Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2025 (this "Report"), including without limitation, statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations are "forward-looking statements" within the meaning of the U.S. federal securities laws, including the Private Securities Litigation Reform Act of 1995. Forward-looking statements are any statements other than statements of historical fact. Forward-looking statements represent current views about possible future events and are often identified by the use of forward-looking terminology, such as "may," "will," "could," "expect," "intend," "estimate," "anticipate," "believe," "project," "plan," "predict," "design" or "continue" or the negative thereof or other similar words. Forward-looking statements are subject to certain risks, uncertainties and assumptions. In the event that one or more of such risks or uncertainties materialize, or one or more underlying assumptions prove incorrect, actual results may differ materially from those expressed or implied by the forward-looking statements.

Important factors and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, the following:

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

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

•	inflation;

•	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,tariffsor other trade actions;

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

•	our ability to achieve the anticipated benefits of our acquisition of a licensed copy of the source code for the BOHA! software and risks to our reputation and business relating to the source code transition;

•	any system outages, interruptions or other disruptions to our software applications, including as a result of unexpected errors or mistakes in connection with over-the-air updates;

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

•	renewal rates for our subscription-based products;

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

•	our dependence on a single contract manufacturerfor the assembly of a large portion of our products in Asia;

•	our dependence on significant suppliers;

•	our ability to recruit and retain quality employees;

•	our dependence on third parties for sales outside the United States;

•	marketplace acceptance of new products;

•	risks associated with foreign operations;

•	the imposition of additional duties, tariffs, quotas, taxes, trade barriers, capital flow restrictions and other charges on imports and exports by the United States or the governments of the countries in which we or our manufacturers and suppliers operate;

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

•	our ability to protect intellectual property;

•	exchange rate fluctuations;

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

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

•

other risk factors identified and discussed in Part I, Item 1A, Risk Factors, and Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2024 (the "2024 Form 10-K") and that may be detailed from time to time in the Company's other reports filed with the Securities and Exchange Commission (the "SEC").

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

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Overview

TransAct is a global leader in developing and selling software-driven technology and printing solutions for large and emerging markets including food service technology("FST"),point of sale ("POS") automation and casino and gaming. Our world-class products are designed from the ground up based on market and customer requirements and are sold under the BOHA!™, AccuDate™, Epic, EPICENTRAL®, and Ithaca® brand names. During 2019, we launched a new line of products for the food service technology market, the BOHA! hardware solutions and companion branded suite of cloud-based applications. The BOHA! software and hardware products help restaurants, convenience stores and food service operators of all sizes automate the food production in the back-of-house operations. Known and respected worldwide for innovative designs and real-world service reliability, our thermal printers and terminals generate top-quality labels, coupons and transaction records such as receipts, tickets and other documents. We sell our technology to original equipment manufacturers ("OEMs"), value-added resellers, and select distributors, as well as directly to end users. Our product distribution spans across the Americas, Europe, the Middle East, Africa, Asia, Australia, New Zealand, the Caribbean Islands and the South Pacific. We also offer world-class service, support, labels, spare parts, accessories and printing supplies to our growing worldwide base of products currently in use by our customers. Through our TransAct Services Group ("TSG"), we provide a complete range of supplies and consumables used in the printing activities of customers in the restaurant and hospitality, retail, casino and gaming, and government markets. Through our webstore, www.transactsupplies.com, and our direct selling team, we address the demand for these products. We operate in one reportable segment: the design, development, and marketing of software-driven technology and printing solutions for large and emerging markets, and the provision ofrelated services, supplies and spare parts. The Company's chief operating decision maker, consisting ofthe Company's Chief Executive Officer and the Company's Chief Financial Officer, utilizesa 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 ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks, trade names and copyrights.

Recent Developments

Source Code Acquisition

On August 6, 2025, the Company announced that it acquired a perpetual license to a copy of the source code for the BOHA! software that it licenses from Avery Dennison. Under the terms of the agreement, TransAct has obtained a perpetual and royalty free license to use, host, market, sublicense, distribute, copy, and modify the code as the Company sees fit for its business purposes. In addition to the perpetual and royalty free license, TransAct will also host the code in its own environment, which is expected to go live in early 2027. Total consideration for the acquisition was $2.55 million, plus professional services fees of approximately $1.0 million for transition services to be provided by Avery Dennison.

Current Business and Economic Trends

After strong demand during most of 2023 due in part to our primary competitor's struggle to deliver products in the face of supply chain constraints, in late 2023, we began to see indications of a temporary slowdown in demand in the casino and gaming market, as customers that had built up excess inventory due to supply chain concerns advised us that they would temporarily reduce orders until their stock normalized. This slowdown impacted our results in the fourth quarter of 2023 and during the year ended December 31, 2024. As of September 30, 2025, we believe all significant domestic customers have been able to sell through their on-hand inventory and have resumed ordering again. As a result, we have seen a return to more normalized casino and gaming sales levels during the first nine months of 2025. However, we continue to monitor the potential impact of macroeconomic factors as well as any price increases resulting from recent tariff actions on casino and gaming sales levels.

We are currently dependent upon a manufacturer located in Thailand for the manufacturing and assembly of substantially all of our printers and terminals. During 2025, the U.S. government has announced a variety of trade-related actions, including the imposition of tariffs on imports from several countries, including Thailand. In response, many countries announced their own retaliatory tariffs. Certain tariffs were paused for a period of time but have not been withdrawn, while others have been revised.

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On July 30, 2025, the U.S. government announced that an agreement was made with Thailand to establish a U.S. tariff of 19% on goods imported from Thailand, effective August 7, 2025. On October 26, 2025, the U.S. government and Thai government issued a joint statement announcing a Framework for an Agreement on Reciprocal Trade, pursuant to which, among other things, the U.S. has agreed to maintain a tariff of 19% on goods imported from Thailand, as set forth in Executive Order 14257 issued April 2, 2025, as amended, with certain products eventually to be identified for a 0% tariff rate.

These tariffs impact certain goods that are assembled and imported into the United States from our manufacturer in Thailand. 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 expected impact of tariffs on goods sold into the United States through alternative sourcing or manufacturing. We currently mitigate these tariffs by raising prices to customers, but there can be no assurance that we will be able to pass on all tariff costs to customers via price increases.

While tariffs did not materially impact our net incomeforthe third quarter of 2025 andthe first nine months of 2025, we expect the 19% tariff will impact our financial results going forward. There can be no assurance that future price increases and other mitigation efforts will be successful in offsetting future tariffs. In addition, itis uncertain whether other countries will continue to seek further negotiations or retaliate as future developments occur, or whether the U.S. government will reconsider or adjust tariffs based upon continued future negotiations, or grant further exemptions, and what types of products will be eligible for such exemptions, if granted.The Company continues to monitor the rapidly evolving and uncertain tariff and global trade environment and the potential impacts to its Consolidated Financial Statements.

The continued effects of any global tariffs may potentially increase the likelihood of a recession, create a significant reduction in consumer confidence and customer demand, increase inflation or impact credit markets and interest rates. Any of these resulting effects could materially and adversely affect our business, financial condition and results of operations. For information regarding the risks related to our manufacturer in Thailand and global economic conditions, please see Part II, Item 1A, "Risk Factors," of this Report.

Balance Sheet, Cash Flow and Liquidity

We began a cost reduction initiative in the second quarter of 2024 focused largely on reducing employee headcount and other external third-party resources. Savings from this initiative were realized beginning in the third quarter of 2024 and are expected to be approximately $2 million on an annualized basis. We expect these savings to continue to be realized in fiscal 2025. However, we expect these operating expense savings in 2025 will be more than offset by typical annual inflationary and cost of living increases as well as higher incentive and share-based compensation expected from improved results compared to 2024. Our cash flow and liquidity also benefited during the first nine months of 2025 from a successful inventory reduction initiative which reduced our inventory levels by approximately $4.4 million from December 31, 2024to September 30, 2025.We do not expect any further reduction in our inventory level for the fourth quarterof 2025.

Notwithstanding the foregoing, there is no assurance that the cost-cutting efforts we have taken to bring expenses in line with our revenue and mitigate the impact of global economic conditions such as inflation, tariffs and conditions in our markets will be sufficient or adequate, and we may be required to take additional measures, as the ultimate extent of the effects of these risks on the Company, our financial condition, results of operations, liquidity, and cash flows are uncertain and are dependent on evolving developments which cannot be predicted at this time.

Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited Condensed Consolidated Financial Statements, which have been prepared by us in accordance with accounting principles generally accepted in the United States of America. The presentation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Our critical accounting estimates include those related to revenue recognition, accounts receivable, inventory obsolescence, goodwill and intangible assets, the valuation of deferred tax assets and liabilities and share-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. There have been no material changes in our critical accounting estimates from the information presented in Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations," since the filing of the 2024 Form 10-K.

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Results of Operations: Three months ended September 30, 2025 compared to three months ended September 30, 2024

Net Sales:Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables (including labels) and maintenance and repair services, by market for the three months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages):

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

Net sales for the third quarter of 2025 increased $2.3 million, or 21%, compared to the third quarter of 2024. Printer, terminal and other hardware unit sales volume increased 18% to approximately 24,300 units, due primarily to a 60% unit sales volume increase in the casino and gaming market, offset by a 29% unit sales volume decrease in FST hardware and a 65% decrease in unit sales volume in the POS automation market. For more information about the sales volume changes described above, please refer to the results of operations for each of our markets discussed further below. The average selling price of our printers, terminals and other hardware was up 9% in the third quarter of 2025 compared to the third quarter of 2024, due to normal inflationary increases and increased costs resulting from U.S. tariffs imposed on our products assembled in Thailand, which have been passed on to our customers. FST software, labels and other recurring revenue increased $382 thousand, or 13%, in the third quarter of 2025 compared to the third quarter of 2024.

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

Food service technology. Our primary offering in the FST market is our line of BOHA! products. The BOHA! solutioncombines our latest generation terminal or workstation, which includes one or two printers, with our BOHA! labeling, timers, and media software. In addition, customers may individually purchase cloud-based software applications for our Terminal or WorkStation. These applications can be integrated withseparate mobile devicesinto a solution to automate back-of-house operations in restaurants, convenience stores and food service operations. The additional software offering of BOHA! consists of a variety of individually purchased software-as-a-service ("SaaS")-based applications for both Android and iOS operating systems, including applications for temperature monitoring, temperature taking and checklists and task lists. These applications are sold separately, and customers purchase the applications they need for their back-of-house operations. Customers may also purchase associated hardware, such as tablets, temperature sensors and gateways. The BOHA! Terminal and the more recently launched Terminal 2 combine an operating system and hardware components in a single touchscreen device with one or two thermal print mechanisms that print easy-to-read food rotation labels, grab-and-go labels, nutritional labels for prepared foods, and "enjoy by" date labels. The BOHA! WorkStation uses an iPad or Android tablet instead of an integrated touchscreen. The BOHA! 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. BOHA! helps food service establishments and restaurants (including fine dining, casual dining, fast casual and quick-service restaurants ("QSRs"), convenience stores, hospitality establishments and contract food service providers) effectively manage food safety and grab-and-go initiatives, as well as automate and manage back-of-house operations. Recurring revenue from BOHA! is generated by software sales, including software subscriptions that are typically charged to customers annually on a per-application basis, as well as sales of labels, extended warranty and service contracts, and technical support services.

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

The increase in food service technology sales in the third quarter of 2025 compared to the third quarter of 2024 was primarily driven by an increase of label sales of $0.4 million, or 18% combined with an increase in hardware sales of 10%. Hardware sales were strong in the third quarter of 2025, up 10% compared to the third quarter of 2024 due largely to higher sales of our new BOHA! Terminal 2 to two large existing customers(BOHA! Terminal 2 sales were up 49% in the third quarter of 2025 compared to the third quarter of 2024), partially offset by lower sales of BOHA! Terminal 1, WorkStations and other BOHA! hardware.FST software, labels and other recurring revenue increased 13% compared to the prior year period due primarily to higher label sales to three existingcustomers.

We expect total FST revenue for the fourth quarterof 2025 to be higher than the equivalent period of 2024as we continue to focus on growing our installed base of terminals and the related recurring revenue (primarily the sale of BOHA! labels and subscription software revenue from our labeling software application).

POS automation: In the POS automation market, we sell our Ithaca 9000 printer, which utilizes thermal printing technology. Our POS printer is used primarily by McDonald's, and to a lesser extent, other QSRs at the checkout counter or grill station or within self-service kiosks to print receipts for consumers or print on linerless labels. In the POS automation market, we primarily sell our products through a network of domestic and international distributors and resellers.

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

The 65% decline in POS automation sales in the third quarter of 2025 compared to the third quarter of 2024 was largely due to competitive pressure that has resulted in a decreasedlevel of sales as well as a reduction in our average selling prices.

We expect POS automation sales for the fourth quarterof 2025 to remain at approximately the same level as the third quarter of 2025 as we expect to continue to experience competitive pressure in this market.

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Domestic sales of our casino and gaming products for the third quarter of 2025 increased by $2.1 million, or 78%, compared to the third quarter of 2024.Sales forthe third quarter of 2024 were negatively impacted as many of our customers had accumulated higher-than-normal levels of inventory of our product as a hedge during the worldwide supply chain crisis during 2022 and 2023. As a result, during 2024, we experienced a significant slowdown in their order and shipment rates as they worked through this excess inventory. Sales increased during the third quarter of 2025 compared to the third quarter of 2024 as most of our major casino and gaming customers hadworked through their on-hand inventory by the first quarter of 2025 and were orderingat normalized levels in the third quarter of 2025. In addition, sales in the third quarter of 2025 benefitted from sales of our casino printer to a new customer ($2.3 million) compared to no sales to this customer in the third quarter of 2024. However, we believe this customer is nowin an overstock position awaiting jurisdictional approvalsto install new gaming machines. As a result, we do not expecta significant level of sales to this customer in the fourth quarter of 2025, butdo expect this new customer to resume purchasing againin 2026. In addition, our domestic OEM customers have indicated slowing demand in the fourth quarter of 2025.As a result of these factors, we expect our domestic casino and gaming sales to be lowerin the fourth quarter of 2025 compared to the third quarter of 2025.

Our international casino and gaming sales were up 26% in the third quarter of 2025 compared to the third quarter of 2024 as most of our international casino and gaming customers had worked through their on-hand inventory and were orderingat normalized levels in the third quarterof 2025.

TransAct Services Group: Revenue generated by TSG includes sales of POS receipt paper for non-FST legacy products, replacement parts and accessories, maintenance and repair services and shipping and handling charges.Sales in our worldwide TSG market for the three months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages):

The decrease in domestic revenue from TSG of $0.1 million forthe third quarter of 2025 as compared to the third quarter of 2024 was due largely to lower sales of legacy spare parts and accessories for lottery printers(down $133 thousand in the third quarter of 2025 compared to the third quarter of 2024), partially offset by increased shipping revenues (up $67 thousand in the third quarter of 2025 compared to the third quarter of 2024).An increase in sales of spare parts and accessories to international customers drove the modest increase of $26 thousand of international sales forthe third quarter of 2025 as compared to the third quarter of 2024.

We expect TSG sales to be somewhat lower for the fourth quarter of2025 compared to the same period in 2024 as we expect to cease selling all our remaining legacy consumable products by the end of 2025.

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

Gross profit is measured as revenue less cost of sales, which includes primarily the cost of all raw materials and component parts, direct labor, manufacturing overhead expenses, cost of finished products purchased directly from our contract manufacturers, expenses associated with installations and support of our EPICENTRAL print system and BOHA! products and royalty payments to third parties, including to the third-party licensor of our food service technology software products(prior to the purchase of a perpetual license to a copy of the BOHA! source code in August 2025). In the third quarter of 2025, gross profit increased $1.3 million, or 25% on 21% higher overall sales, and gross margin improved 170 basis points to 50% due largely to higher overall sales as well as higher sales of casino and gaming products which carry higher average margins than our other products.

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

Operating Expenses - Engineering, Design and Product Development.Engineering, design and product development expense information for the three months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Engineering, design and product development expenses primarily include salary and payroll-related expenses for our hardware and software engineering staff, depreciation and design expenses (including prototype printer expenses, outside design, development and testing services, supplies and contract software development expenses including those payments to the third-party licensor of our food service technology software products). Engineering, design and product development expenses increased $16 thousand, or 1%, for the third quarter of 2025 compared to the third quarter of 2024 due to higher incentive compensation as a result of improved financial results in 2025 compared to 2024, largely offset by a reduction of contracted software development expenses.

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

Selling and marketing expenses primarily include salaries and payroll-related expenses for our sales, marketing and customer success staff, sales commissions, travel expenses, expenses associated with the lease of sales offices, advertising, trade show expenses, public relations, e-commerce, other promotional marketing expenses and outsourced go-to-market consulting services. Selling and marketing expenses increased $211 thousand, or 11%, in the third quarter of 2025 compared to the third quarter of 2024 due largely to higher sales commissions and incentive compensation on higher sales (particularly casino and gaming sales which were up 58%) and to a lesser extent, higher costs related to programs to further improve the Company's go-to-market strategy.

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Operating Expenses - General and Administrative.General and administrative expense information for the three months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

General and administrative expenses primarily include salaries, incentive and share-based compensation, and other payroll-related expenses for our executive, accounting, human resources, corporate development and information technology staff, expenses for our corporate headquarters, professional and legal expenses, information technology expenses, board of director expenses and other expenses related to being a publicly traded company. General and administrative expenses increased $251 thousand, or 10%, for the third quarter of 2025 compared to the third quarter of 2024. This increase was driven largely by higher incentive and share-based compensation expense due to improved financial results as well as estimated better performance against targets in 2025 compared to 2024.

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

We had operating income of $14 thousand in the third quarter of 2025 compared to an operating loss of $837 thousand in the third quarter of 2024 due largely to a 21% increase in sales and a resulting $1.3 million increase in gross profit, partially offset by an increase in operating expenses of $478 thousand, or 8%, as discussed above.

Interest, net.We recorded net interest income of $61 thousand in the third quarter of 2025 compared to $42 thousand in the third quarter of 2024. We earned more interest income on increased levels of invested cash in the third quarter of 2025 compared to the third quarter of 2024. We maintained the required minimum outstanding borrowings under our credit facility of $3 million and $2.25 million during the third quarter of 2025 and 2024, respectively. See Note 5, Borrowings to the accompanying condensed consolidated financial statements for more information regarding the Company's credit facility.

Other, net.Other, net primarily includes foreign exchange gains and losses incurred by our UK subsidiary. For the third quarter of 2025 we recognized $35 thousand of foreign exchange losses compared to $96 thousand foreign exchange gains for the third quarter of 2024. Going forward, we may continue to experience more foreign exchange gains or losses depending on the level of sales to European customers through our UK subsidiary and the fluctuation in exchange rates of the euro and pound sterling against the U.S. dollar.

Income Taxes.We recorded income tax expense in the third quarter of 2025 of $25 thousand at an effective tax rate of 62.5% compared to an income tax benefit in the third quarter of 2024 of $148 thousand at an effective tax rate of (21.2%). The effective tax rate for the third quarter of 2025 was unusually high due to (1) a near-breakeven level of pre-tax incomeof $40 thousand and (2) tax expense only included taxes associated with earnings in the United Kingdom and minimum required state taxes in the United States. As previously discussed in Note 9, Income Taxes, to the accompanying condensed consolidated financial statements, we provided for a full valuation allowance against our U.S. deferred taxes in the fourth quarter of 2024 and continue to believe this allowance is required as of September 30, 2025. As such, the Company has not recorded any U.S. federal tax benefits associated with incomerecorded in the third quarter of 2025.

Net Income (Loss).As a result of the above, we reported net income in the third quarter of 2025 of $15 thousand, or $0.00 per diluted share, compared to a net loss of ($0.6) million, or $(0.06) per diluted share for the third quarter of 2024.

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Results of Operations: Nine Months Ended September 30, 2025 compared to the nine months ended September 30, 2024

Net Sales.Net sales, which include printer, terminal and software sales, as well as sales of replacement parts, consumables (including labels) and maintenance and repair services, by market for the nine months ended September 30, 2025 and 2024 were as follows (in thousands, except percentages):

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

Net sales for the first nine months of 2025 increased $6.9 million, or 21%, from the same period in 2024. Printer, terminal and other hardware sales unit volume increased by 22% to approximately 75,000 units for the first nine months of 2025 driven by a 40% increase in units sold within our casino and gaming market and a 27% increase in units sold within our FST market, offset by a 44% decrease in unit sales volume in the POS automation market. For more information about the sales volume increases described above, please refer to the discussion below of the results of operations for each of our markets. The average selling price of our printers, terminals and other hardware was up 6% in the first nine months of 2025 compared to the first nine months of 2024, due in part to increased costs resulting from U.S. tariffs imposed on our products assembled in Thailand, which have been passed on to our customers. FST software, labels and other recurring revenue increased $0.8 million, or 10%, in the first nine months of 2025 compared to the first nine months of 2024.

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

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

We expect totalFST revenue for the fourth quarterof 2025 to be higher thanthe comparable period of 2024.

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

Sales of POS automation printers decreased $1.3 million, or 46%, for the first nine months of 2025 compared to the first nine months of 2024. We continue to experience competitive pressure that has resulted in a lower level of sales as well as a reduction in our average selling prices.

We expect POS automation sales for the fourth quarterof 2025 to remain at approximately the same level as the third quarter of 2025 as we expect to continue to experience competitive pressure in this market.

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

Domestic sales of our casino and gaming products for the first nine months of 2025 increased by $6.5 million, or 71%, compared to the first nine months of 2024.Sales forthe first nine months of 2024 were negatively impacted as many of our customers had accumulated higher-than-normal levels of inventory of our product as a hedge during the worldwide supply chain crisis during 2022 and 2023. As a result, during 2024, we experienced a significant slowdown in their order and shipment rates as they worked through this excess inventory. Sales increased forthe first nine months of 2025 compared to the first nine months of 2024 as most of our majordomesticcasino and gaming customers had worked through their on-hand inventory by the first quarter of 2025 and were ordering at normalized levels in the second and third quartersof 2025. In addition, sales in the first nine months of 2025 benefitted from sales of our casino printer to a new OEM customer for the use in charitable gaming establishments. However, we believe this customer is now in an overstock position awaiting jurisdictional approvals to install new gaming machines. As a result, we do not expect a significant level of sales to this customer in the fourth quarter of 2025, but do expect this new customer to resume purchasing again in 2026. In addition, our domestic OEM customers have indicated slowing demand in the fourth quarter of 2025.As a result of these factors, we expect our domestic casino and gaming sales to be lowerin the fourth quarter of 2025 compared to the third quarter of 2025.

Our international casino and gaming sales were down $0.6 million or 9% forthe first nine months of 2025 compared to the first nine months of 2024, largely due to a significant European OEM still working down an overstock of their on-hand inventory. We expect our international sales to continue to be negatively impacted until this customer resumes ordering which is expected to occur in 2026.

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

The decrease in domestic revenue from TSG of $0.4 million forthe first nine months of 2025 as compared to the first nine months of 2024 was due largely to (1) lower sales of consumables of $108 thousand in the first nine months of 2025 compared to the first nine months of 2024, (2) lower sales of legacy replacement parts and spares of $217 thousand in the first nine months of 2025 compared to the first nine months of 2024, and (3) lower revenue for repairs of $167 thousand in the first nine months of 2025 compared to the first nine months of 2024 for lottery printers. These increases were partially offset by increased shipping revenue of $98 thousand in the first nine months of 2025 compared to the first nine months of 2024.

International sales were down $3 thousand or only 1% forthe first nine months of 2025 as compared to the first nine months of 2024.

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

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

For the first nine months of 2025, gross profit increased by $2.6 million, or 15%. Gross margin decreased 230 basis points to 49% in the first nine months of 2025 compared to 51% in the first nine months of 2024. Gross profit increased due to an increase in sales of 21% in the first nine months of 2025 compared to the first nine months of 2024, partially offset by the reduction in gross margin described above. Our gross margin decreased largely due to higher sales of BOHA! hardware products which carry lower average margins than our other products, and to a lesser extent, increased overhead costs, inflation, tariffs and lower prices on our POS automation printer due to increased competitive pressure.

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

Operating Expenses - Engineering, Design and Product Development.Engineering, design and product development expenseinformationfor the nine months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Engineering, design and product development expenses decreased $0.4 million, or 7%, forthe first nine months of 2025 compared to the first nine months of 2024 due to cost reduction initiatives taken in the second quarter of 2024 (the full benefit of which was realized in 2025), including a reduction of contracted software development expenses, partially offset by higher incentive compensation due to improved financial results in 2025 compared to 2024.

Operating Expenses - Selling and Marketing.Selling and marketing expenseinformationfor the nine months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

Selling and marketing expenses increased $119 thousand, or 2%, for the first nine months of 2025 compared to the first nine months of 2024 due largely to cost reduction initiatives including reduced headcount, trade show and other marketing expensespartially offset by higher costs related to programs to further improve the Company's go-to-market strategy as well higher sales commissions and incentive compensation due to improved financial results in 2025 compared to 2024.

Operating Expenses - General and Administrative.General and administrative expense for the nine months ended September 30, 2025 and 2024 is summarized below (in thousands, except percentages):

General and administrative expenses increased $0.6 million, or 7%, for the first nine months of 2025 compared to the first nine months of 2024. This increase was driven largely by higher incentive compensation and share-based compensation expense. These increases were partially offset by the impact of cost reduction initiatives taken in the second quarter of 2024.

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

Our operating loss decreased by $2.3 million, or 90%, for the first nine months of 2025 compared to the first nine months of 2024 due largely to a 21% increase in sales in the first nine months of 2025 compared to the first nine months of 2024 and a resulting $2.6 million increase in gross profit (despite a 230 basis point decline in gross margin). These factors were partially offset by increased operating expenses of $0.3 million, or 1%, as discussed above.

Interest, net.We recorded net interest income of $123 thousand for the first nine months of 2025 compared to net interest income of $116 thousand for the first nine months of 2024. For both periods in 2025 and 2024, we incurred interest expense on the required minimum borrowings under our credit facility ($3 million and $2.25 million for the first nine months of 2025 and 2024, respectively). See Note 5, Borrowings to the accompanying condensed consolidated financial statements for more information regarding the Company's credit facility. We earned more interest income on increased levels of invested cash in the first nine months of 2025 compared to the first nine months of 2024.

Other, net.Other, net primarily includes foreign exchange gains and losses by our UK subsidiary. We recorded other foreign exchange gains of $143 thousand in the first nine months of 2025 compared to $43 thousand of foreign exchange gains in the first nine months of 2024. Going forward, we may continue to experience more foreign exchange gains or losses depending on the level of sales to European customers through our UK subsidiary and the fluctuation in exchange rates of the euro and pound sterling against the U.S. dollar.

Income Taxes. We recorded income tax expense in the nine months ended September 30, 2025 of $116 thousand compared to an income tax benefit of $511 thousand at an effective rate of (21.1%) for the nine months ended September 30, 2024. The tax expense of $116 thousand for the nine months ended September 30, 2025 (compared to pre-tax income of only $7 thousand) was high due to (1) a near-breakeven level of pre-tax earnings, and (2) tax expense only included taxes associated with earnings in the United Kingdom and minimum required state taxes in the United States. As previously disclosed, we provided for a full valuation allowance against our deferred taxes in the fourth quarter of 2024 and continue to believe this allowance is required as of September 30, 2025. As such, the Company has not recorded any U.S. federal tax benefits associated with losses recorded in the nine months ended September 30, 2025.

Net Loss.As a result of the above, we reported a net loss for the first nine months of 2025 of $(109) thousand, or $(0.01) per diluted share, compared to a net loss of $(1.9) million, or $(0.19) per diluted share for the first nine months of 2024.

Liquidity and Capital Resources

Cash Flow

In the first nine months of 2025, our cash and cash equivalents balance increased $5.6 million, or 39%, from December 31, 2024. We ended the third quarter of 2025 with $20.0 million in cash and cash equivalents, of which $0.2 million was held by our UK subsidiary.

