What changed in this filing

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Item 1. Financial Statements

2026-08-14 compared with 2026-05-13 · 267 added, 209 removed, 266 unchanged (64% of the section changed)

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C ONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2026

June 30, 2026

December 31, 2025

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Shareholders’ equity:

Common stock, $ 0.01 par value,

20,000,000 shares authorized;

Common stock, $ 0.01 par

value, 20,000,000 shares authorized;

14,369,313 and 14,170,676 shares issued, respectively;

10,276,279 and 10,125,834 shares outstanding, respectively

10,324,471 and 10,125,834 shares

outstanding, respectively

Additional paid-in capital

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TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDE NSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

(In thousands except share data)

Six Months Ended

(In thousands, except per share data)

Cost of sales

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General and administrative

Operating income (loss)

Operating (loss) income

Interest and other income (expense):

Interest, net

Income before income taxes

(Loss) income before income taxes

Income tax expense

Net income per common share (Note 7):

Net (loss) income

Net (loss) income per common share:

Shares used in per-share calculation:

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TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

CONDENSED CONSOLI DATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Three Months Ended

Six Months Ended

(In thousands)

Foreign currency translation adjustment, net of taxes

Comprehensive income

Net (loss) income

Foreign currency translation adjustment, net of tax

Comprehensive (loss) income

See notes to Condensed Consolidated Financial Statements.

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CONDE NSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

Six Months Ended

(In thousands)

Cash flows from operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Share-based compensation expense

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Accounts payable

Accrued liabilities and other liabilities

Net cash used in operating activities

Accrued liabilities, deferred revenue and other liabilities

Net cash provided by operating activities

Cash flows from investing activities:

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Effect of exchange rate changes on cash and cash equivalents

Decrease in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

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Non-cash capital expenditure items

New right of use assets obtained in exchange for lease liabilities

Right of use asset obtained in exchange for new operating lease liabilities

See notes to Condensed Consolidated Financial Statements.

TRANSACT TECHNOLOGIES INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

CONDENSED CONSO LIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended

Six Months Ended

(In thousands)

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Balance, beginning of period

Net (loss) income

Balance, end of period

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GAAP to be included in full year financial statements.

The Condensed Consolidated Financial Statements as of March 31, 2026 and for the quarters ended March 31, 2026 and 2025 are unaudited, but in the

opinion of management, all adjustments considered necessary for a fair statement of the results for the periods presented have been included and are of a normal recurring nature .

The December 31, 2025 Condensed Consolidated Balance Sheet data was derived from audited

financial statements, but does not include all disclosures required by U.S.

These interim financial statements should be read in conjunction with the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”).

The results of operations for the three months ended March 31, 2026

are not necessarily indicative of the results to be expected for the full year ending December 31, 2026.

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.

The Condensed Consolidated Financial Statements as of June 30, 2026 and for the three and six months ended June 30, 2026 and 2025 are unaudited, but in

the opinion of management, all adjustments considered necessary for a fair statement of the results for the periods presented have been included and are of a normal recurring nature .

31, 2025 Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by U.S.

These interim financial

statements should be read in conjunction with the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”).

The results of operations for the three and six

months ended June 30, 2026 are not necessarily indicative of the results to be expected for the full year ending December 31, 2026.

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.

By the first quarter of 2025, we

believe that all significant domestic customers had been able to sell through their on-hand inventory and had resumed ordering, contributing to more normalized casino and gaming sales for the first nine months of 2025.

During the fourth quarter

of 2025, some domestic casino and gaming customers indicated slowing demand, and one large customer indicated they were in an overstock position while awaiting jurisdictional approvals on new machines.

While these conditions impacted our casino

and gaming sales in the fourth quarter of 2025, demand in 2026 has improved as customer inventory levels have normalized and installations have been proceeding.

Although the timing and extent of any improvement will depend on prevailing

economic and industry conditions in the casino and gaming market, we expect our domestic casino and gaming sales to be higher in 2026 compared to 2025.

