What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-14 compared with 2026-05-13 · 450 added, 261 removed, 147 unchanged (83% of the section changed)

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Forward-Looking Statements

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.

federal securities laws, including the Private

Securities Litigation Reform Act of 1995.

Certain statements included in this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 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.

federal securities laws, including the Private Securities

Litigation Reform Act of 1995.

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

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

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;

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;

our continued reliance on third parties to host and support our food service technology (“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 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 and the 12.5% import tariff under Section 301 of the Trade Act of 1974, following the U.S.

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;

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;

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

internationally, in the face of substantial competition;

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

errors or mistakes in connection with over-the-air updates;

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

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;

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

face of substantial competition;

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

connection with over-the-air updates;

our ability to successfully grow our business in the FST market;

renewal rates for our subscription-based products;

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

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;

risks associated with the pursuit of strategic initiatives , including the strategic review of the Company’s casino and gaming business and business growth;

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

other risk factors identified and discussed in Part I, Item 1A, Risk Factors, and Part II, Item 7, Management’s Discussion

and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) and

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

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

Factors, and Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”) and that may be detailed from

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

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

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 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.

TransAct is a leading provider of SaaS 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!

We also have a 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.

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.

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.

We operate in one reportable segment:

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.

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 maker, 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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Current Business and Economic Trends

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.

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

months ended June 30, 2026 and 2025.

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 2026.

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.

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 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.

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 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.

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.

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.

Within 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

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.

Effective July 24, 2026, the U.S.

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.

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

from our manufacturer in Thailand.

The majority of raw components used in

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

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

of tariffs on goods sold into the U.S.

through alternative sourcing or manufacturing.

We currently mitigate 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

The Company continues to monitor and evaluate the ongoing impact of these 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 has initiated a process to claim refunds of approximately $ 0.6 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.

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.

The Company expects to issue these

reimbursements following successful receipt of funds from U.S.

Customs and Border Protection.

The timing and ultimate amount of these payments remain subject to the federal Consolidated Administration and Processing of Entries (“CAPE”) portal

processing timelines and final verification of eligible entries.

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 $0.5 million in cash

reimbursements from the government via the CAPE portal.

The ultimate availability, timing and final total amount to be received from refunds remains uncertain.

The continued effects of 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 Form 10-Q.

For information regarding the risks

related to our manufacturer in Thailand and global economic conditions, please see Part I, Item 1A, “Risk Factors,” of the 2025 Form 10-K.

Critical Accounting Estimates

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

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

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

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

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

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

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

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

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

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

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

There have been no

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

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

Results of Operations:

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

Three months ended June 30, 2026 compared to three months ended June 30, 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 March 31, 2026 and 2025 were as follows (in thousands,

except percentages):

include printer, terminal and software sales, as well as sales of replacement parts, consumables (including labels) and maintenance and repair services, by market for the three months ended June 30, 2026 and 2025 were as follows (in thousands, except

percentages):

Three Months Ended

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

POS automation

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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).

Net sales for the second quarter of 2026 increased $0.2 million, or 1%,

compared to the second quarter of 2025.

The Company recorded a reduction in second quarter 2026 domestic casino and gaming sales of $1.0 million related to

expected customer refunds as discussed earlier .

Printer, terminal and other hardware

unit sales volume increased 6% to approximately 27,800 units, due primarily to a 6% unit sales volume increase in the casino and gaming market, partially offset by a 7 % 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 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

For more information about the sales volume changes described above, please refer to the

results of operations for each of our markets discussed further below.

The average selling price of our printers, terminals and other hardware , excluding the impact of the

aforementioned $1.0 million sales adjustment, was up 2% in the second quarter of 2026 compared to the second quarter of 2025.

FST software, labels and other recurring revenue increased $0.4 million, or 14%, in the second quarter of 2026

compared to the second quarter of 2025 due to increased software and label sales.

International sales for the second quarter of 2026 increased $100 thousand, or 4%, from the same period in 2025 due primarily to increased sales in our

casino and gaming market.

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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.

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.

operating system.

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

Recurring revenue from BOHA!

is generated by software sales, including software subscriptions that are typically

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

Sales of our worldwide FST products for the three months ended March 31, 2026 and 2025 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 June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Three Months Ended

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

International

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Three Months Ended

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

Software, labels and other recurring revenue

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).

The increase in FST sales in the second quarter of 2026 compared to the

second quarter of 2025 of $0.4 million, or 9%, was driven by an increase in both software and label sales.

Hardware sales were relatively flat in the second quarter of 2026 compared to the second quarter of 2025.

FST software, labels and

other recurring revenue increased 14% in the second quarter of 2026 compared to the second quarter of 2025 due largely to stronger software sales (up 47%) and label sales (up 6%).

The increase in software sales was driven by price increases.

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 revenue (including the sale of software, BOHA!

labels, and other

recurring revenue).

POS automation:

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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):

Sales of our POS automation products for the three months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Three Months Ended

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

International

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.

POS sales were consistent in the second quarter of 2026 compared to the second quarter of 2025.

We believe sales have normalized at a lower level due to

competitive pressures that have 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

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.

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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

In addition, casino and gaming market revenue includes sales of the EPICENTRAL print system, our software solution, and is currently

sold both directly and through certain casino system providers on a subscription basis.

EPICENTRAL 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 June 30, 2026 and 2025 were as

follows (in thousands, except percentages):

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Three Months Ended

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

International

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.

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

2026 decreased by $0.6 million, or 10% compared to the second quarter of 2025.

The Company recorded a reduction in second quarter 2026 domestic casino and

gaming sales of $1.0 million related to expected customer refunds as discussed earlier .

Absent this adjustment, casino and gaming sales in the second quarter of 2026 would have been $8.3 million, or up $0.7 million and 9% from the second 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 in 2022 and 2023.

Sales in the second quarter of 2026 strengthened as our major

casino and gaming customers had sold through their on-hand inventory and began to order at more historical 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 $0.3 million or 17% during the second quarter of 2026 compared to the second 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):

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 June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Three Months Ended

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

International

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.

The increase in domestic revenue from TSG during the second quarter of 2026, as compared to the second quarter of 2025, was due largely to higher repair

orders and higher shipping charges.

The decrease in international revenue from TSG during the second quarter of 2026, as compared to the second quarter of 2025, was due to lower sales of spares and accessories.

We expect TSG sales to remain 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 March 31, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

information for the three months ended June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended June 30,

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 (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 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.

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 former third-party licensor of our FST software products (during 2025).

In the second quarter of 2026, gross profit increased

$0.4 million, or 5%, and gross margin increased 200 basis points to 50% due in part to increased sales of FST recurring revenue (software, labels and other recurring revenue) which carry higher average margins than our other product offerings.

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 June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended June 30,

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 former third-party licensor of our FST

software products).

Engineering, design and product development expenses decreased $0.5 million, or 29%, for the second quarter of 2026 compared to the second quarter of

2025 due largely to a reduction in external consulting fees and lower bonus expense.

Also, management capitalized 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 costs related to this project (see Note 2).

Operating Expenses - Selling and Marketing.

Selling and marketing expense information for the three months ended June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended June 30,

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 $0.6 million, or 30%, in the second quarter of 2026 compared to the second 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.

Operating Expenses - General and

Administrative .

General and administrative information for the three months ended June 30, 2026 and 2025 is summarized below (in thousands,

except percentages):

Three Months Ended June 30,

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 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 $12 thousand, or 0.4%, during the second

quarter of 2026 compared to the second quarter of 2025.

Executive separation and associated legal expenses were partially offset by lower bonus and incentive compensation expense.

Operating Loss.

Operating loss for

the three months ended June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended June 30,

Total Sales – 2026

Total Sales – 2025

Our operating loss decreased $ 0.2 million in the second quarter of 2026

compared to the second quarter of 2025 due largely to the improvement of gross margin of $0.4 million discussed above, partially offset by the $ 146 thousand of

increased operating expenses discussed above.

Interest, net.

We recorded net

interest income of $59 thousand in the second quarter of 2026 compared to $40 thousand in the second quarter of 2025.

For both quarters, we were required to maintain outstanding borrowings of at least $3 .0 million in principal amount on our Siena Credit Facility.

We maintained a higher average level of invested cash during the second quarter of 2026 compared to the second 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 second quarter of 2026 we recognized $25 thousand of foreign exchange losses compared to $115

thousand of foreign exchange gains in the second 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 an income

tax expense in the second quarter of 2026 of $30 thousand compared to income tax expense during the second quarter of 2025 of $40 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 reassessed as of June 30, 2026 and management continues to believe this valuation allowance is

As such, we recorded no U.S.

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

Our tax expense for both periods only includes taxes associated with earnings in the United Kingdom and minimum

required state taxes in the United States.

Results of Operations:

Six months ended June 30, 2026 compared to six months ended June 30, 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 six months ended June 30, 2026 and 2025 were as follows (in thousands, except

percentages):

Six Months Ended

June 30, 2026

June 30, 2025

POS automation

Casino and gaming

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 first six months of 2026 increased $1.5 million, or 6%,

compared to the first six months of 2025.

As noted, t he Company recorded a reduction in 2026 domestic casino and gaming sales of $1.0 million in the second quarter of 2026 related to expected customer refunds .

Printer, terminal and other hardware unit sales volume increased 7% to approximately 54,700 units, due

primarily to a 11% unit sales volume increase in the casino and gaming market, partially offset by a 23 % unit sales volume decrease in FST hardware (FST has

a smaller base).

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

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

average selling price of our printers, terminals and other hardware , excluding the impact of the aforementioned $1.0 million sales adjustment, was up 0.5% in the first

six months of 2026 compared to the first six months of 2025.

FST software, labels and other recurring revenue increased $1.1 million, or 19%, in the first six months of 2026 compared to the first six months of 2025 due primarily to both increased

software and label sales.

International sales for the first six months of 2026 increased $ 0.8 million ,

or 17%, from the same period in 2025 due primarily to increased sales in our casino and gaming market.

For an in-depth discussion of our FST market dynamics and business overview, please refer the “Results of Operations:

Three months ended June 30, 2026 compared to three months ended June 30, 2025” above.

Sales of our worldwide FST products for the six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Six Months Ended

June 30, 2026

June 30, 2025

International

Six Months Ended

June 30, 2026

June 30, 2025

Software, labels and other recurring revenue

The increase in FST sales in the first six months of 2026 compared to the

first six months of 2025 was driven by a $1.1 million increase in software, labels and other recurring revenue, partially offset by a $0.9 million decrease in hardware sales.

Hardware sales were particularly strong in the first six months

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 six

months of 2026.

FST software, labels and other recurring revenue increased 19% in the first six months of 2026 compared to the prior year period due largely to stronger label sales (up $0.7 million due primarily to a large order by an existing

customer) and stronger software sales (up $0.3 million or 35%).

The increase in software sales was driven by price increases.

Although FST revenues were relatively flat in the first six months of 2026

compared to the first six months 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 software, BOHA!

labels and other recurring revenue).

POS automation:

For an in-depth discussion of our POS automation market dynamics and

business overview, please refer the “Results of Operations:

Three months ended June 30, 2026 compared to three months ended June 30, 2025” above.

Sales of our POS automation products for the six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Six Months Ended

June 30, 2026

June 30, 2025

International

POS sales increased $31 thousand or 3% in the first six months of 2026 compared

to the first six months of 2025 .

W e believe sales have normalized to a 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.

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

Casino and gaming .

For an in-depth discussion of our casino and gaming market dynamics and business overview, please refer the “Results of Operations:

Three months ended June 30, 2026 compared to three months ended June 30, 2025” above.

Sales of our worldwide casino and gaming products for the six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Six Months Ended

June 30, 2026

June 30, 2025

International

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

2026 increased by $0.4 million, or 3% compared to the first six months of 2025.

As noted, t he Company recorded a reduction in 2026 domestic casino and gaming sales of $1.0 million in the second quarter of 2026 related to expected customer refunds .

Absent this adjustment, casino and gaming sales in the first six months of 2026 would have been $16.7 million, or up $2.3 million and 16% from the first six months 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 a worldwide supply chain crisis of 2022 and 2023.

Sales in the first six months of

2026 strengthened as our major casino and gaming customers had sold through their on-hand inventory and began to order at more historical 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 27% during the first six months of 2026 compared to the first six months 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.

For an in-depth discussion of our TSG market dynamics and business overview, please refer the “Results of Operations:

Three months ended June 30, 2026 compared to three months ended June 30,

Sales in our worldwide TSG market for the six months ended June 30, 2026 and 2025 were as follows (in thousands, except percentages):

Six Months Ended

June 30, 2026

June 30, 2025

International

Domestic revenue from TSG during the first six months of 2026 as compared to the first six months of 2025 was flat as increases in repairs and shipping were

offset by lowers sales of spares.

For the same periods, international sales were down $31 thousand due to lower sales of spares.

We expect TSG sales to be 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 six months ended June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Six Months Ended June 30,

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,

products and royalty

payments to third parties, including to the former third-party licensor of our FST software products (during 2025).

In the first six months of 2026, gross profit increased

$1.2 million, or 10%, and gross margin increased 180 basis points to 50% due primarily to a 6% increase in overall sales, including a 9% increase in sales in our casino and gaming market, as well as increased sales of FST recurring revenue

(software, labels and other recurring revenue) which both carry higher average margins than our other product offerings.

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 March 31, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

Operating Expenses - Engineering, Design

and Product Development.

Engineering, design and product development expense information for the six months ended June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Six Months Ended June 30,

Total Sales - 2026

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

service technology software products).

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 March 31, 2026 and 2025 is summarized below (in thousands, except percentages):

Three Months Ended March 31,

software products).

Engineering, design and product development expenses decreased $0.8 million, or 22%, for the first six months of 2026 compared to the first six months

of 2025 due largely to a reduction in external consulting fees, lower bonus expense and 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 costs related to this project.

Operating Expenses - Selling and Marketing.

Selling and marketing expense information for the six months ended June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Six Months Ended June 30,

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 $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.

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

Selling and marketing expenses increased $0.7 million, or 18%, in the six months ended June 30, 2026 compared to the first six months 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.

Operating Expenses - General and

Administrative .

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

thousands, except percentages):

Three Months Ended March 31,

General and administrative information for the six months ended June 30, 2026 and 2025 is summarized below (in thousands,

except percentages):

Six Months Ended June 30,

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 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.

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

director expenses and other expenses related to being a publicly traded company.

General and administrative expenses increased $0.3 million, or 5%, during the first six

months of 2026 compared to the first six months of 2025.

Higher executive separation and stock compensation expenses were partially offset by lower bonus and salary expenses.

Operating Income (Loss).

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,

income (loss) for the six months ended June 30, 2026 and 2025 is summarized below (in thousands, except percentages):

Six Months Ended June 30,

Total Sales – 2026

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* 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).

Our operating income (loss) improved by $ 1.0 million in the first six

months of 2026 compared to the first six months of 2025 due largely to a $1.5 million, or 6% increase in sales and a resulting $1.2 million increase in gross profit, combined with relatively flat operating expenses (operating expenses increased only $ 0.3 million , or 2%, in the first six months of 2026, compared to the first six months of 2025).

Interest, net.

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.

We recorded net

interest income of $125 thousand in the first six months of 2026 compared to $62 thousand in the first six months of 2025.

For both periods, we were required to maintain outstanding borrowings of at least $3 .0 million in principal amount on our Siena Credit Facility.

We maintained a higher average level of invested cash during the first six months of 2026 compared to the first six months 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.

During the first six months of 2026 we recognized $73 thousand of foreign exchange losses compared to $178

thousand of foreign exchange gains in the first six months 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 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.

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

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

The need for this valuation allowance has been assessed as of June 30, 2026 and management continues to believe this valuation allowance is appropriate.

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.

federal income tax expense during

the first six months of 2026 and the first six months of 2025.

Our tax expense for both periods only include taxes associated with earnings in the United Kingdom and minimum required state taxes in the United States.

Liquidity and Capital Resources

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.

In the first six months of 2026, our cash and cash equivalents balance decreased $1.0 million, or 5%, from December 31, 2025.

We ended the second quarter of

2026 with $19.4 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 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:

factors affected our cash provided by operating activities of $1.2 million for the first six months of 2026 as compared to cash provided by operating activities of $3.4 million for the first six months of 2025:

During the first six months of 2026:

We reported net income of $716 thousand.

We recorded depreciation and amortization of $0.3 million and share-based compensation expense of $1.0 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.

Accounts receivable increased $4.0 million due largely to the timing of payments from large customers at June 30, 2026.

Inventories decreased $1.7 million due to casino and gaming demand and a focus on inventory management.

Account payable increased $1.5 million due to the timing of cash payments and overseas purchases of inventory.

During the first six months of 2025:

We reported a net loss of $124 thousand.

We recorded depreciation and amortization of $0.3 million and share-based compensation expense of $0.8 million.

Accounts receivable increased $1.2 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.

Inventories decreased $3.4 million as we worked down our elevated inventory levels on hand, in part due to increased sales.

Accounts payable decreased $0.6 million consistent with our decrease in inventory.

Accrued liabilities and other liabilities increased $1.0 million due largely to higher accruals for incentive compensation as discussed in our Results of Operations

Investing activities:

Our capital expenditures

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

were $137 thousand for the first six months of 2026 compared to $29 thousand for the first six 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!

We also paid $2.0 million in capitalized software development costs during the first six months of 2026 related to our purchase of a copy of the source code related to our BOHA!

line of products.

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Financing activities used $93

$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.

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

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

Resource Sufficiency

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.

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

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

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.

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 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!

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

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”).

“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.

We also pay a fee of 0.50% on unused

borrowings under the Siena Credit Facility.

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

The Siena Credit Facility imposes a financial covenant on the Company requiring that the Company maintain excess availability of at least $750 thousand

under the Siena Credit Facility, tested as of the end of each calendar month and restricts, among other things, our ability to incur additional indebtedness and create other liens.

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.

The maturity 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.

The Siena Credit Facility imposes a financial covenant on the Company requiring that the Company maintain excess availability of at least $750 thousand under

the Siena Credit Facility, tested as of the end of each calendar month and restricts, among other things, our ability to incur additional indebtedness and create other liens.

We have remained in compliance with our excess availability covenant through

June 30, 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.

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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Item 2. Management’s Discussion and Analysis