain at approximately the same level as the third quarter of 2025 as we expect to continue to experience competitive pressure in this market.

Casino and gaming.

Sales of our worldwide casino and gaming products for the nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2025

September 30, 2024

International

Domestic sales of our casino and gaming products for the first nine months

of 2025 increased by $6.5 million, or 71%, compared to the first nine months of 2024.

Sales for the first nine months 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 for the first nine months of 2025 compared to the first nine months of 2024 as most of

our major domestic casino and gaming customers had worked through their on-hand inventory by the first quarter of 2025 and were ordering at normalized levels in the

second and third quarters of 2025.

In addition, sales in the first nine months of 2025 benefitted from sales of our casino printer to a new OEM customer for the

use in charitable gaming establishments.

However, we believe this customer is now in an overstock position awaiting jurisdictional approvals to install new gaming

As a result, we do not expect a significant level of sales to this customer in the fourth quarter of 2025, but do expect this new customer to resume purchasing again in 2026.

In addition, our domestic OEM customers have indicated

slowing demand in the fourth quarter of 2025.

As a result of these factors, we expect our domestic casino and gaming sales to be lower in the fourth quarter of 2025 compared to the third quarter of 2025 .

Our international casino and gaming sales were down $0.6 million or 9% for

the first nine months of 2025 compared to the first nine months of 2024, largely due to a significant 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 to occur in 2026 .

TransAct Services Group.

Sales in our worldwide TSG market for the nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages) :

Nine Months Ended

September 30, 2025

September 30, 2024

International

The decrease in domestic revenue from TSG of $0.4 million for the

first nine months of 2025 as compared to the first nine months of 2024 was due largely to (1) lower sales of consumables of $108 thousand in the first nine months of 2025

compared to the first nine months of 2024, (2) lower sales of legacy replacement parts and spares of $217 thousand in the first nine months of 2025 compared to

the first nine months of 2024, and (3) lower revenue for repairs of $167 thousand in the first nine months of 2025 compared to the first nine months of 2024 for lottery printers .

These increases were partially offset by increased shipping revenue of $98 thousand in the first nine months of 2025 compared to the first nine months of 2024.

International sales were down $3 thousand or only 1% for the first

nine months of 2025 as compared to the first nine months of 2024.

We expect TSG sales to be somewhat lower for the fourth quarter of 2025 compared to the same period in 2024 as we expect to cease selling

all our remaining legacy consumable products by the end of 2025.

Gross Profit.

Gross profit information for the nine months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Total Sales - 2025

Total Sales – 2024

For the first nine months of 2025, gross profit increased by $2.6 million, or 15%.

Gross margin decreased 230 basis points to 49% in the first nine

months of 2025 compared to 51% in the first nine months of 2024.

Gross profit increased due to an increase in sales of 21% in the first nine months of 2025 compared to the first nine months of 2024, partially offset by the reduction in gross margin

described above.

Our gross margin decreased largely due to higher sales of BOHA!

hardware products which carry lower average margins than our other products, and to a

lesser extent, increased overhead costs, inflation, tariffs and lower prices on our POS automation printer due to increased competitive pressure.

We expect gross margin for the fourth quarter of 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 nine months ended September 30, 2025 and 2024 is

summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Total Sales - 2025

Total Sales - 2024

Engineering, design and product development expenses decreased $0.4 million, or 7%, for the first nine months of 2025 compared to the first nine months of 2024 due to cost reduction initiatives taken in the second quarter of

2024 (the full benefit of which was realized in 2025), including a reduction of contracted software development expenses, partially offset by higher incentive compensation due to improved financial results in 2025 compared to 2024.

Operating Expenses - Selling and

Selling and marketing expense information for the nine months ended September 30, 2025 and 2024 is summarized below (in thousands, except

percentages):

Nine Months Ended September 30,

Total Sales - 2025

Total Sales - 2024

Selling and marketing expenses increased $119 thousand, or 2%, for the first nine months of 2025 compared to the first nine months of 2024 due largely to

cost reduction initiatives including reduced headcount, trade show and other marketing expenses partially offset by higher costs related to programs to further improve the

Company’s go-to-market strategy as well higher sales commissions and incentive compensation due to improved financial results in 2025 compared to 2024.

Operating Expenses - General and

Administrative .