By the first quarter of 2025, we believe that all

significant domestic customers had been able to sell through their on-hand inventory and had resumed ordering, contributing to more normalized casino and gaming sales for the first nine months of 2025.

During the fourth quarter of 2025, some

domestic casino and gaming customers indicated slowing demand, and one large customer indicated they were in an overstock position

while awaiting jurisdictional approvals on new machines.

While these conditions impacted our casino and gaming sales in the fourth quarter of 2025, demand in 2026 has improved as customer inventory levels have normalized and installations have

been proceeding.

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 the Supreme Court’s ruling that

IEEPA-based tariffs were unlawful, the Court of International Trade (CIT) ordered U.S.

Customs and Border Protection (CBP) to provide a process for the refund of collected tariffs.

The refund mechanism allows importers to file claims for

duties paid on shipments through a declaration in the Consolidated Administration and Processing of Entries (“CAPE”) system, which was launched on April 20, 2026.

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 the Supreme Court’s ruling that IEEPA-based tariffs were unlawful, the Court of International Trade (CIT) ordered U.S.

Customs and Border Protection (CBP)

to provide a process for the refund of collected tariffs.

The refund mechanism allows importers to file claims for duties paid on shipments through a declaration in the Consolidated Administration and Processing of Entries (“CAPE”) system, which

was launched on April 20, 2026.

In addition, subsequent to the U.S.

Supreme Court’s decision invalidating certain

tariffs imposed under the IEEPA, 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.

The Company 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.

Supreme Court’s decision invalidating certain tariffs imposed under the IEEPA, 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.

The Company is continuing to monitor the impact of these additional tariffs

but does not expect them to have a material adverse effect on its operations or financial condition.

Following the February 2026 U.S.

Supreme Court ruling regarding IEEPA tariffs, the

Company initiated a process of claiming refunds for approximately $ 0.5 million in previously paid duties.

Supreme Court ruling regarding IEEPA tariffs, the Company initiated a process of claiming refunds for approximately $ 572 thousand in previously paid duties.

In line with our commitment

to customer transparency, we intend to reimburse those specific customers in which tariff costs were previously passed through via pricing adjustments, subject to applicable law and any further legal or regulatory developments.

issue these reimbursements following our successful receipt of funds from U.S.

to customer transparency, we intend to reimburse those specific customers in which tariff costs were previously passed, subject to applicable law and any further legal or regulatory developments.

We expect to issue these reimbursements following

our successful receipt of funds from U.S.

Customs and Border Protection.

The timing and ultimate amount of these payments remain subject to the federal CAPE portal processing timelines and final verification

of eligible entries.

The ultimate availability, timing and amount of any potential refunds remain highly uncertain and are subject to further legal, regulatory, and administrative developments.

Any tariff recoveries received from the CAPE portal will be recorded as a reduction

in cost of sales.

Under Accounting Standards Codification (“ASC”) Topic 606:

Revenue from Contracts with Customers (“ASC 606”), anticipated payments to customers are treated as variable consideration and will be recorded as a reduction to the transaction price (revenue) once they are collected by TransAct and reimbursed

to customers.

We will continue to evaluate the estimate of this liability as the federal refund process matures.

Due to the inherent uncertainties in this process, the Company has not recognized a receivable or payable for any potential refunds as of

March 31, 2026.

We will continue to monitor legal developments and evaluate our eligibility for recovery.

The timing and ultimate amount of these payments remain subject to the federal CAPE portal processing timelines and final verification of eligible entries.

below, certain portal reimbursements were received in July 2026, however the ultimate availability, timing and final amounts to be received from refunds remain

In July 2026, subsequent to the quarter ended June 30, 2026, but prior

to the issuance of these financial statements, the Company received partial payment of $ 466 thousand in cash reimbursements from

the government via the CAPE portal.

The Company has evaluated the financial statement impacts for the quarterly period ended June 30, 2026, and recorded certain accounting adjustments.

The Company recognized a receivable (included in other current assets) and a corresponding reduction in cost of goods sold of $ 572 thousand, representing the total estimated recovery of previously paid invalidated tariffs.

In addition, in the quarter ended June 30, 2026, the Company recorded a

liability of $ 1,070 thousand (included in

accrued liabilities) and a reduction in sales of $ 1,007 thousand .

This liability reflects the Company’s estimated obligation to reimburse customers for prior tariff surcharges in the period from April 2025 through February 2026, net of administrative and processing incidentals.

Use of assumptions and estimates

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

Financial Statements were issued is based on assumptions which involve significant judgment and estimates of future revenues, inflation, tariffs and other trade restrictions, interest rates, capital expenditures and other operating costs.

current assumption is that consumer traffic will continue to remain strong in casinos and restaurants during the remainder of 2026.

We cannot predict the ultimate impact of the current economic environment, including inflation, interest rates and

supply chain disruptions, on our customers, which may impact sales.

We believe that we are positioned to withstand the impact of any potential future economic downturn and we would be able to take additional financial and operational actions to

increase liquidity.

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

Consolidated Financial Statements were issued is based on assumptions which involve significant judgment and estimates of future revenues, inflation, tariffs and other trade restrictions, interest rates, capital expenditures and other operating

We cannot predict the ultimate impact of the current economic environment, including inflation, interest rates and supply chain disruptions, on our customers, which may impact sales.

We believe that we are positioned to withstand the impact

of any potential future economic downturn and we would be able to take additional financial and operational actions to increase liquidity.

In addition, the presentation of the accompanying unaudited Condensed Consolidated Financial Statements requires us to make estimates and judgments that

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

intangible assets, the valuation of deferred tax assets and liabilities, depreciable lives of equipment, share-based compensation and contingent liabilities.

We base our estimates on historical experience and on various other assumptions that we

believe to be reasonable under the circumstances.

intangible assets, the valuation of deferred tax assets and liabilities, depreciable lives of equipment, share-based compensation, tariff refund estimates, and contingent liabilities.

We base our estimates on historical experience and on various other

assumptions that we believe to be reasonable under the circumstances.

Actual results could differ from those estimates used .

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Intangible assets:

The Company accounts for software development costs for products to be sold or marketed in accordance with Accounting Standards Codification (“ASC”) 985-20, Software -- Costs of Software to

Be Sold, Leased, or Marketed.

Costs incurred to establish the technological feasibility of a software product are engineering, design and product development costs and are expensed as incurred.

Technological feasibility is established when the

Company has completed all planning, designing, coding, and testing activities necessary to determine that a product can be produced to meet its design specifications.

Capitalization of software costs begins upon the establishment of technological

feasibility and ceases when the product is available for general release to customers.

Capitalized software costs are amortized on a product-by-product basis using the straight-line method over the estimated economic life of the product, or the ratio

of current gross revenues to total current and anticipated future gross revenues, whichever is greater.

During the quarter ended March 31, 2026, the Company capitalized $ 0.5 million of software development costs.

Amortization will commence upon completion and release to customers and will be over

an estimated useful life of seven years .

The Company accounts for software development costs for products to be sold or marketed in accordance with Accounting Standards Codification (“ASC”)

985-20, Software - Costs of Software to Be Sold, Leased, or Marketed .

Costs incurred to establish the technological feasibility of a software

product are engineering, design and product development costs and are expensed as incurred.

Technological feasibility is established when the Company has completed all planning, designing, coding, and testing activities necessary to determine that

a product can be produced to meet its design specifications.

Capitalization of software costs begins upon the establishment of technological feasibility and ceases when the product is available for general release to customers.

Capitalized software

costs are amortized on a product-by-product basis using the straight-line method over the estimated economic life of the product, or the ratio of current gross revenues to total current and anticipated future gross revenues, whichever is greater.

See additional discussion in Note 5 .

Recently issued accounting pronouncements:

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We are currently evaluating the impact of this standard.

On January 1, 2026, the Company adopted ASU 2025-05, which provides a practical expedient for estimating expected credit losses.

Under this standard, the

Company elected the practical expedient that allows for the measurement of expected credit losses based on the assumption that current conditions will persist through the end of the contractual term of the financial assets.

By electing this

expedient, the Company is no longer required to develop or incorporate complex, forward-looking forecasts or revert to historical loss descriptions for the remaining life of the assets.

The Company applied this transition to its accounts

receivable assets using a modified retrospective approach.

The adoption did not have a material impact on the Company’s consolidated financial statements or opening retained earnings, as the current economic environment at the time of

adoption was consistent with the historical loss experience and existing trends previously utilized in our CECL models.

Other new accounting pronouncements issued, but not effective until after March 31, 2026, did not and are not expected to have a material impact on our financial

position, results of operations or liquidity.

We account for revenue in accordance with ASC 606.

On January 1, 2026, the Company adopted ASU 2025-05, which provides a practical expedient for estimating

expected credit losses.

Under this standard, the Company elected the practical expedient that allows for the measurement of expected credit losses based on the assumption that current conditions will persist through the end of the

contractual term of the financial assets.

By electing this expedient, the Company is no longer required to develop or incorporate complex, forward-looking forecasts or revert to historical loss experience for the remaining life of the

The Company applied this transition to its accounts receivable assets on a prospective basis.

The adoption did not have a material impact on the Company’s consolidated financial statements or opening retained earnings, as the

current economic environment at the time of adoption was consistent with the historical loss experience and existing trends previously utilized in our Current Expected Credit Losses (CECL) models.

Other new accounting pronouncements issued, but not effective until after June 30, 2026, did not and are not expected to

have a material impact on our financial position, results of operations or liquidity.

We account for revenue in accordance with ASC Topic 606:

Revenue from Contracts with Customers .

Disaggregation of revenue

The following tables disaggregate our revenue by market type, as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows

are affected by economic factors.

The following tables disaggregate our revenue by market type, as we believe this best depicts how the nature, amount, timing and uncertainty of our revenue and cash

flows are affected by economic factors.

Sales and usage-based taxes are excluded from revenues.

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Total net sales

Six Months Ended

(In thousands)

United States

International

United States

International

Food service technology

POS automation

Casino and gaming

TransAct Services Group

Total net sales

Contract balances

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

For the three

months ended March 31, 2026, we recognized revenue of $ 0.5 million related to our contract liabilities at December 31, 2025.

months ended June 30, 2026, we recognized revenue of $ 0.9 million related to our contract liabilities at December 31, 2025.

contract liabilities consisted of the following:

March 31, 2026

June 30, 2026

December 31, 2025

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

As of March 31, 2026,

As of June 30, 2026,

the aggregat e amount of transaction prices allo cated t o r emaining performance obligations was $ 6.0 million.

The Company expects to recognize revenue of $ 5.7

million of its r emaining performance obligations within the next 12 months following March 31, 2026, $ 0.3 million within the next 24 months

following March 31, 2026 and the balance

million of its r emaining performance obligations within the next 12 months following June 30, 2026, $ 0.2 million within the next 24 months

following June 30, 2026 and the balance

of these r emaining performance

obligations recognized within the next 36 months following March 31, 2026.

obligations recognized within the next 36 months following June 30, 2026.

The components of inventories were:

March 31, 2026

June 30, 2026

December 31, 2025

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Finished goods

Intangible assets, net

During the six months ended June 30, 2026, the Company capitalized $ 2.0 million of software development costs that were incurred subsequent to achieving technological feasibility but prior to commercialization.

Amortization using the straight-line method will commence on

July 1, 2026 which is the completion and release of the software to customers and will be over an estimated useful life of seven years .

Identifiable intangible assets are recorded in Intangible assets, net in the accompanying Consolidated Balance Sheets and

are comprised of the following:

June 30, 2026

December 31, 2025

(In thousands)

Accumulated Amortization

Purchased technology

Amortization expense was zero

in both fiscal 2025 and in the first six months of 2026.

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.

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.

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additional indebtedness and create other liens.

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 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.

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

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.

We have remained in compliance with our excess availability covenant through June 30, 2026.

$ 3.0 million principal amount of loans, whether or not such amount of loans is actually outstanding.

The maturity date of the Siena

Credit Facility is March 31, 2027.

As of June 30, 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 June 30, 2026.

Segment reporting

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Segment Reporting .

our operations and manage our business as one segment:

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

solutions for high growth markets, and provide related services, supplies and spare parts.

Factors used to identify TransAct’s single operating segment include

the similar design, construction and functionality of our products and services, the combined research & development team that supports the entire company, a combined assembly, production and supply chain logistics process used to construct our

products and services and a similar class of customers within our core markets (distributors, resellers, original equipment manufacturers (“OEMs”) and end users).

view our operations and manage our business as one segment:

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

and printing solutions for high growth markets, and provide related services, supplies and spare parts.

Factors used to identify TransAct’s single operating

segment include the similar design, construction and functionality of our products and services, the combined research & development team that supports the entire company, a combined assembly, production and supply chain logistics process

used to construct our products and services and a similar class of customers within our core markets (distributors, resellers, original equipment manufacturers (“OEMs”) and end users).

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

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and adjusted EBITDA to make operational and strategic decisions.

These financial measures are compared to budgeted and forecasted amounts by the CODM s on a regular

These financial measures are compared to budgeted and forecasted amounts by the CODM on a regular

basis to measure our progress towards our strategic plans, pursue product enhancements, conduct research and development initiatives and make any other necessary overall strategic changes to the business.

We disclose these non-GAAP segment results

because we believe they provide meaningful supplemental information and are used by the CODM in making decisions about how to allocate resources and assess performance.

We disclose these non-GAAP segment

results because we believe they provide meaningful supplemental information and are used by the CODM in making decisions about how to allocate resources and assess performance.

The following table provides the operating financial results of our segment:

Three Months Ended

Six Months Ended

(In thousands)

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Marketing expenses

Severance expense

Severance expenses

Depreciation and amortization

Other segment expenses (1)

Operating income (loss)

Operating (loss) income

Interest income

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Income tax expense

Net (loss) income

Other segment expenses included in segment net income primarily include other cost of goods sold, other administrative costs and engineering costs.

A reconciliation of net income to EBITDA and adjusted EBITDA follows:

Three Months Ended

Six Months Ended

(In thousands)

Net (loss) income

Interest income, net

Income tax expense

Income tax expense (benefit)

Depreciation and amortization

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Three Months Ended

Six Months Ended

(In thousands, except per share data)

Net (loss) income

Weighted average common shares outstanding

Dilutive effect of outstanding options and restricted stock units as determined by the

treasury stock method

Dilutive effect of outstanding options and restricted stock units as determined by the treasury stock method

Weighted average common and common equivalent shares outstanding

Net income per common share:

Net (loss) income per common share:

The computation of basic net earnings per share for each period is computed by dividing earnings by the basic weighted average number of common

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outstanding related to potentially dilutive securities under the treasury stock method (including stock options, restricted stock units and performance stock units), if the impact is dilutive.

When the average market price of our common stock is lower than the exercise price of the related stock option during the period, the

computation of diluted earnings per share excludes the effect of the potential exercise of these stock option awards because the effect of including these stock option exercises would be anti-dilutive.

Furthermore, in periods when a net loss is

reported, basic and diluted net loss per common share are calculated using the same method.

There were 1.1 million and 1.4 million anti-dilutive stock awards excluded from the computation of earnings per share for the quarters ended March 31, 2026, and March 31, 2025, respectively.

When the average market price of our common stock is lower than the exercise price of the related stock option during the period, the computation

of diluted earnings per share excludes the effect of the potential exercise of these stock option awards because the effect of including these stock option exercises would be anti-dilutive.

Furthermore, in periods when a net loss is reported, basic

and diluted net loss per common share are calculated using the same method.

There were 0.8 million and 1.8 million of anti-dilutive stock awards excluded from the computation of earnings per share for the quarters ended June 30, 2026 and 2025, respectively.

There were 1.0 million and 1.7 million of anti-dilutive stock awards excluded from the computation of earnings per diluted share for the six months ended June 30, 2026 and 2025, respectively.

We account for leases in accordance with ASC Topic 842:

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

Our leases are included

in “Right-of-use-assets” and “Lease liabilities” in our Condensed Consolidated Balance Sheets.

leases are included in “Right-of-use-assets” and “Lease liabilities” in our Condensed Consolidated Balance Sheets.

Our leases have various lease terms, some of which include options to extend.

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

On March 31, 2026, we amended our lease agreement for our facility in Ithaca, New York.

This amendment extends the expiration of the lease from May 31, 2026 to

September 30, 2031, resulting in a $ 3.0 million increase in our right of use assets and lease liabilities.

Operating lease expense for the three months ended March 31, 2026

and 2025 was $ 235

thousand and $ 259 thousand, respectively, and is reported as “Cost of sales”, “Engineering, design and product development expense”,

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

Operating lease expenses include short-term lease costs, which were immaterial for the periods presented.

Lease expense is recognized on a straight-line

basis over the lease term.

Leases with an initial term of twelve months or less are not recorded on the Condensed Consolidated Balance Sheets.

On March 31, 2026, we amended our lease agreement for our facility in Ithaca, New York and entered into a new lease for facility in Las Vegas, Nevada.

The Ithaca amendment extended the expiration of the lease from May 31, 2026 to September 30, 2031 and the new lease for our facility in Las Vegas expires on June 30, 2031.

These leases resulted in a $ 3.0

million increase in our right of use assets and lease liabilities in the first quarter of 2026.

Operating lease expense for the six months ended June 30, 2026 and 2025 was $ 441 thousand and $ 518 thousand, respectively, and is reported within “Cost of sales”, “Engineering, design and product development expense”, “Selling and marketing expense”, and “General and administrative expense” in the Condensed Consolidated

Statements of Operations.

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

Three Months Ended,

Six Months Ended,

Operating cash outflows from leases

The following summarizes additional information related to our leases as of March 31, 2026 and December 31, 2025:

March 31, 2026

The following summarizes additional information related to our leases as of June 30, 2026 and December 31, 2025:

June 30, 2026

December 31, 2025

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Weighted average discount rate

The maturity of the Company’s operating lease liabilities as of March 31, 2026

The maturity of the Company’s operating lease liabilities as of June 30, 2026

and December 31, 2025 were as follows (in thousands):

March 31, 2026

June 30, 2026

December 31, 2025

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Total lease liabilities

We recorded 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 in the first quarter of

2025 of $ 51 thousand at an effective tax rate of 72.9 %.

We recorded income tax expense in the first six months of 2026 of $ 53 thousand compared to income tax

expense in the first six months of 2025 of $ 91 thousand.

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 that the negative evidence, as further discussed below, continues to support our valuation allowance.

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 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 of March 31, 2026 and December 31, 2025, we had $ 8.5

million and $ 8.7 million, respectively, of valuation allowance against our net deferred income tax assets in multiple global tax

jurisdictions.

The need for this

valuation allowance has been assessed as of June 30, 2026 and management continues to

believe that the negative evidence, as further discussed below, continues to support our valuation allowance.

As such, we recorded no

federal income tax expense during the first six months of 2026 and the first six months

Tax expense is only being recorded on income taxes associated with earnings in the

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

As of June 30, 2026

and December 31, 2025 , we had $ 8.5 million and $ 8.7 million, respectively, of valuation allowance against

our net deferred income tax assets in multiple global tax jurisdictions.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not (greater than 50%) that a tax benefit will not be realized.

Federal net operating losses can be carried forward indefinitely, however

these indefinite-lived NOLs are generally limited to offsetting 80% of taxable income in any given year.

operating losses can be carried forward indefinitely, but these indefinite-lived NOLs are generally limited to offsetting 80% of taxable income in any given year.

The Federal R&D credit carryforwards typically have a 20-year carryforward period.

In evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in carryback

periods, future reversals of taxable temporary differences, projections of taxable income, income from tax planning strategies, as well as all available positive and negative evidence.

Positive evidence includes factors such as a history of

profitable operations and projections of future profitability within the carryforward period, including any potential tax planning strategies.

Negative evidence includes items such as cumulative losses and projections of future losses.

changes in facts and circumstances, management may conclude that deferred tax assets for which no valuation allowance is currently recorded may not be realized, resulting in a charge to establish a valuation allowance.

Existing valuation

allowances are re-examined on a quarterly basis under the same standards of positive and negative evidence.

In evaluating the need for a valuation allowance, management considers all potential sources of taxable income, including income available in

carryback periods, future reversals of taxable temporary differences, projections of taxable income, income from tax planning strategies, as well as all available positive and negative evidence.

Positive evidence includes factors such as a

history of profitable operations and projections of future profitability within the carryforward period, including any potential tax planning strategies.

Negative evidence includes items such as cumulative losses and projections of future

Upon changes in facts and circumstances, management may conclude that deferred tax assets for which no valuation allowance is currently recorded may not be realized, resulting in a charge to establish a valuation allowance.

valuation allowances are re-examined on a quarterly basis under the same standards of positive and negative evidence.

We are subject to U.S.

1 unchanged sentence

state and foreign jurisdictions.

We have substantially concluded

have substantially concluded all U.S.

federal, state and local income tax, and foreign tax regulatory examination matters through 2021.

However, our federal tax returns for the years 2022 through 2025 remain open to examination.

state and foreign tax jurisdiction

tax years remain open to examination as well, but we believe that any additional assessment would be immaterial to the Condensed Consolidated Financial Statements.

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

Shareholders’ Equity

On April 28, 2026, the Company’s Board of Directors approved a share repurchase program authorizing the repurchase of up to $ 3.0 million of the outstanding common stock of the Company.

Under this program, the Company may repurchase shares from time to time in the open market, through negotiated

transactions, or by other means in accordance with applicable securities laws.

The repurchase program was effective on May 12, 2026 and has a term of one year .

The repurchase program does not obligate the Company to repurchase any specific number of shares and may be suspended, modified, or discontinued at any time.

The repurchase program is funded using the Company’s existing

cash balance and cash generated from operations.

No shares were repurchased by the Company during the three months ended June 30,

Subsequent events

The Company is continuously monitoring the ongoing U.S.

government’s executive order tariffs and counter

tariffs imposed on the U.S.

by certain countries.

Since February 2025, the U.S.

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

engages in trade, including a minimum 10% duty on

imports, subject to certain exemptions, pursuant to Section 122 of the Trade Act of 1974.

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

On February 20, 2026, the U.S.

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

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.

Trump , holding that 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 the Supreme Court’s ruling that IEEPA-based tariffs were unlawful, the Court of

International Trade (“CIT”) ordered U.S.

Customs and Border Protection (“CBP”) to provide a process for the refund of collected tariffs.

The refund mechanism allows importers to file claims for duties paid on shipments through a declaration in

the Consolidated Administration and Processing of Entries (“CAPE”) system, which was launched on April 20, 2026.

See Note 1 Basis of presentation .

On April 28, 2026, the Company’s Board of Directors approved a share repurchase program authorizing the purchase of up to $ 3 million of the Company’s outstanding common stock.

Under this program, the Company may repurchase shares from time to time in the open market, through negotiated

transactions, or other legal means, depending on market conditions, share price, and other factors.

The program has a term of one year ,

unless terminated earlier by the Board of Directors.

The repurchase program will be funded using the Company’s existing cash balance and cash generated from operations.

The Company has evaluated all other events or transactions that occurred up to the date the Condensed Consolidated Financial Statements were available to be issued.

Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Condensed Consolidated Financial Statements.

hours of that ruling, the White House issued Proclamation 11012, utilizing Section 122 of the Trade Act of 1974 to bypass the court decision and immediately instituted a temporary 10% global import surcharge.

Customs and Border Protection

(CBP) officially began collecting the new 10% surcharge on February 24, 2026.

Because Section 122 authority strictly limits emergency balance-of-payments surcharges to 150 days, this specific 10% global tariff met its statutory expiration date on

July 24, 2026.

Also, following the Supreme Court’s ruling that IEEPA-based tariffs were unlawful, the

Court of International Trade (CIT) ordered the CBP to provide a process for the refund of collected tariffs.

The refund mechanism allows importers to file claims for duties paid on shipments through a declaration in the CAPE system, which was

launched on April 20, 2026.

See Note 1 Basis of

presentation .

As stated, on July 24, 2026, the temporary 10% global import surcharge previously levied by the U.S.

administration expired.

Concurrently, effective July 24, 2026, the

government implemented a new 12.5% import tariff under Section 301 on various goods imported from Thailand and dozens of other trading partners, following an administration-led supply chain investigation.

Because these Section 301 trade policy

adjustments occurred subsequent to the close of the reporting period on June 30, 2026, there is no impact on the condensed consolidated financial statements for the quarter then ended.

The Company is currently evaluating the long-term quantitative

impact of these revised tariff rates on its future cost of goods sold, gross margins, and inventory valuation, but expects that it will increase the landed cost of unexempt products imported from Thailand in future periods.

In the second quarter of 2026, the Company submitted tariff refund claims through the CAPE portal totaling approximately $ 572 thousand.

In July 2026, subsequent to the end of the reporting period but prior to the issuance of these financial statements, the Company received

most of this refund claim from the CAPE portal.

The tariff claim has been recognized as of June 30, 2026 as a Type I subsequent event under ASC Topic 855:

Subsequent Events , resulting in a receivable and a credit to Cost of Goods Sold for the quarter ended June 30, 2026 in

the amount of $ 572 thousand.

The Company has communicated to certain customers that it intends to pass through tariff refunds if and when

the cash is successfully received from the government portal.

In addition, in the quarter ended June 30, 2026, t he Company recorded a liability of $ 1,070 thousand (included in accrued liabilities) and a reduction in sales of $ 1,007 thousand.

This liability reflects the Company’s estimated obligation to reimburse customers for

prior tariff surcharges billed from April 2025 to February 2026, net of administrative and processing incidentals.

On August 10, 2026, management engaged BofA Securities as its financial advisor, given their expertise within the casino and gaming market and their

long-standing relationship with TransAct.

This followed a request by the Company’s Board of Directors to initiate a formal strategic review of the casino and gaming business.

The Company believes that exploring potential options within casino and

gaming, given the current strength within this market, is in the best interests of stockholders as they look to maximize value.

While the review is focused on the casino and gaming business, the Board of Directors intends to evaluate a broader

range of strategic alternatives to the extent the Board of Directors determines that doing so may further enhance stockholder value.

The Company has not set a timetable for the review, and there can be no assurance that the review will result in

any transaction or other strategic outcome.

The Company has evaluated all other events or transactions that occurred up to the date the Condensed Consolidated Financial Statements were issued.

Based on this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the Condensed Consolidated Financial

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 1. Financial Statements