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

For the first nine months of 2025:

•	We reported a net loss of $109 thousand.

•	We recorded depreciation and amortization of $0.5 million and share-based compensation expense of $1.3 million.

•	Accounts receivable decreased $0.7 million.

•	Inventories decreased $4.6 million as we were able to workdown our elevated inventory levels on handas of December 31, 2024, in part due to increased sales.

•	Accounts payable decreased $0.8 milliondue largely to reduced inventory purchases as we worked down our inventory levels.

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

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For the first nine months of 2024:

•	We reported a net loss of $1.9 million.

•	We recorded depreciation and amortization of $0.8 million and share-based compensation expense of $0.9 million.

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

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

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

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

Investing activities: Our capital expenditures were $89 thousand for the first nine months of 2025 compared to $311 thousand for the first nine months of 2024. Expenditures for both periods were primarily for computer and networking equipment and new tooling equipment. We also incurred $1.4 million in cash expenditures in the first nine months of 2025 for the BOHA! software source code acquisitionas discussedabove under "Recent Developments.".

Financing activities: Financing activities used $84 thousand of cash forthe first nine months of 2025 compared to $71 thousand in cash used forthe first nine months of 2024. These amounts relate to cash used to pay withholding taxes on stock issued from our stock compensation plans.

Resource Sufficiency

Competitors that were unable to supply products in 2023 due to supply chain constraints have returned to the market, resulting in increased competitive pressure. Certain large customers began to slow their order rates in the first half of 2024 due to higher-than-normal inventory levels, though most have resumed buying again. As a result, following an increase in casino and gaming sales in 2023 and then a fall-off in 2024 as customers worked through inventory on hand, we have experienced amore normalized level of sales in the casino and gaming market duringthe first nine monthsof 2025. However, giventhe continued uncertainty related to tariffs and general economic conditions, we continue to monitor our cash generation, usage and preservation including the management of working capital to generate cash.

We believe that our cash and cash equivalents on hand, our expected cash flows generated from operating activities, and borrowings available under our credit facility will provide sufficient resources to meet our working capital needs, finance our capital expenditures, fund the BOHA! source code acquisition,and meet our liquidity requirements through at least the next twelve months. Notwithstanding this belief, the duration and extent of current global economic pressures and conditions in our markets remain uncertain and their ultimate impact is unknown.

Credit Facility

We are party to a Loan and Security Agreement, dated as of March 13, 2020 (as amended, the "Loan Agreement"), with Siena Lending Group LLC (the "Lender") that provides for a revolving credit line of up to $10.0 million, subject to a borrowing base based on 85% of eligible accounts receivable plus the lesser of (a) $5.0 million and (b) 50% of eligible raw material and 60% of finished goods inventory (the "Siena Credit Facility"). Borrowings under the Siena Credit Facility bear a floating rate of interest equal to the greatest of (i) the prime rate plus 1.75%, (ii) the federal funds rate plus 2.25%, and (iii) 6.50%. We also pay a fee of 0.50% on unused borrowings under the Siena Credit Facility. Borrowings under the Siena Credit Facility are secured by a lien on substantially all the assets of the Company.

The Siena Credit Facility imposes a financial covenant on the Company requiring that the Company maintain excess availability of at least $750 thousand under the Siena Credit Facility, tested as of the end of each calendar month and restricts, among other things, our ability to incur additional indebtedness and create other liens. We have remained in compliance with our excess availability covenant through September 30, 2025.

The Company is required to either maintain outstanding borrowings under the Siena Credit Facility of at least $3.0 million in principal amount, or during any period during which the Lender has control of the Company's deposit account in accordance with the Loan Agreement, to pay interest on at least $3.0 million principal amount of loans, whether or not such amount of loans is actually outstanding. The maturity date of the Siena Credit Facility is March 31, 2027.

As of September 30, 2025, we had $3.0 million of outstanding borrowings under the Siena Credit Facility at an interest rate of 9.00%. We had $4.8 million of net borrowing capacity available under the Siena Credit Facility at September 30, 2025.

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