General and administrative expense for the nine months ended September 30, 2025 and 2024 is summarized below (in

thousands, except percentages):

Nine Months Ended September 30,

Total Sales - 2025

Total Sales - 2024

General and administrative expenses increased $0.6 million, or 7%, for the first nine months of 2025 compared to the first nine months of 2024.

This increase was driven largely by higher incentive compensation and share-based compensation expense.

These increases were partially offset by the impact of cost reduction

initiatives taken in the second quarter of 2024.

Operating Loss.

Operating loss

for the nine months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Nine Months Ended September 30,

Operating income (loss) for the three months ended March 31, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Total Sales – 2026

Total Sales – 2025

Our operating loss decreased by $2.3 million, or 90%, for the first nine months of 2025 compared to the first nine months of 2024 due largely to a 21%

increase in sales in the first nine months of 2025 compared to the first nine months of 2024 and a resulting $2.6 million increase in gross profit (despite a 230 basis point decline in gross margin).

These factors were partially offset by

increased operating expenses of $0.3 million, or 1%, as discussed above.

* Not meaningful

Our operating income (loss) increased $786 thousand in the first quarter of 2026 compared to the first quarter of 2025 due largely to a $1.4 million, or

10% increase in sales and a resulting $894 thousand increase in gross profit combined with relatively flat operating expenses (operating expenses were up only $108 thousand, or 2% in the first quarter of 2026 compared to the first quarter of 2025).

Interest, net.

We recorded net

interest income of $123 thousand for the first nine months of 2025 compared to net interest income of $116 thousand for the first nine months of 2024.

For both periods

in 2025 and 2024, we incurred interest expense on the required minimum borrowings under our credit facility ($3 million and $2.25 million for the first nine months of 2025 and 2024, respectively).

See Note 5, Borrowings to the accompanying condensed consolidated financial statements for more information regarding the Company’s credit facility.

more interest income on increased levels of invested cash in the first nine months of 2025 compared to the first nine months of 2024.

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

We recorded other foreign exchange gains of $143 thousand in the first nine months of 2025 compared to $43 thousand of foreign exchange gains in the first nine months of

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

We recorded net interest

income of $66 thousand in the first quarter of 2026 compared to $22 thousand in the first quarter of 2025.

For both quarters, we were required to maintain outstanding borrowings of at least $3 million in principal amount on our Siena Credit

We maintained a higher average level of invested cash during the first quarter of 2026 compared to the first quarter of 2025 which resulted in higher interest income in the 2026 period.

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

During the first quarter of 2026 we recognized $48 thousand of foreign exchange losses

compared to $63 thousand of foreign exchange gains in the first quarter of 2025.

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 income tax expense in the nine months ended September 30, 2025 of $116 thousand compared to an income tax benefit of $511 thousand at an effective rate of

(21.1%) for the nine months ended September 30, 2024.

The tax expense of $116 thousand for the nine months ended September 30, 2025 (compared to pre-tax income of only $7 thousand) was high due to (1) a near-breakeven level of pre-tax earnings,

We recorded an

income tax expense in the first quarter of 2026 of $23 thousand at an effective tax rate of 2.9%, compared to income tax expense during the first quarter of 2025 of $51 thousand at an effective tax rate of 72.9%.

In the fourth quarter of 2024, the

Company recorded a valuation allowance on the full value of its U.S.

federal net deferred tax asset.

The need for this valuation allowance has been assessed as of March 31, 2026 and management continues to believe this valuation allowance is

As such, we recorded no U.S.

federal income tax expense during the first quarter of 2026 and the first quarter of 2025.

The effective tax rate for the first quarter of 2026 was low due to tax expense only being recorded on income taxes

associated with earnings in the United Kingdom and minimum required state income taxes in the United States.

The effective tax 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) tax expense only included taxes associated with earnings in the United Kingdom and minimum required state taxes in the United States.

As previously disclosed, we provided for a full valuation allowance against our deferred taxes in the

fourth quarter of 2024 and continue to believe this allowance is required as of September 30, 2025.

As such, the Company has not recorded any U.S.

federal tax benefits associated with losses recorded in the nine months ended September 30,

As a result of the above, we reported a net loss for the first nine months of 2025 of $(109) thousand, or $(0.01) per diluted share, compared to a

net loss of $(1.9) million, or $(0.19) per diluted share for the first nine months of 2024.

Liquidity and Capital Resources

In the first nine months of 2025, our cash and cash equivalents balance increased $5.6 million, or 39%, from December 31, 2024.

We ended the third

quarter of 2025 with $20.0 million in cash and cash equivalents, of which $0.2 million was held by our UK subsidiary.

In the first three months of 2026, our cash and cash equivalents balance decreased $1.6 million, or 8%, from December 31, 2025.

We ended the first quarter

of 2026 with $18.8 million in cash and cash equivalents, of which $0.3 million was held by our UK subsidiary.

Operating activities :

The following significant

factors affected our cash provided by operating activities of $7.1 million for the first nine months of 2025 as compared to cash used in operating activities of $0.5 million for the first nine months of 2024:

For the first nine months of 2025:

We reported a net loss of $109 thousand.

factors affected our cash used in operating activities of $946 thousand for the first three months of 2026 as compared to cash used in operating activities of $161 thousand for the first three months of 2025:

During the first three months of 2026:

We reported net income of $766 thousand.

We recorded depreciation and amortization of $0.2 million and share-based compensation expense of $0.5 million.

Accounts receivable decreased $0.7 million.

Inventories decreased $4.6 million as we were able to work

down our elevated inventory levels on hand as of December 31, 2024 , in part due to increased sales.

Accounts payable decreased $0.8 million due largely to reduced

inventory purchases as we worked down our inventory levels .

Accrued liabilities and other liabilities increased $1.4 million due largely to higher accruals for incentive compensation as discussed above under “ Results of Operations .”

For the first nine months of 2024:

We reported a net loss of $1.9 million.

Accounts receivable increased $2.7 million due largely to the increase in sales as discussed in our Results of Operations above.

Inventories decreased $1.2 million due to higher than expected casino and gaming demand.

Accrued liabilities and other liabilities decreased $1.7 million due largely to the payout of 2025 bonuses in the first quarter of 2026.

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.

Inventories decreased $1.0 million consistent with the slowdown in sales.

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

Accrued and other liabilities decreased $1.2 million due largely

to a reduction in planned 2024 bonuses.

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 were able to work down our elevated inventory levels on hand.

Investing activities:

Our capital expenditures were $89 thousand for the first nine months of 2025 compared to $311 thousand for the first nine months of 2024.

Expenditures for both periods

were primarily for computer and networking equipment and new tooling equipment.

We also incurred $1.4 million in cash expenditures in the first nine months of 2025 for the BOHA!

software source code acquisition as discussed above under “Recent Developments.”.

Our capital expenditures

were $80 thousand for the first three months of 2026 compared to $10 thousand for the first three months of 2025.

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

We also incurred $0.5

million in capitalized software development costs during the first three months of 2026 related to our purchase of a copy of the source code related to our BOHA!

line of products.

Financing activities:

Financing activities used $84 thousand of cash for the first nine months of 2025 compared to $71 thousand in cash used for the first nine months of 2024.

Financing activities used

$69 thousand of cash during the first three months of 2026 compared to $50 thousand in cash used during the first three months of 2025.

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

Resource Sufficiency

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

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 have experienced a more normalized level of sales in the casino and gaming market during the first nine months of 2025.

However, 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.

Over the past two years, we have been impacted by global supply chain issues, increased shipping and tariff costs, increased interest rates and

inflationary pressures.

After experiencing lingering effects of the COVID-19 pandemic through 2022, 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.

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 during the years ended December 31, 2024 and 2025.

Given the continued uncertainty related to the impact

of external factors on the food service and casino industries, 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 , fund the BOHA!

source code acquisition, 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

Siena Credit Facility will provide sufficient resources to meet our working capital needs, finance our capital expenditures, fund the remaining payments for the source code purchase and capitalized software development costs related to our BOHA!

software, and meet our liquidity requirements through at least the next twelve months.

Notwithstanding this belief, the ultimate impact of current global economic pressures and uncertainty relating to tariffs, inflationary pressures and market

instability is unknown.

Credit Facility

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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.

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.

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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.

We have remained in compliance with our excess availability

covenant through September 30, 2025.

We have remained in compliance with our excess availability covenant

through March 31, 2026.

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

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

As of September 30, 2025, we had $3.0 million of outstanding borrowings under the Siena Credit Facility at an interest rate of 9.00%.

million of net borrowing capacity available under the Siena Credit Facility at September 30, 2025.

As of March 31, 2026, we had $3.0 million of outstanding borrowings under the Siena Credit Facility at an interest rate of 8.50%.

We had $2.8 million of

net borrowing capacity available under the Siena Credit Facility at March 31, 2026.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis